Homebuilding Revenues Up 16%, Home Closings
Up 11%
Return on Participating Equity Improved 510
bps to 46.0%
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, 2023.
First Quarter 2023 Highlights (As Compared to First Quarter
2022, unless otherwise noted)
- Homebuilding revenues increased 16% to $767 million from $662
million
- Home closings increased 11% to 1,517 from 1,371
- Gross margin as a percentage of homebuilding revenues decreased
170 basis points to 17.0% from 18.7%
- Pre-tax income increased 10% to $69 million, compared to $63
million
- Net income attributable to DFH increased 12% to $49 million, or
$0.49 per basic share, compared to $44 million, or $0.43 per basic
share
- Average sales price of homes closed increased 4% to $490,553
from $470,218
- Active community count increased 7% to 220 from 206
- Backlog of sold homes of 5,479 homes, valued at $2.5
billion
- Return on participating equity increased to 46.0% for the
trailing twelve months ended March 31, 2023, compared to 40.9% for
the trailing twelve months ended March 31, 2022
- Total liquidity, comprised of cash and cash equivalents, and
availability under the revolving credit facility, of $453 million
as of March 31, 2023, compared to $487 million as of December 31,
2022
Management Commentary
Patrick Zalupski, Dream Finders Homes Chairman and CEO, said,
“Coming off a record fourth quarter in 2022, DFH maintained
positive momentum in the first quarter of 2023, delivering revenue
growth of 16% along with pre-tax income of $69 million and earnings
per basic share of $0.49, which increased 10% and 12%,
respectively, compared to the year-ago quarter. These are all first
quarter Company records. We are pleased with our modest progress in
bringing down construction times, which ultimately will allow us to
increase our inventory turns and maintain an industry-leading ROE.
Net new orders in the first quarter, while down year over year,
felt healthy and this demand persisted, with April net new orders
increasing year over year. Supply remains low in our markets, and
we believe our high-quality locations offer some resiliency against
potential headwinds in the economy. Although plenty of uncertainty
remains for 2023, DFH is poised to deliver another solid year.”
First Quarter 2023 Results
Homebuilding revenues in the first quarter 2023 increased 16% to
$767 million, compared to $662 million in the first quarter 2022.
Home closings increased 11% to 1,517, compared to 1,371 in the
first quarter 2022. Average sales price (“ASP”) of homes closed for
the first quarter 2023 increased to $490,553, compared to $470,218
in the first quarter 2022.
Homebuilding gross margin percentage in the first quarter 2023
was 17.0%, compared to 18.7% in the first quarter 2022. The gross
margin decrease was attributable to increases in cost of funds, as
well as closing costs, as we continue to incentivize homebuyers to
close homes.
Selling, general and administrative expense (“SG&A”) as a
percentage of homebuilding revenues improved 100 basis points
(“bps”) to 8% in the first quarter 2023, compared to 9% in the
first quarter 2022, as a result of our continued cost management
efforts. In the first quarter 2023, SG&A included a $2 million
charge related to write-offs of earnest deposits and due diligence
costs for lot option contracts that were terminated.
Net income attributable to DFH in the first quarter 2023 was $49
million, or $0.49 per basic share, compared to $44 million, or
$0.43 per basic share in the first quarter 2022, representing
increases of 12% and 14%, respectively. The Company recorded $5
million of contingent consideration revaluation expense in the
first quarter 2023 primarily as a result of better-than-expected
financial results and adjusted projections for the McGuyer
Homebuilders, Inc. (“MHI”) acquisition.
We consider basic earnings per share (“EPS”) to be a more
meaningful metric of our profitability, as the diluted EPS
calculation is impacted by the volatility of the price of our
common stock and fluctuates outside of our control. In addition,
the holders of the convertible preferred stock cannot trigger the
conversion feature until September 29, 2026, the fifth year
following its issuance. The Company does not intend for the
preferred stock to convert into Class A common stock.
Net new orders in the first quarter 2023 were 1,448, a
sequential improvement of 31% compared to the fourth quarter 2022
net new orders of 1,107. Net new orders in the first quarter 2022
were 2,402. The decrease from the first quarter 2022 is mainly
attributable to built-for-rent sales contracts that did not repeat
in the first quarter 2023. Due to the time and effort involved in
the execution of these types of bulk sales arrangements, results
can be lumpy from quarter to quarter and could vary significantly.
The cancellation rate in the first quarter 2023 was 20.9%, an
improvement of 1,120 bps compared to the fourth quarter 2022
cancellation rate of 32.1%. The first quarter 2022 cancellation
rate was 13.4%, reflective of all-time low levels of cancellations
that were observed throughout the industry. Despite continued
economic uncertainty and elevated mortgage rates in the first
quarter 2023, housing market demand started to show signs of
stabilization. These sequential improvements in net new orders and
the cancellation rate are reflective of our ability to adjust our
operations to current market conditions by focusing on aggressive
sales incentives, pacing starts consistently and maintaining
adequate levels of quick move-in homes in our communities.
As of March 31, 2023, return on participating equity (“ROE”) was
46.0%, an improvement of 510 bps compared to the first quarter
2022. ROE is calculated as net income attributable to DFH less
preferred distributions for the trailing twelve-month period,
divided by average participating stockholders’ equity. Average
participating stockholders’ equity is based on beginning and ending
balances for the trailing twelve-month period.
As of March 31, 2023, DFH had a backlog of 5,479 homes, valued
at $2.5 billion, remaining relatively consistent compared to the
backlog of 5,548 homes, valued at $2.5 billion as of December 31,
2022. As of March 31, 2023, the ASP in backlog was $462,576.
Full Year 2023 Outlook
Dream Finders Homes maintains its guidance of approximately
6,000 home closings for the full year 2023. Further deterioration
of general economic conditions, including interest rate increases
and mortgage availability, as well as any further COVID-19
governmental restrictions on land development, home construction or
home sales or additional supply chain challenges could negatively
affect the Company’s ability to achieve this number of home
closings in 2023. As of March 31, 2023, the Company backlog was
5,479 homes, with approximately 1,649 of the homes in backlog
expected to be delivered in 2024 and beyond.
The following table shows the backlog units and ASP as of March
31, 2023 by segment:
As of March 31, 2023
(unaudited)
Backlog:
Units
Average Sales Price
Jacksonville
1,674
$
316,111
Colorado
88
615,284
Orlando
850
626,819
The Carolinas
679
319,313
Texas
1,171
688,086
Other (1)
1,017
389,164
Total
5,479
$
462,576
(1)
Austin, TX; Washington D.C.; Savannah, GA;
Hilton Head and Bluffton, S.C.; Active Adult and Custom Homes.
Austin refers to legacy DFH operations in Texas, exclusive of
MHI.
About Dream Finders Homes, Inc.
Dream Finders Homes (NYSE: DFH) is a homebuilder based in
Jacksonville, FL. Dream Finders Homes builds single-family homes in
Florida, Texas, North Carolina, South Carolina, Georgia, Colorado,
and the Washington, D.C. metropolitan area, which includes Northern
Virginia and Maryland. Through its mortgage and title joint
ventures, DFH also provides mortgage financing and title services
to its 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 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)
For the Three Months
Ended
March 31,
(unaudited)
2023
2022
Revenues:
Homebuilding
$
767,476
$
662,473
Other
1,944
1,593
Total revenues
769,420
664,066
Homebuilding cost of sales
637,344
538,868
Selling, general and administrative
expense
60,761
61,710
Income from unconsolidated entities
(2,958
)
(2,960
)
Contingent consideration revaluation
5,316
4,192
Other income, net
(430
)
(956
)
Income before income taxes
69,387
63,212
Income tax expense
(17,636
)
(16,878
)
Net and comprehensive income
51,751
46,334
Net and comprehensive income attributable
to noncontrolling interests
(2,662
)
(2,618
)
Net and comprehensive income attributable
to Dream Finders Homes, Inc.
$
49,089
$
43,716
Earnings per share
Basic
$
0.49
$
0.43
Diluted
$
0.45
$
0.42
Weighted-average number of
shares
Basic
92,940,291
92,758,939
Diluted
108,822,306
102,496,876
Other Financial and Operating
Data
Active communities at end of period(1)
220
206
Home closings
1,517
1,371
Average sales price of homes closed(2)
$
490,553
$
470,218
Net new orders
1,448
2,402
Cancellation rate
20.9
%
13.4
%
Backlog (at period end) - homes
5,479
7,413
Backlog (at period end, in thousands) -
value
$
2,534,454
$
3,443,709
Gross margin (in thousands)(3)
$
130,132
$
123,605
Gross margin %(4)
17.0
%
18.7
%
Net profit margin %
6.4
%
6.6
%
(1)
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.
(2)
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.
(3)
Gross margin is homebuilding revenues less
homebuilding cost of sales.
(4)
Calculated as a percentage of homebuilding
revenues.
Three Months Ended
March 31,
2023
(unaudited)
2022
(unaudited)
Home Closings:
Units
Average Sales Price
Units
Average Sales Price
Jacksonville
287
$
423,483
269
$
453,134
Colorado
74
592,553
70
557,092
Orlando
234
492,931
106
436,542
The Carolinas
320
334,257
252
331,425
Texas
421
648,480
483
570,236
Other (1)
181
461,114
191
411,324
Total
1,517
$
490,553
1,371
$
470,218
(1)
Austin, TX; Washington D.C.; Savannah, GA;
Hilton Head and Bluffton, S.C.; Active Adult and Custom Homes.
Austin refers to legacy DFH operations in Texas, exclusive of
MHI.
Dream Finders Homes,
Inc.
Condensed Consolidated Balance
Sheets
(In thousands, except share
and per share amounts)
(Unaudited)
March 31, 2023
December 31,
2022
Assets
Cash and cash equivalents
$
266,569
$
364,531
Restricted cash (VIE amounts of $8,603 and
$4,372)
30,882
30,599
Accounts receivable (VIE amounts of $587
and $580)
33,564
43,490
Inventories:
Construction in process and finished
homes
1,138,690
1,175,107
Company owned land and lots
291,106
196,563
VIE owned land and lots
5,064
6,515
Total inventories
1,434,860
1,378,185
Lot deposits
262,323
277,258
Other assets (VIE amounts of $1,650 and
$1,877)
64,134
59,438
Investments in unconsolidated entities
13,495
14,008
Property and equipment, net
7,564
7,337
Operating lease right-of-use assets
23,199
24,084
Goodwill
172,207
172,207
Total assets
$
2,308,797
$
2,371,137
Liabilities
Accounts payable (VIE amounts of $481 and
$353)
$
134,741
$
134,702
Accrued expenses (VIE amounts of $3,210
and $4,434)
103,963
184,051
Customer deposits
165,859
145,654
Construction lines of credit
915,992
966,248
Operating lease liabilities
23,802
24,661
Contingent consideration
113,965
115,128
Total liabilities
$
1,458,322
$
1,570,444
Mezzanine Equity
Preferred mezzanine equity
156,259
156,045
Stockholders’ Equity
Class A common stock, $0.01 per share,
289,000,000 authorized, 32,775,526 and 32,533,883 outstanding as of
March 31, 2023 and December 31, 2022, respectively.
327
325
Class B common stock, $0.01 per share,
61,000,000 authorized, 60,226,153 outstanding
602
602
Additional paid-in capital
267,185
264,757
Retained earnings
411,494
365,994
Noncontrolling interests
14,608
12,970
Total mezzanine and stockholders’
equity
850,475
800,693
Total liabilities, mezzanine equity and
stockholders’ equity
$
2,308,797
$
2,371,137
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Investor Contact: investors@dreamfindershomes.com
Media Contact: mediainquiries@dreamfindershomes.com
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