Dream Finders Announces Fourth Quarter 2021 Earnings and Full Year 2021 Results

Pre-tax Income Increases 88% for Full Year 2021
Total Company Revenues Increase 70% for Full Year 2021
Largest Backlog in Company History Valued at Nearly $3 Billion

JACKSONVILLE, Fla., March 16, 2022 (GLOBE NEWSWIRE) -- Dream Finders Homes, Inc. (the “Company” or “DFH”) (NASDAQ: DFH), one of the nation’s fastest growing companies, announced financial results for the fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Highlights (As Compared to Fourth Quarter 2020)

  • Backlog of sold homes increased 163.2% to 6,381 homes valued at $2.9 billion, both Company records, compared to 2,424 homes valued at $865.1 million. McGuyer Homebuilders, Inc. (“MHI”), acquired on October 1, 2021, contributed 1,734 homes valued at $1.0 billion
  • Home building revenues increased 84.4% to $850.1 million from $461.0 million
  • Gross margin as a percentage of home sales revenues increased 60 basis points to 16.2% from 15.6%
  • Pre-tax income attributable to DFH increased 86.6% to $71.4 million, compared to $38.2 million
  • Average sales price of homes closed increased 28.4% to $440,939 from $343,305
  • Home closings increased 46.6% to 1,960 from 1,337 homes
  • Net new orders increased 42.3% to 1,974 from 1,387

Full Year 2021 Highlights (As Compared to Full Year 2020)

  • Home building revenues increased 70.0% to $1.9 billion from $1.1 billion
  • Gross margin as a percentage of home sales revenues increased 140 basis points to 16.0% from 14.6%
  • Pre-tax income attributable to DFH increased 87.9% to $148.6 million, compared to $79.1 million
  • Average sales price of homes closed increased 8.8% to $389,094 from $357,633
  • Home closings increased 54.5% to 4,874 from 3,154 homes
  • Net new orders increased 62.5% to 6,804 from 4,186
  • Active community count increased 62.7% to 205 from 126
  • Controlled lot pipeline increased 99.7% to 38,495 as of December 31, 2021, from 19,276 at December 31, 2020
  • Return on participating equity was 44.3% for the year ended December 31, 2021, compared to 47.0% for the year ended December 31, 2020

Acquisition of MHI

On October 1, 2021, the Company completed its acquisition of Texas based homebuilder, MHI. The acquisition allowed the Company to expand operations in the largest housing market in the U.S. It also provided DFH with a platform to capitalize on its land-light acquisition strategy and to achieve significant scale.

The following table shows MHI’s contribution to the Company for the fourth quarter of 2021:

   
Q4 2021 (unaudited)  
Results and Operating Data (In thousands):   Units:    
Revenues $ 361,138     Net new orders 579  
Cost of sales   308,866     Home closings 689  
Gross margin   52,272          
Gross margin %   14.5%          
SG&A   29,755          
SG&A % of revenue   8.2%          
Net income   23,966          
Net income %   6.6%          
           

Management Commentary

Patrick Zalupski, Dream Finders Homes Chairman and CEO, said, “We concluded the fourth quarter and full year 2021 with record results, achieving revenue growth of 85% and 70% respectively, despite the sustained, well-known industry-wide labor, material, and supply chain challenges that remain prevalent to date. We closed 4,874 homes during the year, representing 33% organic growth. Overall growth was 55%, inclusive of the strategic MHI acquisition, which granted DFH immediate access to the robust Texas markets. I am proud of our team and the effort they put forth that has allowed us to achieve an outstanding year. I look forward to a great year of execution in 2022 and to sharing additional details in my upcoming shareholder letter.”

Fourth Quarter 2021 Results

Home building revenues for the fourth quarter 2021 increased 84.4% to $850.1 million, compared to $461.0 million in the same year-ago quarter. Home closings increased 46.6% to 1,960, compared to 1,337 in the same year-ago quarter. Average sales price (“ASP”) of homes closed for the fourth quarter 2021 was $440,939, compared to $343,305 in the same year-ago quarter, primarily due to home price appreciation and our acquisition of MHI, which contributed 689 closings to the fourth quarter at an ASP of $532,243.

Home building gross margin in the fourth quarter 2021 improved 60 basis points to 16.2%, compared to 15.6% in the same year-ago quarter. The increase in gross margin percentage was primarily attributable to home price appreciation outpacing cost inflation as well as lower cost of funds from the legacy operations offset by slightly lower margins on home closings contributed by MHI in the fourth quarter of 14.5%.

SG&A as a percent of home sales revenues was 7.2% in the fourth quarter 2021, compared to 7.5% in the same year-ago quarter, primarily as a result of economies of scale.

Net new orders in the fourth quarter 2021 increased 42.3% to 1,974, compared to 1,387 in the same year-ago quarter, primarily due to increased community count. The cancellation rate remains within industry averages at 12.2% for the year ended December 31, 2021, down, when compared to 12.8% in the same year-ago period. At the end of the fourth quarter 2021, the Company had the largest backlog in Company history with 6,381 homes, valued at $2.9 billion, which represents record increases of 163.2% and 236.7%, respectively, when compared to the year ended December 31, 2020. The average sales price in backlog as of December 31, 2021, was $456,538.

Net income attributable to DFH in the fourth quarter of 2021 was $57.3 million, or $0.55 per diluted share, compared to net income of $38.2 million in the fourth quarter of 2020.

Full Year 2021 Commentary

For the twelve months ended December 31, 2021, the Company incurred certain non-recurring expenses and recorded other adjustments in relation to its business combinations that were not operational in nature, including:

  • Transaction costs of $3.0 million in relation to its initial public offering
  • Transaction costs of $1.4 million related to the acquisition of businesses
  • Fair value adjustments from business combinations of $15.3 million, comprising contingent consideration revaluation of $7.5 million and inventory mark-up of $7.7 million

For the same year ended, the Company successfully compelled arbitration from a legal matter dating back to October of 2019 in Denver, CO and settled the matter during arbitration proceedings. The net impact to other expense was $7.5 million.

Other income related to the forgiveness of the Paycheck Protection Program grant for the year ended December 31, 2021 was $7.2 million.

The above non-operational items had a net impact of $19.9 million to pre-tax income. The after-tax effect to net income was a reduction of $16.2 million or 17.0 cents per diluted share.

Full Year 2022 Outlook

Dream Finders Homes expects a minimum of 7,000 home closings for the full year 2022 for the combined Company. 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 December 31, 2021, the combined Company backlog was 6,381 homes, with approximately 10% 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 December 31, 2021 by segment:

             
             
  As of December 31, 2021
(unaudited)
     
Backlog: Units   Average Sales
Price
   
Jacksonville 1,463   $ 391,593      
Colorado 133     537,906      
Orlando 934     476,442      
DC Metro 16     644,288      
The Carolinas 1,231     330,087      
Texas 1,734     598,517      
Other (1) 870     424,123      
Total 6,381   $ 456,538      
             
(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 homebuilding companies, with industry leading returns on shareholder’s equity. Dream Finders Homes builds homes in Florida, Texas, North Carolina, South Carolina, Georgia, Colorado, Virginia and Maryland. 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 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)  
           
  For the Three Months Ended
December 31,

For the Twelve Months Ended
December 31,

 
  2021
(Unaudited)
2020
(Unaudited)
  2021

2020

Revenues $ 852,090   $ 461,100   $ 1,923,910   $ 1,133,807    
Cost of sales   712,319     387,244     1,610,332     962,928    
Selling, general and administrative expense   61,045     34,591     154,405     90,359    
Income from equity in earnings of unconsolidated entities   (5,198 )   (3,148 )   (9,428 )   (7,992 )  
Gain on sale of assets   (14 )   (65 )   (87 )   (118 )  
Loss on extinguishment of debt   14     -     711     -    
Other Income   -     -     -     -    
Other   (827 )   (150 )   (7,827 )   (1,322 )  
Paycheck Protection Program forgiveness   -     -     (7,220 )   -    
Other Expense   -     -     -     -    
Other   7,560     216     12,771     3,188    
Contingent consideration revaluation   1,771     1,491     7,533     1,379    
Interest expense   0     747     672     871    
Income before taxes $ 75,420   $ 40,174   $ 162,048   $ 84,514    
Income tax expense   (14,049 )   -     (27,455 )   -    
Net and comprehensive income $ 61,371   $ 40,174   $ 134,593   $ 84,514    
Net and comprehensive income attributable to non-controlling interests   (4,068 )   (1,946 )   (13,461 )   (5,420 )  
Net and comprehensive income attributable to Dream Finders Homes, Inc. $ 57,303   $ 38,228   $ 121,132   $ 79,094    
           
Earnings per share(5)          
Basic $ 0.58   $ -   $ 1.27   $ -    
Diluted $ 0.55   $ -   $ 1.27   $ -    
Weighted-average number of shares          
Basic   92,521     -     92,521     -    
Diluted   103,297     -     95,314     -    
           
Other Financial and Operating Data          
Active communities at end of period(1)   205     126     205     126    
Home closings   1,960     1,337     4,874     3,154    
Average sales price for closed homes(2) $ 440,939   $ 343,305   $ 389,094   $ 357,633    
Net new orders   1,974     1,387     6,804     4,186    
Cancellation rate   13.1 %   12.9 %   12.2 %   12.8 %  
Backlog (at period end) - homes   6,381     2,424     6,381     2,424    
Backlog (at period end, in thousands) - value $ 2,913,170   $ 865,109   $ 2,913,170   $ 865,109    
Gross margin (in thousands)(3) $ 137,749   $ 71,755   $ 306,969   $ 165,048    
Gross margin %(4)   16.2 %   15.6 %   16.0 %   14.6 %  
Net profit margin   6.7 %   8.3 %   6.3 %   7.0 %  
           
           
(1)  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.  
(2)  Average sales price of homes closed is calculated based on home sales revenue, excluding the impact of deposit forfeitures and percentage of completion revenues, over homes closed.  
(3) Gross margin is home sales revenue less cost of sales. Gross margin includes commission expense.        
(4) Calculated as a percentage of home sales revenues.          
(5) The Company calculated earnings per share (“EPS”) based on net income attributable to common stockholders for the period January 21, 2021 through December 31, 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.  


                                 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
 
  2021
(unaudited)
  2020
(unaudited)
  2021
(unaudited)
  2020
(unaudited)
 
  Units   Average Sales
Price
  Units   Average Sales
Price
  Units   Average Sales
Price
  Units   Average Sales
Price
 
Home Closings:                                
Jacksonville 372   $ 397,731   520   $ 311,550   1,237   $ 363,755   1,395   $ 318,134  
Colorado 89     508,526   86     457,672   230     488,502   269     454,802  
Orlando 173     394,962   149     360,323   604     404,035   355     356,168  
DC Metro 49     682,334   84     547,710   140     667,780   232     545,887  
The Carolinas 326     307,025   312     286,296   1,233     300,426   312     286,296  
Texas 689     532,243   -     -   689     532,243   -     -  
Other (1) 262     391,057   186     400,613   741     350,142   591     391,337  
Total 1,960   $ 440,939   1,337   $ 343,305   4,874   $ 389,094   3,154   $ 357,633  
                                 
                                 
(1) 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 per share amounts)
                     
                December 31,   December 31,
              2021   2020
  Assets            
    Cash and cash equivalents $ 227,227   $ 43,658
    Restricted cash (VIE amounts of $2,855 and $8,793)   54,095     49,716
    Accounts receivable   33,482     16,766
    Inventories:      
    Construction in process and finished homes   961,779     396,631
    Joint venture owned land and lots      
      (VIE amounts of $20,708 and $40,901)   21,686     40,901
    Company owned land and lots   83,197     46,840
    Lot deposits   241,406     66,272
    Equity method investments   15,967     4,545
    Property and equipment, net   6,789     4,309
    Operating lease right-of-use assets   19,359     14,219
    Finance lease right-of-use assets   140     336
    Intangible assets, net of amortization   9,140     2,660
    Goodwill     171,927     28,566
    Deferred tax asset   4,232     -
    Other assets (VIE amounts of $1,289 and $1,288)   43,822     18,262
            Total assets $ 1,894,248   $ 733,680
  Liabilities        
    Accounts payable (VIE amounts of $656 and $1,316) $ 113,498   $ 37,419
    Accrued expenses (VIE amounts of $7,284 and $9,977)   139,368     67,401
    Customer deposits   177,685     59,392
    Construction lines of credit   760,000     289,879
    Notes payable (VIE amounts of $2,697 and $8,821)   3,291     29,653
    Operating lease liabilities   19,826     14,411
    Finance lease liabilities   140     345
    Contingent consideration   124,056     23,158
            Total liabilities $ 1,337,864   $ 521,657
            Commitments and contingencies      
  Mezzanine Equity      
    Preferred mezzanine equity   155,220     55,638
    Common mezzanine equity   -     20,593
      Total mezzanine equity $ 155,220   $ 76,231
                     
  Members' Equity      
    Common members' equity   -     103,853
        Total members' equity $ -   $ 103,853
                     
  Stockholders' Equity - Dream Finders Homes, Inc.      
    Class A common stock, $0.01 per share, 289,000      
      authorized, 32,295 outstanding   323     -
    Class B common stock, $0.01 per share, 61,000      
      authorized, 60,226 outstanding   602     -
    Additional paid-in capital   257,963     -
    Retained earnings   118,194     -
    Non-controlling interests   24,081     31,939
      Total stockholders' and members' equity   556,383     212,023
      Total liabilities, mezzanine equity, members' equity and stockholders' equity $ 1,894,248   $ 733,680
                     

Investor Contact: investors@dreamfindershomes.com

Media Contact: mediainquiries@dreamfindershomes.com

        Anabel Fernandez – Interim CFO & Senior Vice President
        Robert Riva – General Counsel & Vice President

SOURCE: Dream Finders Homes, Inc.


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Source: Dream Finders Homes, Inc.