Smith Douglas Homes : Reports Third Quarter 2024 Results Form 8 K

About this update from Smith Douglas Homes Corp.

Smith Douglas Homes Reports Third Quarter 2024 Results ATLANTA, November 12, 2024 (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)%." 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 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. Investor Relations Joe Thomas [email protected] 2 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. 3 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 4 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 5 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. 6 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 % 7 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. 8 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: 9 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). 10

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