Dream Finders Homes Inc
For the period ended Sep 30, 2024. Filed Oct 31, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 31, 2024
DFH$12.40-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0001825088-24-000056
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001825088-24-000066
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 189 previous paragraphs and 166 current paragraphs.
65 unchanged; 67 reworded; 30 added; 51 removed; 6 previous and 4 current paragraphs rearranged.
Tables are not compared: 15 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
Although ticking down since earlier this year, mortgage rates and inflationary pressures remain elevated. In September, the Federal Reserve made its first cut to the Federal Funds Rate in 2024. Despite the easing of certain economic conditions, variability in demand for homes and affordability challenges persist. Our asset-light strategy positions us to remain agile in any market conditions, allowing us to strategically renegotiate lot option takedowns to align with our sales pace.
Current report
We continued to see the positive effects of our commitment to future growth, whether through organic efforts, acquisitions, or a combination of both, all while keeping an asset-light approach. This strategy is reflected in our homebuilding revenues and closings, which grew by 10% and 8%, respectively, when comparing the first nine months of 2024 and 2023. Notably, our acquisition of Crescent Homes played a significant role in these improvements. We believe this success, coupled with our increased investments in our lot pipeline, inventories and construction starts, positions us well for the future. We remain optimistic and believe that the current environment will continue to support faster inventory turnover and reinforce our shift towards spec sales for the foreseeable future. Our strategy has also allowed us to continue to pursue opportunities that contribute to our long-term outlook, including acquiring Jet HomeLoans, discussed below.
Current report
On July 1, 2024, we acquired the remaining equity interest in our mortgage joint venture Jet HomeLoans, which is consolidated on the Company’s condensed consolidated financial statements as of that date. Jet HomeLoans continues to be included in the Company’s Financial Services segment.
Current report
Results of Consolidated Operations
Current report
(1)Represents amounts within our corporate component (“Corporate”).
Current report
Results of Homebuilding Operations
Current report
(1)Selling, general and administrative expense, which is comprised of expense from the homebuilding segments and Corporate, (“SG&A”) includes $9 million and $7 million of Corporate SG&A for the three months ended September 30, 2024 and 2023, respectively. Corporate amounts are included as they primarily relate to our homebuilding business.
Current report
(2)Contingent consideration revaluation, which is comprised of amounts from the homebuilding segments and Corporate, (“contingent consideration”) includes $1 million and $4 million of Corporate contingent consideration expense for the three months ended September 30, 2024 and 2023, respectively. Corporate amounts are included as they relate to our homebuilding business.
Current report
(5)Calculated as a percentage of homebuilding revenues.
Current report
Income Before Taxes Related to Homebuilding Operations. The decrease in income before taxes related to homebuilding operations during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was primarily attributable to the increase in SG&A and decrease in homebuilding gross margin percentage explanations above.
Current report
Results of Homebuilding Operations
Current report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current report
(1)Selling, general and administrative expense, which is comprised of expense from the homebuilding segments and Corporate, (“SG&A”) includes $23 million and $10 million of Corporate SG&A for the nine months ended September 30, 2024 and 2023, respectively. Corporate amounts are included as they primarily relate to our homebuilding business.
Current report
(2)Contingent consideration revaluation, which is comprised of amounts from the homebuilding segments and Corporate, (“contingent consideration”) includes $2 million and $6 million of Corporate contingent consideration for the nine months ended September 30, 2024 and 2023, respectively. Corporate amounts are included as they relate to our homebuilding business.
Current report
Homebuilding Cost of Sales and Homebuilding Gross Margin. The increased homebuilding cost of sales and homebuilding gross margin were primarily due to the increase in home closings for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The decrease in homebuilding gross margin as a percentage of homebuilding revenues was primarily attributable to higher land and financing costs, partially offset by direct
Current report
Income Before Taxes Related to Homebuilding Operations. The decrease in income before taxes related to homebuilding operations during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was primarily attributable to the decrease in homebuilding gross margin percentage and the increase in SG&A, partially offset by the decrease in contingent consideration explained above.
Current report
(1)Closings under built-for-rent contracts decreased 52% when comparing the three months ended September 30, 2024 to the three months ended September 30, 2023.
Current report
(2)Closings under built-for-rent contracts decreased 23% when compared to the nine months ended September 30, 2023.
Current report
Our Financial Services segment provides mortgage financing and title services primarily through our wholly owned subsidiaries, Jet HomeLoans and DF Title, respectively. The following table presents selected financial information and supplemental data for our Financial Services segment for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands, unless otherwise indicated):
Current report
DFH
Current report
(1) Supplemental data reflects operations of Jet HomeLoans prior to its consolidation in the Company’s financial statements beginning on that date. Refer to Note 2, Acquisitions to the condensed consolidated financial statements for additional information.
Current report
The $16 million, or 100% increase, in mortgage revenues for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, respectively, was due to the consolidation of Jet HomeLoans beginning July 1, 2024.
Current report
The $2 million, or 95%, and $4 million, or 64%, increases in title services revenues for the three and nine months ended September 30, 2024 as compared to the three and nine months ended September 30, 2023, respectively, were primarily a result of DF Title’s expansion of operations into the Texas market. Our Texas market was previously serviced by our unconsolidated title joint ventures.
Current report
Adjusted Homebuilding Gross Margin
Current report
Net Homebuilding Debt to Net Capitalization
Current report
The following table presents a reconciliation of net homebuilding debt to net capitalization to the GAAP financial measure of total debt to total capitalization for each of the periods indicated (unaudited and in thousands, except percentages):
Current report
As of September 30, 2024 and December 31, 2023, our cash and total liquidity were as follows (in thousands):
Current report
(1)As of September 30, 2024 and December 31, 2023, the borrowing base was reduced by the principal amount of the senior unsecured notes of $300 million.
Current report
(3)Includes cash and cash equivalents related to financial services operations. Amounts reported within cash and cash equivalents on the Condensed Consolidated Balance Sheets related to financial services are not subject to restrictions and are regularly remitted to Corporate.
Current report
•our ability to create synergies from the expansion into industries related to homebuilding, such as mortgage lending and title insurance;
Removed paragraphs (51)
Previous report
We acknowledge the persistent inflationary conditions; there have been no interest rate cuts in 2024 thus far, and the timing of a substantial decrease in mortgage interest rates is uncertain. Our asset-light strategy allows us to remain nimble in this environment, as we can strategically renegotiate lot option takedowns to match our sales pace.
Previous report
The results delivered in the first half of 2024 continued to meet our expectations, reflecting the successful execution of our operating plan to date and we remain optimistic about the second half of the year. We are focused on driving volume and achieving consistent growth. Through increased investments in inventories and construction starts, we believe we are well positioned to achieve our goals for the year. Our positive outlook is bolstered by the ongoing shift towards spec sales compared to pre-order sales. This trend reflects positively on the current housing demand dynamics, which remain favorable for new homebuilders due to limited supplies of both new and resale homes. We anticipate that this environment will continue to support faster inventory turnover and reinforce our shift towards spec sales in the foreseeable future.
Previous report
Our current strategy for selling homes remains the same: delivering affordable, quick move-in homes and providing flexible sales incentives aimed at reducing monthly mortgage payments and closing costs for homebuyers. This strategy continues to prove successful in generating sales and improving our backlog conversion rate. With the acquisition of our preferred mortgage lender, Jet HomeLoans, discussed below, we are excited about the ability to directly manage our mortgage initiatives. We are committed to ongoing improvements in inventory turnover and effective cost management. Furthermore, our close monitoring of net new orders and community-level traffic enables us to promptly adapt to changes in local market conditions as necessary.
Previous report
Our focused efforts in remaining asset-light, delivering affordable homes and expanding our footprint not only drove our strong performance this quarter, but also showcased our ability to navigate a challenging macroeconomic environment.
Previous report
Key Results
Previous report
Key financial results as of and for the three months ended June 30, 2024, as compared to as of and for the three months ended June 30, 2023 (unless otherwise noted) were as follows:
Previous report
•Revenues increased 12% to $1,056 million from $945 million
Previous report
•Home closings increased 10% to 2,031 from 1,846
Previous report
•Average sales price (“ASP”) of homes closed increased to $514,833 from $504,683
Previous report
•Net new orders increased 3% to 1,712 from 1,655
Previous report
•Gross margin as a percentage of homebuilding revenues remained consistent at 19.0% compared to 19.1%
Previous report
•Adjusted gross margin (non-GAAP) as a percentage of homebuilding revenues remained consistent at 27.0% compared to 27.1%
Previous report
•Income before taxes increased 11% to $106 million from $96 million
Previous report
•Net and comprehensive income attributable to DFH increased 18% to $81 million from $69 million
Previous report
•Basic earnings per share (“EPS”) increased to $0.83 and diluted EPS increased to $0.81, compared to $0.70 and $0.65, respectively
Previous report
•EBITDA (non-GAAP) as a percentage of total revenues increased 70 basis points to 14.2% from 13.5%
Previous report
•Active community count of 222 compared to 220
Previous report
•Backlog of sold homes decreased 20% to 4,205 from 5,288, and the value of backlog decreased 15% to $2.1 billion from $2.5 billion
Previous report
•Net debt to net capitalization of 42.7% as of June 30, 2024, compared to 38.8% as of June 30, 2023
Previous report
•Total liquidity, comprised of cash and cash equivalents, and availability under the revolving credit facility, of $475 million as of June 30, 2024, compared to $828 million as of December 31, 2023
Previous report
For reconciliations of the non-GAAP financial measures, including adjusted gross margin and EBITDA, to the most directly comparable GAAP financial measures, see “—Non-GAAP Financial Measures”.
Previous report
Key financial results as of and for the six months ended June 30, 2024, as compared to as of and for the six months ended June 30, 2023 (unless otherwise noted), were as follows:
Previous report
•Revenues increased 10% to $1,884 million from $1,715 million
Previous report
•Homes closed increased 10% to 3,686 from 3,363
Previous report
•Net new orders increased 11% to 3,436 from 3,103
Previous report
•Average sales price of homes closed increased 2% to $505,926 from $498,309
Previous report
•Gross margin as a percentage of homebuilding revenues increased 30 basis points to 18.4% from 18.1%
Previous report
•Adjusted gross margin (non-GAAP) as a percentage of homebuilding revenues increased 90 basis pointsto 26.7% from 25.8%
Previous report
•Net and comprehensive income attributable to DFH increased 15% to $135 million from $118 million
Previous report
•Basic earnings per share increased to $1.38 and diluted earnings per share increased to $1.35 compared to $1.19 and $1.09, respectively
Previous report
•EBITDA (non-GAAP) as a percentage of total revenues increased 70 basis points to 13.5% from 12.8%
Previous report
For reconciliations of the non-GAAP financial measures, including adjusted gross margin and EBITDA, to the most directly comparable GAAP financial measures, see “—Non-GAAP Financial Measures”.
Previous report
Expansion in the Midwest Segment
Previous report
In the second quarter of 2024, we expanded organically into Phoenix, Arizona. As of June 30, 2024, we controlled 282 lots in Phoenix, Arizona.
Previous report
Jet HomeLoans Acquisition
Previous report
On July 1, 2024, the Company acquired the remaining 40% interest in Jet HomeLoans from unaffiliated third parties, resulting in Jet HomeLoans becoming a wholly-owned subsidiary of the Company that will be consolidated in the Company’s condensed consolidated financial statements as of that date. Refer to Note 13, Subsequent Events to the condensed consolidated financials statements for additional information.
Previous report
Results of Operations
Previous report
(7)Calculated as a percentage of homebuilding revenues.
Previous report
(9)Calculated as a percentage of total revenues.
Previous report
Income from Unconsolidated Entities. Income from unconsolidated entities for the three months ended June 30, 2024 was $5 million, remaining consistent compared to $5 million for the three months ended June 30, 2023.
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Reworded paragraphs (67)
Previous wording
(1)Refer to Note 12, Earnings Per Share to the condensed consolidated financial statements for disclosures related to the calculation of EPS. Diluted shares were calculated by using the treasury stock method for stock grants and the if-converted method for the redeemable preferred stock and the associated preferred dividends.
Current wording
(2)Refer to Note 12, Earnings Per Share to the condensed consolidated financial statements for disclosures related to the calculation of EPS. Diluted shares were calculated by using the treasury stock method for stock grants and the if-converted method for the redeemable preferred stock and the associated preferred dividends.
Previous wording
(4)Return on participating equity is calculated as net income attributable to DFH, less redeemable preferred stock distributions, divided by average beginning and ending total Dream Finders Homes, Inc. stockholders’ equity (“participating equity”) for the trailing twelve months.
Current wording
(5)Return on participating equity is calculated as net income attributable to DFH, less redeemable preferred stock distributions, divided by average beginning and ending total Dream Finders Homes, Inc. stockholders’ equity (“participating equity”) for the trailing twelve months.
Previous wording
The following table sets forth our results of operations and balance sheet data (in thousands, except per share and share amounts) for the periods indicated:
Current wording
The following table sets forth our results of homebuilding operations and balance sheet data (in thousands) for the periods indicated:
Previous wording
(6)Gross margin is homebuilding revenues less homebuilding cost of sales.
Current wording
(4)Gross margin is homebuilding revenues less homebuilding cost of sales.
Previous wording
(8)Adjusted gross margin and EBITDA are non-GAAP financial measures. For definitions of these non-GAAP financial measures and a reconciliation to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”
Current wording
(6)Adjusted gross margin and net homebuilding debt to net capitalization are non-GAAP financial measures. For definitions of these non-GAAP financial measures and reconciliations to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”
Previous wording
(2)A community becomes active once the model is completed or the community has its fifth net sale. A community becomes inactive when it has fewer than five homesites remaining to sell.
Current wording
(7)A community becomes active once the model is completed or the community has its fifth net sale. A community becomes inactive when it has fewer than five homesites remaining to sell.
Previous wording
The following tables summarize home closings and ASP of homes closed by homebuilding segment for the three months ended June 30, 2024 and 2023, as well as active communities as of June 30, 2024 and 2023:
Current wording
The following tables summarize home closings and average sales price (“ASP”) of homes closed by homebuilding segment for the three months ended September 30, 2024 and 2023, as well as active communities as of September 30, 2024 and 2023:
Previous wording
The following tables present income before taxes (in thousands) and homebuilding gross margin percentage by segment for the three months ended June 30, 2024 and 2023:
Current wording
The following tables present income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the three months ended September 30, 2024 and 2023:
Previous wording
Revenues. The increase in revenues was primarily attributable to 2,031 home closings for the three months ended June 30, 2024, an increase of 185 homes, or 10%, from 1,846 home closings for the three months ended June 30, 2023. Of the additional home closings, 162 homes with an ASP of $488,485 were contributed by the Crescent Homes acquisition. The consolidated ASP of homes closed increased 2% when comparing the three months ended June 30, 2024 to the three months ended June 30, 2023. Excluding Crescent Homes, 40% of our closings were in the Midwest segment with an ASP of $585,971, which is higher relative to our other homebuilding segments.
Current wording
Homebuilding Revenues. The increase in homebuilding revenues was primarily attributable to 1,889 home closings for the three months ended September 30, 2024, an increase of 91 homes, or 5%, from 1,798 home closings for the three months ended September 30, 2023. 223 home closings with an ASP of $554,231 were contributed by the Crescent Homes acquisition. The consolidated ASP of homes closed increased 3% when comparing the three months ended September 30, 2024 to the three months ended September 30, 2023. Excluding Crescent Homes, 42% of our closings were in the Midwest segment with an ASP of $589,087, which is higher relative to our other homebuilding segments. The increased use of sales incentives during the third quarter of 2024 had a partially offsetting impact on the increase in homebuilding revenues.
Previous wording
Homebuilding Cost of Sales and Gross Margin. The higher homebuilding cost of sales and homebuilding gross margin were primarily due to the increase in home closings for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase in homebuilding gross margin as a percentage of homebuilding revenues was primarily attributable to direct cost reductions and, to a lesser extent, improvements in cycle times, partially offset by higher land and financing costs. In addition, amortization of purchase accounting adjustments associated with home closings contributed from the Crescent Homes acquisition negatively impacted the six months ended June 30, 2024 gross margin percentage by approximately 40 bps.
Current wording
Homebuilding Cost of Sales and Homebuilding Gross Margin. The higher homebuilding cost of sales and homebuilding gross margin were primarily due to the increase in home closings for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The decrease in homebuilding gross margin as a percentage of homebuilding revenues when comparing the three months ended September 30, 2024 and 2023 was primarily attributable to higher land and financing costs, partially offset by direct cost reductions and, to a lesser extent, continued improvements in cycle times.
Previous wording
Southeast. Our Southeast segment total revenues for the three months ended June 30, 2024 were $341 million, a decrease of $32 million, or 9%, from $373 million for the three months ended June 30, 2023. This decline in revenue was primarily driven by a decrease in home closings of 131, or 16%, which was partially offset by a 10% increase in the ASP of homes closed. The reduction in home closings in part stems from temporary delays in the timing of expected active communities opening for sales. Homebuilding gross margin percentage was 20.7% for the three months ended June 30, 2024, representing an increase of 350 bps, or 20%, when compared to the three months ended June 30, 2023. The increase in gross margin percentage was mostly related to direct cost reductions and, to a lesser extent, cycle time improvements, partially offset by higher land and financing costs.
Current wording
Southeast. Our Southeast segment total revenues for the three months ended September 30, 2024 were $293 million, a decrease of $78 million, or 21%, from $371 million for the three months ended September 30, 2023. This decline in revenue was primarily driven by a decrease in home closings of 236, or 29%, which was partially offset by a 6% increase in the ASP of homes closed from changes in the geographic mix of closings within the segment. The reduction in home closings in part stems from temporary delays in the timing of expected active communities opening for sales. There were also fewer closings under built-for-rent contracts during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Homebuilding gross margin percentage was 19.6% for the three months ended September 30, 2024, representing a decrease of 60 bps, or 3%, when compared to the three months ended September 30, 2023. The decrease in homebuilding gross margin percentage was mostly due to higher land and financing costs, partially offset by direct cost reductions and, to a lesser extent, cycle time improvements.
Previous wording
Mid-Atlantic. Our Mid-Atlantic segment total revenues for the three months ended June 30, 2024 were $264 million, an increase of $110 million, or 71%, from $154 million for the three months ended June 30, 2023. This revenue growth was primarily driven by an increase in home closings of 224, or 58%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Crescent Homes contributed $79 million in revenue and 162 home closings with an ASP of $488,485 for the three months ended June 30, 2024.
Current wording
Mid-Atlantic. Our Mid-Atlantic segment total revenues for the three months ended September 30, 2024 were $284 million, an increase of $120 million, or 73%, from $164 million for the three months ended September 30, 2023. This revenue growth was primarily driven by an increase in home closings of 215, or 55%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Crescent Homes contributed $124 million in homebuilding revenues and 223 home closings with an ASP of $554,231 for the three months ended September 30, 2024.
Previous wording
Excluding Crescent, Mid-Atlantic total revenues increased by 20% when comparing the three months ended June 30, 2024 and 2023, mostly due to more home closings and, to a lesser extent, a higher ASP of homes closed of $414,218, an increase of $29,353 when compared to the prior year quarter. Without Crescent, homebuilding gross margin percentage was 18.9% for the three months ended June 30, 2024, representing an increase of 260 bps, or 16%, when compared to the three months ended June 30, 2023. The improvement in this gross margin percentage was primarily a result of direct cost reductions and cycle time improvements, partially offset by higher land and financing costs. To a lesser degree, lower external commissions from a higher proportion of built-for-rent closings positively impacted the gross margin percentage for Mid-Atlantic.
Current wording
Excluding Crescent, Mid-Atlantic total revenues decreased by 2% when comparing the three months ended September 30, 2024 and 2023, mostly due to slightly fewer home closings and homebuilding gross margin percentage was 17.8% for the three months ended September 30, 2024, representing a decrease of 120 bps, or 6%, when compared to the three months ended September 30, 2023. The decline in this homebuilding gross margin percentage was primarily a result of higher land and financing costs.
Previous wording
Midwest. Our Midwest segment total revenues for the three months ended June 30, 2024 were $447 million, an increase of $31 million, or 8%, from $416 million for the three months ended June 30, 2023. The additional revenue was due to higher home closings of 92, or 14%, partially offset by a decrease of 7% in the ASP of homes closed from changes in the geographic mix of closings within the segment. Homebuilding gross margin percentage was 18.1% for the three months ended June 30, 2024, representing a decrease of 260 bps, or 13%, from 20.7% for the three months ended June 30, 2023. The reduction in gross margin percentage was due to an increase in land costs and, to a lesser extent, higher financing costs, partially offset by direct cost reductions.
Current wording
Midwest. Our Midwest segment total revenues for the three months ended September 30, 2024 were $409 million, an increase of $50 million, or 14%, from $359 million for the three months ended September 30, 2023. The additional revenue was due to higher home closings of 112, or 19%, partially offset by a decrease of 4% in the ASP of homes closed from changes in the geographic mix of closings within the segment. Homebuilding gross margin percentage was 18.1% for the three months ended September 30, 2024, representing a decrease of 370 bps, or 17%, from 21.8% for the three months ended September 30, 2023. The reduction in homebuilding gross margin percentage was due to an increase in land costs and, to a lesser extent, higher financing costs.
Previous wording
Selling, General and Administrative Expense. The increases in SG&A and in SG&A as a percentage of homebuilding revenues were primarily due to higher compensation costs of $27 million due to our growth, including the recent acquisition of Crescent Homes. Additionally, for the six months ended June 30, 2024, SG&A included $16 million of spend on forward commitment programs to allow our homebuyers to access lower interest rates on home loans at the point of sale, $8 million higher when compared to the six months ended June 30, 2023.
Current wording
Selling, General and Administrative Expense. The increases in SG&A and in SG&A as a percentage of homebuilding revenues were primarily attributable to higher compensation costs of $12 million due to our growth from continued expansion, including the recent acquisition of Crescent Homes. Additionally, for the three months ended September 30, 2024, SG&A also included $14 million of spend on forward commitment programs to allow our homebuyers to access lower interest rates on home loans at the point of sale, which was $5 million higher when compared to the three months ended September 30, 2023.
Previous wording
Contingent Consideration Revaluation. The decrease in contingent consideration expense for the six months ended June 30, 2024 was mostly the result of lower fair value adjustments of future expected earnout payments when compared to the six months ended June 30, 2023, primarily related to the MHI acquisition.
Current wording
Contingent Consideration Revaluation.$2 million of the decrease in contingent consideration expense for the three months ended September 30, 2024 was attributable to lower fair value adjustments of future expected earnout payments related to the MHI acquisition, as actual results remained more in line with forecasts when compared to the three months ended September 30, 2023.
Previous wording
The following table sets forth our results of operations for the periods indicated:
Current wording
The following table sets forth our results of homebuilding operations and balance sheet data (in thousands) for the periods indicated:
Previous wording
See notes (1) to (9) under results of operations for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Current wording
See notes (3) to (7) under results of homebuilding operations for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Previous wording
The following table summarizes home closings and ASP of homes closed by homebuilding segment for the six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes home closings and ASP of homes closed by homebuilding segment for the nine months ended September 30, 2024 and 2023:
Previous wording
The following table presents income before taxes (in thousands) and homebuilding gross margin percentage by segment for the six months ended June 30, 2024 and 2023:
Current wording
The following table presents income before taxes (in thousands) and homebuilding gross margin (or “gross margin”) percentage by segment for the nine months ended September 30, 2024 and 2023:
Previous wording
Revenues. The higher revenues were primarily attributable to 3,686 home closings for the six months ended June 30, 2024, an increase of 323 homes, or 10%, from the 3,363 home closings for the six months ended June 30, 2023. The consolidated ASP of homes closed increased 2% when comparing the six months ended June 30, 2024 to the six months ended June 30, 2023. Of the additional home closings, 273 homes with an ASP of $466,747 were contributed by the Crescent Homes acquisition. Excluding Crescent Homes, 39% of our closings were in the Midwest segment with an ASP of $580,889, which is higher relative to our other homebuilding segments.
Current wording
Homebuilding Revenues. The higher homebuilding revenues were primarily attributable to 5,575 home closings for the nine months ended September 30, 2024, an increase of 414 homes, or 8%, from the 5,161 home closings for the nine months ended September 30, 2023. The consolidated ASP of homes closed increased 2% when comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023. 496 homes with an ASP of $506,079 were contributed by the Crescent Homes acquisition. Excluding Crescent Homes, 40% of our closings were in the Midwest segment with an ASP of $583,688, which is higher relative to our other homebuilding segments.
Previous wording
Homebuilding Cost of Sales and Gross Margin. The higher homebuilding cost of sales and homebuilding gross margin were primarily due to the increase in home closings for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The consistent homebuilding gross margin as a percentage of homebuilding revenues when comparing the three months ended June 30, 2024 and 2023 was primarily attributable to direct cost reductions and, to a lesser extent, improvements in cycle time, partially offset by higher land and financing costs. In addition, amortization of purchase accounting adjustments associated with home closings contributed from the Crescent Homes acquisition negatively impacted the second quarter of 2024 gross margin percentage by approximately 20 basis points (“bps”). Purchase accounting amortization is a temporary cost that will conclude in conjunction with closing the remaining homes in inventory acquired from Crescent.
Current wording
cost reductions. Additionally, amortization of purchase accounting adjustments associated with home closings contributed from the Crescent Homes acquisition negatively impacted the nine months ended September 30, 2024 homebuilding gross margin percentage by approximately 21 bps.
Previous wording
Southeast. Our Southeast segment total revenues for the six months ended June 30, 2024 were $621 million, a decrease of $60 million, or 9%, from $681 million for the six months ended June 30, 2023. This decline in revenue was primarily driven by a decrease in home closings of 187, or 13%, partially offset by a 8% increase in the ASP of homes closed. Homebuilding gross margin percentage was 19.4% for the six months ended June 30, 2024, representing an increase of 270 bps, or 16%, when compared to the six months ended June 30, 2023. The increase in gross margin percentage was mostly the result of direct cost reductions and, to a lesser extent, cycle time improvements, partially offset by higher land and financing costs.
Current wording
Southeast. Our Southeast segment total revenues for the nine months ended September 30, 2024 were $914 million, a decrease of $137 million, or 13%, from $1,051 million for the nine months ended September 30, 2023. This decline in revenue was primarily driven by a decrease in home closings of 423, or 19%, partially offset by a 7% increase in the ASP of homes closed. Homebuilding gross margin percentage was 19.5% for the nine months ended September 30, 2024, representing an increase of 130 bps, or 7%, when compared to the nine months ended September 30, 2023. The increase in homebuilding gross margin percentage was mostly the result of direct cost reductions and, to a lesser extent, cycle time improvements, partially offset by higher land and financing costs.
Previous wording
Mid-Atlantic. Our Mid-Atlantic segment total revenues for the six months ended June 30, 2024 were $474 million, an increase of $191 million, or 68%, from $283 million for the six months ended June 30, 2023. This revenue growth was primarily driven by an increase in home closings of 345, or 46%, for the six months ended June 30, 2024 compared to the six months June 30, 2023. Crescent Homes contributed $128 million in revenue and 273 home closings with an ASP of $466,747 for the six months ended June 30, 2024.
Current wording
Mid-Atlantic. Our Mid-Atlantic segment total revenues for the nine months ended September 30, 2024 were $758 million, an increase of $311 million, or 70%, from $447 million for the nine months ended September 30, 2023. This revenue growth was primarily driven by an increase in home closings of 560, or 49%, for the nine months ended September 30, 2024 compared to the nine months September 30, 2023. Crescent Homes contributed $252 million in revenue and 496 home closings with an ASP of $506,079 for the nine months ended September 30, 2024.
Previous wording
Excluding Crescent, Mid-Atlantic total revenues increased by 23% when comparing the six months ended June 30, 2024 and 2023 primarily due to more home closings and, to a lesser degree, a higher ASP of $418,090, an increase of $43,105 when compared to the six months ended June 30, 2023. Without Crescent, homebuilding gross margin percentage was 19.1% for the six months ended June 30, 2024, representing an increase of 420 bps, or 28%, when compared to the six months ended June 30, 2023. The improvement in this gross margin percentage was primarily due to direct cost reductions and cycle time improvements, partially offset by higher land and financing costs. To a lesser extent, lower external commissions from a higher proportion of built-for-rent closings positively impacted the gross margin percentage for Mid-Atlantic.
Current wording
Excluding Crescent, Mid-Atlantic total revenues increased by 13% when comparing the nine months ended September 30, 2024 and 2023 primarily due to more home closings and, to a lesser degree, a higher ASP of $414,538, an increase of $28,424, or 7%, when compared to the nine months ended September 30, 2023. Without Crescent, homebuilding gross margin percentage was 18.6% for the nine months ended September 30, 2024, representing an increase of 210 bps, or 13%, when compared to the nine months ended September 30, 2023. The improvement in this homebuilding gross margin percentage was primarily a result of direct cost reductions and, to a lesser extent, cycle time improvements, partially offset by higher land and financing costs.
Previous wording
Midwest. Our Midwest segment total revenues for the six months ended June 30, 2024 were $782 million, an increase of $35 million, or 5%, from $747 million for the six months ended June 30, 2023. This increase was due to higher home closings of 165, or 14%, partially offset by a decrease of 8% in the ASP of homes closed. The decrease in ASP of homes closed was due to changes in the geographic mix of closings within the segment. Homebuilding gross margin percentage was 17.8% for the six months ended June 30, 2024, representing a decrease of 220 bps, or 11%, when compared to six months ended June 30, 2023. The reduction in gross margin percentage was due to an increase in land costs and, to a lesser extent, higher financing costs, partially offset by direct cost reductions.
Current wording
Midwest. Our Midwest segment total revenues for the nine months ended September 30, 2024 were $1,191 million, an increase of $86 million, or 8%, from $1,106 million for the nine months ended September 30, 2023. This increase was due to higher home closings of 277, or 16%, partially offset by a decrease of 6% in the ASP of homes closed. The decrease in ASP of homes closed was due to changes in the geographic mix of closings within the segment. Homebuilding gross margin percentage was 17.9% for the nine months ended September 30, 2024, representing a decrease of 280 bps, or 14%, when compared to nine months ended September 30, 2023. The reduction in homebuilding gross margin percentage was due to an increase in land costs and, to a lesser extent, higher financing costs, partially offset by direct cost reductions.
Previous wording
Contingent Consideration Revaluation. The decrease in contingent consideration expense in the second quarter of 2024 was primarily due to lower fair value adjustments of future expected earnout payments when compared to the second quarter of 2023, primarily related to the MHI acquisition.
Current wording
Contingent Consideration Revaluation.$15 million of the decrease in contingent consideration expense for the nine months ended September 30, 2024 was attributable to lower fair value adjustments of future expected earnout payments related to the MHI acquisition, as actual results remained more in line with forecasts when compared to the nine months ended September 30, 2023.
Previous wording
As of June 30, 2024, our lot deposits for finished lot option and land bank option contracts were $301 million. As of June 30, 2024, we controlled 40,678 lots under finished lot option and land bank option contracts.
Current wording
As of September 30, 2024 and December 31, 2023, our lot deposits for finished lot option and land bank option contracts were $368 million and $247 million, respectively. As of September 30, 2024 and December 31, 2023, we controlled 44,825 and 29,748 lots, respectively, under finished lot option and land bank option contracts.
Previous wording
(2)As of June 30, 2024, the Company had 8,546 owned lots, of which 5,798 were included in construction in process (“CIP”) and finished homes within the Condensed Consolidated Balance Sheet. Of the 5,798 owned lots included in CIP and finished homes, 5,194 were under construction, 461 were completed spec homes and 143 were model homes. The remaining owned lots were purchased just-in-time to start construction through existing lot option contracts.
Current wording
(2)As of September 30, 2024, the Company had 8,481 owned lots, of which 5,884 were included in construction in process (“CIP”) and finished homes on the Condensed Consolidated Balance Sheet. Of the 5,884 owned lots included in CIP and finished homes, 5,224 were under construction, 493 were completed spec homes and 167 were model homes. The remaining owned lots were purchased just-in-time to start construction through existing lot option contracts.
Previous wording
(3)As of June 30, 2024, the Company had 1,533 owned lots and 1,029 controlled lots under built-for-rent contracts (see “—Net Sales, Backlog and Closings for a definition of built-for-rent contracts).
Current wording
(3)As of September 30, 2024, the Company had 1,403 owned lots and 834 controlled lots under built-for-rent contracts (see “—Net Sales, Backlog and Closings for a definition of built-for-rent contracts).
Previous wording
(4)As of June 30, 2024, the Crescent Homes acquisition contributed 706 and 5,171 owned and controlled lots, respectively.
Current wording
(4)As of September 30, 2024, the Crescent Homes acquisition contributed 709 and 4,944 owned and controlled lots, respectively.
Previous wording
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 units remaining to sell. Active community count is an important metric to forecast future net new orders for our business. As of June 30, 2024, we had 222 active communities, an increase of 2 communities, or 1%, as compared to 220 active communities as of June 30, 2023.
Current wording
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 units remaining to sell. Active community count is an important metric to forecast future net new orders for our business. As of September 30, 2024, we had 235 active communities, an increase of 16 communities, or 7%, as compared to 219 active communities as of September 30, 2023.
Previous wording
Our active community count excludes communities under the Company's built-for-rent contracts, as all sales to third-party investors occur at one point in time and these communities would have no homesites remaining to sell. As of June 30, 2024, the Company had 16 communities delivering closings under built-for-rent contracts, as compared to 22 communities as of June 30, 2023.
Current wording
Our active community count excludes communities under the Company's built-for-rent contracts, as all sales to third-party investors occur at one point in time and these communities would have no homesites remaining to sell. As of September 30, 2024, the Company had 13 communities delivering closings under built-for-rent contracts, as compared to 20 communities as of September 30, 2023.
Previous wording
Our materials are subject to price fluctuations. Once construction of a home begins, prices for the materials utilized in the construction of that particular home are generally locked via purchase orders, but fluctuations may occur as a result of market conditions. Price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor and supply chain disruptions, trade disputes and changes in demand for materials as a result of the housing market conditions where we operate. The price changes that most significantly influence our operations are price increases in commodities. Significant price increases of these materials may negatively impact our cost of sales and, in turn, our net income.
Current wording
Our materials are subject to price fluctuations. Once construction of a home begins, prices for the materials utilized in the construction of that particular home are generally locked via purchase orders, but fluctuations may occur as a result of market conditions. Price fluctuations may be caused by several factors, including seasonal variation in availability of materials, labor and supply chain disruptions, trade disputes and changes in demand for materials as a result of the housing market conditions where we operate. The price changes that most significantly influence our operations are price increases in commodities or the cost of labor. Significant price increases of these materials and the cost of labor may negatively impact our cost of sales and, in turn, our net income.
Previous wording
The following tables present our net sales, starts and closings in each of our homebuilding segments for the three and six months ended June 30, 2024 and 2023:
Current wording
The following tables present our net sales, starts and closings in each of our homebuilding segments for the three and nine months ended September 30, 2024 and 2023:
Previous wording
(1)Excluding net sales under built-for-rent contracts, net sales for the six months ended June 30, 2024 in the Southeast segment decreased 3% when compared to the six months ended June 30, 2023.
Current wording
(1)Excluding net sales under built-for-rent contracts, net sales for the nine months ended September 30, 2024 in the Southeast segment increased 3% when compared to the nine months ended September 30, 2023. The nine months ended September 30, 2024 also included a built-for-rent contract termination discussed further below.
Previous wording
(1)Backlog as of June 30, 2024 includes 490 homes from our Crescent Homes acquisition.
Current wording
(1)Backlog as of September 30, 2024 includes 433 homes from our Crescent Homes acquisition.
Previous wording
Backlog of sold homes as of June 30, 2024 was 4,205 homes valued at approximately $2.1 billion based on ASP, a decrease of 1,083 homes and $0.4 billion in value, or 20% and 15%, respectively, from 5,288 homes valued at approximately $2.5 billion as of June 30, 2023. The overall decrease in backlog is primarily reflective of an increase in sales of move-in ready spec homes relative to pre-order sales and, to a lesser extent, a reduction in built-for-rent contracts in backlog when compared to June 30, 2023. Spec homes typically result in quicker closings and turnover of the backlog. Approximately 1,088 of the homes in our backlog are expected to be delivered in 2025 and beyond.
Current wording
Backlog of sold homes as of September 30, 2024 was 3,996 homes valued at approximately $2.0 billion based on ASP, a decrease of 1,029 homes and $0.4 billion in value, or 20% and 17%, respectively, from 5,025 homes valued at approximately $2.4 billion as of September 30, 2023. The overall decrease in backlog was mostly reflective of a continued trend toward move-in-ready spec homes relative to pre-order sales and, to a lesser extent, a reduction in built-for-rent contracts in backlog. Spec homes typically result in quicker closings and turnover of the backlog. Approximately 1,858 of the homes in our backlog are expected to be delivered in 2025 and beyond.
Previous wording
Southeast. Backlog for the Southeast segment as of June 30, 2024 was 1,723 homes, a decrease of 1,428 from 3,151 homes as of June 30, 2023. The decrease from prior year was primarily attributable to more sales of move-in ready spec homes relative to pre-order sales, a reduction in net sales relative to closings under built-for-rent contracts and lower retail net sales. The decrease in retail net sales was mainly due to slower community openings as a result of temporary delays in the land development and entitlement process.
Current wording
Southeast. Backlog for the Southeast segment as of September 30, 2024 was 1,645 homes, a decrease of 1,121 from 2,766 homes as of September 30, 2023. The decrease from prior year was primarily attributable to a continued trend toward more sales of move-in-ready spec homes relative to pre-order sales and a reduction in net sales under built-for-rent contracts.
Previous wording
Mid-Atlantic. Backlog for the Mid-Atlantic segment as of June 30, 2024 was 1,202 homes, an increase of 470 from 732 homes as of June 30, 2023. The increase in backlog from prior year was largely attributable to the Crescent Homes acquisition and, to a lesser extent, higher net sales relative to closings.
Current wording
Mid-Atlantic. Backlog for the Mid-Atlantic segment as of September 30, 2024 was 1,109 homes, an increase of 294 from 815 homes as of September 30, 2023. The increase in backlog from prior year was attributable to the Crescent Homes acquisition and, to a lesser extent, higher net sales relative to closings, partially offset by lower net sales relative to closings under built-for-rent contracts.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
The following table summarizes our results of operations and other financial data (in thousands, except per share amounts) for the periods indicated:
Current report — wording carried from elsewhere
(3)EBITDA is a non-GAAP financial measure. For definition of this non-GAAP financial measure and a reconciliation to our most directly comparable financial measures calculated and presented in accordance with GAAP, see “—Non-GAAP Financial Measures.”
Current report — wording carried from elsewhere
(4)Calculated as a percentage of total revenues.
Current report — wording carried from elsewhere
Selling, General and Administrative Expense. The increases in SG&A and in SG&A as a percentage of homebuilding revenues were primarily due to higher compensation costs of $41 million attributable to our growth, including the recent acquisition of Crescent Homes and our operational expansions in Florida and Arizona. Additionally, for the nine months ended September 30, 2024, SG&A included $30 million of spend on forward commitment programs to allow our homebuyers to access lower interest rates on home loans at the point of sale, which was $13 million higher when compared to the nine months ended September 30, 2023.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
•Return on participating equity was 33.5% for the trailing twelve months ended June 30, 2024, compared to 42.2% for the trailing twelve months ended June 30, 2023
Previous report — wording carried elsewhere
Selling, General and Administrative Expense. The increases in selling, general and administrative expense (“SG&A”) and in SG&A as a percentage of homebuilding revenues were primarily attributable to higher compensation costs of $12 million and additional marketing spend of $6 million due to our growth from continued expansion, including the recent acquisition of Crescent Homes.
Previous report — wording carried elsewhere
In addition, other companies may not calculate adjusted gross margin information in the same manner that we do. Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of our performance.
Previous report — wording carried elsewhere
EBITDA is not a measure of net income as determined by GAAP. EBITDA is a supplemental non-GAAP financial measure used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged in homebuilding cost of sales, (iii) interest expense, (iv) income tax expense and (v) depreciation and amortization.
Previous report — wording carried elsewhere
The Credit Agreement will mature on June 4, 2027. Certain of our subsidiaries guaranteed the Company’s obligations under the Credit Agreement and the 2028 Notes.
Previous report — wording carried elsewhere
We also enter into surety bonds and letters of credit arrangements. Refer to “—Off-Balance Sheet Arrangements” for additional information.