Dream Finders Homes(DFH) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Highlights The company achieved increased homebuilding revenues and closings, significant growth in financial services income, but experienced a decline in overall pre-tax income and EPS Second Quarter 2025 Key Financial and Operational Highlights (YoY) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :---------- | :---------- | :----- | | Homebuilding revenues | $1.1 billion | $1.05 billion | +4% | | Home closings | 2,232 | 2,031 | +10% | | Net new orders | 1,938 | 1,712 | +13% | | Homebuilding gross margin | 16.5% | 19.0% | -2.5 pp | | Adjusted homebuilding gross margin (non-GAAP) | 25.9% | 27.0% | -1.1 pp | | Pre-tax income | $74 million | $106 million | -30.2% | | Net income attributable to DFH | $57 million | $81 million | -29.7% | | Basic EPS | $0.57 | $0.83 | -31.3% | | Financial services pre-tax income | $12 million | $7 million | +86% | | Controlled lot pipeline (as of June 30, 2025 vs Dec 31, 2024) | 63,180 | 54,698 | +15.5% | | Total liquidity (as of June 30, 2025) | $433 million | N/A | N/A | | Return on participating equity | 25.0% | 33.5% | -8.5 pp | | Class A common shares repurchased | 705,404 | N/A | N/A | | Value of shares repurchased | $16 million | N/A | N/A | Management Commentary CEO Patrick Zalupski noted solid performance with increased home closings and net sales despite market challenges, completed strategic acquisitions, and reaffirmed full-year 2025 guidance - CEO notes solid performance despite challenging environment (elevated interest rates, weakening consumer confidence), growing home closings by 10% and net sales by 13%[3] - Completed acquisitions of Alliant National Title Insurance Company, Inc. and Green River Builders, Inc. to enhance vertical integration and expand presence in the Atlanta region[4] - Reiterated full-year 2025 guidance of approximately 9,250 home closings and repurchased over 700,000 shares of common stock, demonstrating confidence in long-term business strength[5] Strategic Acquisitions Dream Finders Homes completed two strategic acquisitions in Q2 2025: Alliant National Title Insurance Company, Inc. to expand financial services and vertical integration, and Green River Builders, Inc. to strengthen its presence in the greater Atlanta housing market Alliant Title Acquisition On April 18, 2025, Dream Finders Homes acquired Alliant National Title Insurance Company, Inc., integrating its operations into the Financial Services segment to enhance vertical integration and expand financial services capabilities - Acquired Colorado-based title insurance underwriter, Alliant National Title Insurance Company, Inc. on April 18, 2025[6] - Operations included in the Financial Services segment, enhancing vertical integration and expanding financial services capabilities[4][6] Green River Builders Acquisition On May 2, 2025, the Company acquired the majority of homebuilding assets of Green River Builders, Inc., expanding its operations in the northern Atlanta, Georgia market, complementing previous acquisitions in the region - Acquired majority of homebuilding assets of Green River Builders, Inc. on May 2, 2025[7] - Expands operations in the greater Atlanta region, specifically northern Atlanta, complementing the Liberty Communities acquisition[4][7] Segment Performance The company's performance is analyzed across its Homebuilding and Financial Services segments, detailing revenue, margin, and order trends Homebuilding Segment The Homebuilding segment saw a 4% increase in revenues and a 10% rise in home closings, primarily driven by the Liberty Communities acquisition. However, average sales price decreased by 7%, and gross margin declined due to increased incentives, higher costs, and product mix changes. SG&A expenses also rose significantly Revenues and Closings Homebuilding revenues increased 4% to $1.1 billion, with home closings up 10% to 2,232. The average sales price decreased 7% to $481,027, partly due to lower ASP from the Liberty Communities acquisition and increased sales incentives Homebuilding Revenues and Closings (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--------------------- | :---------- | :---------- | :----- | | Homebuilding Revenues | $1.1 billion | $1.05 billion | +4% | | Home Closings | 2,232 | 2,031 | +10% | | Average Sales Price | $481,027 | $514,833 | -7% | - Growth in homebuilding revenues primarily due to increased home closings, largely attributable to the January 2025 Liberty Communities acquisition (179 closings with ASP of $355,550)[8] - Increased use of sales incentives partially offset homebuilding revenue growth and contributed to lower ASP[8] Gross Margin Analysis Homebuilding gross margin decreased by 250 basis points to 16.5% (19.0% in Q2 2024), primarily due to increased incentives, higher land and financing costs, and changes in product mix. Adjusted homebuilding gross margin also saw a slight decrease Homebuilding Gross Margin (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (bps) | | :-------------------------- | :------ | :------ | :----------- | | Homebuilding Gross Margin % | 16.5% | 19.0% | -250 bps | | Adjusted Homebuilding Gross Margin % | 25.9% | 27.0% | -110 bps | - Decrease in gross margin primarily resulted from increased incentives, higher land and financing costs, and changes in product mix[9] - Partially offset by direct cost reductions and continued cycle time improvements[9] Selling, General & Administrative (SG&A) Expenses SG&A expenses increased 39% to $135 million, rising to 12.3% of homebuilding revenues (from 9.2% in Q2 2024). This increase was mainly due to costs from forward mortgage commitment programs, higher compensation, and other marketing/general expenses from recent acquisitions and organic expansion SG&A Expenses (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :---------- | :---------- | :----- | | SG&A Expense | $135 million | $97 million | +39% | | SG&A as % of Homebuilding Revenues | 12.3% | 9.2% | +310 bps | - Increases primarily attributable to costs of forward mortgage commitment programs, higher compensation, and other marketing/general expenses from recent acquisitions and organic expansion[11] Net New Orders and Cancellation Rate Net new orders increased 13% to 1,938, while the cancellation rate slightly rose to 14.0%. The company attributes the increase in orders and low cancellation rate to successful sales incentives and the availability of quick, move-in-ready homes Net New Orders and Cancellation Rate (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :---------------- | :------ | :------ | :----- |\ | Net New Orders | 1,938 | 1,712 | +13% | | Cancellation Rate | 14.0% | 13.2% | +80 bps | - Increase in net new orders and low cancellation rate reflect successful sales incentives and availability of quick, move-in-ready homes[14] Backlog As of June 30, 2025, backlog decreased to 2,513 homes valued at $1.2 billion, down from 2,802 homes valued at $1.4 billion as of March 31, 2025. The average sales price in backlog also decreased to $477,865 Backlog (June 30, 2025 vs March 31, 2025) | Metric | June 30, 2025 | March 31, 2025 | Change | | :-------------------- | :-------------- | :--------------- | :----- | | Backlog Homes | 2,513 | 2,802 | -10.3% | | Backlog Value | $1.2 billion | $1.4 billion | -14.3% | | ASP in Backlog | $477,865 | $494,987 | -3.5% | - Approximately 1,997 homes in backlog expected to be delivered in 2025, with 516 in 2026 and beyond[15] Backlog by Homebuilding Segment (June 30, 2025) | Segment | Units | Average Sales Price | | :---------- | :---- | :------------------ | | Southeast | 998 | $438,465 | | Mid-Atlantic | 812 | $399,863 | | Midwest | 703 | $623,893 | | Total | 2,513 | $477,865 | Financial Services Segment Financial services revenues and income before taxes significantly increased by $47 million and $6 million, respectively, for Q2 2025 compared to Q2 2024. This growth was primarily driven by the acquisition of Alliant Title and the consolidation of Jet HomeLoans, along with DF Title's expansion into Texas markets Financial Services Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 vs Q2 2024 Change | | :-------------------------- | :------------------------ | | Financial Services Revenues | +$47 million | | Financial Services Income Before Taxes | +$6 million | - Primary drivers for growth include the April 2025 acquisition of Alliant Title and July 2024 consolidation of Jet HomeLoans[17] - DF Title's expansion into Texas markets also contributed to increased revenues and income[17] Full Year 2025 Outlook Dream Finders Homes maintains its full-year 2025 guidance of approximately 9,250 home closings, which includes contributions from the Liberty Communities and Green River Builders acquisitions - Maintains full-year 2025 guidance of approximately 9,250 home closings[5][18] - Guidance is inclusive of closings from Liberty Communities and Green River Builders acquisitions[18] Company Overview Dream Finders Homes (NYSE: DFH) is a Jacksonville, Florida-based homebuilder operating across the Southeast, Mid-Atlantic, and Midwest regions. The company utilizes an asset-light homebuilding model and provides mortgage financing, title agency, and underwriting services through its subsidiaries - Headquartered in Jacksonville, Florida, building single-family homes across Southeast, Mid-Atlantic, and Midwest regions (e.g., Florida, Texas, Tennessee, North Carolina, South Carolina, Georgia, Colorado, Arizona, Washington, D.C. metropolitan area)[19] - Operates an asset-light homebuilding model to achieve industry-leading growth and returns[19] - Provides mortgage financing, title agency, and underwriting services through wholly-owned subsidiaries[19] Forward-Looking Statements This section contains forward-looking statements regarding future events, market conditions, operational results, acquisition benefits, and company strategies. These statements are based on current beliefs and assumptions and are subject to various risks and uncertainties detailed in the company's SEC filings. Dream Finders Homes disclaims any obligation to update these statements, except as required by law - Includes forward-looking statements on projected 2025 home closings, market conditions, future results, acquisition benefits, and strategies[20] - Statements are based on current beliefs and assumptions and are subject to risks and uncertainties discussed in SEC filings (10-K, 10-Q)[20] - Company undertakes no obligation to update or revise forward-looking statements, except as required by applicable law[20] Consolidated Financial Statements This section presents the company's consolidated balance sheets and statements of operations, highlighting key financial changes and performance metrics Consolidated Balance Sheets As of June 30, 2025, total assets increased to $3.65 billion from $3.33 billion at December 31, 2024, primarily driven by increases in inventories, lot deposits, and goodwill. Total liabilities also rose to $2.14 billion from $1.91 billion, mainly due to an increase in revolving credit facility and other borrowings Consolidated Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------------------- | :-------------- | :----------- | :----- | | Total Assets | $3,650,054 | $3,328,651 | +9.66% | | Total Liabilities | $2,136,329 | $1,908,291 | +11.95% | | Total Equity | $1,335,686 | $1,250,409 | +6.82% | - Significant increases in Inventories ($1.99B from $1.72B) and Lot deposits ($531M from $458M) contributed to asset growth[22] - Revolving credit facility and other borrowings increased substantially to $1.14B from $701M[22] Consolidated Statements of Operations For Q2 2025, total revenues increased 9% to $1.15 billion, driven by growth in both homebuilding and financial services. However, net income attributable to DFH decreased 30% to $56.6 million, or $0.57 per basic share, compared to $80.9 million, or $0.83 per basic share in Q2 2024, primarily due to higher costs of sales and increased SG&A expenses Consolidated Statements of Operations Summary (Q2 2025 vs Q2 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :---------- | :---------- | :----- | | Total Revenues | $1,150,505 | $1,055,747 | +9.0% | | Homebuilding Revenues | $1,099,580 | $1,052,236 | +4.5% | | Financial Services Revenues | $50,925 | $3,511 | +1349% | | Income Before Taxes | $74,064 | $106,008 | -30.1% | | Net Income Attributable to DFH | $56,580 | $80,943 | -30.1% | | Basic EPS | $0.57 | $0.83 | -31.3% | - Significant increase in financial services revenue due to acquisitions and expansion[17][24] - Income before taxes and net income decreased due to higher homebuilding cost of sales and increased selling, general and administrative expense[9][11][24] Other Financial and Operating Data This section provides a detailed breakdown of key operational metrics for the homebuilding segment, including home closings, average sales price, net new orders, and financial ratios Key Operating Data (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :------ | :------ | :----- | | Home Closings | 2,232 | 2,031 | +10% | | Average Sales Price of Homes Closed | $481,027 | $514,833 | -7% | | Net New Orders | 1,938 | 1,712 | +13% | | Cancellation Rate | 14.0% | 13.2% | +0.8 pp | | Homebuilding Gross Margin % | 16.5% | 19.0% | -2.5 pp | | Adjusted Homebuilding Gross Margin % | 25.9% | 27.0% | -1.1 pp | Key Operating Data (Six Months Ended June 30, 2025 vs 2024) | Metric | 6M 2025 | 6M 2024 | Change | | :-------------------------------- | :------ | :------ | :----- | | Home Closings | 4,157 | 3,686 | +12.8% | | Average Sales Price of Homes Closed | $489,018 | $505,926 | -3.3% | | Net New Orders | 3,970 | 3,436 | +15.5% | | Cancellation Rate | 12.8% | 16.8% | -4.0 pp | | Homebuilding Gross Margin % | 17.8% | 18.4% | -0.6 pp | | Adjusted Homebuilding Gross Margin % | 26.8% | 26.7% | +0.1 pp | Key Ratios and Backlog (as of June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Active Communities | 271 | 222 | | Backlog - Units | 2,513 | 4,205 | | Backlog - Value (in thousands) | $1,200,875 | $2,123,618 | | Net Homebuilding Debt to Net Capitalization | 44.7% | 42.7% | | Return on Participating Equity | 25.0% | 33.5% | Home Closings by Segment (Q2 2025 vs Q2 2024) | Segment | Q2 2025 Units | Q2 2025 ASP | Q2 2024 Units | Q2 2024 ASP | | :---------- | :------------ | :------------ | :------------ | :------------ | | Southeast | 842 | $438,549 | 668 | $508,511 | | Mid-Atlantic | 600 | $444,571 | 610 | $433,941 | | Midwest | 790 | $553,989 | 753 | $585,971 | | Total | 2,232 | $481,027 | 2,031 | $514,833 | Reconciliation of Non-GAAP Financial Measures This section reconciles non-GAAP financial measures like adjusted homebuilding gross margin and net homebuilding debt to net capitalization with their GAAP equivalents Adjusted Homebuilding Gross Margin This section provides a reconciliation of adjusted homebuilding gross margin, a non-GAAP measure, to the GAAP homebuilding gross margin. Adjusted gross margin excludes capitalized interest, lot option fees, amortization from purchase accounting, and commission expense to offer a comparable view to other public homebuilders - Adjusted homebuilding gross margin is a non-GAAP measure used by management to evaluate operating performance, excluding capitalized interest, lot option fees, amortization, and commission expense[30][32] Adjusted Homebuilding Gross Margin Reconciliation (Q2 2025 vs Q2 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | | :-------------------------------- | :---------- | :---------- | | Homebuilding gross margin | $181,709 | $199,399 | | Interest expense in homebuilding cost of sales | $56,197 | $41,662 | | Amortization in homebuilding cost of sales | $396 | $2,518 | | Commission expense | $46,860 | $40,992 | | Adjusted homebuilding gross margin | $285,162 | $284,571 | | Homebuilding gross margin % | 16.5% | 19.0% | | Adjusted homebuilding gross margin % | 25.9% | 27.0% | Net Homebuilding Debt to Net Capitalization This section reconciles net homebuilding debt to net capitalization, a non-GAAP measure, to total debt to total capitalization. This ratio is used by management to assess homebuilding segment performance, set compensation targets, and measure overall leverage, by excluding mortgage warehouse facilities and cash from debt - Net homebuilding debt to net capitalization is a non-GAAP measure used to assess homebuilding segment performance, set compensation targets, and measure overall leverage[35] - It excludes borrowings under mortgage warehouse facilities and other non-homebuilding borrowings, as well as cash and cash equivalents[35] Net Homebuilding Debt to Net Capitalization Reconciliation (as of June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------------- | :---------- | :---------- | | Total debt | $1,580,352 | $1,185,440 | | Total mezzanine equity | $178,039 | $169,951 | | Total equity | $1,335,686 | $1,051,581 | | Total capitalization | $3,094,077 | $2,406,972 | | Total debt to total capitalization | 51.1% | 49.3% | | Net homebuilding debt | $1,211,991 | $910,643 | | Net capitalization | $2,725,716 | $2,132,175 | | Net homebuilding debt to net capitalization | 44.5% | 42.7% | Contacts This section provides contact information for investor relations