Smith Douglas Homes Reports Second Quarter 2024 Results

Smith Douglas Homes Corp. (NYSE: SDHC) (“Smith Douglas” or the “Company”) today announced second quarter results for the three and six months ended June 30, 2024.

Q2 2024 Results as compared to Q2 2023:

Net new orders increased 17% to 715
Home closings increased 17% to 653
Revenue increased 22% to $220.9 million
Pre-tax income of $25.9 million
Earnings of $0.40 per diluted share
Backlog homes increased 19% to 1,173
Sales value of backlog homes increased 23% to $404.7 million
Debt-to-book capitalization of 1.1%
Active community count increased 70% to 75 at quarter end
Total controlled lots increased 81% to 15,842

Greg Bennett, Vice Chairman and Chief Executive Officer, commented, “Despite ongoing affordability challenges for our homebuyers, we have achieved another robust financial quarter due to our team’s unwavering commitment to operational excellence, combined with strong market demand. Our success is highlighted by a 17% year-over-year increase in closings and delivering above industry average gross margins of 26.7% for the quarter, which resulted in a pretax income of $25.9 million.”

Russ Devendorf, Executive Vice President and Chief Financial Officer added, “During the quarter we have continued our prudent capital deployment in support of growth while maintaining our disciplined commitment to our land light strategy. We grew our total controlled lot position by 12% for the quarter, with 96% of our unstarted controlled lots being controlled via option agreement. We ended the quarter with over $17 million of cash, nearly $345 million of stockholder’s equity and zero borrowings under our credit facility, resulting in a net-debt-to-net book capitalization of (4.1)%.”

Conference Call & Webcast Information

Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on August 14, 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 (+1) 800-715-9871 International: (+1) 646-307-1963 Conference ID: 9762287

Replay Numbers: Toll Free - North America: (+1) 800-770-2030 Playback Passcode: 9762287 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 June 30,

Six months ended June 30,

2024

2023

2024

2023

Home closing revenue

220,933

181,522

410,142

349,666

Cost of home closings

161,875

128,824

301,624

248,435

Home closing gross profit

59,058

52,698

108,518

101,231

Selling, general and administrative costs

31,809

21,928

59,350

41,722

Equity in income from unconsolidated entities

(220

)

(226

)

(404

)

(436

)

Interest expense

591

301

1,289

546

Other expense (income), net

1,012

(46

)

1,010

(168

)

Income before income taxes

25,866

30,741

47,273

59,567

Provision for income taxes

1,132

—

2,053

—

Net income

24,734

30,741

45,220

59,567

Net income attributable to non-controlling interests and LLC members prior to IPO

21,088

38,602

Net income attributable to Smith Douglas Homes Corp.

3,646

6,618

Three months ended June 30, 2024

Period from January 11, 2024 to June 30, 2024

Earnings per share:

Basic

0.41

0.75

Diluted

0.40

0.74

Weighted average shares of common stock outstanding:

Basic

8,846,154

Diluted

51,431,974

51,414,509

Smith Douglas Homes Condensed Consolidated Balance Sheets

June 30, 2024

December 31, 2023

(unaudited)

Assets

Cash and cash equivalents

17,298

19,777

Real estate inventory

266,553

213,104

Deposits on real estate under option or contract

66,253

57,096

Real estate not owned

13,635

16,815

Property and equipment, net

3,351

1,543

Goodwill

25,726

Deferred tax asset, net

10,934

—

Other assets

25,504

18,631

Total assets

429,254

352,692

Liabilities and Stockholders’/Members’ Equity

Liabilities:

Accounts payable

21,458

17,318

Customer deposits

9,543

7,168

Notes payable

3,859

75,627

Liabilities related to real estate not owned

13,635

16,815

Accrued expenses and other liabilities

25,799

26,861

Tax receivable agreement liability

10,401

—

Total liabilities

84,695

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 June 30, 2024

—

Class A common stock, $0.0001 par value – 250,000,000 shares authorized; 8,846,154 shares issued and outstanding as of June 30, 2024

—

Class B common stock, $0.0001 par value – 100,000,000 shares authorized; 42,435,897 shares issued and outstanding as of June 30, 2024

—

Additional paid-in capital

55,776

—

Retained earnings

6,321

—

Total stockholders’ equity attributable to Smith Douglas Homes Corp.

62,102

—

Non-controlling interests attributable to Smith Douglas Holdings LLC

282,457

—

Total members’/stockholders’ equity

344,559

208,903

Total liabilities and stockholders’/members’ equity

429,254

352,692

Smith Douglas Homes Summary Cash Flow Information (Unaudited, dollars in thousands)

Six months ended June 30,

2024

2023

Net cash (used in) provided by operating activities

(9,234

)

35,902

Net cash used in investing activities

(3,153

)

(180

)

Net cash provided by (used in) financing activities

9,908

(53,931

)

Net decrease in cash and cash equivalents

(2,479

)

(18,209

)

Cash and cash equivalents, beginning of period

19,777

29,601

Cash and cash equivalents, end of period

17,298

11,392

Smith Douglas Homes Selected Other Operating Data (Unaudited, dollars in thousands)

Three months ended June 30,

Six months ended June 30,

2024

2023

2024

2023

Home closings

653

560

1,219

1,060

ASP of homes closed

338

324

336

330

Net new home orders

715

612

1,480

1,276

Contract value of net new home orders

243,842

206,130

503,282

421,248

ASP of net new home orders

341

337

340

330

Cancellation rate(1)

11.8

8.7

11.2

8.8

Backlog homes (period end)(2)

1,173

985

1,173

985

Contract value of backlog homes (period end)

404,750

330,258

404,750

330,258

ASP of backlog homes (period end)

345

335

345

335

Active communities (period end)(3)

Controlled lots (period end):

Homes under construction

1,088

706

1,088

706

Owned lots

587

405

587

405

Optioned lots

14,167

7,659

14,167

7,659

Total controlled lots

15,842

8,770

15,842

8,770

(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 June 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

43,585

145

301

18,800

285

132

120

Atlanta

80,220

231

347

94,104

302

312

(15

(24

Charlotte

15,352

357

14,369

359

Houston

31,248

329

—

100

Nashville

21,707

374

28,019

355

(23

(27

Raleigh

28,821

356

26,230

359

Total

220,933

653

338

181,522

560

324

Six months ended June 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

83,240

277

301

42,867

147

292

Atlanta

142,840

414

345

170,278

537

317

(16

(23

Charlotte

28,816

374

26,871

368

Houston

55,278

169

327

—

100

Nashville

43,737

121

361

51,908

144

360

(16

—

Raleigh

56,231

161

349

57,742

159

363

Total

410,142

1,219

336

349,666

1,060

330

Backlog

As of June 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

169

50,122

297

246

73,028

297

(31

—

Atlanta

492

170,724

347

374

125,606

336

Charlotte

121

49,498

409

25,035

358

Houston

200

64,445

322

—

100

Nashville

20,681

398

129

47,346

367

(60

(56

Raleigh

139

49,280

355

166

59,243

357

(16

(17

Total

1,173

404,750

345

985

330,258

335

Controlled Lots

As of June 30,

2024

2023

Period over period change

Owned(1)

Optioned

Total Controlled

Owned(1)

Optioned

Total Controlled

Owned(1)

Optioned

Total Controlled

Alabama

355

1,420

1,775

315

1,483

1,798

Atlanta

485

7,457

7,942

338

3,384

3,722

120

113

Charlotte

144

2,021

2,165

1,127

1,208

Houston

384

1,390

1,774

—

100

Nashville

820

913

207

662

869

(55

Raleigh

214

1,059

1,273

170

1,003

1,173

Total

1,675

14,167

15,842

1,111

7,659

8,770

(1)

Includes homes under construction and owned lots.

Net Income

Three months ended June 30,

Six months ended June 30,

2024

2023

Period over period change

2024

2023

Period over period change

Alabama

5,559

1,435

4,124

10,163

3,676

6,487

Atlanta

18,012

23,379

(5,367

)

32,583

42,928

(10,345

)

Charlotte

2,380

—

4,004

4,313

(309

)

Houston

3,446

—

3,446

6,812

—

6,812

Nashville

2,789

4,501

(1,712

)

5,102

7,732

(2,630

)

Raleigh

5,207

5,615

(408

)

10,017

12,846

(2,829

)

Segment total

37,393

37,310

68,681

71,495

(2,814

)

Corporate(1)

(12,659

)

(6,569

)

(6,090

)

(23,461

)

(11,928

)

(11,533

)

Total

24,734

30,741

(6,007

)

45,220

59,567

(14,347

)

(1)

Corporate primarily includes 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)

June 30, 2024

December 31, 2023

Notes payable

3,859

75,627

Stockholders’/ Members’ equity

344,559

208,903

Total capitalization

348,418

284,530

Debt-to-book capitalization

1.1

26.6

Notes payable

3,859

75,627

Less: cash and cash equivalents

17,298

19,777

Net debt

(13,439

)

55,850

Stockholders’/ Members’ equity

344,559

208,903

Total net capitalization

331,120

264,753

Net-debt-to-net book capitalization

(4.1

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 25.0% 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 June 30,

Six months ended June 30,

2024

2023

2024

2023

Net income

24,734

30,741

45,220

59,567

Provision for income taxes

1,132

—

2,053

—

Income before income taxes

25,866

30,741

47,273

59,567

Tax-effected adjustments(1)

6,467

7,685

11,818

14,892

Adjusted net income

19,399

23,056

35,455

44,675

(1)

For the three months ended June 30, 2024 and 2023, our tax expenses assumes a 25.0% 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).

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813429502/en/

Investor Relations Joe Thomas 908-399-5413 investors@smithdouglas.com

Smith Douglas Homes (NYSE:SDHC)
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