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).

Contacts

Investor Relations
Joe Thomas
[e-mail]