Dream Finders Announces Fourth Quarter and Full Year 2023 Results
- Record homebuilding revenues of $1.1 billion for the fourth quarter and $3.7 billion for the full year 2023
- Net income up 18% for the fourth quarter and 13% for the full year 2023
- Return on participating equity of 36.3%
- None.
Insights
The reported financial results by Dream Finders Homes, Inc. indicate a robust performance in a period marked by economic uncertainty. A noteworthy aspect is the 18% increase in net income for the fourth quarter and a 13% increase for the full year. This growth trajectory is remarkable, especially when considering the broader homebuilding industry's challenges, such as supply chain disruptions and labor shortages.
From a financial perspective, the reduction in net debt to net capitalization from 42.9% to 23.3% reflects a stronger balance sheet and improved financial leverage. This positions the company well for future growth or potential market downturns. Furthermore, the increase in total liquidity to $828 million provides the company with ample resources to manage operations and invest in strategic opportunities.
However, investors should note the decrease in return on participating equity from 49.1% to 36.3%. Despite being a strong return, this decline could suggest a normalization of returns following an exceptionally high previous year or potentially increased equity base diluting returns.
The homebuilding sector is often seen as a leading economic indicator and Dream Finders Homes' results may signal broader market trends. The increase in the average sales price of homes closed by 9% suggests that the company has been successful in passing on increased costs to consumers, which could be indicative of a market with strong demand and limited supply.
The growth in homebuilding revenues and home closings, alongside an expanded active community count, demonstrates the company's ability to scale operations effectively. This expansion is critical for maintaining competitive advantage and market share in a fragmented industry.
It's also important to consider the potential impact of the issuance of $300 million in senior unsecured notes. This strategic financial move may have contributed to the improved liquidity position and reduced credit facility dependence, but it also adds fixed interest obligations that must be managed.
The data provided by Dream Finders Homes offers insights into the current state of the real estate market. The increase in homebuilding gross margin and adjusted gross margin is particularly significant. These improvements suggest that the company has been able to increase efficiency or command higher prices, possibly due to a favorable product mix or strong market demand.
However, while current performance is strong, the backdrop of rising interest rates could pose challenges for the homebuilding industry. Higher financing costs for consumers could eventually lead to a cooling of demand, potentially impacting future revenue growth and margins.
The backlog of sold homes valued at $1.9 billion is a positive indicator of future revenue, but it is essential to monitor how quickly this backlog converts to closed sales in a changing economic environment. The company's ability to maintain its growth amidst these conditions will be a key factor to watch.
Company Record Homebuilding Revenues of
Net Income Up
Return on Participating Equity of
Fourth Quarter 2023 Highlights (As Compared to Fourth Quarter 2022)
-
Homebuilding revenues increased
$38 million 3% to$1.1 billion -
Average sales price of homes closed increased
9% to$520,940 $479,554 -
Homebuilding gross margin increased 340 basis points (bps) to
20.5% from17.1% -
Adjusted gross margin (non-GAAP) increased 440 bps to
28.1% from23.7% -
Pre-tax income increased
12% to$135 million $121 million -
Net income attributable to DFH increased
18% to$102 million $1.06 $86 million $0.89
Full Year 2023 Highlights (As Compared to Full Year 2022, Unless Otherwise Noted)
-
Homebuilding revenues increased
$404 million 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 $474,292 -
Homebuilding gross margin increased 100 bps to
19.4% from18.4% -
Adjusted gross margin (non-GAAP) increased 260 bps to
27.2% from24.6% -
Pre-tax income increased
14% to$404 million $356 million -
Net income attributable to DFH increased
13% to$296 million $3.03 $262 million $2.67 -
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 to49.1% for the year ended December 31, 2022 -
Issuance of
$300 million 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 to42.9% as of December 31, 2022 -
Total liquidity, comprised of cash and cash equivalents, and availability under the revolving credit facility, increased to
$828 million $487 million
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
"We continue to be proud of our ability to grow the business while also generating record total liquidity of
"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
Fourth Quarter 2023 Results
Homebuilding revenues of
Homebuilding gross margin percentage in the fourth quarter of 2023 was
Adjusted gross margin as a percentage of homebuilding revenues in the fourth quarter of 2023 was
Selling, general and administrative expense (“SG&A”) in the fourth quarter of 2023 increased
Net income attributable to DFH in the fourth quarter of 2023 increased
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
Our total available liquidity as of December 31, 2023 was
Fourth Quarter 2023 Backlog
As of December 31, 2023, DFH had a backlog of 3,978 homes, valued at
The following table shows the backlog units and ASP as of December 31, 2023 by homebuilding segment:
|
As of December 31, 2023
|
||||
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
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
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
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
|
|
Year Ended
|
||||||||||||
|
|
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) |
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|
|
|
|
|
||||||||||||||||
|
|
Three Months Ended
|
|
Year Ended
|
||||||||||||||||
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
||||||||||||
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,
|
|
December 31,
|
||||
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, |
|
|
329 |
|
|
|
325 |
|
Class B common stock, |
|
|
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
|
|
Year Ended
|
|||||||||||||
|
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240228387925/en/
Investor Contact: investors@dreamfindershomes.com
Media Contact: mediainquiries@dreamfindershomes.com
Source: Dream Finders Homes, Inc.
FAQ
What were Dream Finders Homes (DFH) homebuilding revenues for the fourth quarter and full year 2023?
How much did the net income increase for Dream Finders Homes (DFH) in the fourth quarter and full year 2023?
What was the return on participating equity for Dream Finders Homes (DFH) in 2023?
