SDHC Smith Douglas Homes Corp

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

 

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

 

 

 

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

 

 

1

 

 

 

—

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

 

 

4

 

 

 

—

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)

 

 

75

 

 

 

44

 

 

 

75

 

 

 

44

 

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

66

$

285

132

%

120

%

6

%

Atlanta

 

80,220

231

 

347

 

94,104

302

 

312

(15

)%

(24

)%

11

%

Charlotte

 

15,352

43

 

357

 

14,369

40

 

359

7

%

8

%

(1

)%

Houston

 

31,248

95

 

329

 

—

—

 

—

100

%

100

%

100

%

Nashville

 

21,707

58

 

374

 

28,019

79

 

355

(23

)%

(27

)%

6

%

Raleigh

 

28,821

81

 

356

 

26,230

73

 

359

10

%

11

%

(1

)%

Total

$

220,933

653

$

338

$

181,522

560

$

324

22

%

17

%

4

%

 

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

94

%

88

%

3

%

Atlanta

 

142,840

414

 

345

 

170,278

537

 

317

(16

)%

(23

)%

9

%

Charlotte

 

28,816

77

 

374

 

26,871

73

 

368

7

%

5

%

2

%

Houston

 

55,278

169

 

327

 

—

—

 

—

100

%

100

%

100

%

Nashville

 

43,737

121

 

361

 

51,908

144

 

360

(16

)%

(16

)%

—

%

Raleigh

 

56,231

161

 

349

 

57,742

159

 

363

(3

)%

1

%

(4

)%

Total

$

410,142

1,219

$

336

$

349,666

1,060

$

330

17

%

15

%

2

%

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

)%

(31

)%

—

%

Atlanta

492

 

170,724

 

347

374

 

125,606

 

336

32

%

36

%

3

%

Charlotte

121

 

49,498

 

409

70

 

25,035

 

358

73

%

98

%

14

%

Houston

200

 

64,445

 

322

—

 

—

 

—

100

%

100

%

100

%

Nashville

52

 

20,681

 

398

129

 

47,346

 

367

(60

)%

(56

)%

8

%

Raleigh

139

 

49,280

 

355

166

 

59,243

 

357

(16

)%

(17

)%

(1

)%

Total

1,173

$

404,750

$

345

985

$

330,258

$

335

19

%

23

%

3

%

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

13

%

(4

)%

(1

)%

Atlanta

485

7,457

7,942

338

3,384

3,722

43

%

120

%

113

%

Charlotte

144

2,021

2,165

81

1,127

1,208

78

%

79

%

79

%

Houston

384

1,390

1,774

—

—

—

100

%

100

%

100

%

Nashville

93

820

913

207

662

869

(55

)%

24

%

5

%

Raleigh

214

1,059

1,273

170

1,003

1,173

26

%

6

%

9

%

Total

1,675

14,167

15,842

1,111

7,659

8,770

51

%

85

%

81

%

(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

 

 

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

 

 

83

 

 

 

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