Dream Finders Homes, Inc.

Previous wording

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

Current wording

The most significant challenge facing homebuyers across our markets continues to be affordability, especially at entry-level price points, as persistently elevated mortgage interest rates and broader macroeconomic uncertainty pressure consumer confidence. To address this, we have continued to align our product offerings and pricing to current market conditions and drive sales activity through targeted incentives, including mortgage rate buydowns.

Previous wording

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

Current wording

These measures have weighed on margins and profitability, and may continue to do so in the near term as we navigate the balance between pricing, incentives and sales pace in a competitive and evolving environment. Demand across our communities remains particularly sensitive to fluctuations in mortgage interest rates and broader economic conditions.

Previous wording

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

Current wording

Our focus remains on advancing our land-light strategy, enhancing operational efficiencies and delivering homes that address customer needs and set us apart in our markets. Although longer-term housing fundamentals remain favorable, including constrained supply, near-term results may continue to be shaped by macroeconomic conditions and interest rate movements.

Previous wording

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

Current wording

(1)Represents amounts within our corporate component.

Previous wording

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

Current wording

The following tables summarize home closings and average sales price (“ASP”) of homes closed by homebuilding segment and active communities, for and as of the periods indicated, respectively:

Previous wording

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

Current wording

The following table presents income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the periods indicated:

Previous wording

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

Current wording

Homebuilding Revenues. The decrease in homebuilding revenues was primarily attributable to a lower consolidated ASP of homes closed, which decreased 9%, partially offset by lower sales incentives as a percentage of homebuilding revenues, which decreased by 77 basis points (“bps”), or 8%, when comparing the three months ended June 30, 2026 to the three months ended June 30, 2025, as well as changes in geographic and product mix during the period. This reduction in homebuilding revenues was partially offset by an increase in home closings of 58 homes, or 3%, for the three months ended June 30, 2026 to 2,290 from 2,232 home closings for the three months ended June 30, 2025. The Mid-Atlantic segment had an increase of 115 closings with an ASP of homes closed of $372,812, which was the lowest homebuilding segment ASP of homes closed, and the Midwest segment had a decrease of 104 closings with an ASP of homes closed of $514,341, which was the highest homebuilding segment ASP of homes closed.

Previous wording

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

Current wording

Homebuilding Gross Margin. The lower homebuilding gross margin was primarily due to the decrease in consolidated ASP of homes closed for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025. The decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the three months ended June 30, 2026 and 2025 was primarily attributable to higher land and financing costs, partially offset by direct cost reductions and cycle-time improvements.

Previous wording

Southeast. Our Southeast segment homebuilding revenues for the three months ended March 31, 2026 were $273 million, a decrease of $35 million, or 11%, from $308 million for the three months ended March 31, 2025. This revenue contraction was primarily driven by a decrease in home closings of 73, or 11%, as well as a 2% decrease in the ASP of homes closed. Homebuilding gross margin percentage was 15.8% for the three months ended March 31, 2026, representing a decrease of 370 bps, or 19%, when compared to the three months ended March 31, 2025. The decrease in homebuilding gross margin percentage was mostly the result of higher land and financing costs, partially offset by direct cost reductions.

Current wording

Southeast. Our Southeast segment homebuilding revenues for the three months ended June 30, 2026 were $388 million, an increase of $20 million, or 6%, from $368 million for the three months ended June 30, 2025. This growth was primarily driven by an increase in home closings of 47, or 6%, and higher revenue from percentage of completion contracts where we build homes on buyer-owned land, partially offset by a 2% decrease in the ASP of homes closed. Homebuilding gross margin percentage was 14.2% for the three months ended June 30, 2026, representing a decrease of 370 bps, or 21%, when compared to the three months ended June 30, 2025. The decrease in homebuilding gross margin percentage was mostly the result of higher land and financing costs, partially offset by direct cost reductions.

Previous wording

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

Current wording

Mid-Atlantic. Our Mid-Atlantic segment homebuilding revenues for the three months ended June 30, 2026 were $264 million, a decrease of $11 million, or 4%, from $275 million for the three months ended June 30, 2025. This decline in revenue was primarily driven by a decrease in ASP of homes closed of $71,759, or 16%, as well as lower revenue from percentage of completion contracts where we build homes on buyer-owned land, and was largely offset by an increase in home closings of 115, or 19%. The reduction in ASP was driven by higher use of sales incentives as a percentage of homebuilding revenues, which increased by 133 bps, or 30%, when compared to the three months ended June 30, 2025, as well as a higher relative and absolute number of built-for-rent closings with lower ASPs. Homebuilding gross margin percentage was 14.6% for the three months ended June 30, 2026, representing a decrease of 330 bps, or 18%, when compared to the three months ended June 30, 2025. The reduction in homebuilding gross margin percentage was mainly due to increased sales incentives, as well as land and financing costs, partially offset by direct cost reductions and cycle time improvements.

Previous wording

Midwest. Our Midwest segment homebuilding revenues for the three months ended March 31, 2026 were $332 million, a decrease of $92 million, or 22%, from $424 million for the three months ended March 31, 2025. This decrease was primarily due to a decrease in ASP of homes closed of $55,539, or 10%, as well as lower home closings of 87, or 12%. The decline in ASP was mostly driven by higher use of sales incentives as a percentage of homebuilding revenues, which increased by 160 bps, or 15%, when compared to the three months ended March 31, 2025. Additionally, ASP was impacted by changes in product mix, including the strategic introduction of lower-priced offerings in 2025, particularly in our Texas markets, which were not yet fully reflected in the results for the three months ended March 31, 2025. Homebuilding gross margin percentage was 12.6% for the three months ended March 31, 2026, representing a decrease of 510 bps, or 29%, when compared to the three months ended March 31, 2025. The reduction in homebuilding gross margin percentage was primarily due to higher sales incentives and changes in product mix, as well as an increase in land and financing costs.

Current wording

Midwest. Our Midwest segment homebuilding revenues for the three months ended June 30, 2026 were $355 million, a decrease of $102 million, or 22%, from $457 million for the three months ended June 30, 2025. This decrease was primarily due to lower home closings of 104, or 13%, as well as a decrease in ASP of homes closed of $39,648, or 7%. The decline in ASP was mostly driven by changes in product mix, including the strategic introduction of lower-priced offerings in 2025, particularly in our Texas markets, which were not yet fully reflected in the results for the three months ended June 30, 2025. Additionally, strategic lot sales within the segment were lower by $17 million when compared to the three months ended June 30, 2025. Homebuilding gross margin percentage was 14.0% for the three months ended June 30, 2026, representing a decrease of 60 bps, or 4%, when compared to the three months ended June 30, 2025. The reduction in homebuilding gross margin percentage was primarily due to increased land and financing costs, largely offset by direct cost reductions.

Previous wording

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

Current wording

Selling, General and Administrative Expense. The dollar decrease in Homebuilding SG&A was primarily driven by lower compensation cost of $9 million, mostly from reductions commensurate with financial results. $5 million of the decrease in compensation costs were attributable to our Midwest segment. Homebuilding SG&A as a percentage of homebuilding revenues was 12.4% for the three months ended June 30, 2026, an increase of 20 bps, or 2%, when compared to the three months ended June 30, 2025. The percentage increase in Homebuilding SG&A was primarily attributable to reduced absorption per active community, as well as increased investments in technology and growth initiatives.

Previous wording

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

Current wording

Income Before Taxes Of Homebuilding Operations. The decrease in income before taxes of homebuilding operations during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 was primarily attributable to the reduction in homebuilding revenues, the decrease in gross margin, the change in contingent consideration income and the increase in Homebuilding SG&A as a percentage of homebuilding revenues, all explained above.

Previous wording

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

Current wording

Other Expense, Net. The decrease in other expense, net for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily due to $7 million of purchase price adjustments related to the Crescent acquisition, which were recognized outside of the measurement period during the first quarter of 2025.

Previous wording

As of March 31, 2026 and December 31, 2025, our lot deposits for finished lot option and land bank option contracts were $534 million and $545 million, respectively. As of March 31, 2026 and December 31, 2025, we controlled 60,629 and 63,121 lots under finished lot option and land bank option contracts, respectively. The risk of loss related to finished lot and land bank option deposits and related fees was $792.6 million and $773.4 million as of March 31, 2026 and December 31, 2025, respectively. Risk of loss includes the lot deposits noted above, which are reported as such on the condensed consolidated balance sheet, pre-acquisition land costs, which include due diligence costs, lot option fees and property taxes, which are included in inventories on the condensed consolidated balance sheet, and any applicable termination fees.

Current wording

As of June 30, 2026 and December 31, 2025, our lot deposits for finished lot option and land bank option contracts were $502 million and $545 million, respectively. As of June 30, 2026 and December 31, 2025, we controlled 54,091 and 63,121 lots under finished lot option and land bank option contracts, respectively. The risk of loss related to finished lot and land bank option deposits and related fees was $812 million and $773 million as of June 30, 2026 and December 31, 2025, respectively. Risk of loss includes the lot deposits noted above, which are reported as such on the Condensed Consolidated Balance Sheets, pre-acquisition land costs, which include due diligence costs, lot option fees and property taxes, which are included in inventories on the condensed consolidated balance sheet, and any applicable termination fees.

Previous wording

The following table presents our controlled lots through option contracts by homebuilding segment as of March 31, 2026 and December 31, 2025:

Current wording

The following table presents our controlled lots through option contracts by homebuilding segment as of the periods indicated:

Previous wording

(2)As of March 31, 2026 and December 31, 2025, we had 252 and 731 controlled lots under built-for-rent contracts, respectively.

Current wording

(2)As of June 30, 2026 and December 31, 2025, we had 320 and 731 controlled lots under built-for-rent contracts, respectively.

Previous wording

A community becomes active once the model is completed or the community has its fifth net sale. A community becomes inactive when it has fewer than five units remaining to sell. Ending active community count is an important metric to forecast future net sales for our business. As of March 31, 2026, we had 332 active communities, an increase of 74 communities, or 29%, as compared to 258 active communities as of March 31, 2025. As of March 31, 2026, the Company had 1,347 completed quick move-in ready homes, which represents approximately 4 spec homes per ending active community.

Current wording

A community becomes active once the model is completed or the community has its fifth net sale. A community becomes inactive when it has fewer than five units remaining to sell. Ending active community count is an important metric to forecast future net sales for our business. As of June 30, 2026, we had 353 active communities, an increase of 82 communities, or 30%, as compared to 271 active communities as of June 30, 2025. As of June 30, 2026, the Company had 1,004 completed quick move-in ready homes, which represents approximately 3 spec homes per ending active community.

Previous wording

Our active community count excludes communities under built-for-rent contracts, as all sales to third-party investors occur at one point in time and these communities would have no homesites remaining to sell. As of March 31, 2026, we had 12 communities delivering closings under built-for-rent contracts, as compared to 5 communities as of March 31, 2025.

Current wording

Our active community count excludes communities under built-for-rent contracts, as all sales to third-party investors occur at one point in time and these communities would have no homesites remaining to sell. As of June 30, 2026, we had 10 communities delivering closings under built-for-rent contracts, as compared to 7 communities as of June 30, 2025.

Previous wording

The following table presents information concerning our net sales, starts and closings in each of our homebuilding segments for the three months ended March 31, 2026 and 2025:

Current wording

The following table presents information concerning our net sales, starts and closings in each of our homebuilding segments for the periods indicated:

Previous wording

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

Current wording

(2)Excluding built-for-rent activity, net sales in the Mid-Atlantic segment increased 17% when comparing the three months ended June 30, 2026 to the three months ended June 30, 2025.

Previous wording

The following table presents information concerning our backlog in number of homes, ASP and aggregate value (in thousands) for our homebuilding segments as of the dates set forth below:

Current wording

The following table presents information concerning our backlog in number of homes, ASP and aggregate value (in thousands) for our homebuilding segments as of the periods indicated:

Previous wording

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

Current wording

Backlog of sold homes as of June 30, 2026 was 2,319 homes valued at approximately $1.2 billion based on ASP, a decrease of 194 homes and $47 million in value, or 8% and 4%, respectively, from 2,513 homes valued at approximately $1.2 billion as of June 30, 2025. Approximately 213 of the homes in our backlog are expected to be delivered in 2027 and beyond. The overall decrease in backlog was reflective of the cumulative impact of constrained sales activity in prior periods, and, to a lesser extent, fewer built-for-rent contracts in backlog, which outpaced the increase in net sales during the current period. Our backlog is primarily comprised of spec homes. Spec homes typically result in quicker closings and turnover of the backlog within the same reporting period.

Previous wording

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

Current wording

Mid-Atlantic. Backlog for the Mid-Atlantic segment as of June 30, 2026 was 694 homes, a decrease of 118 from 812 homes as of June 30, 2025. The decrease in backlog from prior year was primarily attributable to the cumulative effect of constrained sales activity in prior periods, as well as increased built-for-rent closings.

Previous wording

Midwest. Backlog for the Midwest segment as of March 31, 2026 was 562 homes, a decrease of 292 from 854 homes as of March 31, 2025. The decrease from prior year was mostly a result of the continued constrained sales environment, slightly offset by higher net sales relative to closings.

Current wording

Midwest. Backlog for the Midwest segment as of June 30, 2026 was 609 homes, a decrease of 94 from 703 homes as of June 30, 2025. The decrease from prior year was mostly a result of the continued constrained sales environment, slightly offset by higher net sales relative to closings.

Previous wording

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

Current wording

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

Previous wording

Our cancellation rate for the three months ended March 31, 2026 was 7.5%, an improvement of 420 bps when compared to the 11.7% cancellation rate for the three months ended March 31, 2025. The improvement is partly attributable to the higher number of spec sales contracts, which have shorter closing cycles, typically resulting in lower cancellations when compared to pre-sold home sales contracts.

Current wording

Our cancellation rate for the three months ended June 30, 2026 was 11.1%, an improvement of 290 bps when compared to the 14.0% cancellation rate for the three months ended June 30, 2025. Our cancellation rate for the six months ended June 30, 2026 was 9.3%, an improvement of 350 bps when compared to the 12.8% cancellation rate for the six months ended June 30, 2025. The improvement is partly attributable to the higher number of spec sales contracts, which have shorter closing cycles, typically resulting in lower cancellations when compared to pre-sold home sales contracts.

Previous wording

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

Current wording

The following tables present selected financial information and supplemental data for our Financial Services segment for the periods indicated (dollars in thousands, unless otherwise indicated):

Previous wording

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

Current wording

Mortgage Banking. Mortgage revenues for the three months ended June 30, 2026 increased to $20 million from $18 million for the three months ended June 30, 2025. Financial services income before taxes related to mortgage banking for the three months ended June 30, 2026 was $10 million, an increase of $3 million, or 43%, from $7 million for the three months ended June 30, 2025. These increases were primarily due to continued execution efficiency and benefits from implemented hedging strategies.

Previous wording

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

Current wording

Title and Other Services. Title and other services revenues for the three months ended June 30, 2026 increased to $36 million from $33 million for the three months ended June 30, 2025. Financial services income before taxes related to title and other services for the three months ended June 30, 2026 was $2 million, a decrease of $3 million, or 60%, from $5 million for the three months ended June 30, 2025. The increase in revenues and decrease in income were mostly due to the April 2025 acquisition of Alliant Title, with the decline in income primarily a result of increased costs associated with growth initiatives.

Previous wording

The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for each of the periods indicated (unaudited and in thousands, except percentages):

Current wording

The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for the periods indicated (unaudited and in thousands, except percentages):

Previous wording

The following table presents a reconciliation of adjusted homebuilding gross margin to the GAAP financial measure of homebuilding gross margin for each of the periods indicated (unaudited and in thousands, except percentages):

Current wording

The following table presents a reconciliation of adjusted homebuilding gross margin to the GAAP financial measure of homebuilding gross margin for the periods indicated (unaudited and in thousands, except percentages):

Previous wording

The following table presents a reconciliation of net homebuilding debt to net capitalization to the GAAP financial measure of total debt to total capitalization as of each of the periods indicated (unaudited and in thousands, except percentages):

Current wording

The following table presents a reconciliation of net homebuilding debt to net capitalization to the GAAP financial measure of total debt to total capitalization as of the periods indicated (unaudited and in thousands, except percentages):

Previous wording

Our principal uses of capital are for lot deposits, lot purchases just-in-time for construction, vertical home construction, operating expenses, the payment of routine liabilities, business acquisitions and the origination of mortgage loans. There were no cash payments for business acquisitions during the three months ended March 31, 2026, and there were cash payments of $112 million for business acquisitions during the three months ended March 31, 2025. Refer to Note 1, Nature of Business and Significant Accounting Policies to the consolidated financial statements within our Annual Report on Form 10-K for the year ended December 31, 2025, for more information.

Current wording

Our principal uses of capital are for lot deposits, lot purchases just-in-time for construction, vertical home construction, operating expenses, the payment of routine liabilities, business acquisitions and the origination of mortgage loans. There were no cash payments for business acquisitions during the six months ended June 30, 2026, and there were cash payments of $183 million for business acquisitions during the six months ended June 30, 2025. Refer to Note 1, Nature of Business and Significant Accounting Policies to the consolidated financial statements within our Annual Report on Form 10-K for the year ended December 31, 2025, for more information.

Previous wording

Cash flows generated by our homebuilding projects can differ materially from our results of operations, as these depend upon the stage in the life cycle of each project. The majority of our projects begin at the land acquisition and development stage when we enter into finished lot option and land bank option contracts by placing a deposit with a land seller, developer or land banker. Our lot deposits are an asset on our Condensed Consolidated Balance Sheets. Early stages in our communities require material cash outflows relating to finished lot purchases from option contracts, permitting, construction and furnishing of model homes, roads, utilities, general landscaping and other amenities, as well as ongoing association fees and property taxes. Except for furnishings of model homes, these costs are capitalized within our inventories and are not recognized as an expense until a home sale closes. As such, we incur significant cash outflows prior to the recognition of revenues and the related cost of sales.

Current wording

Cash flows generated by our homebuilding projects can differ materially from our results of operations, as these depend upon the stage in the life cycle of each project. The majority of our projects begin at the land acquisition and development stage when we enter into finished lot option and land bank option contracts by placing a deposit with a land seller, developer or land banker. Our lot deposits are an asset on our Condensed Consolidated Balance Sheets. Early stages in our communities require material cash outflows relating to finished lot purchases from option contracts, permitting, construction and furnishing of model homes, roads, utilities, general landscaping and other amenities, as well as ongoing association fees and property taxes. Except for furnishings of model homes, these costs are capitalized within our inventories and are not recognized as an expense until a home sale closes. As such, we incur significant cash outflows prior to the recognition of homebuilding revenues and the related homebuilding cost of sales.

Previous wording

The above cash and land-light strategies allow us to maintain an adequate lot supply in our existing markets and support ongoing growth and profitability while significantly de-risking our balance sheet. We continue to operate in geographic regions with consistent increases in demand for new homes and constrained lot and inventory supply compared to population and job growth trends. We intend to continue to reinvest our earnings into our business and focus on expanding our operations. In addition, as the opportunity to purchase finished lots in desired locations becomes increasingly more limited and competitive, we are committed to allocating additional liquidity to land bank deposits on land development projects, as this strategy mitigates the risks associated with holding undeveloped land on our balance sheet, while allowing us to control adequate lot supply in our key markets to support forecasted growth. As of March 31, 2026 and December 31, 2025, our lot deposits related to finished lot option contracts and land bank option contracts were $534 million and $545 million, respectively.

Current wording

The above cash and land-light strategies allow us to maintain an adequate lot supply in our existing markets and support ongoing growth and profitability while significantly de-risking our balance sheet. We continue to operate in geographic regions with consistent increases in demand for new homes and constrained lot and inventory supply compared to population and job growth trends. We intend to continue to reinvest our earnings into our business and focus on expanding our operations. In addition, as the opportunity to purchase finished lots in desired locations becomes increasingly more limited and competitive, we are committed to allocating additional liquidity to land bank deposits on land development projects, as this strategy mitigates the risks associated with holding undeveloped land on our balance sheet, while allowing us to control adequate lot supply in our key markets to support forecasted growth. As of June 30, 2026 and December 31, 2025, our lot deposits related to finished lot option contracts and land bank option contracts were $502 million and $545 million, respectively.

Previous wording

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

Current wording

Our total liquidity was as follows as of the periods indicated (in thousands):

Previous wording

(1)As of March 31, 2026 and December 31, 2025, the borrowing base under the Credit Agreement is reduced by the principal amount of the Senior Notes of $600 million. As of March 31, 2026, the borrowing base calculation included available cash and escrow receivables in excess of $25 million. Refer to Note 3, Debt to our condensed consolidated financial statements for additional information.

Current wording

(1)As of June 30, 2026 and December 31, 2025, the borrowing base under the Credit Agreement is reduced by the principal amount of the Senior Notes of $600 million. As of June 30, 2026 and December 31, 2025, the borrowing base calculation included available cash and escrow receivables in excess of $25 million. Refer to Note 3, Debt to our condensed consolidated financial statements for additional information.

Previous wording

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

Current wording

Net cash used in operating activities was $151 million for the six months ended June 30, 2026, compared to $113 million of net cash used in operating activities for the six months ended June 30, 2025. The change in net cash used in operating activities was mostly due to increased spend on inventories of $130 million, partly due to higher pre-acquisition land costs, as well as higher land and financing costs, a reduction of $7 million in mortgage loans held for the current period, compared to a reduction of $151 million in the prior year, and the decrease in net income of $70 million. These increases in net cash used in operating activities were partially offset by $110 million from reduced expenditures on lot deposits, an increase in accounts payable and accrued expenses of $16 million in the current period, compared to a reduction of $67 million in the prior year, increased customer deposits of $66 million from increased sales activity, and the impact of $32 million of contingent consideration revaluation and payments in the prior period related to an acquisition earnout arrangement that concluded in 2025 that did not repeat in the current period. The change in net cash used in operating activities are net of the effects of our acquisitions in 2025. Refer to Note 2, Acquisitions to our condensed consolidated financial statements for more information.

Previous wording

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

Current wording

Net cash used in investing activities was $17 million for the six months ended June 30, 2026, compared to $197 million of net cash used in investing activities for the six months ended June 30, 2025, mostly attributable to business acquisition related payments during the six months ended June 30, 2025, which did not recur during the current period.