What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-02 compared with 2022-03-16 · 268 added, 500 removed, 54 unchanged (93% of the section changed)

Company Overview

We design, build and sell homes in high-growth markets, including Charlotte, Raleigh, Jacksonville, Orlando, Denver, the Washington D.C.

metropolitan area, Austin, Dallas and

We employ an asset-light lot acquisition strategy with a focus on the design, construction and sale of single-family entry-level, first-time move-up and second-time move-up homes.

To fully serve our homebuyer customers and capture

ancillary business opportunities, we also offer title insurance and mortgage banking solutions through our mortgage banking joint venture, Jet Home Loans, LLC (“Jet LLC”), which comprises our Jet Home Loans segment.

Our asset-light lot acquisition strategy, discussed in further detail below, enables us to generally purchase land in a “just-in-time” manner with reduced up-front capital

commitments, which in turn has increased our inventory turnover rate, enhanced our return on equity and contributed to our growth.

metropolitan area, Austin, Dallas and Houston.

We sell homes under the Dream Finders Homes, DF Luxury, Craft Homes and Coventry Homes brands.

We employ an asset-light land acquisition strategy with a focus on the design, construction and sale of single-family entry-level, first-time move-up and second-time move-up homes.

To fully serve our homebuyer customers and capture ancillary business opportunities, we also offer title insurance through DF Title, LLC, doing business as Golden Dog Title & Trust (“DF Title”) and mortgage banking solutions primarily through our mortgage banking joint venture, Jet Home Loans, LLC (“Jet LLC”), which comprises our Jet Home Loans segment.

Since breaking ground on our first home on January 1, 2009, we have closed over 22,200 homes through December 31, 2022 and have been profitable every year since inception.

The following is a summary of our history:

2009 – We began operations building homes in the Jacksonville, Florida market

2013 – We surpassed 1,000 cumulative home closings and entered the Savannah, Georgia market

2014 – We entered the Denver, Colorado market

2015 – We entered the Austin, Texas and Orlando, Florida markets

2017 – We entered the Washington D.C.

metropolitan area market, with a particular focus on the Northern Virginia and Maryland markets

May 2019 – We entered the Hilton Head and Bluffton, South Carolina markets with our acquisition of Village Park Homes, LLC (“Village Park Homes” or “VPH”)

September 2020 – Dream Finders Homes, Inc.

was incorporated under the state laws of Delaware

October 2020 – We entered the Charlotte, Fayetteville, Raleigh, the Triad (consisting of Greensboro, High Point and Winston-Salem, North Carolina) and Wilmington, North

Carolina and Myrtle Beach, South Carolina markets with our acquisition of the homebuilding business (“H&H Homes”) of H&H Constructors of Fayetteville, LLC, a North Carolina limited liability company (“H&H”)

January 2021 – We completed our IPO and certain reorganization transactions in connection with our IPO

February 2021 – We expanded our presence in the Orlando, Florida market with our acquisition (the “Century Acquisition”) of Century Homes Florida, LLC (“Century Homes”)

October 2021 – We significantly increased our geographic operations in the Austin, Texas metro area and expanded into the Texas markets of Houston, Dallas and San Antonio

with our acquisition of privately held Texas homebuilder McGuyer Homebuilders, Inc.

2009 – Began operations building homes in the Jacksonville, Florida market

2013 – Entered the Savannah, Georgia market

2014 – Entered the Denver, Colorado market

2015 – Entered the Austin, Texas and Orlando, Florida markets

2017 – Entered the Washington D.C.

metropolitan area, with a particular focus on the Northern Virginia and Maryland markets (“DC Metro”)

2019 – Entered the Hilton Head and Bluffton, South Carolina markets with our acquisition of Village Park Homes, LLC (“Village Park Homes” or “VPH”)

2020 – Entered the Charlotte, Fayetteville, Raleigh, Piedmont Triad (consisting of Greensboro, High Point and Winston-Salem, North Carolina) and Wilmington, North Carolina and Myrtle Beach, South Carolina markets with our acquisition of the homebuilding business of H&H Constructors of Fayetteville, LLC, a North Carolina limited liability company (“H&H”)

January 2021 – Completed our initial public offering (“IPO”) and expanded our presence in the Orlando, Florida market with our acquisition (the “Century Acquisition”) of Century Homes Florida, LLC (“Century Homes”)

October 2021 – Significantly increased our operations in the Austin, Texas metro area and expanded into the Texas markets of Houston, Dallas and San Antonio with our acquisition of privately held Texas homebuilder McGuyer Homebuilders, Inc.

and related affiliates (“MHI”)

Since breaking ground on our first home on January 1, 2009 we have closed over 15,300 homes through December 31, 2021 and have been profitable every year since inception.

the year ended December 31, 2021, we received 6,804 net new orders (new orders for homes less cancellations), an increase of 2,618 or 62.5 %, as compared to the 4,186 net new orders received for the year ended December 31, 2020.

ended December 31, 2021, we closed 4,874 homes, an increase of 1,720, or 54.5%, as compared to the 3,154 homes closed for the year ended December 31, 2020.

As of December 31, 2021, our backlog of sold homes was 6,381.

In addition, as of December

31, 2021, we owned and controlled over 43,000 lots.

Our owned and controlled lot supply is a critical input to the future revenue of our business.

We sell homes under the Dream Finders Homes, DF Luxury, H&H Homes, Village Park Homes, Century

Homes and, with our recent acquisition of MHI, Coventry Homes brands.

Initial Public Offering

On January 25, 2021, we completed the IPO of 11,040,000 shares of our Class A common stock at a price to the public of $13.00 per share.

The IPO provided us with net proceeds

of $133.5 million.

Immediately following the closing of our IPO, we also entered into a senior unsecured revolving credit facility, which had an initial aggregate commitment of up to $450.0 million and an accordion feature that, to date through

subsequent amendments, allows the facility to expand to a borrowing base of up to $817.0 million (“Credit Agreement”).

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital

Resources” in Item 7 within this Form 10-K for further discussion on the Credit Agreement including amendments.

On January 25, 2021, we used the net proceeds from the IPO, cash on hand and borrowings under our Credit Agreement to repay (i) all

borrowings under our then-existing 34 separate secured vertical construction lines of credit facilities totaling $319.0 million and upon such repayment terminated such facilities and (ii) the bridge loan from Boston Omaha Investments LLC used to

finance the H&H acquisition, totaling $20.0 million, plus contractual interest of $0.6 million (“BOMN Bridge Loan”).

Corporate Reorganization

In connection with the IPO and pursuant to the terms of the Agreement and Plan of Merger by and among the Company, DFH LLC and DFH Merger Sub LLC, a Delaware limited

liability company and direct, wholly owned subsidiary of the Company, DFH Merger Sub LLC merged with and into DFH LLC with DFH LLC as the surviving entity.

As a result of the merger, all of the outstanding non-voting common units and Series A

preferred units of DFH LLC converted into 21,255,329 shares of Class A common stock of the Company, all of the outstanding common units of DFH LLC converted into 60,226,153 shares of Class B common stock of the Company and all of the outstanding

Series B preferred units and Series C preferred units of DFH LLC remained outstanding as Series B preferred units and Series C preferred units of DFH LLC, as the surviving entity in the merger.

We refer to this and certain other related events

and transactions, as the “Corporate Reorganization”.

In connection with the Corporate Reorganization, we made distributions to the members of DFH LLC for estimated federal income taxes of approximately $28.0 million on earnings of our

predecessor, DFH LLC (which was a pass-through entity for tax purposes), for the period from January 1, 2020 through January 25, 2021 (the date of the Corporate Reorganization).

Immediately following the Corporate Reorganization, (1) the Company became a holding company and the sole manager of DFH LLC, with no material assets other than 100% of the

voting membership interests in DFH LLC, (2) the holders of common units, non-voting common units and Series A preferred units of DFH LLC became stockholders of the Company, (3) the holders of the Series B preferred units of DFH LLC outstanding

immediately prior to the Corporate Reorganization continued to hold all 7,143 of the outstanding Series B Preferred Units of DFH LLC, and (4) the holders of the Series C preferred units of DFH LLC outstanding immediately prior to the Corporate

Reorganization continued to hold all 26,000 of the outstanding Series C preferred units of DFH LLC.

On January 27, 2021, we redeemed all 26,000 outstanding Series C preferred units of DFH LLC at a redemption price of $26.0 million, plus accrued distributions and fees of

$0.2 million.

Business Opportunities

We operate an asset-light and capital efficient lot acquisition strategy and generally seek to avoid engaging in land development, which requires significant capital

expenditures and can take several years to realize returns on the investment.

Our asset-light lot acquisition strategy enables us to generally purchase land in a “just-in-time” manner with reduced up-front capital commitments, which in turn has

increased our inventory turnover rate, enhanced our strong return on equity and contributed to our impressive growth.

Our strategy is intended to avoid the financial commitments and risks associated with direct land ownership and land development

by allowing us to control a significant number of lots for a relatively low capital cost.

We believe our asset-light model reduces our balance sheet risk relative to other homebuilders that own a higher percentage of their land supply.

We primarily employ two variations of our asset-light land financing strategy, finished lot option contracts and land bank option contracts, pursuant to which we secure the

right to purchase finished lots at market prices from various land sellers and land bank partners, including through our joint ventures.

We secure the option contracts by paying deposits based on the aggregate purchase price of the finished lots,

which is typically 10% or less in the case of finished lot option contracts and 15% or less in the case of land bank option contracts.

These option contracts generally allow us, at our option, to forfeit our right to purchase the lots controlled

by these option contracts for any reason, and our sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to such option contracts and, in the case of land bank option

contracts, any related fees paid to the land bank partner.

We select the geographic markets in which we operate our homebuilding business through a rigorous selection process based on our evaluation of positive population and

employment growth trends, favorable migration patterns, attractive housing affordability, low state and local income taxes and desirable lifestyle and weather characteristics.

Recently, we believe these favorable factors have been amplified by a

general migration from urban areas to nearby suburbs in which we build homes, a trend that has increased further as a result of the outbreak of the novel coronavirus disease 2019 (“COVID-19”).

In addition, we have experienced an increase in

entry-level homebuyers, who we believe are motivated to move out of their apartments or confined living areas and into more spacious homes in anticipation of spending more time at home with the increasing prevalence of remote-working arrangements

as a result of the COVID-19 pandemic.

Our operations are currently organized into eight segments:

Jacksonville, Orlando, DC Metro, Colorado, Texas (MHI), The Carolinas

(H&H Homes), Other and Jet Home Loans.

Segment Reporting to our consolidated financial statements.

Operating Segments

We select the geographic markets in which we operate our homebuilding business through a rigorous selection process based on our evaluation of positive population and employment growth trends, favorable migration patterns, attractive housing affordability, low state and local income taxes and desirable lifestyle and weather characteristics.

Our operations are currently organized into seven segments:

Jacksonville, Orlando, Colorado, Texas, The Carolinas, Jet Home Loans and Other.

See Note 9, Segment Reporting, to our consolidated financial statements.

Our Jacksonville segment primarily consists of our Jacksonville, Florida homebuilding operations.

Our Orlando segment primarily

consists of our Orlando, Florida homebuilding operations.

Our DC Metro segment primarily consists of our homebuilding operations in the greater Washington D.C.

metropolitan area.

Our Colorado segment primarily consists of our greater Denver

homebuilding operations.

Our H&H Homes segment consists of our homebuilding operations in Charlotte, Fayetteville, Raleigh, the Triad (consisting of Greensboro, High Point and Winston-Salem, North Carolina) and Wilmington, North Carolina,

and Myrtle Beach, South Carolina.

Our MHI segment consists of our homebuilding operations in Austin, Dallas, Houston and San Antonio, Texas.

Our Other segment primarily consists of our homebuilding operations Austin, Texas, Hilton Head and

Bluffton, South Carolina and Savannah, Georgia and our title insurance brokerage business, DF Title, LLC.

The Other operations in Austin, Texas include legacy home building operations outside of those acquired from MHI.

Our Jet Home Loans

segment consists of our mortgage operations conducted through our mortgage banking joint venture, Jet LLC.

We are focused on controlling a capital efficient land pipeline sufficient to meet our growth objectives.

We believe our asset-light land financing strategy represents a

capital efficient platform that allows us to effectively capitalize on growth opportunities in both new and existing markets.

Our culture of building and developing external relationships with land sellers, developers and land finance partners

enhances our success in both sourcing and executing finished lot and land bank option contracts that are fundamental to this strategy.

We believe these arrangements reduce our exposure to economic down cycles and risks associated with direct land

ownership and land development, and increase optionality to effectively manage our pipeline of finished lots.

We continue to emphasize the development of strong external relationships and execute on our asset-light land financing strategy to take

advantage of the proven capital efficiencies this strategy provides.

We are focused on customer satisfaction and ensuring that each customer’s experience exceeds his or her expectations.

We seek to maximize customer satisfaction by providing

attentive one-on-one customer service throughout the home buying process, empowering our customers with flexibility to personalize their homes and actively soliciting feedback from all of our customers.

Our emphasis on adapting to meet potential

homebuyer needs led to increased use of our virtual home tours beginning in April 2020, which has become an increasingly popular and effective marketing strategy following the outbreak of the COVID-19 virus.

In addition, we launched our “Stay

Home & Buy a Home” program in April 2020 as another means for customers to safely and efficiently purchase a new home without leaving their current home.

We believe these efforts have been crucial to our ability to sell homes during the

COVID-19 pandemic.

Ultimately, the willingness of our customers to refer friends and family to us as homebuyers is a direct result of customer satisfaction, and we strive to ensure that each of our customers will make such referrals without

Jet LLC, offers financing to our homebuyers and helps us more effectively convert backlog into home closings.

We believe Jet LLC provides a distinct competitive advantage

relative to homebuilders without holistic mortgage solutions for clients, as many of our homebuyers seek an integrated home buying experience.

Jet LLC allows us to use mortgage finance as an additional sales tool, it helps ensure and enhance our

customer experience, it allows us to prequalify buyers early in the home buying process and it provides us better visibility in converting our sales backlog into closings.

We believe that Jet LLC will continue to be a meaningful source of

incremental revenues and profitability for us.

Our Products and Customers

Our Homes and Homebuyers

We offer a range of single-family homes in each of our markets, with a core focus on entry-level and first-time move-up homebuyers, but we also provide offerings for

second-time move-up and luxury homebuyers.

Our homebuilding business is driven by our commitment to building high quality homes at affordable prices in attractive locations while delivering excellent customer service.

We empower our customers

with the flexibility to personalize our desirable open floor plans with a wide array of finishes and upgrades to best fit their distinctive tastes and unique needs.

Price points in our markets vary for entry-level, first-time move-up and

second-time move-up homebuyers.

Our Active Communities

We define an active community as a community where we have recorded five net new orders or a model home is currently open to customers.

A community is no longer active when

we have less than five home sites to sell to customers.

Active community count is an important metric to forecast future net new orders for our business.

As of December 31, 2021, we had 205 active communities, a year over year increase of 79

communities, or 62.7%, when compared to our 126 active communities at December 31, 2020.

Average monthly sales per community for the year ended December 31, 2021 were 4.0, a decrease of 0.1, or 2.5%, from 4.1 average monthly sales per community

during the year ended December 31, 2020.

Our Title Insurance Business

Our wholly owned subsidiary, DF Title, LLC d/b/a Golden Dog Title & Trust (“DF Title”), is a licensed title insurance agency that provides closing, escrow and title

insurance services.

Our philosophy is to maintain a systematic approach to workflow management with a high level of care and communication during the closing process, thereby delivering an exceptional experience to each of our customers.

is involved primarily in residential real estate transactions, including new home construction and resale and refinancing transactions.

DF Title operates seven closing offices:

four located in Florida, two in Colorado and one in South Carolina.

DF Title’s staff includes attorneys, state licensed title agents,

escrow officers and experienced support staff with over 200 years of collective closing experience.

Closing, escrow and title insurance is primarily regulated at a state level, requiring that operations be conducted by skilled attorneys and/or

licensed title insurance agents.

Expansion of title operations into other markets is ongoing and consideration of new markets is driven by unit volume, average sales price for homes sold in the market and state-level legal considerations.

Our Mortgage Banking Business

Our mortgage banking joint venture, Jet LLC, underwrites and originates home mortgages across our geographic footprint.

We own a 49.9% interest in Jet LLC, and our joint

venture partner, FBC Mortgage, LLC, an Orlando-based mortgage lender, owns the remaining 50.1% interest and performs a number of back office functions, such as accounting, compliance and secondary marketing activities.

Prior to October 1, 2020,

our joint venture partner was Prime Lending Corp., a Dallas-based mortgage lender.

FBC Mortgage, LLC has been approved by the Federal Housing Administration (“FHA”), the Veterans Administration (“VA”) and the U.S.

Department of Agriculture (“USDA”) to

originate mortgages that are insured and/or guaranteed by these entities.

Jet LLC originates conforming and non-conforming mortgages for our homebuyers, as well as customers purchasing homes from third-party sellers.

Jet LLC loan officers assist

customers in identifying various loan options that meet their home financing goals, and Jet LLC underwriters assess borrowers’ ability to meet repayment options of various loans.

When customers elect to finance the purchase of their home with a

mortgage, Jet LLC has historically captured 60-70% of loan originations.

For the year ended December 31, 2021, Jet LLC originated and funded 2,256 home loans with an aggregate principal amount of

approximately $729.0 million as compared to 1,961 home loans with an aggregate principal amount of approximately $564.0 million for the year ended December 31, 2020.

For the years ended December 31, 2021 and 2020, respectively, Jet LLC had net

income of approximately $12.9 million and $15.9 million.

Our interest in Jet LLC is accounted for under the equity method and is not consolidated in our consolidated financial statements, as we do not control, and are not deemed the primary

beneficiary of, the variable interest entity (“VIE”).

Variable Interest Entities and Investments in Other Entities to our consolidated financial statements for a description of our joint ventures, including those that were

determined to be VIEs, and the related accounting treatment.

Land Acquisition Strategy and Development Process

Our Orlando segment primarily consists of our Orlando, Florida homebuilding operations.

Our Colorado segment primarily consists of our greater Denver homebuilding operations.

Our Texas segment consists of our homebuilding operations in Austin, Dallas, Houston and San Antonio, Texas.

The Carolinas segment consists of our homebuilding operations in Charlotte, Fayetteville, Raleigh, the Triad (consisting of Greensboro, High Point and Winston-Salem, North Carolina) and Wilmington, North Carolina, and Myrtle Beach, South Carolina.

Our Jet Home Loans segment consists of our mortgage operations conducted primarily through our mortgage banking joint venture, Jet LLC.

Our Other segment primarily consists of our homebuilding operations in Austin, Texas, Hilton Head and Bluffton, South Carolina, Savannah, Georgia and DC Metro, as well as our Active Adult and Custom Luxury Homes divisions in Jacksonville, and our title insurance brokerage business, DF Title, LLC.

The Other operations in Austin, Texas include legacy homebuilding operations outside of those acquired from MHI.

As a result of our recent business acquisitions and organic growth in the last few years, our footprint in the contiguous United States continues to evolve.

Likewise, management’s evaluation of our operating structure is on-going.

Management will restructure or reorganize, as needed, to achieve optimal growth and oversight for the business.

Asset-Light Business Strategy

We operate an asset-light and capital-efficient lot acquisition strategy to meet our growth objectives.

We generally seek to avoid engaging in land development, which requires significant capital expenditures, and can take several years to realize returns on the investment.

Our asset-light lot acquisition strategy generally enables us to purchase land in a “just-in-time” manner in both new and existing markets with reduced up-front capital commitments, and, in turn, allows us to increase our inventory turnover rate, enhance our return on equity and contributes to our growth.

Our strategy is intended to avoid the financial commitments and risks associated with direct land ownership and land development by allowing us to increase optionality and control a significant number of lots for a relatively low capital cost.

We believe our asset-light business model reduces our balance sheet risk relative to other homebuilders that own a higher percentage of their land supply.

Refer to “— Land Acquisition and Development Process” for a detailed discussion of how we employ our strategy.

Land Acquisition and Development Process

Locating and analyzing attractive land positions is a critical challenge for any homebuilder.

We generally remain focused on controlling as many quality land positions as

possible while minimizing up-front capital outlay.

Our land selection process begins with key economic drivers:

population, demographic trends and employment growth, and we generally pursue opportunities more aggressively in our markets that

generate the greatest returns while proceeding more cautiously in our markets where we continue to improve our operational efficiencies.

While our land selection process is driven mainly by the local division leadership, the land sourcing process, including final approval to move forward with a project, is a

collaboration involving both the local division and corporate leadership, including our President and Chief Executive Officer.

This team effort, complimented by our company-wide emphasis on continually developing new and existing relationships

with land sellers and developers, ensures that we leverage experience and resources throughout the organization for a thoughtful and strategic execution of every new land acquisition.

Our management team leads by example in fostering our culture

of external relationship building by taking an active, personal role in communications with land sellers and developers, an approach that we believe differentiates us from similarly situated homebuilders.

This multilevel cooperation allows us to

remain flexible and react quickly to changing market or project-specific conditions and maximize the potential of each new land opportunity.

We believe our experience, top-down emphasis on relationship building with land market participants and

collaborative involvement of local and corporate management in the land sourcing and acquisition process enables us to identify the ideal developers and efficiently source and secure options to control and close acquisitions of lots to meet our

growth needs.

As part of our asset-light land acquisition strategy, we primarily enter into finished lot option contracts or land bank option

See “Business—Business Opportunities” for further detail on our asset-light strategy.

Finished lot option contracts are generally entered into with the land seller between six months and one year in advance of completion of the land

Pursuant to our finished lot option contracts, the lots are offered to us for purchase on a rolling basis, which is designed to mirror our expected home sales.

When a land seller desires to sell finished lots in bulk or does not

wish to develop finished lots, we often enter into land bank option contracts with land bank partners who fund any required land development costs and sell the finished lots to us, at our option, over a period of time.

These option contracts

generally allow us, at our option, to forfeit our right to purchase the lots controlled by these option contracts for any reason, and our sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the

deposits paid pursuant to such option contracts, any related fees paid to the land bank partner, management of the development to completion and any cost overruns relative to the project.

We remain focused on controlling as many quality land positions as possible while minimizing up-front capital outlay.

Our land selection process begins with key economic drivers, such as demographic trends and employment growth.

We typically pursue opportunities more aggressively in our markets that generate the greatest returns, while proceeding more cautiously in our markets where we have plans in process to improve our operational efficiencies.

While our land selection process is driven mainly by the local division leadership, the land sourcing process, including final approval to move forward with a project, is a collaboration involving both the local division and corporate leadership, including our President and Chief Executive Officer.

This team effort ensures that we leverage experience and resources throughout the organization for a thoughtful and strategic execution of every new land acquisition.

Our company-wide emphasis on continually developing new and existing relationships with land sellers, developers and land bank partners acts to further enhance this strategy.

Our management team leads by example in fostering our culture of external relationship building by taking an active, personal role in communications with land sellers and developers—an approach that we believe differentiates us from similarly situated homebuilders.

Our multilevel cooperation allows us to remain flexible and react quickly to changing markets or project-specific con ditions, and maximize the potential of each new land opportunity.

We believe our experience, top-down emphasis on relationship building with land market participants and collaborative involvement of local and corporate management in the land sourcing and acquisition process enables us to identify the ideal developers and efficiently source and secure options to control and close acquisitions of lots to meet our growth needs while mitigating risk.

We primarily employ two variations of our asset-light land financing strategy—finished lot option contracts and land bank option contracts—pursuant to which we secure the right to purchase finished lots at predetermined fixed contractual pricing from various land developers, land sellers and land bank partners.

Finished lot option contracts are generally entered into with the land seller between six months and one year in advance of completion of the land development.

Pursuant to our finished lot option contracts, the lots are offered to us for purchase on a rolling basis, on a timeline that is designed to mirror our expected home sales pace.

When a land seller desires to sell finished lots in bulk or does not wish to develop finished lots, we often enter into land bank option contracts with land bank partners who fund any required land acquisition and land development costs and sell the finished lots to us over a period of time.

These option contracts generally allow us, at our option, to forfeit our right to purchase the lots controlled within an option contract for any reason, and our sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to such option contracts, and, in the case of land bank option contracts, any related lot option fees paid to the land bank partner, any potential performance obligations, management of the land development to completion and any cost overruns relative to the project.

We typically provide lot deposits in the range of 5% to 10% of the land purchase price.

Lot option fees are based on the outstanding capital balance held by the land banker and often are reflective of interest provisions under which delays in land development and/or longer land takedown periods result in additional costs.

As of December 31, 2022, our lot deposits and investments in finished lot option and land bank contracts were $277 million.

As of December 31, 2021, we controlled 38,495

lots under lot option and land bank option contracts.

Historically, we have supplemented our lot option acquisition strategies by entering into joint venture agreements with external investors to acquire, develop and control

A typical joint venture arrangement requires us to contribute less than 10% of the total equity required to purchase the land and develop finished lots, with our joint venture partners contributing the remainder.

These joint ventures

typically provide for a preferred return on deployed capital and an allocation of the remaining profits in accordance with the corresponding joint venture agreement.

If we were to exit a joint venture arrangement, we would forfeit the initial

equity investment and all future compensation and profit sharing.

Due to the profit sharing requirements of the joint venture agreements, we continue to strategically shift away from these joint venture arrangements in favor of the more

profitable option contract strategies described above.

As of December 31, 2022, we controlled 37,615 lots under lot option and land bank option contracts.

In the past, we have supplemented our lot option acquisition strategies by entering into joint venture agreements with external investors to acquire, develop and control lots.

Due to the profit sharing requirements of the joint venture agreements, we have transitioned from these joint venture arrangements in favor of the more profitable option contract strategies described above.

Refer to Note 7, Variable Interest Entities to our Consolidated Financial Statements for the disclosed amounts of our remaining equity interests in these joint ventures.

Owned and Controlled Lots

The following table presents our owned finished lots purchased just-in-time for production and our controlled lots by segment as of December 31, 2021 and 2020:

The following table presents our owned finished lots purchased just-in-time for production and controlled lots through option contracts by homebuilding segment as of December 31, 2022 and 2021:

As of December 31,

Segment Owned (2)

Controlled Total Owned Controlled Total % Change

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 %

Austin, Savannah, Village Park Homes, Active Adult and Custom Homes.

Texas 1,282 6,835 8,117 1,569 6,304 7,873 3 %

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 %

(1) Austin, DC Metro, Savannah, GA, Hilton Head and Bluffton, S.C., Active Adult and Custom Homes.

Austin refers to legacy DFH operations exclusive of MHI.

Segment Reporting to our consolidated financial statements for further explanation of our reportable segments.

See Note 9, Segment Reporting, to our consolidated financial statements for further explanation of our reportable segments.

(2) As of December 31, 2022, of the 5,943 owned lots, 4,077 were under construction, 206 were completed spec homes and 139 were model homes.

The remaining lots were ready for construction.

Owned Real Estate Inventory Status

The following table presents our owned real estate inventory status as of December 31, 2022 and 2021:

% of Owned Real Estate Inventory

December 31, 2021

December 31, 2020

As of December 31, 2022 As of December 31, 2021

% of Owned Real Estate Inventory % of Owned Real Estate Inventory

Construction in process and finished homes (1)

Finished lots and land under development (2)

Company owned land and lots (2)

Total 100 % 100 %

(1) Represents our owned homes that are completed or under construction, including sold, spec and model homes.

Represents finished lots purchased just-in-time for production and capitalized costs related to land under development held by third party land bank partners, including lot

option fees, property taxes and due diligence.

Land and lots from consolidated joint ventures are excluded.

DF Residential I, LP, DF Residential II, LP and DF Capital Management, LLC

Land and lots from consolidated VIEs are excluded from total owned real estate inventory.

(2) Represents finished lots purchased just-in-time for production and capitalized costs related to land under development held by third-party land bank partners, including lot option fees, property taxes and due diligence.

Land and lots from consolidated VIEs are excluded from both company owned land and lots and total owned real estate inventory.

DF Capital Management, LLC

Controlling a sufficient supply of finished lots is an important component of our asset-light land financing strategy.

Our land team routinely underwrites potential lot

acquisitions that meet our capital allocation criteria.

Once our land acquisition committee approves a transaction that requires financing above a deposit meeting our internal model, we will seek a land bank partner.

Our primary operating

subsidiary, Dream Finders Homes LLC (“DFH LLC”, has entered into six joint ventures and ten land bank projects with DF Residential I, LP (“Fund I”) since its formation in January 2017.

Additionally, on March 11, 2021, the Company entered into

land bank financing arrangements and a Memorandum of Right of First Offer with DF Residential Fund II (“Fund II”), under which Fund II has an exclusive right of first offer on any land bank financing projects up to $20.0 million that meet its

investment criteria and are undertaken by the Company during Fund II’s investment period.

DF Capital Management, LLC, a Florida limited liability company (“DF Capital”), is the investment manager of Fund I and Fund II.

DFH LLC owns 49% of the

membership interests in DF Capital and Christopher Butler, a non-affiliated third party, serves as the managing member and owns the remaining 51% of the membership interests in DF Capital.

Historically, we have provided DF Capital with the opportunity to have one of the funds that it manages participate in transactions that require additional funding.

Capital does not wish to participate in and finance the transaction, we turn to other potential financing sources.

We believe our relationship with DF Capital allows us to act quickly when lot acquisition opportunities are presented to us because

DF Capital generally provides for faster closings and is not subject to the time delays that we historically have experienced when seeking financing for projects.

As of December 31, 2021 and 2020, we controlled 434 and 1,500 lots, respectively, through Fund I, representing 1.0% and 6.7% of our total owned and controlled lots, as of

December 31, 2021 and 2020, respectively.

Fund I was fully committed in early 2019.

Subsequently, we identified lot acquisitions that met our investment threshold, and DF Capital agreed to provide land bank financing

in a total of ten of these projects.

As of December 31, 2021 and 2020, respectively, funds managed by DF Capital controlled an additional 347 and 595 lots as a result of these transactions outside of Fund I or Fund II.

During the twelve months

ended December 31, 2021, we purchased 248 of these lots for $15.6 million, and the outstanding lot deposit balance in relation to these projects was approximately $3.7 million.

As of December 31, 2021, we controlled 4,030 lots through Fund II, representing 9.2% of our total owned and controlled lots, as of December 31, 2021.

As of December 31,

2020, we did not control any lots through Fund II.

Homebuilding, Marketing and Sales Process

We are intently focused on customer satisfaction and committed to providing our homebuyers a unique experience by personalizing each home to fit their lifestyle while also

offering high-quality and affordable homes.

We generally market our homes to entry-level and first- and second-time move-up homebuyers through targeted product offerings in each of the communities in which we operate.

We target what we believe to

be the most underserved customer groups in each of our markets, and our architectural design team works with our land team to secure lots that permit the building of floor plans that we believe will appeal to such target customers.

While we occasionally utilize traditional printed media, such as fliers, to advertise directly to potential homebuyers, digital marketing is the primary component of our

marketing strategy, and we have refined our digital sales efforts in recent years through the work of our dedicated digital sales coordinators.

We believe our online marketing efforts have become a key strength of our business, allowing us to

reach a broad range of potential homebuyers at relatively low expense compared to traditional advertising platforms.

The digital marketing methods that we employ include strategic e-marketing efforts to our current database of potential

customers, internet advertising enhanced by search engine marketing and search engine optimization and campaigns and promotions across an array of social media platforms.

Our proficiency with digital marketing and our commitment to meeting the

customer service needs of our customers led to increased use of our virtual home tours beginning in April 2020, which has become an increasingly popular and effective marketing strategy following the outbreak of the COVID-19 virus.

We also strategically open communities in high visibility areas that permit us to take advantage of local traffic patterns.

Model homes play a significant role in our

marketing efforts by not only creating an attractive atmosphere, but also by displaying options and upgrades.

For example, as the official homebuilder of the Jacksonville Jaguars, we maintain a fully decorated model home at the team’s stadium,

which typically attracts between two- and three-thousand fans each game day.

This model home is deconstructed every two or three years and donated to a local charity supporting veterans as part of our commitment to give back to our community.

We sell our homes through our own sales representatives and through independent real estate brokers.

We continuously work to maintain good relationships with independent real

estate brokers in our markets and offer competitive programs to reward these brokers for selling our homes.

Our in-house sales force typically works from sales offices located in model homes close to or in each community.

Sales representatives

assist potential homebuyers by providing them with basic floor plans, price information, development and construction timetables, tours of model homes and the home customization options that we offer.

Sales representatives are trained by us and

generally have prior experience selling new homes in the local market.

Our customer-tailored homebuilding process begins with a broad range of floor plans from which our customers can select.

Our architectural design team modifies these floor

plans over time based on customer buying trends in each of our markets to achieve the best results for our customers while offering a wide range of materials and upgrades to meet the varying preferences of the entry-level, first-time move-up and

other homebuyers that we aim to service.

We believe that every home is as important as the next regardless of price and that everyone deserves the ability to make modifications in order to build a home that suits their needs.

Accordingly, we

offer an array of customizations to our homebuyers in any of our product offerings, including cabinetry, countertops, fixtures, home automation, energy efficiency, appliances and flooring, as well as certain structural modifications.

our customers with the flexibility to select these customizations for their homes in collaboration with our design consultants at our design studios located in each of our markets.

Our growth strategy includes both organic expansion and targeted acquisitions.

Since we began operations, we have organically expanded from Jacksonville, Florida to Savannah,

Denver, Colorado;

Austin, Texas;

Orlando, Florida;

and the greater Washington D.C.

metropolitan (“DC Metro”) area.

We have also demonstrated our ability to grow externally through (i) our expansion into Hilton Head, South Carolina with

our 2019 acquisition of Village Park Homes, (ii) our expansion into Charlotte, Fayetteville, Raleigh, the Triad (consisting of Greensboro, High Point and Winston-Salem, North Carolina) and Wilmington, North Carolina and Myrtle Beach, South

Carolina markets in 2020 with the H&H acquisition (iii) expanded our presence in the Orlando, Florida market in 2021 with the Century acquisition and (iv) expanded our presence in the Texas market in October 2021 with the MHI acquisition.

MHI Acquisition

On October 1, 2021, we completed the acquisition of certain assets, rights and properties, and assumed certain liabilities of MHI, including:

(i) single-family residential

home-building;

(ii) model homes;

(iii) acquisition, ownership and licensing of intellectual property (including architectural plans);

(iv) purchasing and reselling homebuilding supplies;

(v) development, construction and sale of condominium units

in Austin, Texas;

(vi) mortgage origination through a mortgage company;

and (vii) title insurance, escrow and closing services through a title company.

The consideration given for the MHI acquisition was (a) cash at the closing in the amount of $471.0 million, subject to customary post-closing adjustments based on the

closing date net asset value of the purchased assets, (b) the assumption of approximately $97.0 million of liabilities, and (c) the future payment of additional consideration of up to 25% of pre-tax net income for up to five periods, the last of

which ends 48 months after the closing, subject to certain minimum pre-tax income hurdles and thresholds and certain overhead expenses.

Refer to Note 2 of the Consolidated Financial Statements reported herein for further discussion on the

purchase price and post-closing adjustments.

We used $20.0 million of cash on hand, proceeds from the sale of the newly-issued convertible preferred stock (“Convertible Preferred Stock”) and from unsecured debt incurred

under the Credit Agreement, to fund the MHI acquisition.

Century Acquisition

Effective as of January 31, 2021, we consummated the first phase of the Century acquisition of Orlando-based homebuilder Century Homes from Tavistock Development Company

(“Tavistock”).

We paid $36.0 million to acquire 134 units under construction and 229 finished lots on which we began construction during 2021;

we will continue to release lots into production throughout 2022.

We funded the entire purchase price of the Century acquisition with cash on hand and borrowings under our Credit Agreement.

H&H Acquisition

On October 5, 2020 we consummated the H&H acquisition and acquired 100% of the membership interests in H&H, thereby acquiring H&H Homes.

We paid $29.5 million in

cash at the closing of the transaction (which was equal to 110% of book equity shown on H&H’s most recent balance sheet), subject to customary purchase price adjustments, and we will pay contingent consideration, if any, payable pursuant to

an “earn out” arrangement.

Such earn out payments, if any, will be payable upon H&H Homes meeting certain financial metrics during the following periods:

(i) the period from the closing of the transaction through December 31, 2020, (ii) the

fiscal years ending December 31, 2021, 2022 and 2023 and (iii) the period from January 1, 2024 through the 48-month anniversary of the closing of the transaction (each such period, an “earn out period”).

We will be entitled to 100% of the pre-tax

income of H&H Homes, inclusive of a 1% of revenue overhead charge, up to a specified threshold for each earn out period (the “earn out threshold”), which earn out thresholds escalate with each subsequent earn out period.

For each earn out

period, the H&H seller will be entitled to 100% of the pre-tax income of H&H Homes above the applicable earn out threshold until the cumulative earn out pre-tax income of H&H Homes for such earn out period has been split 80% to us and

20% to the H&H seller.

Any additional pre-tax income for such earn out period will be allocated 80% to us and 20% to the H&H seller.

We funded a portion of the H&H acquisition with the BOMN Bridge Loan, which we paid off in full in conjunction with the consummation of the IPO and the entry into our

Credit Agreement.

Backlog, Sales and Closings

A new order (or new sale) is reported when a customer has received preliminary mortgage approval and the sales contract has been signed by the customer, approved by us and

secured by a deposit, typically approximately 1-3% of the purchase price of the home.

Our land team routinely underwrites potential lot acquisitions that meet our capital allocation criteria.

Once our land acquisition committee approves a transaction meeting our internal model that requires financing, we will seek a land bank partner.

Our primary operating subsidiary, Dream Finders Homes LLC, periodically enters into land bank arrangements with DF Capital Management, LLC, a Florida limited liability company (“DF Capital”).

Dream Finders Homes LLC owns 49% of the membership interests in DF Capital and a non-affiliated third party owns the remaining 51% of the membership interests in DF Capital.

Sales and Backlog

A new order (“new sale”) is reported when a customer has received preliminary mortgage approval and the sales contract has been signed by the customer, approved by us and secured by a deposit of approximatel y 6% of the purchase price of the home.

These deposits are typically nonrefundable, but each customer situation is evaluated individually.

Net new orders are new orders or sales (gross) for the purchase of homes during the period, less cancellations of existing purchase contracts during the period.

cancellation rate for a given period is calculated as the total number of new (gross) sales purchase contracts canceled during the period divided by the total number of new (gross) sales contracts entered into during the period.

Our cancellation

rate for the year ended December 31, 2021 was 12.2% a decrease of 60.0 bps points when compared to the 12.8% cancellation rate for the year ended December 31, 2020.

The following tables present information concerning our new home sales (net), starts and closings in each of our markets for the years ended December 31, 2021 and 2020:

Year Ended December 31,

Period Over Period

Sales to investors that intend to lease the homes are recognized when the Company has received a nonrefundable deposit.

Net new orders are sales of homes during the period less cancellations of existing sales contracts during the period.

Our cancellation rate for a given period is calculated as the total number of new sales contracts cancelled during the period, divided by the total number of new gross sales contracts entered into during the period.

Our cancellation rate for the year ended December 31, 2022 was 21.5%, an increase of 930 basis points when compared to the 12.2% cancellation rate for the year ended December 31, 2021.

During the third and fourth quarters of 2022, demand tightened in response to increases in mortgage rates.

The market's reaction to the deteriorating economic conditions negatively affected net new orders and continues to have an impact on the cancellation rate for the Company.

The cancellation rate for 2022 is within the Company’s pre-pandemic range of historical cancellation rates.

The following table presents information concerning our net sales (“net new orders”), starts and closings in each of our homebuilding segments for the years ended December 31, 2022 and 2021:

Year Ended December 31, Period Over Period

Percent Change

Segment Sales Starts Closings Sales Starts Closings Sales

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 %

(1) Austin, Savannah, Village Park Homes, Active Adult and Custom Homes.

1,566 1,884 2,229 579 512 689 170 % 268 % 224 %

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 %

(1) MHI was acquired on October 1, 2021.

(2) Austin, DC Metro, Savannah, GA, Hilton Head and Bluffton, S.C., Active Adult and Custom Homes.

Austin refers to legacy DFH operations exclusive of MHI.

Segment Reporting to our consolidated financial statements for further explanation of our reportable segments.

(2) Results for The Carolinas only includes sales, starts and closings from the H&H acquisition date of October 1, 2020.

(3) Results for Texas only include sales, starts and closings from the MHI acquisition date of October 1, 2021.

Our “backlog” consists of homes under a purchase contract that are signed by homebuyers who have met the preliminary criteria to obtain mortgage financing, but such home

sales to end buyers have not yet closed.

Ending backlog represents the number of homes in backlog from the previous period plus the number of net new orders generated during the current period minus the number of homes closed during the current

See Note 9, Segment Reporting, to our consolidated financial statements for further explanation of our reportable segments.

Our backlog consists of homes under a purchase contract that are signed by homebuyers who have met the preliminary criteria to obtain mortgage financing, but such home sales to end buyers have not yet closed, or that are signed by third-party investors who have placed a nonrefundable deposit.

Ending backlog represents the number of homes in backlog from the previous period, plus the number of net new orders generated during the current period, minus the number of homes closed during the current period.

Our backlog at any given time will be affected by cancellations and the number of our active communities.

Homes in backlog are generally closed within one to six months, although we may experience cancellations of purchase contracts at

any time prior to such home closings.

Homes in backlog are generally closed within one to nine months, although we may experience cancellations of purchase contracts at any time prior to such home closings.

Sustained supply chain challenges during 2022 could have temporarily elongated cycle times impacting the Company's backlog turnover rate.

In addition, certain circumstances may increase cycle times, including sales to investors that intend to lease the homes may be delivered over a longer duration, as well as pre-sales in new communities.

It is important to note that net new orders, backlog and cancellation metrics are operational, rather than accounting data and should be used only as a general gauge to evaluate performance.

Backlog may be

impacted by customer cancellations for various reasons that are beyond our control, and, in light of our minimal required deposit, there is little negative impact to the potential homebuyer from the cancellation of the purchase contract.

The following table presents information concerning our new orders, cancellation rate and ending backlog for the periods and as of dates set forth below:

The following tables present information concerning our net new orders, cancellation rate and ending backlog for the periods and as of dates set forth below:

Year Ended December 31,

4 unchanged sentences

Ending Backlog - Value (in thousands) $ 2,502,564 $ 2,913,170

(1) Approximately 1,070 of the homes in our backlog are expected to be delivered in 2024 and beyond.

Products and Customers

Homes, Homebuyers and Active Communities

We offer a range of single-family homes in each of our markets, with a core focus on entry-level and first-time move-up homebuyers, but we also provide offerings for second-time move-up homebuyers.

Our homebuilding business is driven by our commitment to building high quality homes at affordable prices in attractive locations while delivering excellent customer service.

Our customers enjoy the flexibility of personalizing our desirable open floor plans with a wide array of finishes and upgrades to best fit their distinctive tastes and unique needs.

Price points in our markets vary for entry-level, first-time move-up and second-time move-up homebuyers.

We define an active community as a community where we have recorded five net new orders or a model home is currently open to customers.

A community is no longer active when we have less than five home sites to sell to customers.

Active community count is an important metric to forecast future net new orders for our business.

As of December 31, 2022, we had 206 active communities, a year over year increase of 1 community when compared to our 205 active communities as of December 31, 2021.

Average monthly sales per active community for the year ended December 31, 2022 were 1.6, a decrease of 2.4, or 60%, from 4.0 average monthly sales per active community during the year ended December 31, 2021.

Our active community count and average monthly sales per active community excludes communities under the Company's built-for-rent contracts, as all sales to investors occur at one point in time and these communities would have no home sites remaining to sell.

Title Insurance Business

Our wholly owned subsidiary, DF Title, is a title insurance agency licensed in multiple states that provides closing, escrow and title insurance services.

Our philosophy is to have a systematic approach to workflow management with a high level of care and communication during the closing process, thereby delivering an exceptional experience to each customer.

DF Title primarily closes residential real estate transactions, including new home construction and resale and refinancing transactions, and handles no commercial real estate closings.

DF Title operates in Colorado, Florida, Georgia, North Carolina and South Carolina.

DF Title’s staff includes attorneys, state licensed title agents, escrow officers and experienced support staff with over 200 years of collective closing experience.

Closing, escrow and title insurance is primarily regulated at a state level, requiring that operations be conducted by skilled attorneys and/or licensed title insurance agents.

Expansion of title operations into other markets is ongoing and consideration of new markets is driven by unit volume, average sales price for homes sold and state-level legal considerations.

Mortgage Banking Business

Our mortgage banking joint venture, Jet LLC, offers conforming and non-conforming mortgage financing to our homebuyers and helps us more effectively convert backlog into home closings.

Jet LLC also provides mortgage financing to customers purchasing homes from third-party sellers.

The loan officers of Jet LLC assist customers in identifying various loan options that meet the customers’ home financing goals.

Jet LLC has historically captured 60-70% of loan originations.

We own a 49.9% interest in Jet LLC, and our joint venture partner, FBC Mortgage, LLC, an Orlando-based mortgage lender, owns the remaining 50.1% interest and performs a number of back office functions, such as accounting, compliance and secondary marketing activities.

We believe Jet LLC provides a distinct competitive advantage relative to homebuilders without holistic mortgage solutions for clients, as many of our homebuyers seek an integrated home buying experience.

Jet LLC allows us to use mortgage finance as an additional sales tool, enhancing our customer experience.

Jet LLC prequalifies buyers early in the home buying process, which supports our ability to ensure timely closings.

Additionally, the integrated sales approach we are able to employ with Jet LLC provides increased transparency into the buyer’s ability to close, allowing us to efficiently convert our sales backlog into closings.

We believe that Jet LLC will continue to be a meaningful source of incremental revenues and profitability for us.

For the year ended December 31, 2022, Jet LLC originated and funded 2,370 home loans with an aggregate principal amount of approximately $879 million as compared to 2,256 home loans with an aggregate principal amount of approximately $729 million for the year ended December 31, 2021.

For the years ended December 31, 2022 and 2021, respectively, Jet LLC had net income of approximately $12 million and $13 million.

Our interest in Jet LLC is accounted for under the equity method and is not consolidated in our consolidated financial statements, as we do not control and are not deemed the primary beneficiary of the variable interest entity (“VIE”).

See N ote 1, Nature of Business and Significant Accounting Policies, to our consolidated financial statements for a discussion of accounting treatment of VIEs.

Marketing and Sales

We seek to ensure that each customer’s experience exceeds their expectations by focusing on customer satisfaction and providing a unique buying experience.

We provide attentive one-on-one customer service throughout the home buying process, empowering our customers with flexibility to personalize their homes, and actively soliciting feedback from all of our customers.

T he willingness of our customers t o refer friends and family to us as homebuyers is a direct result of customer satisfaction, and we strive to ensure that each of our customers will make such referrals.

While we occasionally utilize traditional printed media to advertise directly to potential homebuyers, digital marketing is the primary component of our marketing strategy, and we have refined our digital sales efforts in recent years through the work of our dedicated digital sales coordinators.

We believe our online marketing efforts have become a key strength of our business, allowing us to reach a broad range of potential homebuyers at a relatively low expense compared to traditional advertising platforms.

The digital marketing methods that we employ include strategic e-marketing efforts to our current database of potential customers, internet advertising enhanced by search engine marketing and search engine optimization, and campaigns and promotions across an array of social media platforms.

Our proficiency with digital marketing an d our commitment to meeting customer service needs led to increased use of our virtual home tours during the COVID-19 pandemic, along with our “Stay Home & Buy a Home” program as another means for customers to safely and efficiently purchase a new home without leaving their current home.

These programs continue to be popular and effective aspects of our marketing strategy.

We also strategically open communities in high visibility areas that allow us to take advantage of local traffic patterns.

Model homes play a significant role in our marketing efforts by not only creating an attractive atmosphere, but by also displaying options and upgrades.

As the official homebuilder of the Jacksonville Jaguars, we maintain a fully decorated model home at the team’s stadium, which attract s thousands of fans ea ch game day.

During 2022, we entered into an agreement with the PGA TOUR to become their Official Homebuilder through 2027.

This strategic alliance provides a national marketing footprint in regions where Dream Finders divisions operate and where high profile, annual PGA TOUR golf tournaments are played.

With the rebranding of our recent homebuilder acquisitions, this partnership allows us to more swiftly and efficiently penetrate these markets and elevate the trust and authenticity of our brand to prospective home buyers.

We sell our homes through our own sales representatives and through independent real estate brokers.

We continuously work to maintain good relationships with independent real estate brokers in our markets and offer competitive programs to reward these brokers for selling our homes.

Our in-house sales force typically works from sales offices located in model homes close to or in each community.

Sales representatives assist potential homebuyers by providing them with floor plans, price information, development and construction timetables, tours of model homes and the home customization options that we offer.

Sales representatives are trained by us and generally have prior experience selling new homes in the local market.

Our customer-tailored homebuilding process begins with a broad range of floor plans from which our customers can select.

Our architectural design team modifies these floor plans over time based on customer buying trends in each of our markets.

The architectural design team also works with our land team to secure lots that allow the building of these floor plans.

We also offer a wide range of materials and upgrades to meet the varying preferences of our customers.

We believe that every home is as important as the next, regardless of price point, and that everyone deserves the ability to build a home that suits their needs.

Accordingly, we offer an array of options to our homebuyers in any of our product offerings, including cabinetry, countertops, fixtures, home automation, energy efficiency, appliances and flooring, as well as certain structural modifications.

We empower our customers with the flexibility to select these customizations for their homes in collaboration with our design consultants at our design studios located in each of our markets.

Customer Relations, Quality Control and Warranty Program

We pay particular attention to the product design process and carefully consider quality and choice of materials in order to attempt to eliminate building deficiencies and reduce warranty expenses.

We require all of our vendors and subcontractors, in connection with our on-boarding process, to execute our standard terms agreement, which includes, among other provisions, work quality standards.

Our on-boarding process also requires all vendors and subcontractors to provide proof of insurance, including liability insurance and workers’ compensation insurance, and include us as an additional insured under such policies.

The quality and workmanship of our subcontractors are monitored in the ordinary course of business by our superintendents and project managers, and we do regular inspections and evaluations of our subcontractors to ensure that our standards are being met.

Our customer service team also performs quality assurance inspections on homes prior to the homebuyer assuming ownership to ensure standards are met.

In addition, local governing authorities in all of our markets require that the homes we build pass a variety of inspections at various stages of construction, including a final inspection in which a certificate of occupancy, or its jurisdictional equivalent, is issued.

We maintain professional staff whose role includes providing a positive experience for each customer throughout the pre-sale contract-execution, construction, closing and post-closing periods.

These employees are also responsible for providing after-sales customer service.

Our quality and service initiatives include taking customers on a comprehensive tour of their home prior to closing and using customer survey results to improve our standards of quality and customer satisfaction.

We believe the key metric in our customer surveys is our customers’ willingness to refer us to friends and family.

We are constantly striving to earn a 100% willingness to refer rate in each of our markets and, as a result, our customers’ willingness to refer us is a critical component of the incentive compensation of our construction teams, and, in certain of our divisions, quality control or customer services teams.

We provide each homeowner with product warranties covering workmanship and materials for one year from the time of home closing, and warranties covering structural systems for eight to ten years from the time of closing.

We believe our warranty program meets or exceeds terms customarily offered in the homebuilding industry.

Materials, Procurement and Construction

When constructing our homes, we use various materials and components and are dependent upon building material suppliers for a continuous flow of raw materials.

takes us between 75 and 150 days to construct a four-unit townhome or single-family home in our Dream Series, Designer Series and Platinum Series, and typically longer for our Custom Series.

Our materials are subject to price fluctuations until

construction on a home begins, the point in time in which prices for that particular home are locked via purchase orders.

Such price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor

and supply chain disruptions, international trade disputes and resulting tariffs and increased demand for materials as a result of the improvements in the housing markets where we operate.

See “Management’s Discussion and Analysis of Financial

Condition and Results of Operations—Factors Affecting Our Results of Operations” for additional information.

It typically takes us between 150 and 240 days to construct a single-family home.

The construction period for our custom homes are typically longer.

Our materials are subject to price fluctuations until construction on a home begins, the point in time in which prices for that particular home are locked via purchase orders.

Such price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor and supply chain disruptions, international trade disputes and resulting tariffs, and changes in demand for materials as a result of the housing market conditions where we operate.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations” for additional information.

Our objective in procurement is to maximize efficiencies on local, regional and national levels and to ensure consistent utilization of established contractual arrangements.

We employ a comprehensive procurement program that leverages our size and national presence to achieve attractive cost savings and, whenever possible, to utilize standard products available from multiple suppliers.

We currently determine national

specifications for the majority of our installed products with our distributors.

We currently determine national specifications for the majority of our installed products with our distributors.

This helps us streamline our offerings, maintain service levels and delivery commitments and protect our pricing;

it also allows for no charge or free model home

products and provides a pre-negotiated rebate amount.

it also allows us to receive free model home products and provides for pre-negotiated rebate amounts.

We leverage our volume to negotiate better pricing at a national level from manufacturers as well.

We have extensive experience managing all phases of the construction process.

Although we do not employ our own skilled tradespeople, such as plumbers, electricians and

carpenters, we utilize our relationships with local and regional builder associations to identify reputable tradespeople and actively participate in the management of the entire construction process to ensure that our homes meet our high standard

Although we do not employ our own skilled tradespeople, such as plumbers, electricians and carpenters, we utilize our relationships with local and regional builder associations to identify reputable tradespeople and actively participate in the management of the entire construction process to ensure that our homes meet our high standard of quality.

Each of our divisions has a director, manager or vice president of construction who reports to the division president and oversees one or more area managers, depending on the size of the division.

The area managers are generally

responsible for over a dozen communities, which typically each have a dedicated superintendent who oversees construction in the community by our subcontractors.

As a result of not employing our own construction base, it is not necessary to

purchase and maintain high capital construction equipment.

Our enterprise resource planning system and integrated construction scheduling software allows our superintendents to closely monitor the construction progress of each of our homes and

promptly identify any homes that fall behind our predetermined construction schedules.

The area managers are generally responsible for ten or more communities, which typically each have a dedicated superintendent who oversees construction in the community by our subcontractors.

As a result of not employing our own construction base, it is not necessary to purchase and maintain construction equipment, which requires long-term capital commitments.

Our enterprise resource planning system and integrated construction scheduling software allows our superintendents to closely monitor the construction progress of each of our homes and promptly identify any homes that fall behind our predetermined construction schedules.

Our software also enables our superintendents to monitor the completion of work, which, in turn, expedites payments to our subcontractors.

Our superintendents

are also responsible for making any adjustments to a home before delivery to a purchaser and for after-sales service pursuant to our warranty.

Customer Relations, Quality Control and Warranty Program

We pay particular attention to the product design process and carefully consider quality and choice of materials in order to attempt to eliminate building deficiencies and

reduce warranty expenses.

We require all of our vendors and subcontractors, in connection with our on-boarding process, to execute our standard terms agreement, which includes, among other provisions, work quality standards.

Our on-boarding

process also requires all vendors and subcontractors to provide proof of insurance, including liability insurance and workers’ compensation insurance, and include us as an additional insured under such policies.

The quality and workmanship of our

subcontractors are monitored in the ordinary course of business by our superintendents and project managers, and we do regular inspections and evaluations of our subcontractors to ensure that our standards are being met.

In addition, local

governing authorities in all of our markets require that the homes we build pass a variety of inspections at various stages of construction, including a final inspection in which a certificate of occupancy, or its jurisdictional equivalent, is

We maintain professional staff whose role includes providing a positive experience

for each customer throughout the pre-sale, sale, building, closing and post-closing periods.

These employees are also responsible for providing after-sales customer service.

Our quality and service initiatives include taking customers on a

comprehensive tour of their home prior to closing and using customer survey results to improve our standards of quality and customer satisfaction.

We believe the key metric in our customer surveys is our customers’ willingness to refer us to

friends and family.

teams, and, in certain of our divisions, quality control or customer services teams.

Our willingness to refer rate for the legacy DFH business was 70% and 84% for the year ended December 31, 2021 and 2020, respectively.

The change in the willingness to refer rate is primarily attributable to delays in home construction.

have been driven largely by continued industry-wide shortages of labor and raw materials as a result of the on-going COVID-19 pandemic.

For more information, see “Risk Factors—A shortage of building materials or labor, or increases in materials

or labor costs, could delay or increase the cost of home construction, which could materially and adversely affect us.”

We provide each homeowner with product warranties covering workmanship and materials for one year from the time of closing, and warranties covering structural systems for

eight to ten years from the time of closing and, depending on the size of the warranty claim, we may seek to cover a claim through our general liability insurance policy.

We believe our warranty program meets or exceeds terms customarily offered

in the homebuilding industry.

The subcontractors who perform most of the actual construction of the home also provide customary warranties on workmanship to us.

Our superintendents are also responsible for making any adjustments to a home before delivery and for after-sales service pursuant to our warranty.

Competition and Market Factors

We face competition in the homebuilding industry, which is characterized by relatively low barriers to entry.

Homebuilders compete for, among other things, homebuyers,

desirable lots, financing, raw materials and skilled labor.

Increased competition may prevent us from acquiring attractive lots on which to build homes or make such acquisitions more expensive, hinder our market share expansion or lead to pricing

pressures on our homes that may adversely impact our margins and revenues.

Homebuilders compete for, among other things, homebuyers, desirable lots, financing, raw materials and skilled labor.

Increased competition may prevent us from acquiring attractive lots on which to build homes or make such acquisitions more expensive, hinder our market share expansion or lead to pricing pressures on our homes that may adversely impact our margins and revenues.

Our competitors may independently develop land and construct housing units that are superior or substantially similar to our products.

Because they are or may be

significantly larger, have a longer operating history and/or have greater resources or lower cost of capital than us, they may be able to compete more effectively in one or more of the markets in which we operate or may operate in the future.

also compete with other homebuilders that have longstanding relationships with subcontractors and suppliers in the markets in which we operate or may operate in the future, and we compete for sales with individual resales of existing homes and

with available rental housing.

Because they are or may be significantly larger, have a longer operating history and/or have greater resources or lower cost of capital than us, they may be able to compete more effectively in one or more of the markets in which we operate or may operate in the future.

We also compete with other homebuilders that have longstanding relationships with subcontractors and suppliers in the markets in which we operate or may operate in the future, and we compete for sales with individual resales of existing homes and with available rental housing.

The housing industry is cyclical and is affected by consumer confidence levels, prevailing economic conditions and interest rates.

Other factors that affect the housing

industry and the demand for new homes include:

Other factors that affect the housing industry and the demand for new homes include:

the availability and the cost of land, labor and materials;

2 unchanged sentences

and the availability and interest rates of mortgage finance programs.

Factors” for additional information regarding these risks.

See “Risk Factors” for additional information regarding these risks.

We are dependent upon building material suppliers for a continuous flow of raw materials.

Whenever possible, we attempt to utilize standard products available from multiple

Whenever possible, we attempt to utilize standard products available from multiple sources.

In the past, such raw materials have been generally available to us in adequate supply.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations” for additional information.

In all of our markets, we have historically experienced similar variability in our results of operations and capital requirements from quarter to quarter due to the seasonal

nature of the homebuilding industry.

We generally record higher net new orders in our first and second quarters and record higher home closings to customers in our third and fourth quarters.

As a result, our revenue may fluctuate on a quarterly

basis and we may have higher capital requirements in our second, third and fourth quarters in order to maintain our inventory levels.

As a result of seasonal activity, our quarterly results of operations and financial position at the end of a

particular quarter, especially our first and second quarter, are not necessarily representative of the results we expect at year end.

Our growth strategy includes both organic expansion and targeted acquisitions.

Since we began operations, we have organically expanded from Jacksonville, Florida to Savannah, Georgia;

Denver, Colorado;

Austin, Texas;

Orlando, Florida;

and the greater Washington D.C.

metropolitan area.

We have also demonstrated our ability to grow externally through (i) our expansion into Hilton Head, South Carolina with our 2019 acquisition of Village Park Homes, (ii) our expansion into Charlotte, Fayetteville, Raleigh, Piedmont Triad and Wilmington, North Carolina and Myrtle Beach, South Carolina markets in October 2020 with the H&H acquisition, (iii) our expansion within the Orlando, Florida market in January 2021 with the Century acquisition and (iv) our expansion within the Texas market in October 2021 with the MHI acquisition.

Refer to Note 2, Business Combinations of the Consolidated Financial Statements reported herein for further discussion of our acquisitions.

In all of our markets, we have historically experienced similar variability in our results of operations and capital requirements from quarter to quarter due to the seasonal nature of the homebuilding industry.

We generally sell more homes in the first and second quarters and close more homes in our third and fourth quarters.

As a result, our revenue may fluctuate on a quarterly basis.

Additionally, we generally have higher capital requirements in our second and third quarters in order to maintain our inventory levels.

As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular quarter are not necessarily representative of the results we expect at year-end.

We expect this seasonal pattern to continue in the long-term.

Governmental Regulation and Environmental, Health and Safety Matters

We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction and

similar matters, which impose restrictive zoning and density requirements in order to limit the number of homes that can eventually be built within the boundaries of a particular area.

Projects that are not entitled may be subjected to periodic

delays, changes in use, less intensive development or elimination of development in certain specific areas due to government regulations.

We may also be subject to periodic delays or may be precluded entirely from developing in certain

communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future.

Local and state governments also have broad discretion regarding the imposition of development fees for projects in their

jurisdiction.

unforeseen health, safety and welfare issues, which can further delay these projects or prevent their development.

Governmental Regulation and Environmental Matters

We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction and similar matters, which impose restrictive zoning and density requirements in order to limit the number of homes that can eventually be built within the boundaries of a particular area.

Projects that are not entitled (held by our land bank financing partners), may be subjected to periodic delays, changes in use, less intensive development or elimination of development in certain specific areas due to government regulations.

Local and state governments also have broad discretion regarding the imposition of development fees for projects in their jurisdiction.

Projects for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process and can also be impacted adversely by unforeseen health, safety and welfare issues, which can further delay these projects or prevent their development.

We are also subject to a variety of local, state, federal and other statutes, ordinances, rules and regulations concerning the environment, health and safety.

Shortly after

taking office in January 2021, President Biden issued a series of executive orders designed to address climate change and requiring agencies to review environmental actions taken by the Trump administration, as well as a memorandum to departments

and agencies to refrain from proposing or issuing rules until a departmental or agency head appointed or designated by the Biden administration has reviewed and approved the rule.

These executive orders may result in the development of additional

regulations or changes to existing regulations.

The particular environmental requirements that apply to any given homebuilding site vary according to the site’s location, its environmental conditions, the presence or absence of endangered plants

or species or sensitive habitats and the present and former uses of the site, as well as nearby or adjoining properties.

Environmental requirements and conditions may result in delays, may cause us to incur substantial compliance and other costs

and can prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.

From time to time, the U.S.

Environmental Protection Agency (the “EPA”) and similar federal, state or local agencies review land

developers’ and homebuilders’ compliance with environmental requirements and may levy fines and penalties, among other sanctions, for failure to strictly comply with applicable environmental requirements or impose additional requirements for

future compliance as a result of past failures.

Any such actions taken with respect to us may increase our costs and result in delays.

Further, we expect that increasingly stringent requirements will be imposed on land developers and homebuilders

in the future.

Environmental requirements can also have an adverse impact on the availability and price of certain raw materials such as lumber.

Under various environmental requirements, current or former owners of real estate, as well as certain other categories of parties, may be required to investigate and clean up

hazardous or toxic substances or petroleum product releases and may be held strictly and/or jointly and severally liable to a governmental entity or to third parties for related damages, including property damage or bodily injury, and for

investigation and cleanup costs incurred by such parties in connection with the contamination.

We could also be held liable if the past or present use of building materials or fixtures that contain hazardous materials results in damages, such as

property damage or bodily injury.

A mitigation plan may be implemented during the construction of a home if a cleanup does not remove all contaminants of concern or to address a naturally occurring condition, such as methane or radon.

homebuyers may not want to purchase a home that is, or that may have been, subject to a mitigation plan.

In addition, in those cases where an endangered species is involved, environmental requirements can result in the delay or elimination of

development in identified environmentally sensitive areas.

Jet LLC, our mortgage banking joint venture, and DF Title, our title insurance agency and wholly owned subsidiary, are mutually and independently regulated by local, state

and federal laws, statutes, ordinances, administrative rules and other regulations.

The mortgage lending company and title agency are required to conform their policies, procedures and practices to the applicable regulatory matters affecting

their businesses.

Association, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”).

Our title agency’s practices regarding closing, escrow and issuance of title insurance are subject to rules established,

in part, by states’ insurance regulators and underwriters’ guidelines.

Both industries are affected by rules mandated by the Consumer Financial Protection Bureau, such as the Truth in Lending Act and the Real Estate Settlement Procedures Act

Integrated Disclosure, governing matters like loan applications, disclosing figures and loan materials, closing, funding and issuance of title insurance policies.

Environmental requirements that apply to any given homebuilding site vary according to the site’s location, its environmental conditions, the presence or absence of endangered plants or species or sensitive habitats and the present and former uses of the site, as well as nearby or adjoining properties.

Refer to “Item 1A.

Risk Factors ” for further discussion on risks related to governmental regulation and environmental matters.

Jet LLC, our mortgage banking joint venture, and DF Title, our title insurance agency and wholly owned subsidiary, are mutually and independently regulated by local, state and federal laws, statutes, ordinances, administrative rules and other regulations.

The mortgage lending company and title agency are required to conform to their policies, procedures and practices to the applicable regulatory matters affecting their businesses.

For example, our lending joint venture maintains certain requirements for loan origination, servicing and selling and its participation in federal lending programs, such as FHA, VA, USDA, Government National Mortgage Association, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”).

Our title agency’s practices regarding closing, escrow and issuance of title insurance are subject to rules established, in part, by states’ insurance regulators and underwriters’ guidelines.

Both industries are affected by rules mandated by the Consumer Financial Protection Bureau, such as the Truth in Lending Act and the Real Estate Settlement Procedures Act Integrated Disclosure, governing matters like loan applications, disclosures and loan materials, closing, funding and issuance of title insurance policies.

Environmental, Social, and Corporate Governance (“ESG”)

During 2022, we made significant progress on our ESG initiatives, which included conducting an ESG assessment to identify and prioritize the risks and opportunities that are relevant to the Company and our stakeholders.

We are in the process of developing a strategy for measurement, mitigation, monitoring and reporting.

The key topics we plan to focus on include, but are not limited to:

• Home energy efficiency, quality and safety

• Home affordability

• Employee well-being and talent retention

• Diversity, equity and inclusion

• Board oversight over ESG policies

Human Capital Resources

As of December 31, 2021, we had 1,212 full-time employees, including 511 as a result of our acquisition of MHI on October 1, 2021.

Of our full-time employees, 60 worked in

our corporate office, 17 in divisional management and 293 in sales.

None of our employees are represented by a labor union or covered under a collective bargaining agreement, and we have not experienced any strikes or work stoppages.

that our relations with our employees are good.

Culture and Objectives

Our human capital resource objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.

We believe that investing in finding and retaining exceptional people is the most important part of our business.

We believe that our connection with our employees is positive and well-regarded.

We value our employees and believe that employee loyalty and enthusiasm are key elements of our operating performance.

In fact, one of our core values is to “Empower employees and instill an

ownership culture.” Our human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.

We offer our employees a wide array of company-paid benefits,

which we believe are competitive relative to others in our industry.

We utilize subcontractors and tradespeople to perform the construction of our homes.

We value our relationships with our subcontractors and tradespeople and believe our

relations with our subcontractors and tradespeople are good.

Our corporate headquarters are located in Jacksonville, Florida and consist of approximately 45,000 square feet of office space.

In 2018, after completing the construction of

our corporate office building, we sold the property and entered into a lease with the buyer for a 15-year initial term, expiring in 2033, with renewal options.

We also lease local offices in most of the markets in which we conduct homebuilding

We believe that our current facilities are adequate to meet our current needs.

See “—Land Acquisition Strategy and Development Process—Owned and Controlled Lots” for a summary of the other properties that we owned and controlled as of

December 31, 2021.

We value our network of subcontractors and tradespeople and believe our relationships with them are excellent.

Compensation and Benefits

We offer our employees compensation and an array of company-paid benefits, which we believe are competitive relative to others in our industry.

Additionally, we offer retirement savings in the form of a 401(k) plan.

The 401(k) plan includes matching safe harbor contributions equal to 100% of the first one percent of eligible compensation and 50% of the next five percent of eligible compensation.

The Company may also make additional discretionary profit-sharing contributions.

Health and Safety

The health and safety of our employees and subcontractors is our top priority.

We are committed to continuously evaluating and implementing health and safety guidelines throughout the entirety of our operations to ensure the well-being of all.

We provide an easily accessible safety manual to all employees, and promote an open environment for employees to report any concerns that may impact their health or safety.

Code of Conduct/Diversity and Inclusion

Employees of the Company are required to comply with the Standards of Conduct set forth by the Company, including policies related to anti-harassment and anti-discrimination.

The Company has made an ethics hotline available to all associates of the Company where they are able to report any violations of the Standards of Conduct, including violations related to the harassment or discrimination of any associate.

Furthermore, we intend to implement a company-wide anti-harassment training program beginning in 2023.

As of December 31, 2022, we had 1,170 full-time employees.

Of our full-time employees, 88 worked in our corporate office, 24 in divisional management and 263 in sales.

None of our employees are represented by a labor union or covered under a collective bargaining agreement, and we have not experienced any strikes or work stoppages.

Available Information

Dream Finders Homes, Inc.

is a Delaware corporation incorporated on September 11, 2020.

We make available, as soon as reasonably practicable, on our website, www.dreamfindershomes.com, all of our reports required to be filed with the Securities and Exchange Commission (“SEC”).

These reports can be found on the “Investor Relations” page of our website under “Financials & Filings—SEC Filings” free of charge and include our annual and quarterly reports on Form 10-K and 10-Q, respectively (including related filings in XBRL format), current reports on Form 8-K, beneficial ownership reports on Forms 3, 4, and 5, proxy statements and amendments to such reports.

Our SEC filings are also available to the public on the SEC’s website at www.sec.gov.

We are a Delaware corporation that incorporated on September 11, 2020.

Our principal executive offices are located at 14701 Philips Highway, Suite 300, Jacksonville, Florida 32256, and our telephone number is (904)-644-7670.

We make available, as soon as reasonably practicable, on our website, www.investors.dreamfindershomes.com ,

all of our reports required to be filed with the Securities and Exchange Commission (“SEC”).

These reports can be found on the “Investor Relations” page of our website under “SEC Filings” and include our annual and quarterly reports on Form

10-K and 10-Q, respectively (including related filings in XBRL format), current reports on Form 8-K, beneficial ownership reports on Forms 3, 4, and 5, proxy statements and amendments to such reports.

Our SEC filings are also available to the

public on the SEC’s website at www.sec.gov .

In addition to our SEC filings, our corporate governance documents, including our Corporate Governance Guidelines and Code of Business Conduct and Ethics, are available on the “Investor

Relations” page of our website under “Governance—Documents & Charters” at https://investors.dreamfindershomes.com/corporate-governance/governance-overview .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business