Company Record Homebuilding Revenues of $1.1
billion for Fourth Quarter and $3.7 billion for Full Year
2023
Net Income Up 18% for Fourth Quarter and 13%
for Full Year 2023
Return on Participating Equity of
36.3%
Dream Finders Homes, Inc. (the “Company”, “Dream Finders Homes”,
“Dream Finders” or “DFH”) (NYSE: DFH) announced its financial
results for the fourth quarter and full year ended December 31,
2023.
Fourth Quarter 2023 Highlights (As Compared to Fourth Quarter
2022)
- Homebuilding revenues increased $38 million or 3% to $1.1
billion
- Average sales price of homes closed increased 9% to $520,940
from $479,554
- Homebuilding gross margin increased 340 basis points (bps) to
20.5% from 17.1%
- Adjusted gross margin (non-GAAP) increased 440 bps to 28.1%
from 23.7%
- Pre-tax income increased 12% to $135 million from $121
million
- Net income attributable to DFH increased 18% to $102 million,
or $1.06 per basic share, from $86 million, or $0.89 per basic
share
Full Year 2023 Highlights (As Compared to Full Year 2022,
Unless Otherwise Noted)
- Homebuilding revenues increased $404 million or 12% to $3.7
billion
- Home closings increased 6% to 7,314 from 6,878
- Average sales price of homes closed increased 7% to $505,764
from $474,292
- Homebuilding gross margin increased 100 bps to 19.4% from
18.4%
- Adjusted gross margin (non-GAAP) increased 260 bps to 27.2%
from 24.6%
- Pre-tax income increased 14% to $404 million from $356
million
- Net income attributable to DFH increased 13% to $296 million,
or $3.03 per basic share from $262 million or $2.67 per basic
share
- Active community count increased 7% to 221 from 206
- Backlog of 3,978 sold homes as of December 31, 2023, valued at
$1.9 billion
- Return on participating equity of 36.3% for the year ended
December 31, 2023, compared to 49.1% for the year ended December
31, 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
- Net debt to net capitalization of 23.3% as of December 31,
2023, compared to 42.9% as of December 31, 2022
- Total liquidity, comprised of cash and cash equivalents, and
availability under the revolving credit facility, increased to $828
million as of December 31, 2023, compared to $487 million as of
December 31, 2022
Management Commentary
Patrick Zalupski, Dream Finders Homes Chairman and CEO, said,
“Given the depth of industry uncertainty going into 2023, we were
pleased to achieve another year of positive growth for our
business. Perhaps most importantly, pre-tax income was $404
million, up 14% year over year, and $135 million, up 12% quarter
over quarter. These were both all-time Company records. We also
produced record annual revenues of $3.7 billion and closings of
7,314, up 12% and 6%, respectively.
"We continue to be proud of our ability to grow the business
while also generating record total liquidity of $828 million,
including $494 million of unrestricted cash, and reducing our net
debt to net capitalization to 23.3% as of the end of the year. This
is a pretty significant accomplishment considering we were at 42.9%
a year earlier and continued to provide a best-in-class return on
participating equity of 36.3%.
"While we are excited about our results from the quarter and
2023 overall, in true DFH fashion, we are focused on the future and
continuing to grow our earnings. We have already taken a nice step
forward with our recently announced acquisition of Crescent Homes,
based in Charleston, South Carolina with additional operations in
Greenville, South Carolina and Nashville, Tennessee. This
acquisition added three new markets, increasing our footprint to an
aggregate of 20 markets, and should provide meaningful future
closing and earnings volume. The former owner, Ted Terry, and his
team have been very professional throughout the process and we are
excited to partner with this great company. With the benefit of the
Crescent Homes acquisition, for the full year 2024, DFH expects
approximately 8,250 home closings.”
Fourth Quarter 2023 Results
Homebuilding revenues of $1.1 billion in the fourth quarter of
2023 increased $38 million or 3% compared to the fourth quarter of
2022. Average sales price (“ASP”) of homes closed for the fourth
quarter of 2023 increased 9% to $520,940, compared to $479,554 in
the fourth quarter of 2022. Home closings decreased 7% to 2,153,
compared to 2,316 in the fourth quarter of 2022, as we strive to
even the flow of our production and delivery of homes throughout
the full calendar year. In addition to overall price appreciation,
there was a shift in our product mix towards higher priced homes
during the fourth quarter of 2023 when compared to the fourth
quarter of 2022.
Homebuilding gross margin percentage in the fourth quarter of
2023 was 20.5%, compared to 17.1% in the fourth quarter of 2022.
The gross margin percentage increase was primarily attributable to
direct cost reductions across our segments and to a lesser extent
cycle time improvements, partially offset by higher financing and
closing costs. While we believe that our direct cost management
efforts are sustainable, our gross margins in the future could be
affected by several factors, including variability in product mix
from quarter to quarter, higher financing and closing costs, as
well as purchase accounting amortization from our acquisitions.
Adjusted gross margin as a percentage of homebuilding revenues
in the fourth quarter of 2023 was 28.1%, an increase of 440 bps
compared to 23.7% in the fourth quarter of 2022. Our proactive
management efforts focused on cost and cycle time reductions led to
the improvement in the adjusted gross margin percentage. 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
fourth quarter of 2023 increased 27% to $94 million, compared to
$74 million in the fourth quarter of 2022. SG&A as a percentage
of homebuilding revenues in the fourth quarter of 2023 increased
150 bps to 8.3%, compared to 6.8% in the fourth quarter of 2022.
SG&A in the fourth quarter of 2023 included $11 million of
costs in relation to forward commitment programs to allow our
homebuyers to lock their mortgage interest rates at the time of
sale, which were not incurred in 2022.
Net income attributable to DFH in the fourth quarter of 2023
increased 18% to $102 million, or $1.06 per basic share, from $86
million, or $0.89 per basic share in the fourth quarter of 2022.
The Company recorded $14 million of contingent consideration
revaluation expense in the fourth quarter of 2023 compared to $1
million of contingent consideration revaluation income in the
fourth quarter of 2022. The change is primarily due to
better-than-projected financial results as well as revised
projections for expected future earnout payments for the McGuyer
Homebuilders, Inc. acquisition, which is included in our Midwest
segment.
Net new orders in the fourth quarter of 2023 were 1,106,
remaining consistent when compared to 1,107 net new orders for the
fourth quarter of 2022. The cancellation rate in the fourth quarter
of 2023 was 22.9%, a decrease of 920 bps compared to the
cancellation rate in the fourth quarter of 2022 of 32.1%. Despite
higher mortgage interest rates in the fourth quarter of 2023
relative to the fourth quarter of 2022, net new orders were steady
and the cancellation rate improved, which we believe is due to our
targeted mortgage buydown programs and readily available move-in
homes.
Our total available liquidity as of December 31, 2023 was $828
million, including $494 million of unrestricted operating cash. In
addition, net debt to net capitalization as of December 31, 2023
was 23.3%, a reduction of 1,960 bps from the end of the fourth
quarter of 2022.
Fourth Quarter 2023 Backlog
As of December 31, 2023, DFH had a backlog of 3,978 homes,
valued at $1.9 billion, compared to the backlog of 5,025 homes,
valued at $2.4 billion as of September 30, 2023. As of December 31,
2023, the ASP in backlog was $474,451 compared to $479,638 as of
September 30, 2023. As of December 31, 2023, approximately 704 of
the homes in backlog are expected to be delivered in 2025 and
beyond.
The following table shows the backlog units and ASP as of
December 31, 2023 by homebuilding segment:
As of December 31, 2023
(unaudited)
Backlog:
Units
Average Sales Price
Southeast
2,234
$
393,356
Mid-Atlantic
599
427,593
Midwest
1,145
657,190
Total
3,978
$
474,451
Subsequent Events
On February 1, 2024, DFH acquired the majority of the
homebuilding assets of privately held homebuilder Crescent
Ventures, LLC (“Crescent Homes"), for a purchase price of $185
million, subject to customary post-closing adjustments. DFH funded
the transaction with cash on hand and borrowings under its existing
senior unsecured revolving credit facility. Simultaneously with the
acquisition closing, DFH paid off Crescent’s vertical lines of
credit associated with the assets acquired. The acquisition is
expected to meaningfully enhance Dream Finders Homes’ geographic
footprint, including expansion into the markets of Charleston and
Greenville, South Carolina, and Nashville, Tennessee. Assets
acquired include 457 home sites in different stages of
construction, and a backlog of approximately 460 sold homes valued
in excess of $265 million. Additionally, the Company expects to
control approximately 6,200 lots as a result of the
transaction.
Full Year 2024 Outlook
Dream Finders Homes expects approximately 8,250 home closings
for the full year 2024, inclusive of those from the Crescent Homes
acquisition. 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 2024.
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, Tennessee, 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 2024 home closings and market
conditions, possible or assumed future results of operations,
benefits of the Crescent Homes acquisition, and 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, 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.
Consolidated Statements of
Comprehensive Income and Other Financial and Operating Data
(In thousands, except share
and per share amounts and Other Financial and Operating Data,
unless otherwise noted)
Three Months Ended
December 31, (unaudited)
Year Ended December
31,
2023
2022
2023
2022
Revenues:
Homebuilding
$
1,135,030
$
1,096,911
$
3,738,888
$
3,334,559
Other
2,967
2,555
9,698
7,776
Total revenues
1,137,997
1,099,466
3,748,586
3,342,335
Homebuilding cost of sales
902,328
909,393
3,011,813
2,722,139
Selling, general and administrative
expense
94,362
74,476
308,795
271,040
Income from unconsolidated entities
(5,856
)
(4,691
)
(18,075
)
(16,122
)
Contingent consideration revaluation
13,982
(822
)
46,590
11,053
Other income, net
(2,251
)
(147
)
(4,962
)
(1,931
)
Income before taxes
135,432
121,257
404,425
356,156
Income tax expense
(30,483
)
(31,283
)
(96,483
)
(81,859
)
Net and comprehensive income
104,949
89,974
307,942
274,297
Net and comprehensive income attributable
to noncontrolling interests
(2,999
)
(3,642
)
(12,042
)
(11,984
)
Net and comprehensive income attributable
to Dream Finders Homes, Inc.
$
101,950
$
86,332
$
295,900
$
262,313
Earnings per share
Basic
$
1.06
$
0.89
$
3.03
$
2.67
Diluted
$
1.00
$
0.78
$
2.79
$
2.45
Weighted-average number of
shares
Basic
93,108,277
92,760,036
93,066,564
92,745,781
Diluted
102,029,755
111,470,240
106,027,548
106,691,248
Other Financial and Operating Data
(unaudited)
Home closings
2,153
2,316
7,314
6,878
Average sales price of homes closed(1)
$
520,940
$
479,554
$
505,764
$
474,292
Net new orders
1,106
1,107
5,744
6,045
Cancellation rate
22.9
%
32.1
%
18.3
%
21.5
%
Gross margin (in thousands)(2)
$
232,702
$
187,518
$
727,075
$
612,420
Gross margin %(3)
20.5
%
17.1
%
19.4
%
18.4
%
Adjusted gross margin (in
thousands)(4)
$
319,348
$
259,829
$
1,015,624
$
820,158
Adjusted gross margin %(3)(4)
28.1
%
23.7
%
27.2
%
24.6
%
Active communities as of period-end(5)
221
206
Ending backlog - homes
3,978
5,548
Ending backlog - value (in thousands)
$
1,887,368
$
2,502,564
Return on participating equity(6)
36.3
%
49.1
%
Net debt to net capitalization(7)
23.3
%
42.9
%
(1)
Average sales price of homes
closed is calculated based on homebuilding revenues, adjusted for
the impact of percentage of completion revenues, and excluding
deposit forfeitures and land sales, over homes closed.
(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 a definition of this non-GAAP
financial measure 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
homesites remaining to sell.
(6)
Return on participating equity is
calculated as net income attributable to DFH, less preferred stock
distributions, divided by average beginning and ending
participating equity. Participating equity is stockholders’ equity
excluding noncontrolling interests.
(7)
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 and total mezzanine and
stockholders’ equity.
Dream Finders Homes,
Inc.
Consolidated Statements of
Comprehensive Income and Other Financial and Operating Data
(continued)
Three Months Ended
December 31,
Year Ended December
31,
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
909
$
494,983
1,003
$
440,460
3,170
$
470,405
2,722
$
439,150
Mid-Atlantic
453
422,596
557
359,936
1,597
396,462
1,562
358,548
Midwest
791
607,091
756
619,553
2,547
618,306
2,594
580,865
Total
2,153
$
520,940
2,316
$
479,554
7,314
$
505,764
6,878
$
474,292
Dream Finders Homes,
Inc.
Consolidated Balance
Sheets
(In thousands, except share
and per share amounts)
December 31,
2023
December 31,
2022
Assets
Cash and cash equivalents
$
494,145
$
364,531
Restricted cash
54,311
30,599
Accounts receivable
30,874
43,490
Inventories
1,440,249
1,378,185
Lot deposits
247,207
277,258
Other assets
80,759
59,438
Investments in unconsolidated entities
15,364
14,008
Property and equipment, net
7,043
7,337
Right-of-use assets
20,280
24,084
Goodwill
172,207
172,207
Total assets
$
2,562,439
$
2,371,137
Liabilities
Accounts payable
$
134,115
$
134,702
Accrued expenses
207,389
184,051
Customer deposits
172,574
145,654
Construction lines of credit
530,384
966,248
Senior unsecured notes, net
293,918
—
Lease liabilities
21,114
24,661
Contingent consideration
116,795
115,128
Total liabilities
1,476,289
1,570,444
Mezzanine Equity
Preferred mezzanine equity
148,500
156,045
Stockholders’ Equity
Class A common stock, $0.01 per share,
289,000,000 authorized, 32,882,124 and 32,533,883 outstanding as of
December 31, 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
275,241
264,757
Retained earnings
648,412
365,994
Noncontrolling interests
13,066
12,970
Total mezzanine and stockholders’
equity
1,086,150
800,693
Total liabilities, mezzanine equity and
stockholders’ equity
$
2,562,439
$
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
December 31,
Year Ended December
31,
2023
2022
2023
2022
Gross margin(1)
$
232,702
$
187,518
$
727,075
$
612,420
Interest charged to homebuilding cost of
sales(2)
37,173
24,488
122,759
60,595
Amortization in homebuilding cost of
sales(3)
—
279
—
6,701
Commission expense
49,473
47,544
165,790
140,442
Adjusted gross margin
$
319,348
$
259,829
$
1,015,624
$
820,158
Gross margin %(4)
20.5
%
17.1
%
19.4
%
18.4
%
Adjusted gross margin %(4)
28.1
%
23.7
%
27.2
%
24.6
%
(1)
Gross margin is homebuilding
revenues less homebuilding cost of sales.
(2)
Includes interest charged to
homebuilding cost of sales related to our construction lines of
credit and senior unsecured notes, net, as well as lot option
fees.
(3)
Represents amortization of
purchase accounting adjustments from the Company’s prior
acquisitions.
(4)
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, lot option
fees, 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 these excluded items 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, lot option fees, 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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Investor Contact: investors@dreamfindershomes.com
Media Contact: mediainquiries@dreamfindershomes.com
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