Homebuilding Revenues Up 14%, Home Closings
Up 17%
Return on Participating Equity of
38.9%
Dream Finders Homes, Inc. (the “Company”, “Dream Finders Homes”,
“Dream Finders” or “DFH”) (NYSE: DFH) announced its financial
results for the third quarter ended September 30, 2023.
Third Quarter 2023 Highlights (As Compared to Third Quarter
2022, unless otherwise noted)
- Homebuilding revenues increased 14% to $894 million from $784
million
- Home closings increased 17% to 1,798 from 1,542
- Net new orders increased 38% to 1,535 from 1,110
- Gross margin as a percentage of homebuilding revenues increased
200 basis points to 20.6% from 18.6%
- Adjusted gross margin (non-GAAP) as a percentage of
homebuilding revenues increased 350 basis points to 28.4% from
24.9%
- Pre-tax income increased 27% to $104 million from $82
million
- Net income attributable to DFH increased 9% to $76 million, or
$0.79 per basic share, from $70 million, or $0.71 per basic
share
- Average sales price of homes closed increased 3% to $501,536
from $487,852
- Active community count increased 11% to 219 from 197
- Backlog of sold homes of 5,025 homes, valued at $2.4
billion
- Return on participating equity of 38.9% for the trailing twelve
months ended September 30, 2023, compared to 50.3% for the trailing
twelve months ended September 30, 2022
- Issuance of $300 million in aggregate principal amount of 8.25%
senior unsecured notes used to repay a portion of the outstanding
balance under the revolving credit facility
- Total liquidity, comprised of cash and cash equivalents, and
availability under the revolving credit facility, of $564 million
as of September 30, 2023, compared to $487 million as of December
31, 2022
Management Commentary
Patrick Zalupski, Dream Finders Homes Chairman and CEO, said,
“DFH continued its positive momentum in the third quarter of 2023,
delivering revenue growth of 14%, along with pre-tax income of $104
million and earnings per basic share of $0.79, which increased 27%
and 11%, respectively, compared to the year-ago quarter and are
both third quarter Company records. Home closings of 1,798 and net
new orders of 1,535 increased 17% and 38%, respectively, compared
to the year-ago quarter. Our performance in a difficult interest
rate environment reflects our ability to generate sales and
successfully deliver on our growth strategy. We continue to focus
on managing construction times and increasing inventory
turnover.
Return on equity of 38.9% for the trailing twelve months remains
among the best in the industry. We continued to de-lever the
balance sheet to a net debt to net capitalization ratio of 34.5%,
the lowest in Company history. We generated record operating cash
flows of $408 million over the trailing twelve months, which
resulted in record total available liquidity of $564 million. On
August 22nd, we raised additional liquidity through the first
Company issuance of senior unsecured notes for a total aggregate
principal amount of $300 million, which carries interest at 8.25%
annually and matures August 15, 2028. While we utilized this
capital to pay down our existing line of credit, this was an
important step for the Company in becoming rated and establishing
the foundation for future issuances. The team did an excellent job
making sure we were prepared for this opportunity and I want to
commend their efforts.
Although uncertainty remains for the remainder of 2023 and
beyond, we have set ourselves up for another successful year and
have increased guidance to approximately 6,750 closings for the
fiscal year.”
Third Quarter 2023 Results
Homebuilding revenues in the third quarter of 2023 increased 14%
to $894 million, compared to $784 million in the third quarter of
2022. Home closings increased 17% to 1,798, compared to 1,542 in
the third quarter of 2022. Average sales price (“ASP”) of homes
closed for the third quarter of 2023 increased 3% to $501,536,
compared to $487,852 in the third quarter of 2022.
Homebuilding gross margin percentage in the third quarter of
2023 was 20.6%, compared to 18.6% in the third quarter of 2022. The
gross margin percentage increase was primarily attributable to cost
and cycle time improvement efforts across our segments, partially
offset by increases in cost of funds as well as closing costs.
Adjusted gross margin as a percentage of homebuilding revenues
in the third quarter of 2023 was 28.4%, an increase of 350 basis
points (“bps”) compared to 24.9% in the third quarter of 2022. The
adjusted gross margin percentage improved, despite increased
closing costs, due to proactive cost management efforts and modest
home sales price appreciation. Adjusted gross margin is a non-GAAP
financial measure. See “Reconciliation of Non-GAAP Financial
Measures.”
Selling, general and administrative expense (“SG&A”) in the
third quarter of 2023 increased 16% to $80 million, compared to $69
million in the third quarter of 2022. SG&A as a percentage of
homebuilding revenues in the third quarter of 2023 remained
consistent at 9% compared to the third quarter of 2022.
Net income attributable to DFH in the third quarter of 2023
increased 9% to $76 million, or $0.79 per basic share, from $70
million, or $0.71 per basic share in the third quarter of 2022.
Net new orders in the third quarter of 2023 were 1,535, an
increase of 38% compared to 1,110 net new orders for the third
quarter of 2022. The cancellation rate in the third quarter of 2023
was 14.9%, an improvement of 1,060 bps compared to the third
quarter of 2022 cancellation rate of 25.5%. Despite the mortgage
interest rate reaching a peak in August and remaining elevated
through the end of the third quarter of 2023, net new orders and
the cancellation rate have improved. We believe this is reflective
of our flexible sales incentives, targeted mortgage buydown
programs and availability of affordable quick move-in homes in our
communities.
On August 22, 2023, we successfully completed the first Company
issuance of senior unsecured notes for a total aggregate principal
of $300 million, carrying interest at 8.25% annually and maturing
August 15, 2028. The net proceeds of approximately $294 million
were used to repay a portion of the outstanding balance under our
revolving credit facility.
Our total available liquidity as of September 30, 2023 was $564
million, including $330 million of unrestricted operating cash. In
addition, net debt to net capitalization as of September 30, 2023
was 34.5%, a reduction of 1,980 bps from the end of the third
quarter of 2022. Net debt to net capitalization is defined as the
sum of the senior unsecured notes, net and construction lines of
credit, less cash and cash equivalents (“net debt”), divided by the
sum of net debt, preferred mezzanine equity, and total
stockholders’ equity.
Change in Segments
During the third quarter of 2023, as a result of our continued
growth and strategy to maintain agility, the management of our
homebuilding operations changed from a divisional level to a
regional level. We have updated our reporting to align with this
change in view and there are now four segments comprised of the
following operations:
- Southeast (Jacksonville, Orlando, Savannah, GA, Hilton Head and
Bluffton, SC, Active Adult, Custom Homes)
- Mid-Atlantic (The Carolinas and DC Metro)
- Midwest (Texas and Colorado)
- Financial Services (primarily Jet HomeLoans and Golden Dog
Title and Trust)
Third Quarter 2023 Backlog
As of September 30, 2023, DFH had a backlog of 5,025 homes,
valued at $2.4 billion, compared to the backlog of 5,479 homes,
valued at $2.5 billion as of June 30, 2023. As of September 30,
2023, the ASP in backlog was $479,638 compared to $470,192 as of
June 30, 2023. As of September 30, 2023, approximately 3,177 of the
homes in the Company backlog are expected to be delivered in 2024
and beyond.
The following table shows the backlog units and ASP as of
September 30, 2023 by segment:
As of September 30, 2023
(unaudited)
Backlog:
Units
Average Sales Price
Southeast
2,766
$
406,944
Mid-Atlantic
815
426,143
Midwest
1,444
649,078
Total
5,025
$
479,638
Full Year 2023 Outlook
Based on the progress made year-to-date, Dream Finders Homes is
updating its guidance and now expects approximately 6,750 home
closings for the full year 2023 compared to a previous outlook of
approximately 6,500 homes. Deterioration of general economic
conditions, including interest rate increases and mortgage
availability, as well as any governmental restrictions on land
development, home construction or home sales, or supply chain
challenges, could negatively affect the Company’s ability to
achieve this number of home closings in 2023.
About Dream Finders Homes, Inc.
Dream Finders Homes (NYSE: DFH) is a homebuilder based in
Jacksonville, FL. Dream Finders Homes builds single-family homes
throughout the Southeast, Mid-Atlantic and Midwest, including
Florida, Texas, North Carolina, South Carolina, Georgia, Colorado,
and the Washington, D.C. metropolitan area, which comprises
Northern Virginia and Maryland. Through its financial services
joint ventures, DFH also provides mortgage financing and title
services to homebuyers. Dream Finders Homes achieves its
industry-leading growth and returns by maintaining an asset-light
homebuilding model. For more information, please visit
www.dreamfindershomes.com.
Forward-Looking Statements
This press release includes forward-looking statements regarding
future events, including projected 2023 home closings and market
conditions and possible or assumed future results of operations,
including statements regarding the Company’s strategies and
expectations as they relate to market opportunities and growth. All
forward-looking statements are based on Dream Finders Homes’
beliefs as well as assumptions made by and information currently
available to Dream Finders Homes. These statements reflect Dream
Finders Homes’ current views with respect to future events and are
subject to various risks, uncertainties and assumptions. These
risks, uncertainties and assumptions are discussed in Dream Finders
Homes’ Annual Report on Form 10-K for the year ended December 31,
2022 and Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2023 and June 30, 2023, and other filings with the U.S.
Securities and Exchange Commission. Dream Finders Homes undertakes
no obligation to update or revise any forward-looking statement
except as may be required by applicable law.
Dream Finders Homes, Inc.
Condensed Consolidated Statements of Comprehensive Income and Other
Financial and Operating Data (In thousands, except per share
amounts and Other Financial and Operating Data, unless otherwise
noted) (Unaudited)
Three Months Ended
September 30, (unaudited)
Nine Months Ended
September 30, (unaudited)
2023
2022
2023
2022
Revenues:
Homebuilding
$
893,502
$
783,945
$
2,603,858
$
2,237,648
Other
2,328
1,724
6,731
5,221
Total revenues
895,830
785,669
2,610,589
2,242,869
Homebuilding cost of sales
709,286
638,456
2,109,485
1,812,746
Selling, general and administrative
expense
79,963
68,839
214,433
196,564
Income from unconsolidated entities
(4,557
)
(5,137
)
(12,219
)
(11,431
)
Contingent consideration revaluation
9,026
2,641
32,608
11,875
Other income, net
(1,646
)
(1,119
)
(2,711
)
(1,784
)
Income before taxes
103,758
81,989
268,993
234,899
Income tax expense
(24,158
)
(10,371
)
(66,000
)
(50,576
)
Net and comprehensive income
79,600
71,618
202,993
184,323
Net and comprehensive income attributable
to noncontrolling interests
(3,503
)
(1,977
)
(9,043
)
(8,342
)
Net and comprehensive income attributable
to Dream Finders Homes, Inc.
$
76,097
$
69,641
$
193,950
$
175,981
Earnings per share
Basic
$
0.79
$
0.71
$
1.98
$
1.78
Diluted
$
0.75
$
0.64
$
1.83
$
1.67
Weighted-average number of
shares
Basic
93,108,277
92,760,013
93,052,507
92,760,013
Diluted
102,052,181
108,286,433
105,819,964
105,117,234
Other Financial and Operating
Data
Home closings
1,798
1,542
5,161
4,562
Average sales price of homes closed(1)
$
501,536
$
487,852
$
499,433
$
471,621
Net new orders
1,535
1,110
4,638
4,938
Cancellation rate
14.9
%
25.5
%
17.1
%
18.6
%
Gross margin (in thousands)(2)
$
184,216
$
145,489
$
494,373
$
424,902
Gross margin %(3)
20.6
%
18.6
%
19.0
%
19.0
%
Adjusted gross margin (in
thousands)(4)
$
254,172
$
195,042
$
696,276
$
560,329
Adjusted gross margin %(4)
28.4
%
24.9
%
26.7
%
25.0
%
Active communities at end of period(5)
219
197
Ending backlog - homes
5,025
6,758
Ending backlog - value (in thousands)
$
2,410,181
$
3,137,243
(1)
Average sales price of homes closed is
calculated based on homebuilding revenues, excluding the impact of
deposit forfeitures, percentage of completion revenues and land
sales, over homes closed.
(2)
Gross margin is homebuilding revenues less
homebuilding cost of sales.
(3)
Calculated as a percentage of homebuilding
revenues.
(4)
Adjusted gross margin is a non-GAAP
financial measure. For definitions of this non-GAAP financial
measures and a reconciliation to our most directly comparable
financial measure calculated and presented in accordance with GAAP,
see “Reconciliation of Non-GAAP Financial Measures.”
(5)
A community becomes active once the model
is completed or the community has its fifth net new order. A
community becomes inactive when it has fewer than five units
remaining to sell.
Dream Finders Homes, Inc.
Condensed Consolidated Statements of Comprehensive Income and Other
Financial and Operating Data (continued) (Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023 (unaudited)
2022 (unaudited)
2023 (unaudited)
2022 (unaudited)
Home Closings:
Units
Average Sales Price
Units
Average Sales Price
Units
Average Sales Price
Units
Average Sales Price
Southeast
828
$
467,896
547
$
446,518
2,261
$
460,524
1,719
$
438,386
Mid-Atlantic
388
407,798
366
371,552
1,144
386,114
1,005
357,779
Midwest
582
611,886
629
591,470
1,756
623,358
1,838
564,952
Total
1,798
$
501,536
1,542
$
487,852
5,161
$
499,433
4,562
$
471,621
Dream Finders Homes, Inc.
Condensed Consolidated Balance Sheets (In thousands, except share
and per share amounts) (Unaudited)
September 30, 2023
December 31,
2022
Assets
Cash and cash equivalents
$
330,129
$
364,531
Restricted cash
33,172
30,599
Accounts receivable
33,315
43,490
Inventories
1,473,917
1,378,185
Lot deposits
241,280
277,258
Other assets
56,532
59,438
Investments in unconsolidated entities
14,297
14,008
Property and equipment, net
7,523
7,337
Operating lease right-of-use assets
21,676
24,084
Goodwill
172,207
172,207
Total assets
$
2,384,048
$
2,371,137
Liabilities
Accounts payable
$
137,146
$
134,702
Accrued expenses
122,924
184,051
Customer deposits
163,544
145,654
Construction lines of credit
555,512
966,248
Senior unsecured notes, net
293,604
—
Operating lease liabilities
22,433
24,661
Contingent consideration
102,813
115,128
Total liabilities
$
1,397,976
$
1,570,444
Mezzanine Equity
Preferred mezzanine equity
148,500
156,421
Stockholders’ Equity
Class A common stock, $0.01 per share,
289,000,000 authorized, 32,882,124 and 32,533,883 outstanding as of
September 30, 2023 and December 31, 2022, respectively
329
325
Class B common stock, $0.01 per share,
61,000,000 authorized, 60,226,153 outstanding
602
602
Additional paid-in capital
271,429
264,381
Retained earnings
549,837
365,994
Noncontrolling interests
15,375
12,970
Total mezzanine and stockholders’
equity
986,072
800,693
Total liabilities, mezzanine equity and
stockholders’ equity
$
2,384,048
$
2,371,137
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of adjusted gross
margin to the GAAP financial measure of gross margin for each of
the periods indicated (unaudited and in thousands, except
percentages):
Three Months Ended
September 30,
Nine Months Ended September
30,
2023
2022
2023
2022
Gross margin(1)
$
184,216
$
145,489
$
494,373
$
424,902
Interest expense in homebuilding cost of
sales
30,369
14,470
85,586
36,107
Amortization in homebuilding cost of
sales(2)
—
601
—
6,422
Commission expense
39,587
34,482
116,317
92,898
Adjusted gross margin
$
254,172
$
195,042
$
696,276
$
560,329
Gross margin %(3)
20.6
%
18.6
%
19.0
%
19.0
%
Adjusted gross margin %(3)
28.4
%
24.9
%
26.7
%
25.0
%
(1)
Gross margin is homebuilding revenues less
homebuilding cost of sales.
(2)
Represents amortization of purchase
accounting adjustments from the Company’s prior acquisitions.
(3)
Calculated as a percentage of homebuilding
revenues.
Adjusted gross margin is a non-GAAP financial measure used by
management as a supplemental measure in evaluating operating
performance. The Company defines adjusted gross margin as gross
margin excluding the effects of capitalized interest, amortization
included in homebuilding cost of sales (adjustments resulting from
the application of purchase accounting in connection with
acquisitions) and commission expense. Management believes this
information is meaningful because it isolates the impact that
capitalized interest, purchase accounting amortization and
commission expense have on gross margin. The Company includes
internal and external commission expense in homebuilding cost of
sales, not selling, general and administrative expense, and
therefore commission expense is taken into account in gross margin.
As a result, in order to provide a meaningful comparison to the
public company homebuilders that include commission expense below
the gross margin line in selling, general and administrative
expense, commission expense has been excluded from adjusted gross
margin. However, because adjusted gross margin information excludes
capitalized interest, purchase accounting amortization and
commission expense, which have real economic effects and could
impact our results of operations, the utility of adjusted gross
margin information as a measure of operating performance may be
limited. In addition, other companies may not calculate adjusted
gross margin information in the same manner. Accordingly, adjusted
gross margin information should be considered only as a supplement
to gross margin information as a measure of performance.
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version on businesswire.com: https://www.businesswire.com/news/home/20231101269203/en/
Investor Contact: investors@dreamfindershomes.com
Media Contact: mediainquiries@dreamfindershomes.com
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