Financial Data and Key Metrics Changes - Smith Douglas Homes reported pre-tax income of 117 million in pre-tax income for the full year [8][10] - Revenue for Q4 2024 was 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 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]
Smith Douglas Homes(SDHC) - 2024 Q4 - Earnings Call Transcript