Closing the year with $3.7 billion in revenue for 2023 and $1.1 billion for the fourth quarter, Dream Finders Homes (DFH) expects to reach 8,240 home closings at the end of 2024, including those from the Crescent Homes acquisition in early February.

“Given the depth of industry uncertainty going into 2023, we were pleased to achieve another year of positive growth for our business,” Patrick Zalupski, DFH chairman and CEO, said. “Perhaps most importantly, pre-tax income was $404 million, up 14% year over year, and $135 million, up 12% quarter over quarter. These were both all-time company records. We also produced record annual revenues of $3.7 billion and closings of 7,314, up 12% and 6%, respectively.

In the fourth quarter, net new orders were 1,106, remaining consistent when compared with 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 basis points compared with the cancellation rate in the fourth quarter of 2022 of 32.1%.

Despite higher mortgage interest rates in the fourth quarter relative to the prior-year period, net new orders were steady, and the cancellation rate improved. The home builder said it believes this is due to its targeted mortgage buydown programs and readily available move-in homes.

The average sales price of homes closed for the fourth quarter increased 9% to $520,940, compared with $479,554 in the fourth quarter of 2022. While home closings decreased 7% to 2,153, compared with 2,316 in the fourth quarter of 2022, DFH aims to even the flow of production and delivery of homes throughout the full calendar year.

Additionally, there was a shift in its product mix toward higher-priced homes during the fourth quarter of 2023 when compared with the fourth quarter of 2022, DFH said.

Home building gross margin percentage in the fourth quarter was 20.5%, compared with 17.1% in the fourth quarter of 2022. The gross margin percentage increase was largely attributable to direct cost reductions across segments and to a lesser extent cycle time improvements, partially offset by higher financing and closing costs.

The builder’s proactive management efforts focusing on cost and cycle time reductions led to the improvement in the adjusted gross margin percentage. Adjusted gross margin as a percentage of home building revenues in the fourth quarter was 28.1%, an increase of 440 basis points compared with 23.7% in the fourth quarter of 2022.

"We continue to be proud of our ability to grow the business while also generating record total liquidity of $828 million, including $494 million of unrestricted cash, and reducing our net debt to net capitalization to 23.3% as of the end of the year. This is a pretty significant accomplishment considering we were at 42.9% a year earlier and continued to provide a best-in-class return on participating equity of 36.3%,” Zalupski said.

Compared with the backlog of 5,025 homes, valued at $2.4 billion as of the end of September, DFH had a backlog of 3,978 homes, valued at $1.9 billion, as of year-end. Approximately 704 of the homes in backlog at the end of 2023 are expected to be delivered in 2025 and beyond.

"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 Crescent Homes, based in Charleston, South Carolina, with additional operations in Greenville, South Carolina and Nashville, Tennessee,” Zalupski noted.

“This acquisition added three new markets, increasing our footprint to an aggregate of 20 markets, and should provide meaningful future closing and earnings volume. The former owner, Ted Terry, and his team have been very professional throughout the process, and we are excited to partner with this great company.”

Assets acquired include 457 homesites in different stages of construction, and a backlog of approximately 460 sold homes valued in excess of $265 million. Additionally, DFH expects to control approximately 6,200 lots because of the transaction.

Looking into 2024, DFH noted deterioration of general economic conditions, including interest rate increases and mortgage availability, as well as any governmental restrictions on land development, home construction or home sales, or supply chain challenges, as potential threats to reaching the goal of 8,250 home closings for the full year.

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