Dream Finders Announces Second Quarter 2022 Results

Aug 04, 2022

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
Backlog:Units Average Sales Price
Jacksonville1,734 $364,137
Colorado135  619,289
Orlando1,016  550,965
DC Metro124  502,018
The Carolinas1,110  330,399
Texas1,859  633,287
Other (1)1,212  374,484
Total7,190 $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,
 For the Six Months Ended
June 30,
   2022   2021   2022   2021 
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,
 Units Average
 Units Average
 Units Average
 Units Average
Home Closings:               
Jacksonville377 $472,065 265 $351,496 646 $464,182 560 $338,077
Colorado69  584,356 47  494,604 139  570,443 81  473,882
Orlando100  481,968 147  409,362 206  458,593 308  404,494
DC Metro21  584,930 35  681,706 36  671,168 59  640,193
The Carolinas351  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
Total1,649 $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)

 June 30, 2022 December 31, 2021
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
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
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