Smith Douglas Homes Reports Second Quarter 2024 Results

About this update from 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/

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