2Q25 Summary.
Total revenues grew +9% y/y to $1.15bn, marking a deceleration from the +12% growth recorded in 2Q24 and the first single-digit revenue growth since 1Q24. Margins and profitability continued to be weighed down by elevated financial service expenses and SG&A. They maintained their full year guidance of 9,250 home closings, which includes the home building acquisitions of Liberty Communities and Green River Builders. As mentioned in our last recap, these acquisitions are masking the softness DFH is experiencing. Their financial services segment lead by their new acquisition of Alliant Title, now represents ~4% of revenues, which doubled since last quarter.
Homebuilding revenues dwindled to +4% y/y, a step-function lower from +12% last year and +18% last quarter. In the press release, CEO Patrick Zalupski noted that, “the industry continues to be faced with challenges from elevated interest rates straining housing affordability and weakening consumer confidence… this is perhaps the most challenging environment in the past 3 years (since rates became elevated in mid 2022).” Without the closing of the Liberty Communities acquisition, which increased home closing by 179 in the quarter, revenues would have contracted slightly y/y. This exemplifies how acquisitions have been key to helping DFH grow through this very challenging housing market.
While relying on acquisitions to drive growth is usually be a yellow flag, the nature of home building is a bit different than most businesses. This is because the assets they purchase are “extinguishable”. Most of the price of a home builder acquisition can be attributable to the assets they are purchasing (land + in process homes), which are effectively their raw materials. This makes these acquisitions a bit like an oil production company purchasing new reservoirs to drill—they are acquiring assets for their core business just as much as they may be “expanding”. Though of course with DFH, the ability to enter new markets and acquire talent is an important aspect of the acquisitions as well (it just is a small portion of what they end up paying for.
Despite the challenging housing market though, cancellation rates only slightly increased to 14%, up 80bps y/y. Their backlog of homes shrunk to 2,513 homes valued at $1.2bn, down about $0.2bn q/q. To the positive, net new orders increased 13% y/y, which they attribute to “successful sales incentives and availability of quick, move-in-ready homes.” As noted in our 1Q25 recap, the emphasis on “move-in-ready” homes is slightly concerning as it pushes them to own more inventory prior to having a sales commitment. In a worsening housing downturn this could force them to sell inventory at a loss or carry the construction financing cost until markets recover. NVR in contrast, by and large, only builds once they know they have a buyer. Nevertheless, in the context of the challenging housing market and the fact that these homes are usually at the cheaper end of new homes available for purchase (not speculating on multi-million-dollar construction) reduces the risk of a material inventory impairment.
Gross margins were pressured in the quarter by 250bps y/y to 16.5% due to “increased incentives, higher land and financing costs, and changes in product mix.” This was partially offset by direct cost reductions and continued cycle improvements. While the increased sales incentives are a negative, it is good to see that the tariffs have not been driving their building costs higher.
In the quarter, they made two acquisitions: Alliant Title and Green River Builders. While they were immaterial in size, they believe they are strategic. Alliant Title allows for “vertical integration” and expands their financial services offerings. Green River Builders expands their presence in northern Atlanta which complements their prior acquisition of Liberty Communities, which was in the south side of Atlanta.
During the quarter, they updated their share buyback program in which they can now repurchase up to $50mn. This is the largest authorization thus far. They repurchased 705k shares for $16mn, totaling $23mn worth of share repurchases YTD. They still have ~$19mn in share repurchase program, inclusive to the recent program increase.
Currently DFH trades at around 8x earnings with an estimated $3.20 in EPS for the year.
See some notable commentary from the press release and 10-Q below.
Quarter Notables.
- Homebuilding revenues reaching $1.1 billion, largely consistent with the prior year quarter, while growing home closings by 10% and net sales by 13%.
- The increased use of sales incentives during the second quarter of 2025 also had a partially offsetting impact on the homebuilding revenue growth.
Home Closings
- Home closings increased 10% to 2,232, compared to 2,031 in the second quarter of 2024.
Macro
- The industry continues to be faced with challenges from elevated interest rates straining housing affordability and weakening consumer confidence.
Backlog
- Approximately 1,997 of the homes in backlog are expected to be delivered in 2025 and 516 of homes are expected to be delivered in 2026 and beyond.
Buyback
- Our continued confidence in the long-term strength of our business is evident in the repurchase of over 700,000 shares of our common stock during the second quarter.
- During the second quarter of 2025, the limit that can be repurchased under the share buyback program was increased to $50.0 million.
- As of June 30, 2025, approximately $19.2 million, remained available for purchase under the share buyback program, inclusive of the recent program increase.
ASP
- Average sales price (“ASP”) of homes closed for the second quarter of 2025 was $481,027, a decrease of 7% compared to the prior year quarter ASP of $514,833.
- This decrease was attributable to the acquistion of Liberty Communities, whose homes have a lower ASP.
- As of June 30, 2025, the ASP in backlog was $477,865 compared to $494,987 as of March 31, 2025.
MHI Earnout
- In the second quarter of 2025, the Company recorded $13 million of contingent consideration income in relation to the MHI acquisition earnout arrangement, which ends on September 30, 2025.
Guidance
- Dream Finders Homes maintains its guidance of approximately 9,250 home closings for the full year 2025, inclusive of those resulting from the Liberty Communities and Green River Builders acquisitions.
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*At the time of this writing, one or more contributors to this report has a position in DFH. Furthermore, accounts one or more contributors advise on may also have a position in DFH. This may change without notice.
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