Smith Douglas Homes Reports Third Quarter 2024 Results

ATLANTA--(BUSINESS WIRE)--Smith Douglas Homes Corp. (NYSE: SDHC) (“Smith Douglas” or the “Company”) today announced third quarter results for the three and nine months ended September 30, 2024.

Q3 2024 Results as compared to Q3 2023:

• Home closings increased 39% to 812
• Home closing revenue increased 41% to $277.8 million
• Home closing gross margin of 26.5%
• Net new home orders increased 6% to 600
• Pretax income of $39.6 million
• Earnings of $0.58 per diluted share
• Debt-to-book capitalization of 0.9%
• Active community count increased 19% to 74 at quarter end
• Total controlled lots increased 54% to 17,878

Greg Bennett, Vice Chairman and Chief Executive Officer, commented, “Our team's commitment to our core operational strategies - offering homebuyers a personalized buying experience, working closely with suppliers and trade partners for an efficient production cycle, and maintaining a land light balance sheet - continues to deliver strong results. We achieved record results in the third quarter, with 812 closings for $277.8 million in home closing revenue, and gross margins of 26.5%, all of which translated to pretax income of $39.6 million.”

Russ Devendorf, Executive Vice President and Chief Financial Officer, added, “During the quarter we further expanded our geographic presence by expanding into Greenville, SC as well as continuing to build our infrastructure in Central Georgia and Chattanooga, TN. This strategic growth reflects our commitment to meeting demand for quality homes in the Southeastern and Southern United States.”

Mr. Devendorf continued, “As we approach the fourth quarter, our financial condition remains strong. As of September 30, 2024, we had 16,743 unstarted controlled lots, 96% of which are controlled via option agreement. We had 74 active communities at quarter end and 961 homes in backlog. We increased our total controlled lot position by 54% year-over-year and ended the quarter with $24 million of cash, $372 million of stockholder’s equity and zero borrowings under our credit facility, resulting in a net debt-to-net book capitalization of (5.8)%.”

Conference Call & Webcast Information

Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on November 12, 2024. 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: ([phone]
International: ([phone]
Conference ID: 8743844

Replay Numbers:

Toll Free - North America: ([phone]
Playback Passcode: 8743844
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 15,000 families to fulfill their new home dreams. Ranked a top 50 builder nationally for several years and with 2,297 closings in 2023, Smith Douglas currently holds the #36 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, Charlotte, Chattanooga, 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 opportunities, and financial position. 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, 2023, 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 Statements of Income (Unaudited, in thousands, except share and per share amounts)
	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Home closing revenue	$	277,835		$	197,638		$	687,977		$	547,304
Cost of home closings		204,140			140,548			505,764			388,983
Home closing gross profit		73,695			57,090			182,213			158,321
Selling, general, and administrative costs		34,137			22,952			93,487			64,674
Equity in income from unconsolidated entities		(396	)		(222	)		(800	)		(658	)
Interest expense		614			476			1,903			1,022
Other (income) expense, net		(245	)		(49	)		765			(217	)
Income before income taxes		39,585			33,933			86,858			93,500
Provision for income taxes		1,761			—			3,814			—
Net income		37,824		$	33,933			83,044		$	93,500
Net income attributable to non-controlling interests and LLC members prior to IPO		32,477						71,079
Net income attributable to Smith Douglas Homes Corp.	$	5,347					$	11,965

	Three months ended September 30, 2024		Period from January 11, 2024 to September 30, 2024
Earnings per share:
Basic	$	0.60	$	1.35
Diluted	$	0.58	$	1.30
Weighted average shares of common stock outstanding:
Basic		8,846,154		8,846,154
Diluted		51,533,407		51,502,413

Smith Douglas Homes Condensed Consolidated Balance Sheets
	September 30, 2024		December 31, 2023
	(unaudited)
Assets
Cash and cash equivalents	$	23,716	$	19,777
Real estate inventory		282,013		213,104
Deposits on real estate under option or contract		80,209		57,096
Real estate not owned		9,445		16,815
Property and equipment, net		3,569		1,543
Goodwill		25,726		25,726
Deferred tax asset, net		10,693		—
Other assets		24,679		18,631
Total assets	$	460,050	$	352,692
Liabilities and Stockholders’/Members’ Equity
Liabilities:
Accounts payable	$	23,505	$	17,318
Customer deposits		7,608		7,168
Notes payable		3,463		75,627
Liabilities related to real estate not owned		9,445		16,815
Accrued expenses and other liabilities		33,268		26,861
Tax receivable agreement liability		10,401		—
Total liabilities		87,690		143,789
Commitments and contingencies (Note 9)
Members’ equity:
Class A units		—		206,303
Class C units		—		2,000
Class D units		—		600
Total members’ equity		—		208,903
Stockholders’ equity:
Preferred stock, $0.0001 par value – 10,000,000 shares authorized; none issued and outstanding as of September 30, 2024		—		—
Class A common stock, $0.0001 par value – 250,000,000 shares authorized; 8,846,154 shares issued and outstanding as of September 30, 2024		1		—
Class B common stock, $0.0001 par value – 100,000,000 shares authorized; 42,435,897 shares issued and outstanding as of September 30, 2024		4		—
Additional paid-in capital		57,010		—
Retained earnings		11,420		—
Total stockholders’ equity attributable to Smith Douglas Homes Corp.		68,435		—
Non-controlling interests attributable to Smith Douglas Holdings LLC		303,925		—
Total stockholders’/members’ equity		372,360		208,903
Total liabilities and stockholders’/members’ equity	$	460,050	$	352,692

Smith Douglas Homes Summary Cash Flow Information (Unaudited, dollars in thousands)
Nine months ended September 30,	2024			2023
Net cash provided by operating activities	$	13,655		$	54,958
Net cash used in investing activities		(3,780	)		(75,631	)
Net cash (used in) provided by financing activities		(5,936	)		1,512
Net increase (decrease) in cash and cash equivalents		3,939			(19,161	)
Cash and cash equivalents, beginning of period		19,777			29,601
Cash and cash equivalents, end of period	$	23,716		$	10,440

Smith Douglas Homes Selected Other Operating Data (Unaudited, dollars in thousands)
	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Home closings		812			583			2,031			1,643
ASP of homes closed	$	342		$	339		$	339		$	333
Net new home orders		600			568			2,080			1,844
Contract value of net new home orders	$	205,164		$	193,435		$	708,446		$	614,683
ASP of net new home orders	$	342		$	341		$	341		$	333
Cancellation rate^(2)		11.4	%		11.0	%		11.3	%		9.5	%
Backlog homes (period end)^(3)		961			1,042			961			1,042
Contract value of backlog homes (period end)	$	332,035		$	350,439		$	332,035		$	350,439
ASP of backlog homes (period end)	$	346		$	336		$	346		$	336
Active communities (period end)^(4)		74			62			74			62
Controlled lots (period end):
Homes under construction		1,135			905			1,135			905
Owned lots		611			395			611			395
Optioned lots		16,132			10,279			16,132			10,279
Total controlled lots		17,878			11,579			17,878			11,579

(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.

Smith Douglas Homes Selected Financial Information by Segment (Unaudited, dollars in thousands)
Home Closing Revenue
Three months ended September 30,	2024					2023					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
Alabama	$	37,780	129	$	293	$	33,048	114	$	290	14	%	13	%	1	%
Atlanta		121,334	350		347		80,494	232		347	51	%	51	%	—	%
Charlotte		32,070	82		391		15,155	44		344	112	%	86	%	14	%
Houston		30,830	97		318		10,260	31		331	200	%	213	%	(4	%)
Nashville		20,097	52		386		25,694	70		367	(22	)%	(26	)%	5	%
Raleigh		35,724	102		350		32,987	92		359	8	%	11	%	(3	)%
Total	$	277,835	812	$	342	$	197,638	583	$	339	41	%	39	%	1	%

Nine months ended September 30,	2024					2023					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
Alabama	$	121,020	406	$	298	$	75,915	261	$	291	59	%	56	%	2	%
Atlanta		264,174	764		346		250,772	769		326	5	%	(1	)%	6	%
Charlotte		60,886	159		383		42,026	117		359	45	%	36	%	7	%
Houston		86,108	266		324		10,260	31		331	739	%	758	%	(2	%)
Nashville		63,834	173		369		77,602	214		363	(18	)%	(19	)%	2	%
Raleigh		91,955	263		350		90,729	251		361	1	%	5	%	(3	)%
Total	$	687,977	2,031	$	339	$	547,304	1,643	$	333	26	%	24	%	2	%

Backlog
As of September 30,	2024					2023					Period over period change
	Backlog homes	Contract value of backlog homes		ASP of backlog homes		Backlog homes	Contract value of backlog homes		ASP of backlog homes		Backlog homes		Contract value of backlog homes		ASP of backlog homes
Alabama	173	$	50,321	$	291	257	$	78,431	$	305	(33	)%	(36	)%	(5	%)
Atlanta	363		126,406		348	359		119,157		332	1	%	6	%	5	%
Charlotte	104		42,454		408	68		26,448		389	53	%	61	%	5	%
Houston	168		55,392		330	101		34,266		339	66	%	62	%	(3	%)
Nashville	36		14,983		416	107		38,881		363	(66	)%	(61	)%	15	%
Raleigh	117		42,479		363	150		53,256		355	(22	)%	(20	)%	2	%
Total	961	$	332,035	$	346	1,042	$	350,439	$	336	(8	%)	(5	%)	3	%

Controlled Lots
As of September 30,	2024			2023			Period over period change
	Owned^(1)	Optioned	Total Controlled	Owned^(1)	Optioned	Total Controlled	Owned^(1)		Optioned		Total Controlled
Alabama	390	1,388	1,778	329	1,578	1,907	19	%	(12	)%	(7	)%
Atlanta	567	7,950	8,517	318	4,612	4,930	78	%	72	%	73	%
Charlotte	141	2,339	2,480	67	1,101	1,168	110	%	112	%	112	%
Houston	364	1,713	2,077	242	1,157	1,399	50	%	48	%	48	%
Nashville	84	913	997	166	816	982	(49	)%	12	%	2	%
Raleigh	200	1,491	1,691	178	1,015	1,193	12	%	47	%	42	%
Other	—	338	338	—	—	—	100	%	100	%	100	%
Total	1,746	16,132	17,878	1,300	10,279	11,579	34	%	57	%	54	%

(1)	Includes homes under construction and owned lots.

Net Income
	Three months ended September 30,									Nine months ended September 30,
	2024			2023			Period over period change			2024			2023			Period over period change
Alabama	$	4,188		$	3,882		$	306		$	14,351		$	7,558		$	6,793
Atlanta		28,929			21,282			7,647			61,512			64,210			(2,698	)
Charlotte		5,120			2,303			2,817			9,124			6,616			2,508
Houston		4,305			869			3,436			11,117			869			10,248
Nashville		2,707			4,787			(2,080	)		7,809			12,519			(4,710	)
Raleigh		5,770			6,795			(1,025	)		15,787			19,641			(3,854	)
Segment total		51,019			39,918			11,101			119,700			111,413			8,287
Other^(1)		(13,195	)		(5,985	)		(7,210	)		(36,656	)		(17,913	)		(18,743	)
Total	$	37,824		$	33,933		$	3,891		$	83,044		$	93,500		$	(10,456	)

(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.

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 stockholders’ 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:

As of (in thousands, except percentages)	September 30, 2024			December 31, 2023
Notes payable	$	3,463		$	75,627
Stockholders’/ Members’ equity		372,360			208,903
Total capitalization	$	375,823		$	284,530
Debt-to-book capitalization		0.9	%		26.6	%
Notes payable	$	3,463		$	75,627
Less: cash and cash equivalents		23,716			19,777
Net debt		(20,253	)		55,850
Stockholders’/ Members’ equity		372,360			208,903
Total net capitalization	$	352,107		$	264,753
Net debt-to-net book capitalization		(5.8	)%		21.1	%

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 24.5% 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:

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Net income	$	37,824	$	33,933	$	83,044	$	93,500
Provision for income taxes		1,761		—		3,814		—
Income before income taxes		39,585		33,933		86,858		93,500
Tax-effected adjustments^(1)		9,710		8,324		21,306		22,936
Adjusted net income	$	29,875	$	25,609	$	65,552	$	70,564

(1)

For the three and nine months ended September 30, 2024 and 2023, our tax expenses assumes a 24.5% 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).