SDHC Smith Douglas Homes Corp

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: (+1) 800-715-9871 International: (+1) 646-307-1963 Conference ID: 8743844

Replay Numbers:

Toll Free - North America: (+1) 800-770-2030 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).

 

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Investor Relations Joe Thomas investors@smithdouglas.com