Latest news with #SmithDouglasHomesCorp
Yahoo
15-05-2025
- Business
- Yahoo
Q1 2025 Smith Douglas Homes Corp Earnings Call
Joe Thomas; SVP of Accounting & Finance; Smith Douglas Homes Corp Gregory S. Bennett; Chief Executive Officer and President; Smith Douglas Homes Corp Russell Devendorf; Chief Financial Officer, Executive Vice President; Smith Douglas Homes Corp Michael Reha; Analyst; JP Morgan Michael Dahl; Analyst; RBC Capital Markets Jay McCanless; Analyst; Wedbush Rafi Glass; Analyst; Bank of America Operator Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Smith Douglas Holmes first quarter 2025 earnings call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. (Operator Instructions). Thank you. I would now like to turn the call over to Joe Thomas, SVP of accounting and finance. Please go ahead. Joe Thomas Good morning and welcome to the earnings conference call for Smith Douglas Holmes. We issued a press release this morning outlining our results for the first quarter of 2025, which we will discuss on today's call and which can be found on our website at or by selecting the investor relations link at the bottom of our homepage. Please note this call will be simultaneously webcast on the investor relations section of our website. Before the call begins, I would like to remind everyone that certain statements made on this call, which are not historical facts, including statements concerning future financial and operating goals and performance, are forward-looking statements. Actual results could differ materially from such statements due to known and unknown risks, uncertainties, and other important factors as detailed in the company's SEC filings. Except as required by law, the company undertakes no duty to update these forward-looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be found in our press release located on our website and our SEC filings. Hosting the call this morning are Greg Bennett, the company's CEO and Vice Chairman, and Russ Devendorf, our executive Vice President and CFO. I'd now like to turn the call over to Greg. Gregory S. Bennett Thanks, Joe, and good morning to everyone. Smith Douglas Homes posted another quarter of strong profitability to start the year, generating pre-tax income of $19.6 million or net earnings of $0.30 per share. Home closing revenue was $225 million in the first quarter, representing a 19% increase over the first quarter of 2024. On closing, gross margin for the quarter came in at 23.8%, which was higher than the guidance range we shared on our last call. We generated 768 net new orders in the first quarter on a sales pace of 3.1 homes per community per month. Overall, I'm very pleased with our execution to start the year and believes Smith Douglas remains on track to achieve our long-term goals. We experienced normal seasonality during the quarter with a quarter activity improving as we headed into the spring. We had solid traffic throughout the quarter. The sales conversions were negatively impacted by affordability concerns and macro uncertainty. Similar to past quarters, we use financing incentives to overcome needs, obstacles, and solve for monthly payments that would fit our buyers' needs. While there are many factors that affect their business that are out of our control, there are many things we can do to optimize our performance in any demand environment. The first is controlling land through option agreements rather than owning it outright. At the end of the first quarter, less than 5% of our unstarted controlled lots were owned on balance sheet, while the remainder was tied up through auction and land banking agreements. This landline strategy gives us some degree of flexibility with respect to our lot takedown timing if needed and limits our downside risk should market conditions soften. Another factor within our control is how quickly we build our homes. For those of you that followed the Smith Douglas story, we're highly focused on improving build times and turning our inventories as fast as possible. Not only does this improve our return on capital, it also limits the possibility of cancellation thanks to a shorter time frame between sale and close. And so at the end of the first quarter, our cycle times average 56 days excluding Houston. We also made further progress during the quarter getting Houston division and their trade partners on board the our team platform, and we expect to see build times move closer to the company average over time. A third factor we focus on at Smith Douglas is limiting the amount of spec inventory for sale in our communities. We believe our business runs better and more properly when we presell our homes. This gives buyers the ability to make important design decisions for their home and allows us to implement lot premiums and offer higher margin home upgrades in our communities, which we feel reduces our cancellation rate as the buyers become attached to their home they have designed. In summary, while there's more uncertainty today around the economy and our industry than in previous quarters. We built Smith Douglas to weather the ups and downs of this business. We remain focused on our long-term goals of growing our market share and achieving better economies of scale, while maintaining a strong balance sheet and focusing on returns. This strategy has worked for our company since its inception, and we believe will continue to do so into the future. With that, I'd like to turn the call over to Russ, who will provide more details on our results this quarter and give an update on our outlook. Russell Devendorf Thanks, Greg. I'll now walk through our financial results for the 1st quarter and then provide an update on our outlook for the 2nd quarter. We closed 671 homes during the first quarter, up 19% from 566 closings in the same quarter last year. Home building revenue was $224.7 million, an increase of nearly 19% over the prior year. Our average sales price was approximately $335,000 which is up slightly year over year due to shifts in geographic and product mix. Gross margin came in at 23.8%, which was at the high end of our guidance range and compares to 26.1% in the prior year. On an adjusted basis, excluding a $642,000 impairment charge related to a Houston community we exited during the quarter, our gross margin would have been 24.1%. Our lower year over year margin reflects the impact of higher average lot costs, which were 25.5% of revenue in the current quarter, versus 23% in the year ago period. As well as rising incentives and promotional activity, which total 4.7% of revenue this quarter, up slightly from 4.5% a year ago. SGNA was 14.7% of revenue compared to 14.5% last year, driven primarily by increased payroll and performance-based compensation expense. We continue to tightly manage overhead while supporting our growth. Net income for the quarter was $18.7 million compared to $20.5 million in the prior year, and pre-tax income was $19.6 million versus $21.4 million. Our numbers for the quarter include a $716,000 charge related to the abandonment of a lot option deal with a developer which is included in other income and expenses. This is related to the same community where we recorded the $642,000 impairment I mentioned earlier, which is included in our cost of home closings. Adjusted net income was $14.7 million compared to $16.1 million in the prior year. As a reminder, given the nature of our UpC organizational structure, our reported net income reflects an effective tax rate of 4.4% this quarter, which is attributable to the approximate 17.5% economic ownership held by public shareholders through Smith Douglas Homes Corp and Smith Douglas Holdings LLC. Because the majority of our earnings are allocated to our Class B members, which is shown as income attributable to the uncontrolling interest on our income statement, we provide adjusted net income which assumes 100% public ownership and a 24.9% blended federal and state effective tax rate. We believe this measure is helpful in evaluating our results relative to peers with more traditional C corporation structures. Additional details on our structure and related income tax treatment can be found in the footnotes to our financial statements. Turning to the balance sheet, we ended the quarter with $12.7 million in cash and had $40 million outstanding on our unsecured revolver with $195 million available to draw. Our debt to book capitalization was 9.5% and our net debt to net book capitalization was 6.9%. I am also happy to announce that we are in the final stages of finalizing an amendment to our credit facility that will, among other things, increase the total facility size by $75 million to $325 million and extend the maturity, which will be 4 years from the closing date. We appreciate all of our existing and new banking partners for their unwavering support. Our strong balance sheet and liquidity puts us in a great position to support our ongoing growth. Backlog at the end of the quarter was 791 homes with an average sales price of $341,000 and an expected gross margin of approximately 22.5%. While backlog is lower from the 1,100 homes year over year, reflecting a tougher selling environment this year, we did see positive momentum in our absorption pace as we progressed through the quarter. Monthly sales per community improved from 2.4 in January to 3.3 in February and 3.8% in March. In April, we saw that averaged back to approximately 3 sales per community as we move further into the spring selling season. Affordability remains a key challenge for our buyers, and we've leaned into targeted incentives to support sales. In late March, we launched a $10 million forward commitment program offering a 4.99% mortgage rate buy down in select communities which helped boost conversion rates. In the trailing 13 week period, our total incentives and discounts have averaged just over 7%. Turning to our second quarter outlook, we expect to close between 620 and 650 homes. With an average sales price between $335,000 and $340,000. Gross margin is projected to be in the range of 22.75% to 23.25%. While incentives will continue to pressure margins, we are maintaining discipline in how and where we deploy them. We ended the first quarter with 87 active communities and expect to see that number continue to grow modestly throughout the remainder of the year. We're actively opening new communities across multiple divisions and remain focused on supporting a stable and scalable growth platform. Before I conclude, I want to reiterate that while we're encouraged with our start to the year, our outlook does include several risks. As always, our ability to achieve these results will depend on maintaining an adequate pace of sales, bringing new lots in communities online as scheduled, and managing cost pressures, particularly in labor and materials. Additionally, broader macroeconomic factors such as inflation, employment trends, interest rates, and consumer confidence could create headwinds to demand and impact the timing or volume of sales and closings. We remain focused on executing what we can control and believe our land light model, steady operations, and financial strength position us well to navigate these challenges over the long term. With that, I'll turn the call over to the operator for questions. Operator (Operator Instructions). Michael Reha with JP Morgan. Please go ahead. Michael Reha Hi, good morning. This is Alex. I was calling for Mike. Thanks for taking my question. You mentioned on the demand side that there's some weakness and a lot of affordability challenges. I want to ask sort of how you characterize the spring season overall and expectations for that. And also if you feel like that demand weakness is consistent across geographies or more specifically, you see it more specifically in certain geographies than other geographies. Gregory S. Bennett Yeah, so I think, thanks for the question. I think the spring, demand has been there all along. It's just, week by week as we said, we're just solving for payments to reach, affordability in each market and it seems to be. Across our entire footprint, the man's been And relatively the same. Michael Reha That makes a lot of sense. Appreciate the color on that. And then as my follow up question, I want to ask, on the land side you mentioned some land inflation. I'm just curious about any color on the land environment and your ability to find new lots, but, unfinished and finished lots, as well as how we should think about, the land environment for the company going forward. Russell Devendorf Yeah, it's we've obviously been able to find deals, right? We've more than doubled our control lot count over the last, since we've been public land inflation certainly a, prior 12 months has continued to increase, but we've always said, I think land sellers are usually when things have started to slow, land sellers typically in our experience are the last ones to figure out that, maybe their land isn't worth what it was, previously, but we are starting to see a few cracks in, the sellers out there. I think it is transitioning a bit to a buyer's market and so. You are starting to see some land prices moderate. I mean, there's definitely demand out there, right? I think builders are still out looking for deals and so we're competing every day, but the land that's in our backlog and as we mentioned on the call, we're. We're working off the land that the prices over the last few years have continued to increase and so the stuff that we're closing, obviously has a higher basis than what we had previously, but we are starting to see, a little bit of negotiating power in some of the land deals. So hopefully that trend continues, especially as affordability remains challenging. Michael Reha It makes a lot of sense. I appreciate all the color. Gregory S. Bennett Sure. Operator Michael Dahl with RBC Capital Markets. Michael Dahl Hey, good morning, everyone. You guys actually got Steve and Mia on your mic today. Thanks for taking my questions. I wanted to start Outlook beyond 2Q. I appreciate the macro Outlook has gotten a lot murky here since we last spoke, but I just wanted to get a sense of how you guys are kind of formally thinking about the guideposts you guys have been giving us for the full year. I believe it was around 3,000 homes, just kind of, beyond the second quarter, what do you guys kind of have in how are you guys thinking about that. Thanks. Russell Devendorf Yeah, I wish we had the perfect crystal ball. It's kind of the reason that we didn't, really give specific guidance. I think when we talked, towards the end of last year and, going back a little bit and when the Feds started to cut rates, we were hopeful. That that would, help with affordability, but as we moved in the first quarter, clearly you know the mortgage rates, were not in our favor, right? They peak in January and they still, looking today, I think the 10 year yield is back up to about 4.5%, so affordability is a challenge like Greg said. You're seeing people need homes. There's demand out there, as it relates to full year guidance, that's why we really kind of pulled it off. It's very, it's really kind of a day to day thing as we just kind of navigate, what's happening with more the macro environment. We certainly have the communities and the lots to get to our 3, 100 closing target. So you know that's clearly the objective. A lot's going to depend on, how the balance of selling season shakes out and where we see the, kind of the demand for the back half of the year really more so the affordability, and what we're able to do. We're trying to balance, margins with. The, really balance our incentives and TRY to find that that kind of, appropriate mix. So look, our target, without giving specifics or definitive guidance, we're certainly targeting that 3, 100. Like I said, I think we can get there, but it's really going to be more of a macro story. Michael Dahl No, definitely appreciate that and also appreciate all the color thanks for that. And I wanted to jump ship to Houston and kind of the expansions you guys been making recently. It's great to hear that there's, further progress with here to date, and I guess since the acquisition on like the RTM integration in Houston, but I think it would be helpful for everyone, in terms of framing the story, like there's any further color you can provide on that progress and any potential. Time frame you may have for milestones there in Houston and the other expansion areas. It will be really helpful thanks. Gregory S. Bennett Yeah, thanks for the question. We are seeing, really big improvements in cycle time in Houston. We're up and running in our [aring] process across the footprint. We are. I think implemented on a 70 day schedule currently that that we've rolled out. We're not executing a 70 day schedule quite yet, but our goal is to be there by the end of this year, so. Yeah, and that's from a high point of cycle time near 200 days when we closed on that acquisition. So I'd say there's been quite a bit of improvement there. Michael Dahl Yeah, absolutely, thanks for the questions, guys. I'll pass them thanks the answer to that one. Operator Jay McCanless with Wedbush. Jay McCanless Hey, good morning, everyone. So 3 questions for me I guess could you talk a little bit about what you've seen so far in May in terms of demand and and pricing power? Russell Devendorf I think it's been pretty consistent with April. We haven't seen any. Any real shift, like I said, people are still coming into the to the sales office. We're seeing traffic, but it's still a challenging environment from an affordability perspective and then even from a competitive perspective when you see a lot of new home builders, offering, some pretty big incentives that we're in and, a lot of, a lot more spec inventory. On the ground, so it's challenging, but I, like I said, I don't, I don't see a huge difference from what we've seen in April. Jay McCanless And so, Not to harp on it, but are you guys pulling the fiscal '25 guidance or do you still think you can hit some of the targets that you laid out last quarter? Russell Devendorf Yeah, look, I think for the last question, it's really like I said, we've got the community count, we've got the lots in place we we're not, we didn't want to comment specifically on it. I think our target is still to get to that 3, 100, that's our goal, and if the macro environment. Remains, gets a little bit better, remains steady. I think we have a good shot at hitting it. It's just it's really stuff that's out of our control, right? So we're, I think some of our competitors, some of the other new builders have you pulled back on some guidance. It's just, it's still a little bit early to tell based on, where things are moving, obviously this new administration, there's been some, quite a bit of choppiness, from a macro perspective, so. It's, I'll be H1st, I mean, it's difficult to forecast in this environment, right? But look, our goal and like I said, we're, we still have a good shot at getting to our 3,000 plus target. Jay McCanless Got it. And then the last question for me, I'm sure you guys saw the news on [Lams] yesterday, any comments you might make on that and any impact that could have on Smith Douglas? Russell Devendorf No, I mean, we don't, we wouldn't comment on somebody else's transaction traditionally, but the only thing I would say is, look, it's Apollo, so it does show some pretty good support from a pretty good backer that, clearly they see some opportunity to. To make an investment of that size in the home building space, so we like to see that. And it won't, no impact from our standpoint. We don't see LMC, or new home in our markets. Jay McCanless Okay, great. Thanks guys. Operator Rafi Glass with Bank of America. Rafi Glass Hi, good morning, it's Ray, thanks for taking my questions. Russ, can you just, on the 2nd quarter gross margin guidance, relative to where you came in in the 1st quarter, which I think was pretty solid, is the quarter over quarter decline just higher incentives and that relates to that to that forward commitment? Russell Devendorf Yeah, that, that's I think a good part of it and to the extent that we may do a little bit more, but that's definitely a driver, yeah. Rafi Glass Okay, and then, when the backlog, year over year is down like over 25% here, but you've been able to continue to grow deliveries. Can you the backlog of version has obviously improved a lot over the last year. Where can that go from here? Do you still see additional opportunity to drive the backlog conversion higher? And is there sort of a cap to that? Well, you'll have to sort of refill the backlog with more orders to continue to grow deliveries? Russell Devendorf Yeah, and that's a great point. We, there's a couple of things there, we, our cycle times are improving, but yeah, we came in with a with a few more specs than we had last year. So even though backlogs down, we actually had, as much, if not a little bit more inventory. And so we're able to, like Rick said, and we've said there are, there is demand there, so there are people coming into the sales offices we're getting traffic, but it's just taking higher incentives to get people to convert. And so that's why, margins are dipping a bit, but we're still able to, get some pretty good closing numbers. And so even though backlog is down and we're traditionally and obviously our business model is focusing on pre-sales. We, we've still got the inventory, we're clicking on, pretty much all cylinders from an operating perspective, and so we're really just taking a measured approach to how we're pricing and we don't want to get, we're not looking to, fill up a whole bunch of, spec inventory and so as we start to see. Maybe a few more specs or a little bit of slowness in a community here or there, we'll turn the dial on incentives and kind of move the inventory. So that's a long way of saying, yeah, we can definitely increase that backlog conversion rate because, we'll just continue to turn the dial and just, move some more of that speculative inventory that's sitting in some of those communities. Rafi Glass Okay, that that's helpful, and then is there any just update on the mortgage JV that you have right now? Any plans to, change that that relationship? Russell Devendorf No, actually, I tell you it continues to get better every week. It's part of the reason that really, and it's very been very helpful in pushing out some of these, a very consistent message on the on the incentive side. And so we were using, through our partner which is Loan Depot, using them for our forward commitments and just pushing out a consistent message. We are now fully licensed in all of our all of our markets. We've got loan officers that have been operating in all of our markets and our capture continues to get better, and I want to say last week our capture was 56%, for. For our mortgage partner and so obviously that's, our goal is to be at 90+%, but we were still using, we were not using our Ridgeland brand yet in Atlanta because we had just gotten licensed and that's obviously our biggest market, but in everywhere else capture has been very good and we think it'll continue to improve so looking forward to it. Rafi Glass And I think the operator said I'm the last one, so if I could sneak one more in here in your core markets, are you seeing a pullback in starts, from competition or have you adjusted the starts pace at all and obviously some of the larger public builders that have already reported on a year over year basis we've seen starts down a lot. I'm just wondering if some of the standing, kind of. Sitting finished spec inventory out there from competitors, do you think that's a problem right now or an issue and is there any sign that that's sort of improving and there's been an adjustment on the start side? Gregory S. Bennett Yeah, hello, Ray. I'll take that we have not. Had an interruption and starts on our side. We are hearing discussion about slowing starts from competitors. And probably seeing a little bit of evidence of that. We went in, to tag on the Russ's backlog question, previous question. We pushed starts in the end of 2024 to be certain that we kept our machine running that that is the kind of environment around rates and we know how we ended Q4 with sales last. Yeah it built some inventory, but that inventory coming into the year, drove a lot of conversions for us in Q1. We've grown backlog since the beginning of the year. And we continue to push starts every day. We're hitting on our starts actually ahead of our starts budget for the year and I, I've been refreshed to see the past two weeks that we've outpaced with our pre-sales. In our orders, so. I'm optimistic that that we'll continue to be able to build on our model and that our pre-sales will overtake the inventory that we've built and. In our cycle times, as we said, helps us to be able to convert that that buyer quickly. Rafi Glass That that that's helpful. I appreciate all the color, guys. Gregory S. Bennett Thank you. Rafi Glass Thanks, Greg. Operator And this does conclude the our Q&A session. I will now turn the call back over to Greg Bennett, CEO for closing remarks. Gregory S. Bennett Yes, thank you, Tina. Thank you everyone for joining us. Appreciate all the interest in in Smith Douglas and hope to speak again next quarter. Operator Ladies and gentlemen, that concludes today's call. Thank you for all for joining and you may now disconnect.
Business Wire
14-05-2025
- Business
- Business Wire
Smith Douglas Homes Reports First Quarter 2025 Results
ATLANTA--(BUSINESS WIRE)--Smith Douglas Homes Corp. (NYSE: SDHC) ('Smith Douglas' or the 'Company') today announced first quarter results for the three months ended March 31, 2025. Q1 2025 Results as compared to Q1 2024: Home closings increased 19% to 671 Home closing revenue increased 19% to $224.7 million Home closing gross margin of 23.8% compared to 26.1% Net new home orders of 768 compared to 765 Pretax income of $19.6 million compared to $21.4 million Earnings of $0.30 per diluted share compared to $0.33 Debt-to-book capitalization of 9.5% compared to 0.8% at December 31, 2024 Active community count increased 24% to 87 at quarter end Total controlled lots increased 45% to 20,442 Greg Bennett, Vice Chairman and Chief Executive Officer, commented, 'Smith Douglas Homes turned in another quarter of strong profitability to start 2025, generating pretax income of $19.6 million, or earnings of $0.30 per diluted share. Home closing revenue grew 19% year-over-year on a similar increase in new home closings, while home closing gross margin came in at 23.8%, which was above our expectations for the quarter. I want to thank our entire team for once again executing with efficiency and precision.' Russ Devendorf, Executive Vice President and Chief Financial Officer added, 'Order activity improved as the quarter progressed, though I would characterize overall demand as somewhat inconsistent and still dependent on incentives. While affordability remains an issue in our markets, we continue to see good traffic to our website and our communities. We feel this is a reflection on the appeal of our homes and the value proposition we provide to buyers.' Mr. Devendorf continued, 'Despite much of the noise surrounding macroeconomic uncertainty, we remain confident in our ability to execute on our strategic plans and achieve our long-term growth goals. Active community count at quarter-end increased 24% compared to last year, while total controlled lots were up 45%, giving us a great opportunity to grow our market share and increase our size and scale. We believe our asset light strategy, solid operational execution and strong balance sheet has us well-positioned to successfully navigate today's changing homebuilding landscape.' Conference Call & Webcast Information Management will host a conference call to discuss the Company's results at 8:30 a.m. Eastern Time on May 14, 2025. Interested parties can dial in using the numbers below or access the call via a webcast link provided in the investor relations section of the company's website. Dial-in Numbers: Toll Free - North America (+1) 800-715-9871 International: (+1) 646-307-1963 Conference ID: 8459388 Replay Numbers: Toll Free - North America: (+1) 800-770-2030 Playback Passcode: 8459388 Replay will expire 7 days following the event About Smith Douglas Homes Headquartered in Woodstock, Georgia, Smith Douglas Homes completed its initial public offering in January 2024. Since its inception, Smith Douglas has been entrusted by over 17,500 families to fulfill their new home dreams. Ranked a top 50 builder nationally for several years and with 2,867 closings in 2024, Smith Douglas currently holds the #32 position on the Builder Magazine Top 100 list. The Smith Douglas communities are primarily targeted to entry-level and empty-nest homebuyers looking to purchase a new home priced below the Federal Housing Administration loan limit in the metro areas of Atlanta, Birmingham, Central Georgia, Charlotte, Chattanooga, Greenville, Houston, Huntsville, Nashville, and Raleigh. Smith Douglas offers its homebuyers a personalized, affordable-luxury buying experience at attractive prices. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding the Company's performance, growth, strategic plans and opportunities, financial position, ability to navigate the changing homebuilding landscape in the macroeconomic environment, and the timing of any of the foregoing. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the factors discussed under the caption 'Risk Factors' in our Annual Report on Form 10-K for the year ended December 31, 2024, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. These forward-looking statements are based on management's current estimates and expectations. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. Smith Douglas Homes Condensed Consolidated Balance Sheets (In thousands, except share and per share amounts) December 31, 2024 (unaudited) Assets Cash and cash equivalents $ 12,651 $ 22,363 Real estate inventory 294,991 277,834 Deposits on real estate under option or contract 119,339 103,026 Real estate not owned 7,502 5,830 Property and equipment, net 4,317 3,775 Goodwill 25,726 25,726 Deferred tax asset, net 10,767 10,906 Other assets 38,626 26,441 Total assets $ 513,919 $ 475,901 Liabilities and Equity Liabilities: Accounts payable $ 19,912 $ 17,234 Customer deposits 5,585 5,301 Notes payable 42,648 3,060 Liabilities related to real estate not owned 7,502 5,830 Accrued expenses and other liabilities 20,708 32,348 Tax receivable agreement liability 10,401 10,401 Total liabilities 106,756 74,174 Commitments and contingencies (Note 9) Stockholders' equity: Preferred stock, $0.0001 par value – 10,000,000 shares authorized; none issued and outstanding as of March 31, 2025 and December 31, 2024 — — Class A common stock, $0.0001 par value – 250,000,000 shares authorized; 8,991,378 and 8,846,154 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 1 1 Class B common stock, $0.0001 par value – 100,000,000 shares authorized; 42,435,897 shares issued and outstanding as of March 31, 2025 and December 31, 2024 4 4 Additional paid-in capital 58,820 58,208 Retained earnings 18,040 15,419 Total stockholders' equity attributable to Smith Douglas Homes Corp. 76,865 73,632 Non-controlling interests attributable to Smith Douglas Holdings LLC 330,298 328,095 Total equity 407,163 401,727 Total liabilities and equity $ 513,919 $ 475,901 Expand Smith Douglas Homes Summary Cash Flow Information (Unaudited, dollars in thousands) Three months ended March 31, 2025 2024 Net cash used in operating activities $ (34,905 ) $ (9,273 ) Net cash used in investing activities (2,106 ) (430 ) Net cash provided by financing activities 27,299 22,704 Net (decrease) increase in cash and cash equivalents (9,712 ) 13,001 Cash and cash equivalents, beginning of period 22,363 19,777 Cash and cash equivalents, end of period $ 12,651 $ 32,778 Expand Smith Douglas Homes Selected Other Operating Data (Unaudited, dollars in thousands) Three months ended March 31, 2025 2024 Home closings 671 566 ASP of homes closed $ 335 $ 334 Net new home orders 768 765 Contract value of net new home orders $ 258,718 $ 259,440 ASP of net new home orders $ 337 $ 339 Cancellation rate (1) 8.1 % 10.6 % Backlog homes (period end) (2) 791 1,110 Contract value of backlog homes (period end) $ 270,082 $ 381,155 ASP of backlog homes (period end) $ 341 $ 343 Active communities (period end) (3) 87 70 Controlled lots (period end): Homes under construction 995 896 Owned lots 888 693 Optioned lots 18,559 12,528 Total controlled lots 20,442 14,117 Expand (1) The cancellation rate is the total number of cancellations during the period divided by the total gross new home orders during the period. (2) Backlog homes (period end) is the number of homes in backlog from the previous period plus the number of net new home orders generated during the current period minus the number of homes closed during the current period. (3) A community becomes active once the model is completed or the community has its first sale. A community becomes inactive when it has fewer than two homes remaining to sell. Expand Smith Douglas Homes Selected Financial Information by Segment (Unaudited, dollars in thousands) Home Closing Revenue Three months e nded March 31, 2025 2024 Period over period change Home closing revenue Home closings ASP of homes closed Home closing revenue Home closings ASP of homes closed Home closing revenue Home closings ASP of homes closed Southeast $ 138,218 392 $ 353 $ 103,494 297 $ 348 34 % 32 % 1 % Central 86,504 279 310 85,715 269 319 1 % 4 % (3 )% Total $ 224,722 671 $ 335 $ 189,209 566 $ 334 19 % 19 % — % Expand Backlog As of March 31, 2025 2024 Period over period change Central 305 100,115 328 437 141,568 324 (30 )% (29 )% 1 % Total 791 $ 270,082 $ 341 1,110 $ 381,155 $ 343 (29 )% (29 )% (1 )% Expand (1) Includes homes under construction and owned lots. Expand Net Income Three months ended March 31, 2025 2024 Period over period change Southeast $ 23,855 $ 21,005 $ 2,850 Central 7,010 10,283 (3,273 ) Segment total 30,865 31,288 (423 ) Other (1) (12,155 ) (10,802 ) (1,353 ) Total $ 18,710 $ 20,486 $ (1,776 ) Expand (1) Other primarily includes homebuilding operations in non-reportable segments, corporate overhead costs, such as payroll and benefits, business insurance, information technology, office costs, outside professional services and travel costs, and certain other amounts that are not allocated to the reportable segments. Expand Non-GAAP Financial Measures In addition to our results determined in accordance with generally accepted accounting principles in the U.S. ('GAAP'), this press release includes net debt-to-net book capitalization and adjusted net income. Net debt-to-net book capitalization Net debt-to-net book capitalization is a supplemental measure of our leverage that is not required by, or presented in accordance with, GAAP and should not be considered as an alternative to debt-to-book capitalization or any other measure derived in accordance with GAAP. We caution investors that amounts presented in accordance with our definition of net debt-to-net book capitalization may not be comparable to similar measures disclosed by our competitors because not all companies and analysts calculate this non-GAAP financial measure in the same manner. We present this non-GAAP financial measure because we consider it to be an important supplemental measure of our leverage and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. We define net debt-to-net book capitalization as: Total debt, less cash and cash equivalents, divided by Total debt, less cash and cash equivalents, plus equity. This non-GAAP financial measure has limitations as an analytical tool in that it subtracts cash and cash equivalents and therefore may imply that the Company has less debt than the most comparable measure determined in accordance with GAAP. Because of this limitation, this non-GAAP financial measure should be considered along with other financial measures presented in accordance with GAAP. The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in the following table: Adjusted net income Adjusted net income is not a measure of net income or net income margin as determined by GAAP. Adjusted net income 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 adjusted net income as net income adjusted for the tax impact using a 24.9% federal and state blended tax rate (assuming 100% public ownership to adjust for the impact of taxes on earnings attributable to Smith Douglas Holdings LLC as if Smith Douglas Holdings LLC was a subchapter C corporation in the periods presented). Management believes adjusted net income is useful because it allows management to more effectively evaluate our operating performance and comparability to industry peers who record income tax expense on their income before tax as opposed to the income of Smith Douglas Holdings LLC not being taxed at the entity level and, therefore, not reflecting a charge against earnings for income tax expense. Adjusted net income should not be considered as an alternative to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. Our computation of adjusted net income may not be comparable to adjusted net income of other companies. We present adjusted net income because we believe it provides useful information regarding our comparability to peers. The following table presents a reconciliation of adjusted net income to the GAAP financial measure of net income for each of the periods indicated: (1) For the three months ended March 31, 2025 and 2024, our tax expenses assumes a 24.9% and 25.0% federal and state blended tax rate, respectively, (assuming 100% public ownership to adjust for the impact of taxes on earnings attributable to Smith Douglas Holdings LLC as if Smith Douglas Holdings LLC was a subchapter C corporation in the periods presented). Expand
