Smith Douglas Homes(SDHC) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Smith Douglas Homes reported strong Q2 2025 results with increased closings and strategic expansion, despite some margin and income declines Second Quarter 2025 Performance Overview Smith Douglas Homes Corp. announced its second quarter results for the three and six months ended June 30, 2025, highlighting strong performance driven by disciplined homebuilding and solid execution - Smith Douglas Homes Corp. (NYSE: SDHC) announced second quarter results for the three and six months ended June 30, 2025[2] Management Commentary CEO Greg Bennett reported strong Q2 2025 results, with home closings exceeding guidance and gross margin at the high end of the range. CFO Russ Devendorf noted uneven new home sales due to affordability concerns but highlighted strategic expansion with 57% more lots under control and 23% more new communities, while maintaining a strong balance sheet with a net debt-to-net book capitalization ratio of 12.1% - CEO Greg Bennett stated that home closings for the quarter came in above guidance, and home closing gross margin of 23.2% was at the high end of the range[4] - CFO Russ Devendorf noted new home sales were uneven due to affordability constraints and macroeconomic concerns, but the company ended Q2 with 57% more lots under control and 23% more new communities open year-over-year[4] - The company maintained a strong balance sheet with a net debt-to-net book capitalization ratio of 12.1% at quarter end[4] Key Financial and Operational Highlights (Q2 2025 vs Q2 2024) The second quarter of 2025 saw modest increases in home closings and revenue, alongside a decline in gross margin and pretax income. Operational expansion was significant, with active community count and total controlled lots increasing substantially Q2 2025 vs Q2 2024 Key Highlights | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Home closings | 669 | 653 | 2% | | Home closing revenue (in millions) | $223.9 | $220.9 | 1% | | Home closing gross margin | 23.2% | 26.7% | -3.5 pp | | Net new home orders | 736 | 715 | 2.9% | | Pretax income (in millions) | $17.2 | $25.9 | -33.6% | | Earnings per diluted share | $0.26 | $0.40 | -35% | | Debt-to-book capitalization (vs Dec 31, 2024) | 15.2% | 0.8% | +14.4 pp | | Active community count (quarter end) | 92 | 75 | 23% | | Total controlled lots (quarter end) | 24,824 | 15,842 | 57% | Company Information Smith Douglas Homes provides details on its Q2 2025 conference call, company profile, and investor relations contact Conference Call & Webcast Information Management hosted a conference call on August 6, 2025, to discuss the Q2 results, with replay options available for seven days - A conference call was hosted on August 6, 2025, at 8:30 a.m. Eastern Time[6] - Replay numbers and a playback passcode (8459388) are provided, with the replay expiring 7 days after the event[7] About Smith Douglas Homes Smith Douglas Homes, headquartered in Woodstock, Georgia, completed its IPO in January 2024 and is a top 50 national builder, targeting entry-level and empty-nest homebuyers - Smith Douglas Homes completed its initial public offering in January 2024[7] - The company is ranked a top 50 builder nationally, holding the 32 position on the Builder Magazine Top 100 list with 2,867 closings in 2024[7] - Smith Douglas primarily targets entry-level and empty-nest homebuyers in metro areas including Atlanta, Birmingham, Charlotte, Chattanooga, Greenville, Houston, Huntsville, Nashville, and Raleigh[7] Investor Relations Investor inquiries can be directed to Joe Thomas via email - Investor Relations contact: Joe Thomas at investors@smithdouglas.com[8] Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, emphasizing that they are not guarantees and involve known and unknown risks and uncertainties that could cause actual results to differ materially. The company disclaims any obligation to update these statements - The press release contains forward-looking statements regarding performance, growth, market share, strategic plans, financial position, and ability to navigate the macroeconomic environment[9] - These statements involve known and unknown risks, uncertainties, and other important factors that may cause actual results to be materially different, as discussed in the Annual Report on Form 10-K[9] - The company disclaims any obligation to update such forward-looking statements in the future[9] Condensed Consolidated Financial Statements This section presents the company's condensed consolidated statements of income, balance sheets, and cash flow information for the reported periods Condensed Consolidated Statements of Income For Q2 2025, Smith Douglas Homes reported a 1% increase in home closing revenue to $223.9 million, but a 3.5 percentage point decrease in gross margin to 23.2%. Income before income taxes declined by 33.6% to $17.2 million, resulting in diluted EPS of $0.26, down from $0.40 in Q2 2024 Condensed Consolidated Statements of Income (Q2 2025 vs Q2 2024) | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Home closing revenue | $223,924 | $220,933 | $448,646 | $410,142 | | Home closing gross profit | $51,939 | $59,058 | $105,469 | $108,518 | | Selling, general, and administrative costs | $34,702 | $31,809 | $67,701 | $59,350 | | Income before income taxes | $17,179 | $25,866 | $36,746 | $47,273 | | Net income | $16,435 | $24,734 | $35,145 | $45,220 | | Net income attributable to Smith Douglas Homes Corp. | $2,365 | $3,646 | $5,048 | $6,618 | | Diluted Earnings per share | $0.26 | $0.40 | $0.55 | $0.74 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $570.2 million from $475.9 million at December 31, 2024, primarily driven by a significant increase in real estate inventory and deposits. Total liabilities also rose substantially, mainly due to an increase in notes payable from $3.1 million to $74.1 million Condensed Consolidated Balance Sheets (as of June 30, 2025 vs Dec 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $16,777 | $22,363 | | Real estate inventory | $320,848 | $277,834 | | Deposits on real estate under option or contract | $132,372 | $103,026 | | Total assets | $570,219 | $475,901 | | Notes payable | $74,088 | $3,060 | | Total liabilities | $155,387 | $74,174 | | Total equity | $414,832 | $401,727 | Summary Cash Flow Information For the six months ended June 30, 2025, net cash used in operating activities significantly increased to $63.8 million from $9.2 million in the prior year. Net cash provided by financing activities also increased to $62.5 million, leading to a net decrease in cash and cash equivalents of $5.6 million Summary Cash Flow Information (Six months ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(63,847) | $(9,234) | | Net cash used in investing activities | $(4,225) | $(3,153) | | Net cash provided by financing activities | $62,486 | $9,908 | | Net (decrease) in cash and cash equivalents | $(5,586) | $(2,479) | | Cash and cash equivalents, end of period | $16,777 | $17,298 | Selected Operational Data This section provides key operational metrics including home closings, orders, backlog, and community and lot counts for the reported periods Selected Other Operating Data Operational data for Q2 2025 shows a 2% increase in home closings and a 2.9% rise in net new home orders year-over-year. However, backlog homes decreased by 27% to 858 units, and the contract value of backlog homes fell by 28%. Active communities increased by 23% to 92, and total controlled lots surged by 57% to 24,824 Selected Other Operating Data (Q2 2025 vs Q2 2024) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Home closings | 669 | 653 | 1,340 | 1,219 | | ASP of homes closed (in thousands) | $335 | $338 | $335 | $336 | | Net new home orders | 736 | 715 | 1,504 | 1,480 | | Cancellation rate | 10.0% | 11.8% | 9.1% | 11.2% | | Backlog homes (period end) | 858 | 1,173 | 858 | 1,173 | | Contract value of backlog homes (in thousands) | $292,881 | $404,750 | $292,881 | $404,750 | | Active communities (period end) | 92 | 75 | 92 | 75 | | Total controlled lots (period end) | 24,824 | 15,842 | 24,824 | 15,842 | Segment Performance Analysis This section analyzes key financial and operational metrics broken down by the Southeast and Central geographic segments Home Closing Revenue by Segment In Q2 2025, the Southeast segment saw a 14% increase in home closing revenue and a 15% rise in closings, while the Central segment experienced a 14% decrease in revenue and a 12% decrease in closings. Overall, total home closing revenue increased by 1% year-over-year Home Closing Revenue by Segment (Q2 2025 vs Q2 2024) | Segment | Home closing revenue (2025, in thousands) | Home closings (2025) | ASP of homes closed (2025, in thousands) | Home closing revenue (2024, in thousands) | Home closings (2024) | ASP of homes closed (2024, in thousands) | Revenue Change (%) | Closings Change (%) | ASP Change (%) | | :-------- | :-------------------------- | :------------------- | :------------------------- | :-------------------------- | :------------------- | :------------------------- | :----------------- | :------------------ | :------------- | | Southeast | $141,267 | 407 | $347 | $124,393 | 355 | $350 | 14% | 15% | (1)% | | Central | $82,657 | 262 | $315 | $96,540 | 298 | $324 | (14)% | (12)% | (3)% | | Total | $223,924 | 669 | $335 | $220,933 | 653 | $338 | 1% | 2% | (1)% | Backlog by Segment As of June 30, 2025, total backlog homes decreased by 27% and contract value of backlog homes decreased by 28% year-over-year. Both the Southeast and Central segments experienced declines in backlog homes and contract value, with the Southeast seeing a 32% drop in homes and 34% in value Backlog by Segment (as of June 30, 2025 vs 2024) | Segment | Backlog homes (2025) | Contract value of backlog homes (2025, in thousands) | ASP of backlog homes (2025, in thousands) | Backlog homes (2024) | Contract value of backlog homes (2024, in thousands) | ASP of backlog homes (2024, in thousands) | Backlog homes Change (%) | Contract value Change (%) | ASP Change (%) | | :-------- | :------------------- | :------------------------------------- | :-------------------------- | :------------------- | :------------------------------------- | :-------------------------- | :----------------------- | :------------------------ | :------------- | | Southeast | 511 | $178,409 | $349 | 752 | $269,502 | $358 | (32)% | (34)% | (3)% | | Central | 347 | $114,472 | $330 | 421 | $135,248 | $321 | (18)% | (15)% | 3% | | Total | 858 | $292,881 | $341 | 1,173 | $404,750 | $345 | (27)% | (28)% | (1)% | Controlled Lots by Segment As of June 30, 2025, total controlled lots increased significantly by 57% year-over-year to 24,824. Both segments contributed to this growth, with the Southeast increasing controlled lots by 49% and the Central segment by 76%, primarily driven by a substantial increase in optioned lots Controlled Lots by Segment (as of June 30, 2025 vs 2024) | Segment | Owned lots (2025) | Optioned lots (2025) | Total Controlled lots (2025) | Owned lots (2024) | Optioned lots (2024) | Total Controlled lots (2024) | Owned Change (%) | Optioned Change (%) | Total Change (%) | | :-------- | :---------------- | :------------------- | :--------------------------- | :---------------- | :------------------- | :--------------------------- | :--------------- | :------------------ | :--------------- | | Southeast | 986 | 16,005 | 16,991 | 843 | 10,537 | 11,380 | 17% | 52% | 49% | | Central | 939 | 6,894 | 7,833 | 832 | 3,630 | 4,462 | 13% | 90% | 76% | | Total | 1,925 | 22,899 | 24,824 | 1,675 | 14,167 | 15,842 | 15% | 62% | 57% | Net Income by Segment For Q2 2025, net income from the Southeast segment decreased by $3.6 million, while the Central segment saw a larger decrease of $7.0 million. Total segment net income declined by $10.6 million, partially offset by a $2.3 million improvement in 'Other' (corporate overhead and non-reportable segments), resulting in a total net income decrease of $8.3 million Net Income by Segment (Q2 2025 vs Q2 2024) | Segment | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Period over period change (in thousands) | | :-------------- | :------------------------------- | :------------------------------- | :------------------------ | | Southeast | $21,991 | $25,598 | $(3,607) | | Central | $6,345 | $13,336 | $(6,991) | | Segment total | $28,336 | $38,934 | $(10,598) | | Other | $(11,901) | $(14,200) | $2,299 | | Total | $16,435 | $24,734 | $(8,299) | Non-GAAP Financial Measures This section provides reconciliations and definitions for non-GAAP financial measures, including net debt-to-net book capitalization and adjusted net income Net Debt-to-Net Book Capitalization Net debt-to-net book capitalization is presented as a supplemental non-GAAP measure to evaluate leverage, defined as total debt less cash and cash equivalents, divided by total debt less cash and cash equivalents plus equity. As of June 30, 2025, this ratio was 12.1%, a significant increase from (5.0)% at December 31, 2024, primarily due to a rise in notes payable - Net debt-to-net book capitalization is a non-GAAP measure defined as (Total debt - cash and cash equivalents) / (Total debt - cash and cash equivalents + equity)[28] - This measure is used by management and external users to evaluate leverage and comparability within the industry[27] Net Debt-to-Net Book Capitalization Reconciliation | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :------------ | :---------------- | | Notes payable | $74,088 | $3,060 | | Equity | $414,832 | $401,727 | | Total capitalization | $488,920 | $404,787 | | Debt-to-book capitalization | 15.2% | 0.8% | | Net debt | $57,311 | $(19,303) | | Total net capitalization | $472,143 | $382,424 | | Net debt-to-net book capitalization | 12.1% | (5.0)% | Adjusted Net Income Adjusted net income is a non-GAAP measure that adjusts net income for the tax impact, assuming 100% public ownership and a blended federal and state tax rate (24.9% for 2025, 25.0% for 2024). This measure helps evaluate operating performance and comparability to peers. For Q2 2025, adjusted net income was $12.9 million, down from $19.4 million in Q2 2024 - Adjusted net income is a non-GAAP measure that adjusts net income for the tax impact, assuming 100% public ownership and a blended federal and state tax rate (24.9% for 2025, 25.0% for 2024)[30][32] - Management uses adjusted net income to evaluate operating performance and comparability to industry peers[31] Adjusted Net Income Reconciliation | Metric | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :----------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $16,435 | $24,734 | $35,145 | $45,220 | | Provision for income taxes | $744 | $1,132 | $1,601 | $2,053 | | Income before income taxes | $17,179 | $25,866 | $36,746 | $47,273 | | Tax-effected adjustments | $4,278 | $6,467 | $9,150 | $11,818 | | Adjusted net income | $12,901 | $19,399 | $27,596 | $35,455 |