Group 1 - The individual investor focuses on managing personal capital accumulated over the years, utilizing a diverse range of investment strategies including fundamental, technical, and momentum investing [1] - The investor aims to leverage the strengths of various investment approaches to refine their investment process [1] - The purpose of writing on Seeking Alpha is to track the performance of investment ideas and connect with like-minded investors [1]

PART I FINANCIAL INFORMATION This section covers the company's financial statements, management's analysis, market risk, and internal controls [Financial Statements](index=11&type=section&id=Item%201.%20Financial%20Statements) Q1 2025 financial statements show asset growth to **$513.9 million**, 18.8% revenue increase, but 8.7% net income decrease [Condensed Consolidated Balance Sheets](index=11&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$513.9 million** by March 31, 2025, driven by real estate inventory and deposits, and liabilities rose Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $12,651 | $22,363 | ($9,712) | | Real estate inventory | $294,991 | $277,834 | $17,157 | | Deposits on real estate | $119,339 | $103,026 | $16,313 | | **Total Assets** | **$513,919** | **$475,901** | **$38,018** | | Notes payable | $42,648 | $3,060 | $39,588 | | **Total Liabilities** | **$106,756** | **$74,174** | **$32,582** | | **Total Equity** | **$407,163** | **$401,727** | **$5,436** | [Condensed Consolidated Statements of Income](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q1 2025 home closing revenue grew 18.8% to **$224.7 million**, but net income declined 8.7% to **$18.7 million** due to rising costs Condensed Consolidated Statements of Income (in thousands) | Metric | Q1 2025 | Q1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Home closing revenue | $224,722 | $189,209 | +18.8% | | Cost of home closings | $171,192 | $139,749 | +22.5% | | **Home closing gross profit** | **$53,530** | **$49,460** | **+8.2%** | | SG&A costs | $32,999 | $27,541 | +19.8% | | Income before income taxes | $19,567 | $21,407 | -8.6% | | **Net income** | **$18,710** | **$20,486** | **-8.7%** | | Net income attributable to Smith Douglas Homes Corp. | $2,683 | $2,972 | -9.7% | | Diluted EPS | $0.30 | $0.33 | -9.1% | [Condensed Consolidated Statements of Cash Flows](index=14&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased to **$34.9 million** in Q1 2025, leading to a **$9.7 million** decrease in cash Summary of Cash Flows (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(34,905) | $(9,273) | | Net cash used in investing activities | $(2,106) | $(430) | | Net cash provided by financing activities | $27,299 | $22,704 | | **Net (decrease) increase in cash** | **$(9,712)** | **$13,001** | - The increased use of cash in operations in Q1 2025 was mainly due to a **$19.5 million** increase in real estate inventory and a **$17.0 million** increase in deposits on real estate under option or contract[202](index=202&type=chunk)[203](index=203&type=chunk) - Financing activities in Q1 2025 were driven by **$66.0 million** in borrowings under the revolving credit facility, partially offset by **$26.0 million** in repayments and **$13.9 million** in distributions[34](index=34&type=chunk)[35](index=35&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's IPO, Up-C structure, accounting policies, **$1.16 billion** in lot-option commitments, and financial facilities - The company completed its IPO on January 16, 2024, raising net proceeds of approximately **$172.8 million** and reorganizing into an Up-C structure where Smith Douglas Homes Corp. is the sole managing member of Smith Douglas Holdings LLC[41](index=41&type=chunk)[42](index=42&type=chunk) - As of March 31, 2025, the company had total lot option contracts with a remaining purchase price of **$1.16 billion**, secured by **$121.0 million** in deposits[69](index=69&type=chunk) - The company entered into a **$250 million** unsecured revolving credit facility in January 2024, maturing in January 2027. As of March 31, 2025, **$40.0 million** was outstanding[73](index=73&type=chunk)[77](index=77&type=chunk) - In connection with the IPO, the company entered into a Tax Receivable Agreement (TRA) and has recorded a TRA liability of **$10.4 million** as of March 31, 2025[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 revenue growth from increased home closings, gross margin decline due to rising costs, and liquidity [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q1 2025 home closing revenue increased 18.8% to **$224.7 million**, but gross margin contracted to **23.8%** due to rising costs Q1 2025 vs Q1 2024 Operating Highlights (dollars in thousands) | Metric | Q1 2025 | Q1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Home closing revenue | $224,722 | $189,209 | +18.8% | | Home closings (units) | 671 | 566 | +18.6% | | ASP of homes closed | $335 | $334 | +0.3% | | Home closing gross profit | $53,530 | $49,460 | +8.2% | | Home closing gross margin | 23.8% | 26.1% | -2.3 p.p. | | Net new home orders (units) | 768 | 765 | +0.4% | | Backlog homes (units) | 791 | 1,110 | -28.7% | | Contract value of backlog | $270,082 | $381,155 | -29.1% | - The decrease in home closing gross margin was primarily driven by a **3%** increase in the average cost of home closings while the ASP of homes closed remained constant[149](index=149&type=chunk) - The cancellation rate improved, decreasing to **8.1%** in Q1 2025 from **10.6%** in Q1 2024[142](index=142&type=chunk)[143](index=143&type=chunk) [Non-GAAP Financial Measures](index=37&type=section&id=Non-GAAP%20Financial%20Measures) Q1 2025 non-GAAP measures include adjusted gross margin of **24.1%**, adjusted net income of **$14.7 million**, and adjusted EBITDA of **$22.6 million** Reconciliation of GAAP to Non-GAAP Measures (Q1 2025, in thousands) | Measure | GAAP Value | Adjustments | Non-GAAP Value | | :--- | :--- | :--- | :--- | | Home closing gross profit | $53,530 | $646 | $54,176 (Adjusted) | | Home closing gross margin | 23.8% | +0.3 p.p. | 24.1% (Adjusted) | | Net income | $18,710 | $(4,015) | $14,695 (Adjusted) | | EBITDA | $20,749 | $1,818 | $22,567 (Adjusted) | | EBITDA margin | 9.2% | +0.8 p.p. | 10.0% (Adjusted) | - Adjusted EBITDA decreased from **$24.1 million** in Q1 2024 to **$22.6 million** in Q1 2025, primarily due to a **$1.4 million** charge for real estate inventory impairment and lot option contract abandonment in 2025 that was not present in 2024[177](index=177&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, liquidity includes **$12.7 million** in cash and a **$250 million** credit facility, with future TRA payments reducing cash flow - The company's principal uses of cash are deposits on lot-option contracts, acquisition of finished lots, and home construction[181](index=181&type=chunk) - The company has a **$250 million** unsecured revolving credit facility maturing in January 2027. As of March 31, 2025, **$40.0 million** was outstanding, with availability of approximately **$194.6 million** under the borrowing base[187](index=187&type=chunk)[77](index=77&type=chunk) - The company is required to make cash payments under the Tax Receivable Agreement equal to **85%** of realized tax benefits, which are expected to be significant and will reduce available cash flow[197](index=197&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's market risk disclosures regarding interest rates and inflation since its last Annual Report - There have been no material changes to the information regarding market risk from changes in interest rates and inflation since the company's Annual Report[217](index=217&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were ineffective as of March 31, 2025, due to a material weakness in IT general controls, with remediation underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to a material weakness in internal control over financial reporting[219](index=219&type=chunk) - The material weakness relates to ineffective IT general controls (ITGCs) in user access, change management, and segregation of duties for key IT systems supporting financial reporting[220](index=220&type=chunk) - A remediation plan is in progress, which includes implementing regular reviews of privileged access, strengthening IT policies, reassessing roles and responsibilities, and hiring additional resources with IT control expertise[222](index=222&type=chunk)[223](index=223&type=chunk) PART II OTHER INFORMATION This section addresses legal matters, risk factor updates, and disclosures regarding equity security sales and use of proceeds [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary course legal claims but anticipates no material impact on its business or financial condition - The company does not believe that any existing claims or legal proceedings will have a material effect on its business or financial condition[227](index=227&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the risk factors affecting the company since the filing of its Annual Report - No material changes have occurred in the risks affecting the Company since the filing of its Annual Report[228](index=228&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities, no use of proceeds, and no equity purchases during the period - There were no unregistered sales of equity securities or use of proceeds during the quarter[229](index=229&type=chunk)[230](index=230&type=chunk)

Smith Douglas Homes (SDHC) Q1 2025 Earnings Call May 14, 2025 08:30 AM ET Company Participants Joe Thomas - SVP of Accounting & FinanceGregory Bennett - President, CEO, Director & Vice ChairmanRuss Devendorf - Executive VP & CFOMike Dahl - Managing Director - Equity ResearchJay McCanless - SVP - Equity Research Conference Call Participants Alex Isaac - Equity Research AnalystRafe Jadrosich - Managing Director & Senior Equity Analyst Operator Thank you for standing by. My name is Tina, and I will be your con ...

Financial Data and Key Metrics Changes - Smith Douglas Homes reported pretax income of $19.6 million and net earnings of $0.30 per share for the first quarter of 2025, with home closing revenue reaching $225 million, a 19% increase from the same quarter in 2024 [4][11] - Gross margin for the quarter was 23.8%, down from 26.1% in the prior year, reflecting higher average lock costs and increased incentives [12][13] - Net income for the quarter was $18.7 million, compared to $20.5 million in the prior year, with adjusted net income at $14.7 million versus $16.1 million [13][14] - The company ended the quarter with $12.7 million in cash and $40 million outstanding on its unsecured revolver, with a debt to book capitalization ratio of 9.5% [14][15] Business Line Data and Key Metrics Changes - Home closings increased to 671 homes, up 19% from 566 closings in the same quarter last year [11] - The average sales price was approximately $335,000, slightly up year over year due to shifts in geographic and product mix [11] - Backlog at the end of the quarter was 791 homes with an average sales price of $341,000, reflecting a decrease from 1,100 homes year over year [15][16] Market Data and Key Metrics Changes - Monthly sales per community improved from 2.4 in January to 3.3 in February and 3.8 in March, but dipped back to approximately three sales per community in April [16][17] - The company launched a $10 million forward commitment program offering a 4.99% mortgage rate buy down in select communities to boost conversion rates [17] Company Strategy and Development Direction - The company is focused on controlling land through option agreements rather than outright ownership, with less than 5% of unstarted controlled lots owned on the balance sheet [6] - Smith Douglas aims to improve build times and limit spec inventory, believing that pre-selling homes enhances buyer attachment and reduces cancellation rates [9] - The company remains committed to long-term goals of growing market share and achieving better economies of scale while maintaining a strong balance sheet [9] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is uncertainty in the economy and industry, the company is built to weather fluctuations and remains focused on executing controllable factors [9][19] - The outlook for the second quarter includes expectations to close between 620 and 650 homes, with gross margin projected between 22.75% and 23.25% [18] - Management acknowledged risks related to maintaining sales pace, managing cost pressures, and broader macroeconomic factors impacting demand [19] Other Important Information - The company is in the final stages of amending its credit facility to increase the total facility size by $75 million to $325 million and extend the maturity [15] - The mortgage joint venture continues to improve, with a capture rate of 56% for the mortgage partner [58] Q&A Session Summary Question: How would you characterize the spring selling season overall and expectations for that? - Management indicated that demand has been consistent across their footprint, with efforts focused on solving for payments to reach affordability [22][23] Question: Any color on the land environment and ability to find new lots? - Management noted that while land inflation has continued, they are starting to see some moderation in land prices, indicating a potential shift to a buyer's market [24][25][26] Question: Outlook beyond Q2 and guidance for the full year? - Management expressed uncertainty due to macroeconomic conditions but indicated a target of 6,100 closings for the year, contingent on market conditions [32][34][45] Question: Update on Houston expansion and cycle time improvements? - Management reported significant improvements in cycle times in Houston, aiming for a 70-day schedule by the end of the year [38] Question: Demand and pricing power observed in May? - Management stated that demand remains consistent with April, but affordability continues to be a challenge [42] Question: Comments on the recent news regarding Landsea? - Management refrained from commenting on other companies' transactions but noted that it reflects good support for the home building space [48] Question: Second quarter gross margin guidance and backlog conversion? - Management indicated that the decline in gross margin is primarily due to higher incentives, but they see potential for improving backlog conversion rates [50][52] Question: Update on the mortgage joint venture? - Management confirmed that the mortgage joint venture is performing well, with consistent messaging on incentives and improving capture rates [56][58] Question: Are you seeing a pullback in starts from competition? - Management noted no interruption in their starts, while competitors are experiencing some slowing in starts [60][61]

Revenue and Income - Home closing revenue increased by 19% year-over-year to $224.7 million, driven by a 19% increase in home closings to 671 units[5]. - Pretax income for Q1 2025 was $19.6 million, compared to $21.4 million in Q1 2024, resulting in earnings of $0.30 per diluted share, down from $0.33[5]. - Net income for the three months ended March 31, 2025, was $18,710, a decrease of 8.7% from $20,486 in the same period of 2024[23]. - Adjusted net income for Q1 2025 was $14,695, down 8.5% from $16,055 in Q1 2024[30]. - The Southeast segment reported net income of $23,855 for Q1 2025, up 13.6% from $21,005 in Q1 2024[23]. - The Central segment experienced a decline in net income to $7,010 in Q1 2025, down 31.9% from $10,283 in Q1 2024[23]. Operational Metrics - Active community count rose by 24% to 87 at the end of the quarter, while total controlled lots increased by 45% to 20,442[5]. - Net new home orders were 768, slightly up from 765 in the previous year, with a contract value of $258.7 million[5][17]. - Cancellation rate improved to 8.1% from 10.6% year-over-year, indicating better order stability[17]. - Backlog homes decreased by 29% to 791, with a contract value of $270.1 million, down from $381.2 million[17][21]. - Total controlled lots increased by 45% year-over-year, reaching 20,442 lots as of March 31, 2025, compared to 14,117 lots in 2024[22]. Financial Position - Total liabilities increased to $106.8 million from $74.2 million at the end of the previous year[12]. - Cash and cash equivalents at the end of the period were $12.7 million, down from $22.4 million at the beginning of the period[15]. - Net debt-to-net book capitalization improved to 6.9% as of March 31, 2025, compared to (5.0)% at the end of 2024[26]. - Total debt increased significantly to $42,648 thousand as of March 31, 2025, from $3,060 thousand at the end of 2024[26]. - The company’s total capitalization reached $449,811 thousand as of March 31, 2025, compared to $404,787 thousand at the end of 2024[26]. Taxation - The company reported a provision for income taxes of $857 for Q1 2025, slightly down from $921 in Q1 2024[30]. - The tax-effected adjustments for Q1 2025 amounted to $4,872, compared to $5,352 in Q1 2024[30]. Strategic Outlook - The company maintains confidence in its strategic plans despite macroeconomic uncertainties, supported by a strong balance sheet and operational execution[4].

Group 1 - The individual investor focuses on managing personal capital accumulated over the years, utilizing a diverse range of investment strategies including fundamental, technical, and momentum investing [1] - The investor aims to leverage the strengths of various investment approaches to refine their investment process [1] - The purpose of writing on Seeking Alpha is to track the performance of investment ideas and connect with like-minded investors [1] Group 2 - There is no stock, option, or similar derivative position held by the analyst in any mentioned companies, nor are there plans to initiate such positions in the near future [2] - The article reflects the author's personal opinions and is not compensated beyond the platform [2] - Seeking Alpha does not provide recommendations or advice regarding the suitability of investments for particular investors [3]

IPO and Capital Structure - Smith Douglas Homes Corp. issued 8,846,154 shares of Class A common stock in the IPO, generating gross proceeds of approximately $185.8 million at an IPO price of $21.00 per share[16]. - The company used net proceeds of approximately $125.2 million to purchase 6,410,257 newly issued LLC Interests from Smith Douglas Holdings LLC and $47.6 million to purchase 2,435,897 LLC Interests from Continuing Equity Owners[16]. - Smith Douglas Holdings LLC repaid approximately $84.0 million of borrowings under the Prior Credit Facility and redeemed Class C and Class D Units for $2.6 million using proceeds from the sale of LLC Interests[16]. - Continuing Equity Owners hold approximately 82.7% of the economic interest in Smith Douglas Holdings LLC, while Smith Douglas Homes Corp. holds approximately 17.3%[19]. - The Class B common stock has ten votes per share, allowing Continuing Equity Owners to maintain control over significant corporate decisions until the Sunset Date[19]. - The Tax Receivable Agreement provides for the payment of 85% of tax benefits realized by Smith Douglas Homes Corp. to the Continuing Equity Owners[501]. Financial Performance - Home closing revenue for 2024 reached $975,463, an increase of 27.6% compared to $764,631 in 2023[460]. - The cost of home closings increased to $719,921 in 2024, up from $548,304 in 2023, reflecting a rise of 31.2%[460]. - Home closing gross profit for 2024 was $255,542, compared to $216,327 in 2023, marking a gross margin improvement[460]. - Net income attributable to Smith Douglas Homes Corp. for 2024 was $16,070, with a net income of $111,829 overall, down from $123,180 in 2023[460]. - The company reported a net income of $111,829,000 for the year ended December 31, 2024, compared to $123,180,000 in 2023, reflecting a decrease of approximately 9.2%[464]. - Cash flows from operating activities decreased to $19,132,000 in 2024 from $76,257,000 in 2023, indicating a significant decline of approximately 74.9%[464]. - The total stockholders' equity increased to $401,727,000 as of December 31, 2024, up from $208,903,000 in 2023, representing a growth of approximately 92.3%[462]. - The total segment profit for the Company in 2024 was $166.728 million, compared to $149.425 million in 2023, reflecting an increase of about 11.6%[583]. Assets and Inventory - Total assets increased to $475,901 in 2024, up from $352,692 in 2023, representing a growth of 35%[459]. - Real estate inventory rose to $277,834 in 2024, compared to $213,104 in 2023, indicating a 30.4% increase[459]. - Total real estate inventory rose to $277.8 million in 2024, up from $213.1 million in 2023, representing a 30.34% increase[507]. - The company reported outstanding borrowings under its Amended Credit Facility totaling $44.0 million as of March 14, 2025[446]. Costs and Expenses - Selling, general and administrative costs for 2024 were $136,382, significantly higher than $92,442 in 2023, reflecting a 47.5% increase[460]. - Advertising expenses increased to approximately $6.8 million in 2024 from $4.8 million in 2023, reflecting a growth of 41.67%[503]. - The Company recognized $3.0 million of deferred compensation expense related to incentive compensation agreements in 2024, compared to $2.3 million in 2023[533]. - Warranty reserves increased to $3.6 million in 2024, up from $2.8 million in 2023, with additions from new home closings amounting to $1.95 million[532]. Business Model and Strategy - The company operates in multiple markets including Atlanta, Birmingham, and Houston, targeting first-time and empty-nest homebuyers[468]. - Smith Douglas Homes Corp. has adopted a land-light business model, primarily purchasing finished lots via lot-option contracts[468]. Tax and Deferred Assets - The Company recognized a deferred tax asset of $10.5 million related to the purchase of LLC Interests, with a corresponding estimated liability of $10.4 million to the Continuing Equity Owners[566]. - As of December 31, 2024, the net deferred tax asset was $10.9 million after accounting for a valuation allowance of $15.2 million[561]. - The estimated impact of the exchange of all Continuing Equity Owners' LLC Interests was an additional deferred tax asset of approximately $328.2 million[567]. Future Outlook - The company anticipates future growth and capital expenditures, with forward-looking statements subject to risks and uncertainties that may impact actual results[27]. - The Company is currently evaluating the impact of ASU 2023-09 on its financial statement disclosures, which will require expanded income tax disclosures starting in 2025[505].

Financial Data and Key Metrics Changes - Smith Douglas Homes reported pre-tax income of $30 million for Q4 2024, with a total of nearly $117 million in pre-tax income for the full year [8][10] - Revenue for Q4 2024 was $287 million, a 32% increase year-over-year, with an average sales price of closed homes at $344,000 [20][21] - Gross margin for Q4 was 25.5%, while the full year gross margin averaged 26.2%, down from 28.3% in 2023 [24][10] - The company ended the year with $287 million in revenue and a net income of $28.8 million for the quarter [21][10] Business Line Data and Key Metrics Changes - In Q4 2024, Smith Douglas delivered 836 homes, exceeding guidance and setting a quarterly record, with total home deliveries for the year at 2,867 [9][23] - The company generated 569 net new orders in Q4, with incentives impacting margins negatively [11][10] - The average lot cost increased to 24.4% of revenue compared to 21.3% in 2023, contributing to margin pressure [24][10] Market Data and Key Metrics Changes - The average 30-year mortgage rate peaked over 7% in January 2025, impacting affordability for buyers [15][10] - Sales started slowly in January but improved in February and early March, indicating some stabilization in the market [16][10] - Housing inventories remain low due to the lock-in effect, where homeowners are reluctant to sell due to low mortgage rates [16][10] Company Strategy and Development Direction - The company is focused on a land-light strategy, controlling 19,522 lots with 96% acquired via auction agreements [14][10] - Smith Douglas aims to expand operations throughout the Southeast, leveraging its manufacturing approach and operational efficiency [17][10] - The company is optimistic about gaining market share despite potential near-term headwinds from macroeconomic factors [17][10] Management's Comments on Operating Environment and Future Outlook - Management noted uncertainties around interest rates and tariffs as potential headwinds for the business [15][10] - Despite challenges, the company remains optimistic about the long-term outlook for the industry and its operational strategies [17][10] - The balance sheet is strong, with no borrowings under its credit facility, positioning the company well for growth [26][10] Other Important Information - The company ended the year with 694 homes in backlog, with an expected gross margin of just under 24% on those homes [25][10] - SG&A expenses were 14.9% of revenue for Q4, influenced by bonus accruals due to exceeding operational metrics [21][56] Q&A Session Summary Question: Backlog gross margins and dynamics - Backlog margin is about 24%, influenced by sales made in Q4 and increased incentives to maintain sales pace [32][10] Question: Lot cost inflation framework - Lot cost inflation is estimated to erode margins by 200 to 300 basis points, with expectations of leveling off in the future [36][10] Question: Community count growth and cadence - Community count is expected to grow low single digits, reaching around 90 by the end of the year [46][10] Question: Market assumptions in full-year guidance - The company has communities in place to meet its closing guidance, but uncertainties remain regarding margins and macroeconomic factors [62][10] Question: Incentives offered to buyers - Incentives are primarily in the form of closing costs, including rate buydowns, with some discounting as well [91][10]

Home Closings and Revenue - Q4 2024 home closings increased by 28% to 836, setting a company record for quarterly closings[4] - Q4 2024 home closing revenue rose by 32% to $287.5 million, compared to $217.3 million in Q4 2023[4] - Full year 2024 home closing revenue increased by 28% to $975.5 million, up from $764.6 million in 2023[4] - Total home closings for the year ended December 31, 2024, were 2,867, representing a 28% increase from 2,297 in 2023[22] - The Southeast segment contributed $192.609 million in home closing revenue, up 53% from $126.248 million in the same period last year[20] Income and Profitability - Pre-tax income for Q4 2024 was $30.0 million, slightly up from $29.7 million in Q4 2023[4] - Full year 2024 pre-tax income decreased to $116.9 million from $123.2 million in 2023[4] - Net income for Q4 2024 was $28.785 million, a slight decrease of 3% from $29.680 million in Q4 2023[28] - Adjusted net income for the year ended December 31, 2024, was $88.138 million, down 5% from $92.878 million in 2023[36] Orders and Cancellation Rates - Net new home orders for Q4 2024 increased by 9% to 569, while full year net new home orders rose by 12% to 2,649[4] - The cancellation rate for Q4 2024 was 14.8%, slightly higher than 14.0% in Q4 2023[15] Average Selling Price - The average selling price (ASP) of homes closed in Q4 2024 was $344, compared to $332 in Q4 2023[15] - The average selling price (ASP) of homes closed in 2024 was $340, a 2% increase from $333 in 2023[22] Controlled Lots and Debt - Total controlled lots increased by 52% to 19,522 at the end of 2024, compared to 12,821 in 2023[4] - Controlled lots increased to 19,522 in 2024, a 52% increase from 12,821 in 2023[26] - The company reported a debt-to-book capitalization decrease to 0.8% from 26.6%[4] - The net debt-to-net book capitalization ratio improved to (5.0)% in 2024 from 21.1% in 2023, indicating a significant reduction in net debt[33] - The company reported a total debt of $3.060 million as of December 31, 2024, compared to $75.627 million in 2023[33] Backlog - The backlog of homes as of December 31, 2024, was valued at $235.869 million, down 24% from $310.714 million in 2023[24]

Core Viewpoint - The outlook for homebuilder stocks is challenging as the spring selling season approaches, with declining demand and higher mortgage rates impacting performance [1][2]. Group 1: Company Downgrades - D.R. Horton, Inc. (DHI) has been downgraded from Buy to Neutral, with the price forecast reduced from $160 to $150 [3]. - Smith Douglas Homes Corp. (SDHC) has been downgraded from Neutral to Underperform, with the price forecast cut from $33 to $22 [6]. Group 2: Market Conditions - Homebuilder stocks lagged the market in 2024 due to a decline in demand in the second half of the year, primarily driven by higher mortgage rates [1]. - The tough environment for homebuilders is expected to persist through the first half of 2025 [1]. Group 3: Financial Projections - The analyst anticipates a decline in return-on-equity (ROE) for seven out of eight homebuilders in 2025, with order growth negatively impacting margins [2]. - DHI's lot costs, which constitute 26%-27% of total costs, are rising, with a 3% quarter-over-quarter and 10% year-over-year increase in the first quarter [4]. Group 4: Company-Specific Insights - DHI is no longer investing in its rental segment, which already accounts for 11% of book value, and is expected to have a low single-digit ROE for rentals in 2025 [5]. - SDHC is facing cost inflation headwinds and higher mortgage rates, which pressure net prices, despite a 15% community count growth and faster build cycles [6][7]. Group 5: Regional Performance - Housing markets in the Northeast, Midwest, and Mid-Atlantic are expected to outperform the Southeast and other regions, with the move-up and luxury segments set to outperform entry-level markets [3].