Smith Douglas Homes Corp.

Previous wording

We continued to face market challenges in the second quarter of 2026, with elevated mortgage interest rates and macroeconomic uncertainty weakening potential homebuyer confidence. We have continued to use financing incentives, such as closing cost credits and mortgage rate buydowns, to address these concerns. We achieved 839 homes closed for a total of $273.0 million in home closing revenue for the three months ended June 30, 2026, which reflects an increase of 25% in the number of homes closed and 22% in home closing revenue over the same period of the prior year. Our net new home orders were 970, which reflects a 32% increase period over period, and contract value of net new home orders increased 26% period over period.

Current wording

During the third quarter of 2026, we continued to operate in a challenging housing environment marked by rising mortgage interest rates and broader macroeconomic pressures that impacted potential homebuyer sentiment. In response, we deployed financing incentives, such as closing cost credits and mortgage rate buydowns, to support demand. Despite these headwinds, we achieved 831 homes closed for a total of $262.5 million in home closing revenue for the three months ended September 30, 2026, representing increases of 5% in the number of homes closed and 0.2% in home closing revenue over the same period of the prior year. Additionally, net new home orders increased 13% and contract value of net new home orders increased 6% period over period.

Previous wording

We aim to construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows us to provide this optionality for homebuyers based on just-in-time modifications. As a result of our differentiated value proposition and efficient construction cycle times, we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 13% and 10% for the three months ended June 30, 2026 and 2025, respectively.

Current wording

We seek to construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows us to provide this optionality for homebuyers based on just-in-time modifications. As a result of our differentiated value proposition and efficient construction cycle times, we believe we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 11% for both the three months ended September 30, 2026 and 2025, respectively.

Previous wording

At the core of our land-light operating strategy lies the principle and discipline of primarily acquiring finished lots from a diverse pool of third-party land developers or land bankers through the effective utilization of lot-option contracts. Our lot acquisition strategy reduces our upfront capital requirements and generally seeks to provide for “just-in-time” lot delivery, better aligning our pace of home orders and home starts. While using land bankers and third-party developers comes at an additional cost, we believe our lot acquisition strategy reduces our operational and financial risk relative to other homebuilders that own a higher percentage of their land supply. As of June 30, 2026, we had 664 owned unstarted lots in real estate inventory on our balance sheet, which represented only 2.8% of our total controlled lot supply.

Current wording

At the core of our land-light operating strategy lies the principle and discipline of primarily acquiring finished lots from a diverse pool of third-party land developers or land bankers through the effective utilization of lot-option contracts. Our lot acquisition strategy reduces our upfront capital requirements and generally seeks to provide for “just-in-time” lot delivery, better aligning our pace of home orders and home starts. While using land bankers and third-party developers comes at an additional cost, we believe our lot acquisition strategy reduces our operational and financial risk relative to other homebuilders that own a higher percentage of their land supply. As of September 30, 2026, we had 517 owned unstarted lots in real estate inventory on our balance sheet, which represented only 2.1% of our total controlled lot supply.

Previous wording

We believe the geographic markets in which we operate demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions. Our operations are currently organized into eleven geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Chattanooga, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and Alabama Gulf Coast divisions. We believe there is significant opportunity to expand our presence in each of our respective markets.

Current wording

We believe the geographic markets in which we operate demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions. Our operations are currently organized into eleven geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, East Tennessee, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, and Nashville, and Alabama Gulf Coast divisions. We believe there is significant opportunity to expand our presence in each of our respective markets.

Previous wording

Our operations are currently organized into eleven geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Chattanooga, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and Alabama Gulf Coast divisions.

Current wording

Our operations are currently organized into eleven geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, East Tennessee, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Alabama Gulf Coast, Houston, and Nashville divisions.

Previous wording

Comparison of three and six months ended June 30, 2026 and 2025

Current wording

Comparison of three and nine months ended September 30, 2026 and 2025

Previous wording

Home closing revenue for the three months ended June 30, 2026, was $273.0 million, an increase of $49.1 million, or 22%, from $223.9 million for the three months ended June 30, 2025. Home closing revenue for the six months ended June 30, 2026, was $479.5 million, an increase of $30.8 million, or 7%, from $448.6 million for the six months ended June 30, 2025. The increase in revenue for both periods is primarily attributable to increases in the number of homes closed, which increased by 25% and 9% for the three and six months ended June 30, 2026, respectively, while ASP of homes closed decreased by 3% and 2%, respectively, for the three and six months ended June 30, 2026. The growth in the number of homes closed for the current year periods as compared to the three and six months ended June 30, 2025 were primarily due to increases of 25% and 9%, respectively, in our Southeast segment, and increases of 26% and 10%, respectively, in our Central segment.

Current wording

Home closing revenue for the three months ended September 30, 2026, was $262.5 million, an increase of $0.5 million, or 0.2%, from $262.0 million for the three months ended September 30, 2025. Home closing revenue for the nine months ended September 30, 2026, was $742.0 million, an increase of $31.3 million, or 4%, from $710.7 million for the nine months ended September 30, 2025. The increase in revenue for both periods is primarily attributable to increases in the number of homes closed, which increased by 5% and 8% for the three and nine months ended September 30, 2026, respectively, while ASP of homes closed decreased by 5% and 3% for the three and nine months ended September 30, 2026, respectively, in each case due to higher incentives. The growth in the number of homes closed for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 was primarily due to increases of 2% in our Southeast segment and 11% in our Central segment. The growth in the number of homes closed for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 was primarily due to increases of 6% in our Southeast segment and 10% in our Central segment.

Previous wording

Cost of home closings for the three months ended June 30, 2026, was$225.1 million, an increase of$53.1 million, or 31%, from$172.0 million for the three months ended June 30, 2025, which was primarily driven by a 25% increase in home closings and a 4% increase in the average cost of home closings. Cost of home closings for the six months ended June 30, 2026, was $391.1 million, an increase of $47.9 million, or 14%, from $343.2 million for the six months ended June 30, 2025, which was primarily driven by a 9% increase in home closings and a 4% increase in the average cost of home closings.

Current wording

Cost of home closings for the three months ended September 30, 2026, was$219.8 million, an increase of$12.7 million, or 6%, from$207.1 million for the three months ended September 30, 2025, which was primarily driven by a 5% increase in home closings and a 1% increase in the average cost of home closings. Cost of home closings for the nine months ended September 30, 2026, was $610.9 million, an increase of $60.6 million, or 11%, from $550.2 million for the nine months ended September 30, 2025, which was primarily driven by an 8% increase in home closings and a 3% increase in the average cost of home closings, due to higher land costs.

Previous wording

Home closing gross profit for the three months ended June 30, 2026 was$47.9 million, a decrease of$4.0 million, or 8%, from$51.9 million for the three months ended June 30, 2025. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 17.6% in the three months ended June 30, 2026 compared to 23.2% in the same period in 2025. Home closing gross profit for thesix months ended June 30, 2026 was$88.4 million, adecrease of$17.1 million, or 16%, from$105.5 million for thesix months ended June 30, 2025. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 18.4% in thesix months ended June 30, 2026 compared to 23.5% in the same period in 2025.

Current wording

Home closing gross profit for the three months ended September 30, 2026 was$42.7 million, a decrease of$12.3 million, or 22%, from$55.0 million for the three months ended September 30, 2025. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 16.3% in the three months ended September 30, 2026 compared to 21.0% in the same period in 2025. Home closing gross profit for thenine months ended September 30, 2026 was$131.1 million, adecrease of$29.3 million, or 18%, from$160.4 million for thenine months ended September 30, 2025. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 17.7% in thenine months ended September 30, 2026 compared to 22.6% in the same period in 2025.

Previous wording

The decrease in home closing gross margin for each of the three and six months ended June 30, 2026 compared to the same periods of the prior year was for each period primarily driven by a 4% increase in the average cost of home closings while the ASP of homes closed decreased by 3% and 2%, respectively.

Current wording

The decrease in home closing gross margin for each of the three and nine months ended September 30, 2026 compared to the same periods of the prior year was for each period primarily driven by increases of 1% and 3%, respectively, in the average cost of home closings and decreases of 5% and 3%, respectively, in the ASP of homes closed.

Previous wording

Selling, general, and administrative costs for the three months ended June 30, 2026 were$41.9 million, anincrease of$7.2 million, or 21%, from$34.7 million for the three months ended June 30, 2025. Selling, general, and administrative costs for thesix months ended June 30, 2026 were$77.8 million, anincrease of$10.1 million, or 15%, from$67.7 million for thesix months ended June 30, 2025.

Current wording

Selling, general, and administrative costs for the three months ended September 30, 2026 were$40.4 million, anincrease of$4.3 million, or 12%, from$36.1 million for the three months ended September 30, 2025. Selling, general, and administrative costs for thenine months ended September 30, 2026 were$118.2 million, anincrease of$14.4 million, or 14%, from$103.8 million for thenine months ended September 30, 2025.

Previous wording

Theincrease for thethree and six months ended June 30, 2026 compared to the same periods of the prior year was for each period primarily dueto an increase in sales commissions, advertising costs, and division overhead associated with our increase in homes closed and related home closing revenue, an increase in division overhead primarily due to our recently formed divisions, Dallas-Fort Worth and Alabama Gulf Coast, and increased compensation expenses attributable to higher employee headcount.

Current wording

The increase for the three and nine months ended September 30, 2026 compared to the same periods of the prior year was for each period primarily due to an increase in sales commissions, advertising costs, and division overhead associated with our increase in homes closed and related home closing revenue, an increase in division overhead primarily due to our recently formed divisions, Dallas-Fort Worth, Alabama Gulf Coast, and East Tennessee, and increased compensation expenses attributable to higher employee headcount.

Previous wording

Equity in income from unconsolidated entities consists primarily of our portion of income from our interest in the title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers and our portion of income from our interest in thecompany engaged in providing mortgage broker services to our homebuyers. For the three and six months ended June 30, 2026, equity in income from unconsolidated entities increased $0.2 million and $0.5 million from the three and six months ended June 30, 2025, respectively, in each case primarily due to an increase in income from the mortgage brokerage company, which ramped up operations in 2025.

Current wording

Equity in income from unconsolidated entities consists primarily of our portion of income from our interest in the title companies which operate in certain of our markets to provide title insurance to our homebuyers and our portion of income from our interest in thecompany engaged in providing mortgage broker services to our homebuyers. For the three and nine months ended September 30, 2026, equity in income from unconsolidated entities increased $0.2 million and $0.6 million, respectively, from the three and nine months ended September 30, 2025, in each case primarily due to an increase in income from the mortgage brokerage company, which ramped up operations in 2025.

Previous wording

Interest expense is comprised of interest incurred, but not capitalized on our Amended Credit Facility, other borrowings, and amortization of debt issuance costs. For the three months ended June 30, 2026, interest expense decreased $0.1 million from the three months ended June 30, 2025, primarily due to higher interest eligible for capitalization. For the six months ended June 30, 2026, interest expense increased $0.1 million from the six months ended June 30, 2025, primarily due to higher outstanding borrowings on our Amended Credit Facility.

Current wording

Interest expense is comprised of interest incurred, but not capitalized on our Prior Credit Facility, Amended Credit Facility, other borrowings, and amortization of debt issuance costs. For each of the three and nine months ended September 30, 2026, interest expense decreased $0.8 million from the three and nine months ended September 30, 2025, in each case primarily due to higher interest eligible for capitalization.

Previous wording

Other expense (income), net primarily consists of interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses. For the three and six months ended June 30, 2026, other expense (income), net increased by $4.4 million and $3.8 million, respectively, from the three and six months ended June 30, 2025, primarily due to lot option contract abandonment charges of $4.5 million during the three and six months ended June 30, 2026 compared to none and $0.7 million during the three and six months ended June 30, 2025.

Current wording

Other (income) expense, net primarily consists of lot option contract abandonment charges, interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses. For the three months ended September 30, 2026, other income, net increased $1.6 million from the three months ended September 30, 2025, which was primarily due to a $0.5 million decrease in lot option contract abandonment charges and a $0.9 million increase in gain on disposal of property and equipment. For the nine months ended September 30, 2026, other expense, net increased $2.2 million from the nine months ended September 30, 2025, which was primarily due to a $3.2 million increase in lot option contract abandonment charges, partially offset by a $0.9 million increase in gain on disposal of property and equipment.

Previous wording

Smith Douglas Homes Corp. is subject to U.S. federal, state, and local income taxes with respect to its allocable share of taxable income of Smith Douglas Holdings LLC assessed at the prevailing corporate tax rates. Smith Douglas Holdings LLC operates as a limited liability company and is treated as a partnership for income tax purposes. Accordingly, it incurs no significant liability for federal or state income taxes, since the taxable income or loss is passed through to its members. Provision for income taxes was$0.1 million and $0.7 million, respectively, for thethree months ended June 30, 2026 and 2025, which reflects an effective tax rate of 5.4% and 4.3%, respectively. Provision for income taxes was $0.4 million and $1.6 million, respectively, for the six months ended June 30, 2026 and 2025, which reflects an effective tax rate of 5.7% and 4.4%, respectively. The increase in the effective tax rate is primarily related to an increase in state income taxes.

Current wording

Smith Douglas Homes Corp. is subject to U.S. federal, state, and local income taxes with respect to its allocable share of taxable income of Smith Douglas Holdings LLC assessed at the prevailing corporate tax rates. Smith Douglas Holdings LLC operates as a limited liability company and is treated as a partnership for income tax purposes. Accordingly, it incurs no significant liability for federal or state income taxes, since the taxable income or loss is passed through to its members. Provision for income taxes was $0.3 million and $1.0 million, respectively, for the three months ended September 30, 2026 and 2025, which reflects an effective tax rate of 8.4% and 5.9%, respectively. Provision for income taxes was $0.6 million and $2.6 million, respectively, for the nine months ended September 30, 2026 and 2025, which reflects an effective tax rate of 6.7% and 4.9%, respectively.

Previous wording

Net income for the three and six months ended June 30, 2026 decreased by $14.7 million, or 89% and $29.3 million, or 83%, respectively, from the same periods of the prior year. The decrease was primarily due to decreases of $4.0 million and $17.1 million in home closing gross profit, respectively, and increases of $7.2 million and $10.1 million in selling, general and administrative costs and in other expense (income), net of $4.4 million and $3.8 million, respectively.

Current wording

Net income for the three and nine months ended September 30, 2026 decreased by $13.2 million, or 81%, and $42.5 million, or 83%, respectively, from the same periods of the prior year. The decrease was primarily due to decreases of $12.3 million and $29.3 million in home closing gross profit, respectively, and increases of $4.3 million and $14.4 million in selling, general and administrative costs, respectively.

Previous wording

Southeast: The $11.4 million decrease in net income for the three months ended June 30, 2026 compared to the same period in the prior year was primarily due to a $5.9 million decrease in home closing gross profit, a $1.7 million increase in selling, general and administrative costs, and a $3.9 million increase in other expense (income), net, primarily attributable to lot option contract abandonment charges. The decrease in net income for the six months ended June 30, 2026 compared to the same period in the prior year was primarily due to a $17.1 million decrease in home closing gross profit, a $1.7 million increase in selling, general and administrative costs, and a $4.0 million increase in other expense (income), net, primarily attributable to lot option contract abandonment charges.

Current wording

Southeast: The $8.8 million decrease in net income for the three months ended September 30, 2026 compared to the same period in the prior year was primarily due to a $9.8 million decrease in home closing gross profit, partially offset by a $1.1 million decrease in selling, general and administrative costs. The decrease in net income for the nine months ended September 30, 2026 compared to the same period in the prior year was primarily due to a $27.0 million decrease in home closing gross profit and a $4.0 million increase in other segment items.

Previous wording

We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP financial measures provide users of our financial information with additional useful information in evaluating our performance and to more readily compare these financial measures between past and future periods. There are limitations to the use of the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q. For example, our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Current wording

We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP financial measures provide users of our financial information with additional useful information to evaluate our performance and to more readily compare these financial measures between past and future periods. There are limitations to the use of the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q. For example, our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Previous wording

Adjusted home closing gross profit and adjusted home closing gross margin are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define adjusted home closing gross profit as home closing revenue less cost of home closings, excluding capitalized interest charged to cost of home closings, impairment charges and adjustments resulting from the application of purchase accounting included in cost of sales, if applicable. We define adjusted home closing gross margin as adjusted home closing gross profit as a percentage of home closing revenue. Management believes this information is meaningful because it isolates the impact that capitalized interest has on home closing gross margin. However, because adjusted home closing gross profit and adjusted home closing gross margin information excludes capitalized interest, which has real economic effects and could impact our results of operations, the utility of adjusted home closing gross profit and adjusted home closing gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted home closing gross profit and adjusted home closing margin information in the same manner we do. Accordingly, adjusted home closing gross profit and adjusted home closing gross margin information should be considered only as a supplement to home closing gross profit and home closing gross margin information as a measure of our performance.

Current wording

Adjusted home closing gross profit and adjusted home closing gross margin are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance. We define adjusted home closing gross profit as home closing revenue less cost of home closings, excluding capitalized interest charged to cost of home closings, impairment charges and adjustments resulting from the application of purchase accounting included in cost of sales, if applicable. We define adjusted home closing gross margin as adjusted home closing gross profit as a percentage of home closing revenue. Management believes this information is meaningful because it isolates the impact that capitalized interest has on home closing gross margin. However, because adjusted home closing gross profit and adjusted home closing gross margin information excludes capitalized interest, which has real economic effects and could impact our results of operations, the utility of adjusted home closing gross profit and adjusted home closing gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted home closing gross profit and adjusted home closing gross margin information in the same manner we do. Accordingly, adjusted home closing gross profit and adjusted home closing gross margin information should be considered only as a supplement to home closing gross profit and home closing gross margin information as a measure of our performance.

Previous wording

Our adjusted home closing gross profit and adjusted home closing gross margin decreased from both the three and six months ended June 30, 2025 to the same periods in 2026. The decreases in adjusted home closing gross profit and adjusted home closing gross margin were primarily due to increases in the average cost of home closings of 4% in both periods.

Current wording

Our adjusted home closing gross profit and adjusted home closing gross margin decreased for both the three- and nine-month periods ended September 30, 2025 to the same periods in 2026. The decreases in adjusted home closing gross profit and adjusted home closing gross margin were primarily due to decreases in ASP of homes closed of (5.1)% and (3.3)%, respectively, and increases in the average cost of home closings of 1% and 3%, respectively, partially offset by increases in the add-back for real estate inventory impairment.

Previous wording

(1)For the three and six months ended June 30, 2026 and 2025, our tax expenses assume a 26.9% and 24.9% federal and state blended tax rate, respectively, (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).

Current wording

(1)For the three and nine months ended September 30, 2026 and 2025, our tax expenses assume a 27.2% and 24.6% federal and state blended tax rate, respectively, (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).

Previous wording

EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP. EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation. We define EBITDA margin as EBITDA as a percentage of home closing revenue. We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included inother expense (income), net, and (ix) real estate inventory impairment and lot option contract abandonment charges. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of home closing revenue.

Current wording

EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP. EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation. We define EBITDA margin as EBITDA as a percentage of home closing revenue. We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included inother (income) expense, net, and (ix) real estate inventory impairment and lot option contract abandonment charges. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of home closing revenue.

Previous wording

Our EBITDA and EBITDA margin decreased from the three and six months ended June 30, 2025 to the same periods in 2026, primarily as a result of decreases in net income of $14.7 million and $29.3 million, respectively. Our adjusted EBITDA and adjusted EBITDA margin also decreased from the three and six months ended June 30, 2025 to the same periods in 2026, primarily as a result of the decrease in net income described above, partially offset by the increases in the add-back for real estate inventory impairment and lot option contract abandonment charges of $7.6 million and $7.2 million, respectively.

Current wording

Our EBITDA and EBITDA margin decreased from the three and nine months ended September 30, 2025 to the same periods in 2026, primarily as a result of decreases in net income of $13.2 million and $42.5 million, respectively. Our adjusted EBITDA and adjusted EBITDA margin decreased from the three and nine months ended September 30, 2025 to the same periods in 2026, primarily as a result of the decreases in net income described above, partially offset by the increases in real estate inventory impairment and lot option contract abandonment charges of $0.1 million and $7.3 million, respectively.

Previous wording

As of June 30, 2026, we had$14.2 million of cash and cash equivalents. We believe existing cash and cash equivalents, availability under our Amended Credit Facility, and positive cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We have historically generated cash and fund our operations primarily from cash flows from operating activities as well as availability under our credit facilities and other borrowings. We exercise strict controls and have a prudent strategy for our cash management, including those related to cash outlays for lot acquisitions and deposits on lot-option contracts. We require multiple party account control and authorization for payments. We competitively bid each phase of the development and construction process and closely manage production schedules and payments. Land acquisitions are reviewed and analyzed by our senior management team and ultimately approved by our Chief Executive Officer and Chief Financial Officer. Additionally, our land-light business model reduces our upfront capital requirements and generally provides for “just-in- time” lot delivery, which better aligns our pace of home orders and home starts. Our principal uses of cash include deposits on lot-option contracts, acquisition of finished lots, home construction, operating expenses, and the payment of interest and routine liabilities.

Current wording

As of September 30, 2026, we had$5.9 million of cash and cash equivalents. We believe existing cash and cash equivalents, availability under our Amended Credit Facility, and positive cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We have historically generated cash and fund our operations primarily from cash flows from operating activities as well as availability under our credit facilities and other borrowings. We exercise strict controls and have a prudent strategy for our cash management, including those related to cash outlays for lot acquisitions and deposits on lot-option contracts. We require multiple party account control and authorization for payments. We competitively bid each phase of the development and construction process and closely manage production schedules and payments. Land acquisitions are reviewed and analyzed by our senior management team and ultimately approved by our Chief Executive Officer and Chief Financial Officer. Additionally, our land-light business model reduces our upfront capital requirements and generally provides for “just-in-time” lot delivery, which better aligns our pace of home orders and home starts. Our principal uses of cash include deposits on lot-option contracts, acquisition of finished lots, home construction, operating expenses, and the payment of interest and routine liabilities.

Previous wording

As of June 30, 2026 and December 31, 2025, there were $63.0 million and $40.0 million, respectively, of outstanding borrowings under the Amended Credit Facility. As of June 30, 2026 and December 31, 2025, there were$0.8 million and $0.5 million of outstanding letters of credit, respectively.

Current wording

As of September 30, 2026 and December 31, 2025, there were $99.0 million and $40.0 million, respectively, of outstanding borrowings under the Amended Credit Facility. As of September 30, 2026 and December 31, 2025, there were $0.8 million and $0.5 million, respectively, of outstanding letters of credit.

Previous wording

Additionally, in the event we declare any cash dividends, we intend to cause Smith Douglas Holdings LLC to make distributions to us in amounts sufficient to fund such cash dividends declared by us to our stockholders. Deterioration in the financial condition, earnings, or cash flow of Smith Douglas Holdings LLC for any reason could limit or impair their ability to pay such distributions.

Current wording

Additionally, in the event we declare any cash dividends, we intend to cause Smith Douglas Holdings LLC to make distributions to us in amounts sufficient to fund such cash dividends declared by us to our stockholders. Deterioration in the financial condition, earnings, or cash flow of Smith Douglas Holdings LLC for any reason could limit or impair its ability to pay such distributions.

Previous wording

Cash flows from operating, investing, and financing activities – comparison for the six months ended June 30, 2026 and 2025

Current wording

Cash flows from operating, investing, and financing activities – comparison for the nine months ended September 30, 2026 and 2025

Previous wording

We generated $4.9 million and used $63.8 million in net cash in operating activities for the six months ended June 30, 2026 and 2025, respectively. Operating cash flows for the six months ended June 30, 2026 benefited from cash generated by net income of $5.8 million and non-cash operating expenses of $14.3 million, which were partially offset by a $32.9 million increase in real estate inventory, $5.0 million increase in deposits on real estate under option or contract, and $25.0 million increase in accounts payable. Operating cash flows for the six months ended June 30, 2025 benefited from cash generated by net income of $35.1 million and non-cash operating expenses of $5.4 million, which were more than offset by a $64.0 million increase in real estate inventory, $30.1 million increase in deposits on real estate under option or contract, and $10.3 million decrease in accrued expenses and other liabilities.

Current wording

We used$28.5 million and $41.1 million in net cash in operating activities for thenine months ended September 30, 2026 and 2025, respectively. Operating cash flows for thenine months ended September 30, 2026 benefited from cash generated by net income of$8.9 million, non-cash operating expenses of $17.7 million, and a $35.9 million increase in accounts payable, which were more than offset by a$80.2 million increase in real estate inventory and a $1.2 million decrease in accrued expenses and other liabilities. Operating cash flows for thenine months ended September 30, 2025 benefited from cash generated by net income of$51.4 million and non-cash operating expenses of $9.5 million, which were more than offset by a$61.0 million increase in real estate inventory, a$34.4 million increase indeposits on real estate under option or contract, and a$7.5 million decrease in accrued expenses and other liabilities.

Previous wording

We used $1.2 million and $4.2 million in net cash in investing activities for the six months ended June 30, 2026 and 2025, respectively. The net cash used in investing activities during the six months ended June 30, 2026 was primarily due to $1.1 million in purchases of property and equipment. The net cash used in investing activities during the six months ended June 30, 2025 was primarily due to $3.2 million in purchases of property and equipment and $1.1 million in investments in unconsolidated entities.

Current wording

We used$0.9 million and$5.6 million in net cash in investing activities for thenine months ended September 30, 2026 and 2025, respectively. The net cash used in investing activities during thenine months ended September 30, 2026 was primarily due to$2.7 million inpurchases of property and equipment, partially offset by$1.8 million in proceeds from sale of property and equipment. The net cash used in investing activities during thenine months ended September 30, 2025 was primarily due to$4.5 million inpurchases of property and equipment and$1.1 million ininvestments in unconsolidated entities.

Previous wording

We used $2.2 million and generated $62.5 million in net cash from financing activities for the six months ended June 30, 2026 and 2025, respectively. The net cash used in financing activities during the six months ended June 30, 2026 was primarily due to $23.0 million in net borrowings under the Amended Credit Facility, $16.1 million in payments related to repurchases of real estate not owned, $10.1 million in share repurchases, and $8.9 million in tax distributions, which were partially offset by $12.3 million in proceeds from sale of real estate not owned. The net cash provided by financing activities during the six months ended June 30, 2025 was primarily due to $68.9 million in net borrowings under the Amended Credit Facility and $27.1 million in proceeds from sale of real estate not owned, partially offset by $23.6 million in tax distributions, $6.8 million in payments related to repurchases of real estate not owned, and $2.2 million in debt issuance costs.

Current wording

We generated$22.6 million and$39.1 million in net cash from financing activities for thenine months ended September 30, 2026 and 2025, respectively. The net cash provided by financing activities during thenine months ended September 30, 2026 was primarily due to$59.0 million in net borrowings under the Amended Credit Facility and $12.3 million in proceeds from sale of real estate not owned, partially offset by $1.8 million in payments on notes payable and related party notes payable, $9.5 million in tax distributions, $25.8 million in payments related to repurchases of real estate not owned, and $10.4 million in share repurchases. The net cash provided by financing activities during thenine months ended September 30, 2025 was primarily due to$49.0 million in net borrowings under the Amended Credit Facility and $36.7 million in proceeds from sale of real estate not owned, partially offset by $1.4 million in payments on notes payable and related party notes payable, $28.0 million in tax distributions, $13.7 million in payments related to repurchases of real estate not owned, and $2.2 million in debt issuance costs.

Previous wording

While using land bankers and third-party developers as part of our land-light operating strategy comes at an additional cost, we believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own and develop a higher percentage of their land supply. As of June 30, 2026, we had 664 owned unstarted lots in real estate inventory on our balance sheet which represented only 2.8% of our total controlled lot supply.

Current wording

While using land bankers and third-party developers as part of our land-light operating strategy comes at an additional cost, we believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own and develop a higher percentage of their land supply. As of September 30, 2026, we had 517 owned unstarted lots in real estate inventory on our balance sheet which represented only 2.1% of our total controlled lot supply.

Previous wording

As of June 30, 2026, we had $134.8 million of non-refundable cash deposits under land and lot-option contracts pertaining to 13,986 lots with a remaining aggregate purchase price of approximately $1.05 billion.

Current wording

As of September 30, 2026, we had $138.4 million of non-refundable cash deposits under land and lot-option contracts pertaining to 15,099 lots with a remaining aggregate purchase price of approximately $1.1 billion.

Previous wording

From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers. These arrangements relate to certain performance or maintenance-related obligations. As of June 30, 2026 and December 31, 2025, there were $0.8 million and $0.5 million outstanding letters of credit. Surety bonds do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. These bonds, which totaled $56.6 million and $47.4 million as of June 30, 2026 and December 31, 2025, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development. If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations.

Current wording

From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers. These arrangements relate to certain performance or maintenance-related obligations. As of September 30, 2026 and December 31, 2025, there were $0.8 million and $0.5 million, respectively, of outstanding letters of credit. Surety bonds do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. These bonds, which totaled $60.7 million and $47.4 million as of September 30, 2026 and December 31, 2025, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development. If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations.