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Dream Finders Announces First Quarter 2024 Results

First Quarter Homebuilding Revenues of $825 million

Net New Orders Up 19%, Net Income to DFH Up 11%

Return on Participating Equity of 34.9%

Dream Finders Homes, Inc. (the “Company”, “Dream Finders Homes”, “Dream Finders” or “DFH”) (NYSE: DFH) announced its financial results for the first quarter ended March 31, 2024.

First Quarter 2024 Highlights (As Compared to First Quarter 2023, unless otherwise noted)

  • Homebuilding revenues increased 8% to $825 million from $767 million
  • Home closings increased 9% to 1,655 from 1,517
  • Net new orders increased 19% to 1,724 from 1,448
  • Average sales price of homes closed increased to $494,995 from $490,553
  • Homebuilding gross margin increased 80 basis points to 17.8% from 17.0%
  • Adjusted gross margin (non-GAAP) increased 200 basis points to 26.3% from 24.3%
  • Pre-tax income increased 2% to $71 million from $69 million
  • Net income attributable to DFH increased 11% to $54 million, or $0.55 per basic share, from $49 million, or $0.49 per basic share
  • Active community count increased 5% to 232 from 220
  • Backlog of 4,524 sold homes as of March 31, 2024, valued at $2.3 billion
  • Net debt to net capitalization of 39.9% as of March 31, 2024, compared to 43.3% as of March 31, 2023
  • Return on participating equity of 34.9% for the trailing twelve months ended March 31, 2024, compared to 46.0% for the trailing twelve months ended March 31, 2023
  • Total liquidity, comprised of cash and cash equivalents, and availability under the revolving credit facility, of $500 million as of March 31, 2024, compared to $828 million as of December 31, 2023. The Crescent Homes acquisition (discussed below) was funded by cash on hand and borrowings under the revolving credit facility.

Management Commentary

Patrick Zalupski, Dream Finders Homes Chairman and CEO, said, “Despite persistent uncertainty in the interest rate environment, DFH achieved another quarter of quality growth, with homebuilding revenues of $825 million, an 8% increase over the prior year quarter and another first quarter Company record. More notably, we delivered increases in net new orders of 19% and net income attributable to DFH of 11% in the first quarter of 2024 compared to the year ago quarter.

“We are also very excited about closing the Crescent Homes acquisition during the quarter, our fifth acquisition in five years. We are confident this will provide significant growth opportunities in our Mid-Atlantic segment. We remain enthusiastic about our current and long-term prospects for DFH as we continue to pursue strategic opportunities in new and existing markets.”

Acquisition of Crescent Homes

On February 1, 2024, the Company acquired the majority of the homebuilding assets of privately held homebuilder, Crescent Homes (“Crescent Homes” or “Crescent”). The acquisition allowed the Company to expand into the markets of Charleston and Greenville, South Carolina, and Nashville, Tennessee. Crescent’s operations are included within our Mid-Atlantic segment as of the acquisition date.

First Quarter 2024 Results

Homebuilding revenues in the first quarter of 2024 increased 8% to $825 million, compared to $767 million in the first quarter of 2023. Average sales price (“ASP”) of homes closed for the first quarter of 2024 was $494,995, a slight increase compared to the prior year quarter ASP of $490,553. Home closings increased 9% to 1,655 compared to 1,517 in the first quarter of 2023. The increase in homebuilding revenues was primarily due to the Crescent acquisition and overall product mix during the first quarter of 2024 when compared to the first quarter of 2023.

Homebuilding gross margin percentage in the first quarter of 2024 increased 80 basis points (“bps”) to 17.8% from 17.0% in the first quarter of 2023, primarily attributable to direct cost reductions and, to a lesser extent, cycle time improvements across our homebuilding operations. The increase in gross margin percentage was partially offset by higher land and financing costs. In addition, amortization of purchase accounting adjustments associated with home closings contributed from the Crescent Homes acquisition negatively impacted the first quarter of 2024 gross margin percentage by approximately 50 bps. Purchase accounting amortization is a temporary cost that will conclude in conjunction with closing the remaining homes in inventory acquired from Crescent.

Adjusted gross margin as a percentage of homebuilding revenues in the first quarter of 2024 was 26.3%, an increase of 200 bps compared to 24.3% in the first quarter of 2023. The increase in adjusted gross margin was primarily due to direct cost reductions, partially offset by higher land costs. 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 first quarter of 2024 increased 35% to $82 million, compared to $61 million in the first quarter of 2023. SG&A as a percentage of homebuilding revenues in the first quarter of 2024 was 9.9%, an increase of 200 basis points compared to 7.9% in the first quarter of 2023. The increase was primarily attributable to higher compensation costs as we continue to expand our operations, as well as costs associated with forward mortgage commitment programs which allow our homebuyers to lock in their mortgage interest rates at the time of sale. Although the SG&A percentage of homebuilding revenues increased in the current quarter, this metric should normalize for the year as anticipated quarterly closing volumes materialize.

Net income attributable to DFH in the first quarter of 2024 increased 11% to $54 million, or $0.55 per basic share, from $49 million, or $0.49 per basic share in the first quarter of 2023. This improvement primarily resulted from a 14% reduction in income tax expense compared to the prior year quarter, mainly as a result of increased tax benefits from stock-based compensation.

Net new orders in the first quarter of 2024 were 1,724, an increase of 19% compared to 1,448 net new orders for the first quarter of 2023. The cancellation rate in the first quarter of 2024 was 21.0%, remaining consistent with the first quarter of 2023 cancellation rate of 20.9%. The Company had one built-for-rent contract of 229 units that was terminated during the first quarter of 2024 based on a strategic decision to convert the controlled lots into future retail sales. Excluding the impact of this unique event, net new orders were 1,953, an increase of 35% over the prior year quarter, and the total cancellation rate was 10.5% for the three months ended March 31, 2024.

Our total available liquidity as of March 31, 2024 was $500 million, including $239 million of unrestricted operating cash. In addition, net debt to net capitalization as of March 31, 2024 was 39.9%, a reduction of 340 bps from the end of the first quarter of 2023. The improvement in net debt to net capitalization was achieved despite the Crescent Homes acquisition in 2024, which was funded by cash on hand and borrowings under the revolving credit facility.

First Quarter 2024 Backlog

As of March 31, 2024, DFH had a backlog of 4,524 homes, valued at $2.3 billion, compared to the backlog of 3,978 homes, valued at $1.9 billion as of December 31, 2023. As of March 31, 2024, the ASP in backlog was $513,238 compared to $474,451 as of December 31, 2023. As of March 31, 2024, approximately 727 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 March 31, 2024 by homebuilding segment:

 

As of March 31, 2024

(unaudited)

Backlog:

Units

 

Average Sales Price

Southeast

1,933

 

$

421,208

Mid-Atlantic

 

1,202

 

 

 

490,623

 

Midwest

 

1,389

 

 

 

660,881

 

Total

 

4,524

 

 

$

513,238

 

Full Year 2024 Outlook

Dream Finders Homes maintains its guidance of approximately 8,250 home closings for the full year 2024, inclusive of the Crescent Homes acquisition.

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.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2024

 

December 31,

2023

Assets

 

 

 

 

Cash and cash equivalents

 

$

239,428

 

$

494,145

Restricted cash

 

 

28,392

 

 

 

54,311

 

Accounts receivable

 

 

28,213

 

 

 

30,874

 

Inventories

 

 

1,733,488

 

 

 

1,440,249

 

Lot deposits

 

 

268,074

 

 

 

247,207

 

Other assets

 

 

68,317

 

 

 

80,759

 

Investments in unconsolidated entities

 

 

17,688

 

 

 

15,364

 

Property and equipment, net

 

 

8,275

 

 

 

7,043

 

Right-of-use assets

 

 

19,986

 

 

 

20,280

 

Goodwill

 

 

305,068

 

 

 

172,207

 

Total assets

 

$

2,716,929

 

 

$

2,562,439

 

 

 

 

 

 

Liabilities

 

 

 

 

Accounts payable

 

$

144,466

 

 

$

134,115

 

Accrued expenses

 

 

113,808

 

 

 

207,389

 

Customer deposits

 

 

169,291

 

 

 

172,574

 

Construction lines of credit

 

 

710,288

 

 

 

530,384

 

Senior unsecured notes, net

 

 

294,243

 

 

 

293,918

 

Lease liabilities

 

 

20,842

 

 

 

21,114

 

Contingent consideration

 

 

112,956

 

 

 

116,795

 

Total liabilities

 

$

1,565,894

 

 

$

1,476,289

 

Mezzanine Equity

 

 

 

 

Redeemable preferred stock

 

 

148,500

 

 

 

148,500

 

Redeemable noncontrolling interest

 

 

28,533

 

 

 

 

Equity

 

 

 

 

Class A common stock, $0.01 per share, 289,000,000 authorized, 34,419,949 and $32,882,124 outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

344

 

 

 

329

 

Class B common stock, $0.01 per share, 61,000,000 authorized, 59,226,153 and $60,226,153 outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

592

 

 

 

602

 

Additional paid-in capital

 

 

268,242

 

 

 

275,241

 

Retained earnings

 

 

699,531

 

 

 

648,412

 

Total Dream Finders Homes, Inc. stockholders' equity

 

 

968,709

 

 

 

924,584

 

Noncontrolling interests

 

 

5,293

 

 

 

13,066

 

Total equity

 

 

974,002

 

 

 

937,650

 

Total liabilities, mezzanine equity and equity

 

$

2,716,929

 

 

$

2,562,439

 

 

Dream Finders Homes, Inc.

Condensed Consolidated Statements of Comprehensive Income

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2024

 

 

 

2023

 

Revenues:

 

 

 

 

Homebuilding

 

$

825,221

 

 

$

767,476

 

Other

 

 

2,579

 

 

 

1,944

 

Total revenues

 

 

827,800

 

 

 

769,420

 

Homebuilding cost of sales

 

 

678,640

 

 

 

637,344

 

Selling, general and administrative expense

 

 

81,793

 

 

 

60,761

 

Income from unconsolidated entities

 

 

(4,903

)

 

 

(2,958

)

Contingent consideration revaluation

 

 

3,207

 

 

 

5,316

 

Other income, net

 

 

(1,761

)

 

 

(430

)

Income before taxes

 

 

70,824

 

 

 

69,387

 

Income tax expense

 

 

(15,141

)

 

 

(17,636

)

Net and comprehensive income

 

 

55,683

 

 

 

51,751

 

Net and comprehensive income attributable to noncontrolling interests

 

 

(1,189

)

 

 

(2,662

)

Net and comprehensive income attributable to Dream Finders Homes, Inc.

 

$

54,494

 

 

$

49,089

 

 

 

 

 

 

Earnings per share

 

 

 

 

Basic

 

$

0.55

 

 

$

0.49

 

Diluted

 

$

0.55

 

 

$

0.45

 

 

 

 

 

 

Weighted-average number of shares

 

 

 

 

Basic

 

 

93,325,838

 

 

 

92,940,291

 

Diluted

 

 

99,935,524

 

 

 

108,822,306

 

 

Dream Finders Homes, Inc.

Other Financial and Operating Data

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2024

 

 

 

2023

 

Other Financial and Operating Data

 

 

 

 

Home closings

 

 

1,655

 

 

 

1,517

 

Average sales price of homes closed(1)

 

$

494,995

 

 

$

490,553

 

Net new orders

 

 

1,724

 

 

 

1,448

 

Cancellation rate

 

 

21.0

%

 

 

20.9

%

Gross margin (in thousands)(2)

 

$

146,581

 

 

$

130,132

 

Gross margin %(3)

 

 

17.8

%

 

 

17.0

%

Adjusted gross margin (in thousands)(4)

 

$

217,213

 

 

$

186,193

 

Adjusted gross margin %(3)(4)

 

 

26.3

%

 

 

24.3

%

Active communities(5)

 

 

232

 

 

 

220

 

Backlog - units

 

 

4,524

 

 

 

5,479

 

Backlog - value (in thousands)

 

$

2,321,889

 

 

$

2,534,354

 

Return on participating equity(6)

 

 

34.9

%

 

 

46.0

%

Net debt to net capitalization(7)

 

 

39.9

%

 

 

43.3

%

(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 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.

(6)

 

Return on participating equity is calculated as net income attributable to DFH, less redeemable preferred stock distributions, divided by average beginning and ending total Dream Finders Homes, Inc. stockholders’ equity (“participating equity”) for the trailing twelve months.

(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, total mezzanine equity and total equity.

 

Three Months Ended

March 31,

 

2024

(unaudited)

 

2023

(unaudited)

Home Closings:

Units

 

Average

Sales Price

 

Units

 

Average

Sales Price

Southeast

578

 

$

473,608

 

634

 

$

450,188

Mid-Atlantic

 

491

 

 

 

425,452

 

 

 

370

 

 

 

364,679

 

Midwest

 

586

 

 

 

574,359

 

 

 

513

 

 

 

631,224

 

Total

 

1,655

 

 

$

494,995

 

 

 

1,517

 

 

$

490,553

 

 

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

March 31,

 

 

2024

 

 

 

2023

 

Gross margin(1)

$

146,581

 

 

$

130,132

 

Interest expense in homebuilding cost of sales(2)

 

30,742

 

 

 

22,419

 

Amortization in homebuilding cost of sales(3)

 

4,582

 

 

 

 

Commission expense

 

35,308

 

 

 

33,642

 

Adjusted gross margin

$

217,213

 

 

$

186,193

 

Gross margin %(4)

 

17.8

%

 

 

17.0

%

Adjusted gross margin %(4)

 

26.3

%

 

 

24.3

%

(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 Crescent Homes acquisition.

(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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