Dream Finders Announces Fourth Quarter and Full Year 2023 Results
Company Record Homebuilding Revenues of
Net Income Up 18% for Fourth Quarter and 13% for Full Year 2023
Return on Participating Equity of 36.3%
Fourth Quarter 2023 Highlights (As Compared to Fourth Quarter 2022)
-
Homebuilding revenues increased
$38 million or 3% to$1.1 billion -
Average sales price of homes closed increased 9% to
$520,940 from$479,554 - Homebuilding gross margin increased 340 basis points (bps) to 20.5% from 17.1%
- Adjusted gross margin (non-GAAP) increased 440 bps to 28.1% from 23.7%
-
Pre-tax income increased 12% to
$135 million from$121 million -
Net income attributable to DFH increased 18% to
$102 million , or$1.06 per basic share, from$86 million , or$0.89 per basic share
Full Year 2023 Highlights (As Compared to Full Year 2022, Unless Otherwise Noted)
-
Homebuilding revenues increased
$404 million or 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 from$474,292 - Homebuilding gross margin increased 100 bps to 19.4% from 18.4%
- Adjusted gross margin (non-GAAP) increased 260 bps to 27.2% from 24.6%
-
Pre-tax income increased 14% to
$404 million from$356 million -
Net income attributable to DFH increased 13% to
$296 million , or$3.03 per basic share from$262 million or$2.67 per basic share - 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 to 49.1% for the year endedDecember 31, 2022 -
Issuance of
$300 million in aggregate principal amount of 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 to 42.9% as ofDecember 31, 2022 -
Total liquidity, comprised of cash and cash equivalents, and availability under the revolving credit facility, increased to
$828 million as ofDecember 31, 2023 , compared to$487 million as ofDecember 31, 2022
Management Commentary
"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
Fourth Quarter 2023 Results
Homebuilding revenues of
Homebuilding gross margin percentage in the fourth quarter of 2023 was 20.5%, compared to 17.1% in the fourth quarter of 2022. The gross margin percentage increase was primarily attributable to direct cost reductions across our segments and to a lesser extent cycle time improvements, partially offset by higher financing and closing costs. While we believe that our direct cost management efforts are sustainable, our gross margins in the future could be affected by several factors, including variability in product mix from quarter to quarter, higher financing and closing costs, as well as purchase accounting amortization from our acquisitions.
Adjusted gross margin as a percentage of homebuilding revenues in the fourth quarter of 2023 was 28.1%, an increase of 440 bps compared to 23.7% in the fourth quarter of 2022. Our proactive management efforts focused on cost and cycle time reductions led to the improvement in the adjusted gross margin percentage. Adjusted gross margin is a non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures.”
Selling, general and administrative expense (“SG&A”) in the fourth quarter of 2023 increased 27% to
Net income attributable to DFH in the fourth quarter of 2023 increased 18% to
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 22.9%, a decrease of 920 bps compared to the cancellation rate in the fourth quarter of 2022 of 32.1%. Despite higher mortgage interest rates in the fourth quarter of 2023 relative to the fourth quarter of 2022, net new orders were steady and the cancellation rate improved, which we believe is due to our targeted mortgage buydown programs and readily available move-in homes.
Our total available liquidity as of
Fourth Quarter 2023 Backlog
As of
The following table shows the backlog units and ASP as of
|
As of |
||||
Backlog: |
Units |
|
Average Sales Price |
||
Southeast |
2,234 |
|
$ |
393,356 |
|
Mid- |
599 |
|
|
427,593 |
|
Midwest |
1,145 |
|
|
657,190 |
|
Total |
3,978 |
|
$ |
474,451 |
Subsequent Events
On
Full Year 2024 Outlook
About
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
|
||||||||||||||||
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 |
|
$ |
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. |
|
|
||||||||||||||||||||
Consolidated Statements of Comprehensive Income and Other Financial and Operating Data (continued) |
||||||||||||||||||||
|
|
|
|
|
||||||||||||||||
|
|
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- |
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 |
|
|
||||||||
Consolidated Balance Sheets |
||||||||
(In thousands, except share and per share amounts) |
||||||||
|
|
|
|
|
||||
|
|
|
|
|
||||
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 |
|
|
|
|
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: