Smith Douglas Homes Corp.

11/12/2024 | Press release | Distributed by Public on 11/12/2024 06:04

Smith Douglas Homes Reports Third Quarter 2024 Results

ATLANTA--(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)%."

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

S eptember 30,

2024

Period from

January 11,

2 024 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

r evenue

Home

closings

ASP of

h omes

closed

Home

closing

r evenue

Home

closings

ASP of

h omes

closed

Home

closing

r evenue

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

r evenue

Home

closings

ASP of

h omes

closed

Home

closing

r evenue

Home

closings

ASP of

h omes

closed

Home

closing

r evenue

Home

closings

ASP of

h omes

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

h omes

Contract

v alue of

b acklog

h omes

ASP of

b acklog

h omes

Backlog

h omes

Contract

v alue of

b acklog

h omes

ASP of

b acklog

h omes

Backlog

h omes

Contract

v alue of

b acklog

h omes

ASP of

b acklog

h omes

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

p eriod

change

2024

2023

Period over

p eriod

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,

2 024

December 31,

2 023

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).

Investor Relations
Joe Thomas
[email protected]

Source: Smith Douglas Homes Corp.