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Dream Finders Announces Second Quarter 2022 Results

·13 min read
Dream Finders Homes, Inc.
Dream Finders Homes, Inc.

JACKSONVILLE, Fla., Aug. 04, 2022 (GLOBE NEWSWIRE) -- Dream Finders Homes, Inc. (the “Company”, “Dream Finders” or “DFH”) (NASDAQ: DFH), one of the nation’s fastest-growing companies, announced its financial results for the second quarter ended June 30, 2022.

Second Quarter 2022 Highlights (As Compared to Second Quarter 2021, unless otherwise noted)

  • Homebuilding revenues increased 118% to $791 million from $364 million

  • Gross margin as a percentage of homebuilding revenues increased 320 basis points to 19.7% from 16.5%

  • Pre-tax income increased 145% to $90 million, compared to $37 million

  • Net income attributable to DFH increased 119% to $63 million, or $0.60 per diluted share, compared to $29 million, or $0.31 per diluted share

  • Home closings increased 66% to 1,649 from 996

  • Average sales price of homes closed increased 29% to $463,447 from $358,604

  • Net new orders decreased 6% to 1,426 from 1,521

  • Active community count increased 74% to 203 from 117

  • Backlog of sold homes increased 74% to 7,190 homes valued at $3.3 billion, compared to 4,137 homes valued at $1.6 billion

  • Return on participating equity was 44.0% for the trailing twelve months ended June 30, 2022, compared to 44.3% for the trailing twelve months ended June 30, 2021

  • Controlled lot pipeline increased 66% to 37,983 as of June 30, 2022, compared to 22,923 as of June 30, 2021

  • Commitment on the revolving credit facility increased to $1.1 billion as of June 30, 2022, compared to $818 million as of December 31, 2021

  • Total liquidity, comprised of cash and cash equivalents, and availability under the revolving credit facility, increased 21% to $334 million as of June 30, 2022, compared to $277 million as of December 31, 2021

Management Commentary

Patrick Zalupski, Dream Finders Homes Chairman and CEO, said, “In DFH’s sixth quarter as a public company, we continued to outperform growth and execution expectations. For the full year 2020 (the year prior to our IPO), DFH had annual pre-tax earnings of $85 million. Less than 18 months after going public, DFH had quarterly pre-tax earnings of $90 million. While we are confident that DFH earnings will continue to grow, it is important to step back and appreciate our employees' hard work to reach this point in a relatively short period of time. These most recent results are a function of several years' hard work. It is rewarding to see all of that work bearing fruit and our accomplishments reinforce the benefits of our culture and business model.

More specific to the quarter, our homebuilding margin improved to 19.7%, another Company record, as our team continues to closely manage sales prices, cost inflation, supply chain challenges and mortgage rates in a quickly changing macro environment. While we acknowledge the rapid increase in mortgage rates and appreciation in home values pose headwinds, we believe the overall shortage of homes available will perpetuate the supply-demand gap. Our net new orders were up year over year in both May and June, however, we were limiting sales across most communities in April to ensure pricing was appropriately placed during a period of enhanced market volatility. This limitation contributed to an overall 6% quarterly decrease in net new orders, however, excluding cancellations, our total gross sales were up year over year.

Our land-light operating model allows us to navigate temporary housing market challenges and quickly change course in light of macroeconomic conditions. We continue to be strategically positioned in high growth markets, providing affordable homes to the entry-level, first and second-time move up homebuyers. Our build-for-rent platform provides a consistent home deliveries pipeline, which is less susceptible to temporary changes in demand from individual homebuyers. While the short-term may be uncertain, we are committed to our business model and focused on generating long-term earnings growth.”

Second Quarter 2022 Results

Homebuilding revenues for the second quarter 2022 increased 118% to $791 million, compared to $364 million in the year-ago quarter. Home closings increased 66% to 1,649, compared to 996 in the year-ago quarter. Average sales price (“ASP”) of homes closed for the second quarter 2022 was $463,447, compared to $358,604 in the year-ago quarter. The ASP increase was primarily due to the MHI acquisition as well as home price appreciation.

Homebuilding gross margin percentage in the second quarter 2022 improved 320 basis points to 19.7%, compared to 16.5% in the year-ago quarter. The gross margin improvement was attributable to our ability to increase prices while managing cost inflation.

Selling, general and administrative expenses as a percentage of homebuilding revenues was 8% in the second quarter 2022, remaining consistent when compared to 8% in the year-ago quarter.

Net new orders in the second quarter 2022 decreased 6% to 1,426, compared to 1,521 in the year-ago quarter. During the first month of the quarter, the Company delayed the sale of homes until later stages in the construction cycle. Later in June, demand tightened in response to the rapid rise in mortgage rates coupled with continued home price appreciation. The market's reaction to the quickly changing economic conditions negatively impacted new orders for the quarter and drove an uptick in cancellations for the Company and the industry as a whole. Our cancellation rate remains within the Company’s pre-pandemic historical averages at 21.0% for the quarter ended June 30, 2022, compared to 14.4% for the year-ago period. At the end of the second quarter 2022, DFH's large backlog of 7,190 homes, valued at $3.3 billion, represented record increases of 74% and 103%, respectively, compared to the year-ago quarter. As of June 30, 2022, the ASP in backlog was $463,831.

Net income attributable to DFH in the second quarter 2022 was $63 million, or $0.60 per diluted share, compared to $29 million, or $0.31 per diluted share in the second quarter 2021.

Full Year 2022 Outlook

Dream Finders Homes is reaffirming its guidance of a minimum of 7,000 home closings for the full year 2022. This outlook considers the rapid increase in interest rates and overall moderation of the housing market that began at the end of the second quarter of 2022 and assumes general economic conditions, including interest rates and mortgage availability, remain similar to those experienced in the latter half of the second quarter of 2022. Additionally, any further COVID-19 governmental restrictions on land development, home construction or home sales or additional supply chain challenges could negatively impact the Company’s ability to achieve this number of home closings in 2022. As of June 30, 2022, the Company backlog was 7,190 homes, with approximately 32% of the homes in backlog expected to be delivered in 2023 and beyond. The Company continues to believe the backlog of homes sold is the best indicator for future growth.

The following table shows the backlog units and ASP as of June 30, 2022 by segment:

 

As of June 30, 2022
(unaudited)

Backlog:

Units

 

Average Sales Price

Jacksonville

1,734

 

$

364,137

Colorado

135

 

 

619,289

Orlando

1,016

 

 

550,965

DC Metro

124

 

 

502,018

The Carolinas

1,110

 

 

330,399

Texas

1,859

 

 

633,287

Other (1)

1,212

 

 

374,484

Total

7,190

 

$

463,831


(1)

Austin, Savannah, Village Park Homes, Active Adult and Custom Homes. Austin refers to legacy DFH operations, exclusive of MHI.


About Dream Finders Homes, Inc.

Dream Finders Homes (NASDAQ: DFH) is based in Jacksonville, FL, and is one of the nation’s fastest-growing companies, with industry-leading returns on shareholders’ equity. Dream Finders Homes builds single-family homes in Florida, Texas, North Carolina, South Carolina, Georgia, Colorado, Virginia, Maryland, and the DC Metro area. 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 2022 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, 2021 and Quarterly Report on Form 10-Q for the quarter ended March 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.
Consolidated Statements of Comprehensive Income and Operating Activity
(In thousands, except per share amounts and Other Financial and Operating Data, unless otherwise noted)

 

 

For the Three Months Ended
June 30,
(unaudited)

 

For the Six Months Ended
June 30,
(unaudited)

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Homebuilding

 

$

791,230

 

 

$

363,743

 

 

$

1,453,703

 

 

$

705,910

 

Other

 

 

1,904

 

 

 

1,533

 

 

 

3,497

 

 

 

2,926

 

Total revenues

 

 

793,134

 

 

 

365,276

 

 

 

1,457,200

 

 

 

708,836

 

Homebuilding cost of sales

 

 

635,422

 

 

 

303,589

 

 

 

1,174,290

 

 

 

594,626

 

Selling, general and administrative expense

 

 

66,015

 

 

 

30,137

 

 

 

127,725

 

 

 

59,452

 

Income from equity in earnings of unconsolidated entities

 

 

(3,334

)

 

 

(1,125

)

 

 

(6,294

)

 

 

(2,857

)

Contingent consideration revaluation

 

 

5,042

 

 

 

3,977

 

 

 

9,234

 

 

 

5,160

 

Other (income) expense, net

 

 

278

 

 

 

(7,856

)

 

 

(691

)

 

 

(7,153

)

Interest expense

 

 

13

 

 

 

16

 

 

 

26

 

 

 

658

 

Income before taxes

 

 

89,698

 

 

 

36,538

 

 

 

152,910

 

 

 

58,950

 

Income tax expense

 

 

(23,327

)

 

 

(4,479

)

 

 

(40,205

)

 

 

(9,295

)

Net and comprehensive income

 

 

66,371

 

 

 

32,059

 

 

 

112,705

 

 

 

49,655

 

Net and comprehensive income attributable to non-controlling interests

 

 

(3,747

)

 

 

(3,486

)

 

 

(6,365

)

 

 

(4,961

)

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

 

$

62,624

 

 

$

28,573

 

 

$

106,340

 

 

$

44,694

 

 

 

 

 

 

 

 

 

 

Earnings per share(1)

 

 

 

 

 

 

 

 

Basic

 

$

0.64

 

 

$

0.31

 

 

$

1.07

 

 

$

0.49

 

Diluted

 

$

0.60

 

 

$

0.31

 

 

$

1.02

 

 

$

0.49

 

Weighted-average number of shares

 

 

 

 

 

 

 

 

Basic

 

 

92,758,939

 

 

 

92,521,482

 

 

 

92,758,939

 

 

 

92,521,482

 

Diluted

 

 

104,566,243

 

 

 

92,670,727

 

 

 

103,531,560

 

 

 

92,641,222

 

Other Financial and Operating Data

 

 

 

 

 

 

 

 

Active communities at end of period(2)

 

 

203

 

 

 

117

 

 

 

203

 

 

 

117

 

Home closings

 

 

1,649

 

 

 

996

 

 

 

3,020

 

 

 

1,998

 

Average sales price of homes closed(3)

 

$

463,447

 

 

$

358,604

 

 

$

463,318

 

 

$

347,261

 

Net new orders

 

 

1,426

 

 

 

1,521

 

 

 

3,828

 

 

 

3,531

 

Cancellation rate

 

 

21.0

%

 

 

14.4

%

 

 

16.4

%

 

 

10.9

%

Backlog (at period end) - homes

 

 

7,190

 

 

 

4,137

 

 

 

7,190

 

 

 

4,137

 

Backlog (at period end, in thousands) - value

 

$

3,334,945

 

 

$

1,646,725

 

 

$

3,334,945

 

 

$

1,646,725

 

Gross margin (in thousands)(4)

 

$

155,808

 

 

$

60,154

 

 

$

279,413

 

 

$

111,284

 

Gross margin %(5)

 

 

19.7

%

 

 

16.5

%

 

 

19.2

%

 

 

15.8

%

Net profit margin %

 

 

7.9

%

 

 

7.8

%

 

 

7.3

%

 

 

6.3

%


(1)

The Company calculated earnings per share (“EPS”) based on net income attributable to common stockholders for the period January 21, 2021 through June 30, 2021 over the weighted average diluted shares outstanding for the same period. EPS was calculated prospectively for the period subsequent to the Company’s initial public offering and corporate reorganization, resulting in 92,521,482 shares of common stock outstanding as of the closing of the initial public offering. The total outstanding shares of common stock are made up of Class A common stock and Class B common stock, which participate equally in their ratable ownership share of the Company. Diluted shares were calculated by using the treasury stock method for stock grants and the if-converted method for the convertible preferred stock and the associated preferred dividends.

(2)

A community becomes active once the model is completed or the community has its fifth sale. A community becomes inactive when it has fewer than five units remaining to sell.

(3)

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.

(4)

Gross margin is homebuilding revenues less homebuilding cost of sales.

(5)

Calculated as a percentage of homebuilding revenues.


 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2022
(unaudited)

 

2021
(unaudited)

 

2022
(unaudited)

 

2021
(unaudited)

 

Units

 

Average
Sales
Price

 

Units

 

Average
Sales
Price

 

Units

 

Average
Sales
Price

 

Units

 

Average
Sales
Price

Home Closings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jacksonville

377

 

$

472,065

 

265

 

$

351,496

 

646

 

$

464,182

 

560

 

$

338,077

Colorado

69

 

 

584,356

 

47

 

 

494,604

 

139

 

 

570,443

 

81

 

 

473,882

Orlando

100

 

 

481,968

 

147

 

 

409,362

 

206

 

 

458,593

 

308

 

 

404,494

DC Metro

21

 

 

584,930

 

35

 

 

681,706

 

36

 

 

671,168

 

59

 

 

640,193

The Carolinas

351

 

 

330,195

 

315

 

 

301,033

 

603

 

 

330,709

 

658

 

 

293,807

Texas (1)

527

 

 

559,770

 

 

 

 

1,010

 

 

555,270

 

 

 

Other (2)

204

 

 

365,479

 

187

 

 

331,101

 

380

 

 

371,562

 

332

 

 

332,649

Total

1,649

 

$

463,447

 

996

 

$

358,604

 

3,020

 

$

463,318

 

1,998

 

$

347,261


(1)

Texas consists of the operations of MHI, which was acquired on October 1, 2021.

(2)

Austin, Savannah, Village Park Homes, Active Adult and Custom Homes. Austin refers to legacy DFH operations, exclusive of MHI.


Dream Finders Homes, Inc.
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

Cash and cash equivalents

$

84,097

 

$

227,227

Restricted cash (VIE amounts of $2,944 and $4,275)

 

45,296

 

 

54,095

Accounts receivable (VIE amounts of $1,711and $2,684)

 

30,280

 

 

33,482

Inventories:

 

 

 

Construction in process and finished homes

 

1,254,199

 

 

961,779

Company owned land and lots

 

93,404

 

 

83,197

VIE owned land and lots

 

8,414

 

 

21,686

Total inventories

 

1,356,017

 

 

1,066,662

Lot deposits

 

288,426

 

 

241,406

Other assets (VIE amounts of $2,727 and $2,185)

 

78,946

 

 

43,962

Equity method investments

 

14,188

 

 

15,967

Property and equipment, net

 

6,511

 

 

6,789

Operating lease right-of-use assets

 

25,108

 

 

19,359

Deferred tax asset

 

4,905

 

 

4,232

Intangible assets, net of amortization

 

7,085

 

 

9,140

Goodwill

 

171,927

 

 

171,927

Total assets

$

2,112,786

 

$

1,894,248

Liabilities

 

 

 

Accounts payable (VIE amounts of $668 and $1,309)

$

130,115

 

$

113,498

Accrued expenses (VIE amounts of $6,213 and $6,915)

 

126,823

 

 

139,508

Customer deposits

 

190,945

 

 

177,685

Construction lines of credit

 

875,000

 

 

760,000

Notes payable (VIE amounts of $0 and $1,979)

 

1,568

 

 

3,292

Operating lease liabilities

 

25,625

 

 

19,826

Contingent consideration

 

115,555

 

 

124,056

Total liabilities

$

1,465,631

 

$

1,337,865

Commitments and contingencies

 

 

 

Mezzanine Equity

 

 

 

Preferred mezzanine equity

 

155,621

 

 

155,220

 

 

 

 

Stockholders’ Equity

 

 

 

Class A common stock, $0.01 per share, 289,000,000 authorized, 32,295,329 outstanding

 

323

 

 

323

Class B common stock, $0.01 per share, 61,000,000 authorized, 60,226,153 outstanding

 

602

 

 

602

Additional paid-in capital

 

261,207

 

 

257,963

Retained earnings

 

217,346

 

 

118,194

Non-controlling interests

 

12,056

 

 

24,081

Total mezzanine and stockholders’ equity

 

647,155

 

 

556,383

Total liabilities, mezzanine equity, and stockholders’ equity

$

2,112,786

 

$

1,894,248


SOURCE: Dream Finders Homes, Inc.

Investor Contact: investors@dreamfindershomes.com
Media Contact: mediainquiries@dreamfindershomes.com

Anabel Fernandez – Chief Financial Officer
Robert Riva – General Counsel