Smith Douglas Homes(SDHC) - 2024 Q2 - Quarterly Report

Financial Performance - Home closing revenue for the three months ended June 30, 2024, was $220.93 million, an increase of 21.7$181.52 million for the same period in 2023[19]. - Gross profit from home closings for the same period was $59.06 million, up from$52.70 million, reflecting a gross margin improvement[19]. - Net income for the three months ended June 30, 2024, was $24.73 million, compared to$30.74 million in the prior year, indicating a decrease of 19.5%[19]. - Adjusted net income attributable to Smith Douglas Homes Corp. for the six months ended June 30, 2024, was $6.62 million[19]. - Total revenue for the three months ended June 30, 2024, was$220.9 million, an increase from $181.5 million for the same period in 2023, representing a growth of 21.7$45,220,000, a decrease of 24% compared to $59,567,000 for the same period in 2023[26]. - The company reported a net income of$24.7 million for Q2 2024, down from $30.7 million in Q2 2023, and a net income of$45.2 million for the first six months of 2024, compared to $59.6 million in the same period of 2023[78]. - Adjusted net income for Q2 2024 was$19,399, down from $23,056 in Q2 2023, representing a 15.0$25,866, compared to $30,741 in Q2 2023, indicating a decline of 15.9$429.25 million as of June 30, 2024, from $352.69 million at the end of 2023, representing a growth of 21.7$84.70 million from $143.79 million, a reduction of 41$344,559,000, reflecting a decrease of $11,819,000 from the previous period[22]. - The balance on the seller note payable decreased from$4.6 million as of December 31, 2023, to $3.9 million as of June 30, 2024[20]. - The company reported a net-debt-to-net book capitalization of (4.1)$17.30 million, down from $19.78 million[18]. - The balance of cash flows from operating activities for the six months ending June 30, 2023, shows a net increase of$30,694,000[24]. - Net cash used in operating activities was $(9,234,000) for the six months ended June 30, 2024, compared to$35,902,000 for the same period in 2023[26]. - The company experienced a net cash used in investing activities of approximately $3.2 million for the six months ended June 30, 2024, compared to$0.2 million in 2023, primarily due to purchases of property and equipment[108]. - Net cash provided by financing activities was approximately $9.9 million for the six months ended June 30, 2024, a substantial increase from the net cash used of$53.9 million in 2023, attributed to net proceeds from the IPO and Reorganization Transactions of $115.7 million[108]. Market and Growth Strategy - The company anticipates future growth despite potential risks, including tightening mortgage lending standards and fluctuations in the housing market[16]. - The company is focused on maintaining an adequate inventory of lots at reasonable prices to support its growth strategy[16]. - The company aims to expand operations within existing markets and into new markets to maximize profit and returns[70]. - The company’s business model focuses on entry-level and empty-nest homebuyers, providing a personalized home buying experience at affordable price points[70]. - The company’s lot acquisition strategy reduces upfront capital requirements and aligns home orders with home starts, mitigating operational and financial risks[70]. Inventory and Construction - As of June 30, 2024, total real estate inventory increased to$266.6 million from $213.1 million as of December 31, 2023, representing a 25$228.7 million as of June 30, 2024, compared to $180.9 million at the end of 2023, indicating a 26$172.8 million from the issuance of 8,846,154 shares of Class A common stock at $21.00 per share[31]. - The acquisition of Devon Street Homes significantly contributed to the increase in backlog homes and contract value as of June 30, 2024[91]. - The company plans to use a portion of the net proceeds from the IPO for potential acquisitions or investments, although no material agreements are currently in place[101]. Tax and Compliance - The Company recognized tax benefits under the Tax Receivable Agreement (TRA), which will provide for the payment of 85% of tax benefits realized related to tax basis adjustments[40]. - The company is required to make cash payments under the Tax Receivable Agreement equal to 85% of the tax benefits realized, which is expected to be significant and may impact overall cash flow[105]. - As of June 30, 2024, the Company was in compliance with all covenants related to the Amended Credit Facility[47]. Risks and Market Conditions - The company is exposed to market risk from changes in interest rates and inflation, which arise in the normal course of business[115]. - The company is open to seeking additional capital to enhance liquidity and acquire finished lot inventory in response to competitive market conditions[102].