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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