Smith Douglas Homes Reports First Quarter 2024 Results

Rhea-AI Summary

Smith Douglas Homes (NYSE: SDHC) announced strong Q1 2024 results. Net new orders grew 15% to 765, and home closings rose 13% to 566. Revenue increased 13% to $189.2 million, with pre-tax income reaching $21.4 million. Earnings per diluted share were $0.33. The backlog of homes increased by 19% to 1,110, and the sales value of backlog homes grew 25% to $381.2 million. The company's debt-to-book capitalization stands at 1.3%, with an active community count rising 49% to 70 and total controlled lots up 82% to 14,117.

CEO Greg Bennett highlighted the successful IPO in January and the expansion into Central Georgia and Chattanooga. CFO Russ Devendorf emphasized a strong financial position with nearly $33 million in cash and $333 million in stockholders’ equity, noting zero borrowings under a $250 million unsecured credit facility.

Positive

• Net new orders increased by 15% to 765.
• Home closings rose by 13% to 566.
• Revenue increased by 13% to $189.2 million.
• Pre-tax income of $21.4 million.
• Earnings per diluted share were $0.33.
• Backlog homes increased by 19% to 1,110.
• Sales value of backlog homes increased by 25% to $381.2 million.
• Active community count increased by 49% to 70.
• Total controlled lots increased by 82% to 14,117.
• Gross margins were strong at 26.1%.
• Strong financial position with almost $33 million in cash.
• Stockholders’ equity of $333 million.
• Zero borrowings under a $250 million unsecured credit facility, resulting in a negative net debt position of (9.4)%.
• Expansion into Central Georgia and Chattanooga markets.

Negative

• Debt-to-book capitalization of 1.3%, indicating some leverage.

Insights

Financial Analyst

Smith Douglas Homes has delivered a promising first quarter for 2024. The 15% increase in net new orders and 13% rise in home closings show a strong demand for their offerings. Revenue increased by 13% to $189.2 million, reflecting efficient operational performance. Notably, their pre-tax income of $21.4 million indicates robust profitability.

Importantly, the company has maintained a debt-to-book capitalization of 1.3% and ended the quarter with a negative net debt position, indicating financial stability. This is especially relevant given their recent IPO and increased credit facility.

One key point to note is their increased backlog homes by 19% and the sales value of these backlogs surged 25% to $381.2 million. This suggests a healthy pipeline, which bodes well for future revenues and profitability. Their expansion into new markets like Central Georgia and Chattanooga is also a positive sign of growth potential.

Market Research Analyst

The increase in the active community count by 49% to 70 and the rise in total controlled lots by 82% to 14,117 indicate aggressive market expansion. This is a substantial shift in market presence and demonstrates Smith Douglas Homes' strategy to capitalize on growing housing demand.

The company's ability to expand its footprint effectively without over-leveraging shows prudent management. The solid gross margins of 26.1% further exhibit their operational efficiency and cost management capabilities. This could make the company an attractive investment in the competitive homebuilding market.

Investors should also consider the broader market conditions, such as interest rates and housing market trends, which could influence future performance. However, the strong financial metrics and strategic expansions position Smith Douglas Homes well for sustained growth.

ATLANTA--(BUSINESS WIRE)-- Smith Douglas Homes Corp. (NYSE: SDHC) (“Smith Douglas” or the “Company”) today announced first quarter results for the three months ended March 31, 2024.

Q1 2024 Results as compared to Q1 2023:

• Net new orders increased 15% to 765
• Home closings increased 13% to 566
• Revenue increased 13% to $189.2 million
• Pre-tax income of $21.4 million
• Earnings of $0.33 per diluted share
• Backlog homes increased 19% to 1,110
• Sales value of backlog homes increased 25% to $381.2 million
• Debt-to-book capitalization of 1.3%
• Active community count increased 49% to 70 at quarter end
• Total controlled lots increased 82% to 14,117

Greg Bennett, Vice Chairman and Chief Executive Officer, commented, “We are pleased by the results this quarter, our first as a public company, during which we completed our IPO in January and concurrently amended and increased the size of our credit facility. We achieved our sales and closings expectations and continue to produce excellent gross margins, coming in at 26.1% for the period.”

Mr. Bennett continued, “During the quarter we also had the opportunity to expand our footprint by contracting for lots in the Central Georgia market in Houston County, which includes Perry and Warner Robbins and the surrounding submarket, as well as in Chattanooga, Tennessee. We intend to leverage our expansive operations in our Atlanta Division as we scale up the R-teams in these markets.”

Russ Devendorf, Executive Vice President and Chief Financial Officer, added, “Having our capital markets transactions behind us, we are in a strong financial position and can now focus on executing our growth strategy. We finished the quarter with almost $33 million of cash, $333 million of stockholders’ equity and zero borrowings under our $250 million unsecured credit facility resulting in a negative net debt position with a net debt-to-net book capitalization of (9.4)%.”

Conference Call & Webcast Information

Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on May 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: 4493724

Replay Numbers:

Toll Free - North America: (+1) 800-770-2030
Playback Passcode: 4493724
Replay will expire 7 days following the event

About Smith Douglas Homes

Headquartered in Atlanta, Georgia, Smith Douglas Homes completed its initial public offering in January 2024. Since its inception, Smith Douglas has been entrusted by over 13,000 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, 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 March 31,
		2024				2023
Home closing revenue		$	189,209			$	168,144
Cost of home closings			139,749				119,611
Home closing gross profit			49,460				48,533
Selling, general and administrative costs			27,541				19,794
Equity in income from unconsolidated entities			(184	)			(210	)
Interest expenses			698				245
Other income, net			(2	)			(122	)
Income before income taxes			21,407				28,826
Provisions for income taxes			921				—
Net income			20,486			$	28,826
Net income attributable to non-controlling interests and LLC members prior to IPO			17,514
Net income attributable to Smith Douglas Homes Corp.		$	2,972
		Period from January 11, 2024 to March 31, 2024
Earnings per share:
Basic		$	0.34
Diluted		$	0.33
Weighted average shares of common stock outstanding:
Basic			8,846,154
Diluted			51,410,397

Smith Douglas Homes Condensed Consolidated Balance Sheets (Unaudited, in thousands, except share and per share amounts)
		March 31, 2024			December 31, 2023
Assets
Cash and cash equivalents		$	32,778		$	19,777
Real estate inventory			234,080			213,104
Deposits on real estate under option or contract			64,770			57,096
Real estate not owned			13,617			16,815
Property and equipment, net			1,634			1,543
Goodwill			25,726			25,726
Deferred tax asset, net			13,054			—
Other assets			15,591			18,631
Total assets		$	401,250		$	352,692
Liabilities and Stockholders’/Members’ Equity
Liabilities:
Accounts payable		$	11,510		$	17,318
Customer deposits			8,989			7,168
Notes payable			4,247			75,627
Liabilities related to real estate not owned			13,617			16,815
Accrued expenses and other liabilities			19,371			26,861
Tax receivable agreement liability			10,401			—
Total liabilities			68,135			143,789
Commitments and contingencies (Note 15)
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 March 31, 2024			—			—
Class A common stock, $0.0001 par value – 250,000,000 shares authorized; 8,846,154 shares issued and outstanding as of March 31, 2024			1			—
Class B common stock, $0.0001 par value – 100,000,000 shares authorized; 42,435,897 shares issued and outstanding as of March 31, 2024			4			—
Additional paid-in capital			56,746			—
Retained earnings			2,972			—
Total stockholders’ equity attributable to Smith Douglas Homes Corp.			59,723			—
Non-controlling interests attributable to Smith Douglas Holdings LLC			273,392			—
Total members’/stockholders’ equity			333,115			208,903
Total liabilities and stockholders’/members’ equity		$	401,250		$	352,692

Smith Douglas Homes Summary Cash Flow Information (unaudited, dollars in thousands)
Three months ended March 31,​	​	2024​			​	2023​​
​	​	Amount​			​	Amount​​​​
Cash (used in) provided by operating activities		$	(9,273	)		$	26,555
Cash (used in) provided by investing activities		$	(430	)		$	38
Cash provided by (used in) financing activities		$	22,704			$	(43,800	)
Net increase (decrease) in cash and cash equivalents		$	13,001			$	(17,207	)

Smith Douglas Homes Selected Other Operating Data (unaudited, dollars in thousands)

Three months ended March 31,​

​

2024​

​2023​

​

Period over period change

​

​

Amount​

​Amount​

​

Amount​

​

Percent

Home closings​

​

566​

​

500​

​

66​

​

13.2

%

ASP of homes closed​

​

$

334​

$​

336​

$​

(2​

)

​

(0.6

)%

Net new home orders​

​

765​

​

664​

​

101​

​

15.2

%

Contract value of net new home orders​

​

$

259,440​

$​

​215,118​

$​

44,322​

​

20.6

%

ASP of net new home orders​

​

$

339​

$​

​324​

$​

15​

​

4.6

%

Cancellation rate(1)​

​

10.6​

%

​

8.9​

%

​

1.7​

%

​

19.1

%

Backlog homes (period end)(2)​

​

1,110​

​

934​

​

176​

​

18.8

%

Contract value of backlog homes (period end)​

​

$

381,155​

$​

305,643​

$​

75,512​

​

24.7

%

ASP of backlog homes (period end)​

​

$

343​

​$

327​

​

16​

​

4.9

%

Active communities (period end)(3)​

​

70​

​

47​

​

23​

​

48.9

%

Controlled lots:​

​

​

​

​

​

​

​

Homes under construction​

​

896​

​

638​

​

258​

​

40.4

%

Owned lots​

​

693​

​

370​

​

323​

​

87.3

%

Optioned lots​

​

12,528​

​

6,734​

​

5,794​

​

86.0

%

Total controlled lots​

​

14,117​

​

7,742​

​

6,375​

​

82.3

%

[nm* Not meaningful]
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)
Three months ended March 31,		2024									2023
		Home closing revenue			Home closings			ASP of homes closed			Home closing revenue			Home closings			ASP of homes closed
Alabama		$	39,655			132		$	300		$	24,067			81		$	297
Atlanta			62,620			183			342			76,174			235			324
Charlotte			13,464			34			396			12,502			33			379
Houston			24,030			74			325			—			—			—
Nashville			22,030			63			349			23,889			65			368
Raleigh			27,410			80			343			31,512			86			366
Total		$	189,209			566		$	334		$	168,144			500		$	336

As of March 31,		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			172		$	52,198		$	303			151		$	43,928		$	291			21			$	8,270			$	12
Atlanta			434			151,356			349			445			140,209			315			(11	)			11,147				34
Charlotte			93			36,143			389			79			28,229			357			14				7,914				32
Houston			197			63,839			324			—			—			—			197				63,839				324
Nashville			68			25,531			375			116			42,110			363			(48	)			(16,579	)			12
Raleigh			146			52,088			357			143			51,167			358			3				921				(1	)
Total			1,110		$	381,155		$	343			934		$	305,643		$	327			176			$	75,512			$	16

Three months ended March 31,		2024				2023				Period over period change
Net income:
Alabama		$	4,604			$	2,241			$	2,363
Atlanta			14,571				19,549				(4,978	)
Charlotte			1,624				1,933				(309	)
Houston			3,366				—				3,366
Nashville			2,313				3,231				(918	)
Raleigh			4,810				7,231				(2,421	)
Segment total			31,288				34,185				(2,897	)
Corporate(1)			(10,802	)			(5,359	)			(5,443	)
Total		$	20,486			$	28,826			$	(8,340	)

(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’/members’ 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)​	​	March 31, 2024​			​	December 31, 2023​​
Notes payable​	​	$	4,247​		​	$	75,627​​
Stockholders’/Members’ equity​	​		333,115				208,903​​
Total capitalization​	​	$	337,362			$	284,530​​
Debt-to-book capitalization​	​		1.3	%			26.6​​	%
Notes payable​	​	$	4,247			$	75,627​​
Less: cash and cash equivalents​	​		32,778				19,777​​
Net debt​	​		(28,531	)			55,850​​
Stockholders’/Members’ equity​	​		333,115				208,903​​
Total net capitalization​	​	$	304,584				264,753​​
Net debt-to-book capitalization			(9.4	)%			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 March 31, (in thousands, except percentages)		​	​​
			2024	​		​2023
Net income		​$	​​20,486	​	$	​28,826
Provision for income taxes			921			—
Income before income taxes			21,407			28,826
Tax-effected adjustments(1)		​	​​5,352	​		​7,207
Adjusted net income		​$	​​16,055	​	$	​21,619

(1)

For the year ended December 31, 2023 and 2022, 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/20240513037376/en/

Investor Relations

Drew Mackintosh

(310) 924-9036

ir@smithdouglas.com

Source: Smith Douglas Homes Corp.

FAQ

What were Smith Douglas Homes' Q1 2024 revenue results?

Smith Douglas Homes reported a 13% increase in revenue to $189.2 million for Q1 2024.

How much did Smith Douglas Homes' net new orders increase in Q1 2024?

Net new orders increased by 15% to 765 in Q1 2024.

What was Smith Douglas Homes' earnings per share for Q1 2024?

Earnings per diluted share were $0.33 for Q1 2024.

What is the sales value of Smith Douglas Homes' backlog homes in Q1 2024?

The sales value of backlog homes increased by 25% to $381.2 million.

How many home closings did Smith Douglas Homes report in Q1 2024?

Smith Douglas Homes reported 566 home closings, a 13% increase.

What was Smith Douglas Homes' pre-tax income in Q1 2024?

Pre-tax income for Smith Douglas Homes was $21.4 million in Q1 2024.

What is Smith Douglas Homes' debt-to-book capitalization ratio as of Q1 2024?

The debt-to-book capitalization ratio is 1.3% as of Q1 2024.

How many active communities did Smith Douglas Homes have at the end of Q1 2024?

Smith Douglas Homes had 70 active communities at the end of Q1 2024, a 49% increase.

What was the total number of controlled lots for Smith Douglas Homes in Q1 2024?

The total number of controlled lots increased by 82% to 14,117 in Q1 2024.

What expansion did Smith Douglas Homes undertake in Q1 2024?

Smith Douglas Homes expanded into the Central Georgia market and Chattanooga, Tennessee in Q1 2024.