Dream Finders Homes Announces Record Second Quarter 2021 Earnings, Increasing Quarterly Pre-Tax Income by 193% YoY

Aug 10, 2021

JACKSONVILLE, Fla., Aug. 10, 2021 (GLOBE NEWSWIRE) -- Dream Finders Homes, Inc. (NASDAQ: DFH) announces pre-tax income of $37 million for the quarter ended June 30, 2021, an increase of 193% over the $12 million earned in the quarter ended June 30, 2020. The increase in pre-tax income was primarily driven by an 83% increase in home sales revenues and 270 basis points of gross margin percentage accretion from the second quarter of 2020. Our focus on shareholder returns continues to deliver superior results with return on equity growing 10.6% to 44.3% for the trailing twelve months ended June 30, 2021, compared to 33.7% for the trailing twelve months ended June 30, 2020.
Second Quarter 2021 Highlights and Results

  • Total revenues were $365 million, an increase of 83% when compared to the $200 million in the second quarter of 2020. Home closings increased to 996 homes for the second quarter of 2021, a 91% increase over the 522 home closings in the second quarter of 2020. Average selling price per home closed in the second quarter of 2021 was $358,604 compared to $366,704 for the second quarter of 2020. The decrease in average selling price per home closed was driven by the acquisition of H&H Homes, which delivered 315 homes in the second quarter at an average selling price of $301,033
  • Gross margin as a percentage of homes sales revenues was 16.5%, an increase of 270 basis points when compared to the second quarter of 2020 gross margin percentage of 13.8%. Margin expansion was driven by price appreciation outpacing cost inflation as well as lower cost of funds
  • Pre-tax income, net of income attributable to non-controlling interests, was $33 million, an increase of 182% when compared to the $12 million generated in the second quarter of 2020
  • Net profit margin as a percentage of total revenues was 7.8%, an increase of 190 basis points when compared to the second quarter of 2020 net profit margin percentage of 5.9%
  • Net new orders increased to 1,521 homes, an increase of 92% over the net new orders of 792 in the second quarter of 2020. H&H Homes contributed 499 net new orders in the second quarter of 2021
  • The cancellation rate for the second quarter of 2021 was 14.4%, a decrease of 360 basis points from the 18.0% in the second quarter of 2020
  • Our controlled lot pipeline increased from 19,276 lots at December 31, 2020 to 22,923 at June 30, 2021 as we continue building for the future. As of June 30, 2021, the Company owned 4,280 lots, of which 3,224 were homes under construction. In addition, as of June 30, 2021, the Company’s lot pipeline under due diligence is over 14,000 lots
  • Active community count at the end of the second quarter of 2021 was 117, an increase of 36% over the 86 active communities at the end of the second quarter of 2020. Active community count at the end of 2020 was 126, resulting in an absorption rate of 4.7 per month for the six months ended June 30, 2021
  • Homes in backlog at the end of the second quarter of 2021 were 4,137, valued at $1,647 million, increases of 184% and 205%, respectively, over the 1,457 homes in backlog valued at $540 million at the end of the second quarter of 2020
  • Return on equity was 44.3% for the trailing twelve months ended June 30, 2021, compared to 33.7% for the trailing twelve months ended June 30, 2020
  • Selling, general and administrative expense as a percentage of revenue was 7.9% for the three months ended June 30, 2021, compared to 8.5% for the three months ended June 30, 2020. The decrease of 60 basis points is attributable to the Company achieving improved operating scale in certain segments

Patrick Zalupski, Dream Finders Homes Chairman and CEO, said, “I’m proud of what we accomplished in the quarter. Our team’s strengths and our focus on delivering a quality product drove superior growth and returns in this challenging environment. Our strategic footprint and disciplined land acquisition strategy have positioned us to capitalize on market demand. Price appreciation in our homes sold has flowed through to our margins, which are outpacing the industry-wide headwinds we are facing in the supply chain.

Our operations have been impacted by numerous supply chain disruptions that - in our opinion - ultimately stemmed from suppliers’ start and stop production schedules, resulting from Covid-19. The homebuilding industry is resilient, and our suppliers and trade partners are working hard to address these issues. In response to the extended supply chain cycle times, we have taken steps throughout our communities to moderate sales to maintain the quality of our homes and maximize returns. We also believe that the recent relief in lumber prices will help keep costs down and allow builders to provide more affordability to customers. The best managers will find a way to work through different market environments. Our team is working relentlessly to find innovative ways to deliver homes more efficiently, resulting in growth and margin accretion.

Dream Finders Homes has the culture, tenacity and skills to navigate the current dynamics facing homebuilders and we maintain our unwavering focus on delivering a great product to our customers while maintaining market leading returns on shareholder equity. We remain focused on delivering a material portion of our record backlog in the second half of this year.”

Second Quarter 2021 Results

Net income for the quarter ended June 30, 2021 was $29 million, or $0.31 per diluted share. Net income for the second quarter of 2021 increased 144% when compared to the $12 million achieved in the second quarter of 2020 – net income for the second quarter of 2020 excludes the impact of income tax expense considerations, as the Company was a pass-through entity for taxation purposes at that time. Applying the Company’s six month effective tax rate of 17% to the Company’s earnings for the quarter ended June 30, 2020, would generate net income attributable to Dream Finders Homes, Inc. of $10 million, resulting in an increase of 194% over the second quarter of 2020 on a tax effected comparable basis.

During the second quarter of 2021, the Company recorded $7 million of other income in relation to its PPP loan forgiveness, partially offset by $4 million of contingent consideration expense due to a fair value adjustment of future expected earnout payments from the acquisition of H&H Homes. The increase in contingent consideration is due to H&H Homes exceeding our initial projections. At the time of the H&H Homes acquisition, the Company recorded a contingent consideration liability based on the expected value of future earn out payments of the acquiree. This liability is remeasured to fair value quarterly and the adjustment is recorded in other expense.

Full Year 2021 Outlook

Dream Finders Homes delivered a strong second quarter and remains focused on providing an affordable product for its entry-level and first-time move-up homebuyers. The Company recognizes the difficulties encountered in labor and materials constraints, as well as changing consumer dynamics created by the current environment. Management is determined to serve its customers by innovating ways to deliver homes and rapidly adapting to demand changes. Based on the Company’s backlog and average sales price per home closed, the low interest rate environment, and persistent relocation patterns into its core markets, the Company is well positioned to achieve its expected growth in 2021 and maintains its guidance of 5,000 to 6,000 home closings for the full year 2021. In addition, the Company expects an increase in the average sales price of homes closed in future quarters, as the average sales price in backlog as of June 30, 2021 was $398,048.

This outlook assumes that general economic conditions, including interest rates and mortgage availability, in the remainder of 2021 remain similar to those experienced in the first half of 2021, and that construction costs and overall absorption rates in the remainder of 2021 are consistent with the Company’s recent experience. In addition, this outlook assumes that the Company can continue to increase its portfolio of controlled lots, and that governmental regulations relating to land development, home construction and COVID-19 are similar to those currently in place. Any further COVID-19 governmental restrictions on land development, home construction or home sales could negatively impact the Company’s ability to achieve this number of home closings in 2021.

Investor Communication

Dream Finders Homes encourages all interested parties -- including analysts, current and potential stockholders, and other stakeholders -- to submit questions in writing about the Company’s results and business to investors@dreamfindershomes.com. The Company intends to make written responses to selected questions available monthly by furnishing Current Reports on Form 8-K to the Securities and Exchange Commission and through its investor relations website at https://investors.dreamfindershomes.com/.

About Dream Finders Homes, Inc.

Dream Finders Homes 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.

Forward-Looking Statements

This press release includes forward-looking statements regarding future events, including projected 2021 home closings and average sales price of homes closed in 2021; 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, 2020, 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
(Unaudited)

 For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
  2021  2020  2021  2020 
Revenues$365,276,101 $199,801,128 $708,836,466 $388,539,561 
Cost of sales 303,589,420  171,236,637  594,626,181  334,982,320 
Selling, general and administrative expense 28,686,162  17,062,297  55,652,375  34,581,082 
Income from equity in earnings of unconsolidated entities (1,125,001) (1,926,702) (2,857,394) (3,286,090)
Loss/(Gain) on sale of assets 48,034  (200) (17,483) (34,295)
Loss on extinguishment of debt -  -  697,423  - 
Other Income    
Other (1,668,263) (785,153) (2,150,482) (919,214)
Paycheck Protection Program forgiveness (7,219,794) -  (7,219,794) - 
Other Expense    
Other 2,434,780  1,360,526  5,337,828  2,555,837 
Contingent consideration revaluation 3,976,980  316,772  5,159,725  316,772 
Interest expense 15,796  45,948  657,657  81,653 
Income before taxes$36,537,987 $12,491,003 $58,950,430 $20,261,496 
Income tax expense (4,478,317) -  (9,294,799) - 
Net and comprehensive income$32,059,670 $12,491,003 $49,655,631 $20,261,496 
Net and comprehensive income attributable to non-controlling interests (3,485,789) (766,902) (4,961,107) (1,957,361)
Net and comprehensive income attributable to Dream Finders Homes, Inc.$28,573,881 $11,724,101 $44,694,524 $18,304,135 
     
Earnings per share(4)    
Basic$0.31 $- $0.49 $- 
Diluted$0.31 $- $0.49 $- 
Weighted-average number of shares    
Basic 92,521,482  -  92,521,482  - 
Diluted 92,670,727  -  92,641,222  - 
     
Other Financial and Operating Data     
Active communities at end of period(1) 117  86  117  86 
Home closings 996  522  1,998  1,037 
Average sales price of homes closed$358,604 $366,704 $347,261 $366,604 
Net new orders 1,521  792  3,531  1,641 
Cancellation rate 14.4%  18.0%  10.9%  14.9% 
Backlog (at period end) - homes 4,137  1,457  4,137  1,457 
Backlog (at period end, in thousands) - value$1,646,725 $539,856 $1,646,725 $539,856 
Gross margin (in thousands)(2)$60,154 $27,386 $111,284 $51,413 
Gross margin %(3) 16.5%  13.8%  15.8%  13.3% 
Net profit margin 7.8%  5.9%  6.3%  4.7% 

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)   Gross margin is home sales revenue less cost of sales. Gross margin includes commission expense.
3)   Calculated as a percentage of home sales revenues.
4)   EPS was calculated 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 as described in the prospectus dated January 20, 2021 and filed with the Securities and Exchange Commission on January 22, 2021, resulting in 92,521,482 shares of common stock outstanding as of the closing of the initial public offering. For the six months ended June 30, 2021, the diluted shares of common stock outstanding were 92,641,222.



 Three Months Ended June 30, Six Months Ended June 30,
 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:               
The Carolinas (H&H Homes)315 $301,033 N/A N/A 658 $293,807 N/A N/A
Jacksonville265 $351,496 247 $305,665 560 $338,077 513 $299,797
Orlando147 $409,362 72 $384,195 308 $404,494 98 $362,162
Colorado47 $494,604 50 $443,751 81 $473,882 97 $451,999
DC Metro35 $681,706 37 $549,285 59 $640,193 88 $543,490
Other (1)187 $331,101 116 $394,370 332 $332,649 241 $403,297
Total996 $ 358,604 522 $ 366,704 1,998 $ 347,261 1,037 $ 366,604

(1) Austin, Savannah, Village Park Homes, Active Adult and Custom Homes.



Dream Finders Homes, Inc.
Consolidated Balance Sheets
(Unaudited)

      June 30, December 31,
     2021 2020
         
Assets     
 Cash and cash equivalents$6,154,320 $35,495,595
 Restricted cash (VIE amounts of $5,946,424 and $8,793,201) 46,936,952  49,715,553
 Accounts receivable 51,021,302  24,927,903
 Inventories:   
 Construction in process and finished homes 537,758,853  396,630,945
 Joint venture owned land and lots   
  (VIE amounts of $18,151,982 and $40,900,552) 18,152,136  40,900,552
 Company owned land and lots 75,083,602  46,839,616
 Lot deposits 107,717,122  66,272,347
 Equity method investments 7,453,783  4,545,349
 Property and equipment, net 4,228,857  4,309,071
 Operating lease right-of-use assets 12,788,540  14,219,248
 Finance lease right-of-use assets 256,612  335,791
 Intangible assets, net of amortization 2,161,250  2,660,003
 Goodwill 30,360,997  28,566,232
 Deferred tax asset 3,312,736  -
 Other assets (VIE amounts of $2,159,645 and $1,288,359) 28,894,891  18,262,036
     Total assets$932,281,953 $733,680,241
Liabilities    
 Accounts payable (VIE amounts of $0 and $1,315,582) 34,204,013  37,418,693
 Accrued expenses (VIE amounts of $8,571,439 and $9,977,268) 65,908,878  67,401,055
 Customer deposits 93,275,468  59,392,135
 Construction lines of credit 365,000,000  289,878,716
 Notes payable (VIE amounts of $2,992,531 and $8,821,282) 4,048,531  29,653,282
 Operating lease liabilities 13,064,645  14,410,560
 Finance lease liabilities 267,198  345,062
 Contingent consideration 27,110,480  23,157,524
     Total liabilities$602,879,213 $521,657,027
         
Mezzanine Equity   
 Preferred mezzanine equity 6,703,460  55,638,450
 Common mezzanine equity -  20,593,001
     Total mezzanine equity$6,703,460 $76,231,451
         
Members' Equity    
 Common members' equity -  103,852,646
     Total members' equity$- $103,852,646
         
Stockholders' Equity - Dream Finders Homes, Inc.   
 Class A common stock, $0.01 per share, 289,000,000   
  authorized, 32,295,329 outstanding 322,953  -
 Class B common stock, $0.01 per share, 61,000,000   
  authorized, 60,226,153 outstanding 602,262  -
 Additional paid-in capital 255,289,812  -
 Retained earnings 45,610,738  -
 Non-controlling interests 20,873,515  31,939,117
 Total stockholders' and members' equity 329,402,740  212,023,214
     Total liabilities, mezzanine equity, members' equity and stockholders' equity$932,281,953 $733,680,241


SOURCE: Dream Finders Homes, Inc.

Investor and Analyst Contact – investors@dreamfindershomes.com
Rick Moyer – Chief Financial Officer
Anabel Fernandez – Treasurer
Jake Williamson – Director of Treasury

Media Contact – mediainquiries@dreamfindershomes.com
Rick Moyer – Chief Financial Officer
Anabel Fernandez – Treasurer
Robert Riva – General Counsel