Smith Douglas Homes Corp

Previous wording

In the first half of 2024, we continued to experience strong demand for new homes despite fluctuating interest rates. Our net new home orders increased by 17% in the three months ended June 30, 2024 compared to the three months ended June 30, 2023 and 16% in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. We expect the housing undersupply in the resale market and favorable demographic trends to provide a strong, long-term runway for future new home buying demand. We believe our dedication to entry-level and empty-nest homebuyers with a focus on price points that fall below FHA guidelines, our efficient construction process, and our affordable luxury sales experience caters to the desires of today’s aspiring homeowners and is resilient across economic cycles. Additionally, we 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 12% and 9% for the three months ended June 30, 2024 and 2023, respectively.

Current wording

We 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 remained steady at 11% for both the three months ended September 30, 2024 and 2023.

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 provides 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 operating and financial risk relative to other homebuilders that own a higher percentage of their land supply. As of June 30, 2024, we had 587 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.7% 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, 2024, we had 611 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.4% 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 six geographical segments; our reportable segments include Alabama (which consists of both Birmingham and Huntsville), Atlanta (which includes certain Atlanta suburbs like Dalton, GA), Charlotte, Houston, Nashville, and Raleigh. Each of our markets is experiencing strong momentum in housing demand drivers relative to historic averages, and 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 eight geographical segments, of which six are reportable segments, including Alabama (which consists of both Birmingham and Huntsville), Atlanta, Charlotte, Houston, Nashville, and Raleigh. We expanded into two additional operating segments during 2024, Greenville and Central Georgia, which are included in the "Other" category for segment reporting. We believe there is significant opportunity to expand our presence in each of our respective markets.

Previous wording

We believe our dedication to entry-level and empty-nest homebuyers with a focus on price points that fall below FHA guidelines, our efficient construction process, and our affordable luxury sales experience caters to the desires of today’s aspiring homeowners and is resilient across economic cycles. While we expect the current housing undersupply in the resale market and favorable demographic trends to provide a strong, long-term runway for future new home buying demand, there are several factors beyond our control that could have a significant impact on our business including, but not limited to, rising inflation, future increases in interest rates, availability and cost of land, labor and construction, availability of mortgage and land bank financing, macroeconomic trends and other factors described elsewhere in this Quarterly Report on Form 10-Q.

Current wording

We believe our dedication to entry-level and empty-nest homebuyers with a focus on price points that fall below FHA guidelines, our efficient construction process, and our affordable luxury sales experience caters to the desires of today’s aspiring homeowners and is resilient across economic cycles. While we expect the current housing undersupply and favorable demographic trends to provide a strong, long-term runway for future new home buying demand, there are several factors beyond our control that could have a significant impact on our business including, but not limited to, rising inflation, future increases in interest rates, availability and cost of land, labor and construction, availability of mortgage and land bank financing, macroeconomic trends and other factors described elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

We completed our IPO on January 16, 2024, through which we offered 8,846,154 shares of our Class A common stock at a price to the public of $21.00 per share, which includes the exercise in full by the underwriters of their option to purchase an additional 1,153,846 shares of our Class A common stock. The gross proceeds to us from the IPO were $185.8 million, before deducting underwriting discounts and commissions, and the net proceeds to us from the IPO were approximately $172.8 million, after deducting the underwriting discount of approximately $13.0 million.

Current wording

We completed our IPO on January 16, 2024, through which we offered 8,846,154 shares of our Class A common stock at a price to the public of$21.00 per share, which includes the exercise in full by the underwriters of their option to purchase an additional 1,153,846 shares of our Class A common stock. The gross proceeds to us from the IPO were$185.8 million, before deducting underwriting discounts and commissions, and the net proceeds to us from the IPO were approximately$172.8 million, after deducting the underwriting discount of approximately$13.0 million.

Previous wording

Our operations are currently organized into six geographical segments. Our reportable segments include Alabama (which consists of both Birmingham and Huntsville), Atlanta (which includes certain Atlanta suburbs like Dalton, GA), Charlotte, Houston, Nashville, and Raleigh.

Current wording

Our operations are currently organized into eight geographical segments, of which six are reportable segments. Our reportable segments include Alabama (which consists of both Birmingham and Huntsville), Atlanta, Charlotte, Houston, Nashville, and Raleigh. We expanded into two additional operating segments during 2024, Greenville and Central Georgia, which are included in the "Other" category for segment reporting.

Previous wording

Comparison of three and six months ended June 30, 2024 and 2023

Current wording

Comparison of three and nine months ended September 30, 2024 and 2023

Previous wording

The increase in revenue was primarily attributable to increases of 17% and 15% in the number homes closed for the three and six months ended June 30, 2024, respectively, which are largely driven by our Devon Street Homes acquisition. The increase in revenue was also attributable to an increase in the ASP of homes closed of 4% and 2% for the three and six months ended June 30, 2024, respectively.

Current wording

Home closing revenue for the nine months ended September 30, 2024, was$688.0 million, anincrease of$140.7 million, or 26%, from$547.3 million for the nine months ended September 30, 2023. The increase in revenue was primarily attributable to increases of 24% in the number of homes closed and 2% in the ASP of homes closed for the nine months ended September 30, 2024, respectively.

Previous wording

Cost of home closings for the three months ended June 30, 2024, was $161.9 million, an increase of $33.1 million, or 26%, from $128.8 million for the three months ended June 30, 2023, which was primarily driven by a 17% increase in home closings and an 8% increase in the average cost of home closings. Cost of home closings for the six months ended June 30, 2024, was $301.6 million, an increase of $53.2 million, or 21%, from $248.4 million for the six months ended June 30, 2023, which was primarily driven by a 15% increase in home closings and a 6% increase in the average cost of home closings.

Current wording

39% increase in home closings and an 4% increase in the average cost of home closings. Cost of home closings for the nine months ended September 30, 2024, was$505.8 million, an increase of$116.8 million, or 30%, from$389.0 million for the nine months ended September 30, 2023, which was primarily driven by a 24% increase in home closings and a 5% increase in the average cost of home closings.

Previous wording

Home closing gross profit for the three months ended June 30, 2024 was $59.1 million, an increase of $6.4 million, or 12%, from $52.7 million for the three months ended June 30, 2023. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 26.7% in the three months ended June 30, 2024 compared to 29.0% in the same period in 2023. Home closing gross profit for the six months ended June 30, 2024 was $108.5 million, an increase of $7.3 million, or 7%, from $101.2 million for the six months ended June 30, 2023. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 26.5% in the six months ended June 30, 2024 compared to 29.0% in the same period in 2023.

Current wording

Home closing gross profit for the three months ended September 30, 2024 was$73.7 million, an increase of$16.6 million, or 29%, from$57.1 million for the three months ended September 30, 2023. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 26.5% in the three months ended September 30, 2024 compared to 28.9% in the same period in 2023. Home closing gross profit for the nine months ended September 30, 2024 was$182.2 million, an increase of$23.9 million, or 15%, from$158.3 million for the nine months ended September 30, 2023. Home closing gross margin was 26.5% in the nine months ended September 30, 2024 compared to 28.9% in the same period in 2023.

Previous wording

The decrease in home closing gross margin for the three and six months ended June 30, 2024 was primarily driven by increases of 8% and 6% in the average cost of home closings, respectively, partially offset by increases of 4% and 2% in the ASP of homes closed, respectively.

Current wording

The decrease in home closing gross margin for the three and nine months ended September 30, 2024 was primarily driven by increases of 4% and 5% in the average cost of home closings, respectively, partially offset by increases of 1% and 2% in the ASP of homes closed, respectively.

Previous wording

Selling, general, and administrative costs for the three months ended June 30, 2024 were $31.8 million, an increase of $9.9 million, or 45%, from $21.9 million for the three months ended June 30, 2023. Selling, general, and administrative costs for the six months ended June 30, 2024 were $59.4 million, an increase of $17.7 million, or 42%, from $41.7 million for the six months ended June 30, 2023.

Current wording

Selling, general, and administrative costs for the three months ended September 30, 2024 were$34.1 million, anincrease of$11.2 million, or 49%, from$23.0 million for the three months ended September 30, 2023. Selling, general, and administrative costs for the nine months ended September 30, 2024 were$93.5 million, anincrease of$28.8 million, or 45%, from$64.7 million for the nine months ended September 30, 2023.

Previous wording

The increase for the three and six months ended June 30, 2024 compared to the same periods of the prior year was primarily due to an increase in sales commissions and advertising costs associated with our increase in homes closed and related home closing revenue, increased payroll and performance-based bonus compensation expenses on higher employee headcount, stock compensation expense and additional overhead related to our Devon Street Homes Acquisition.

Current wording

Theincrease for the three and nine months ended September 30, 2024 compared to the same periods of the prior year was primarily due to an increase in sales commissions and advertising costs associated with our increase in homes closed and related home closing revenue, increased payroll and performance-based bonus compensation expenses on higher employee headcount, stock compensation expense, and additional overhead related to our Devon Street Homes Acquisition.

Previous wording

Equity in income from unconsolidated entities consists 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. For the three and six months ended June 30, 2024, equity in income from unconsolidated entities decreased slightly from the three and six months ended June 30, 2023, due to slightly lower title insurance revenue generated by the joint venture.

Current wording

Equity in income from unconsolidated entities consists 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. For the three and nine months ended September 30, 2024, equity in income from unconsolidated entities increased slightly from the three and nine months ended September 30, 2023, due to slightly higher title insurance revenue generated by the joint venture.

Previous 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. Our interest expense increased $0.3 million to $0.6 million for the three months ended June 30, 2024 from $0.3 million for the three months ended June 30, 2023. Our interest expense increased $0.8 million to $1.3 million for the six months ended June 30, 2024 from $0.5 million for the six months ended June 30, 2023.

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. Our interest expense increased$0.1 million to$0.6 million for the three months ended September 30, 2024 from$0.5 million for the three months ended September 30, 2023. Our interest expense increased$0.9 million to$1.9 million for the nine months ended September 30, 2024 from$1.0 million for the nine months ended September 30, 2023.

Previous wording

The increase in interest expense for the three and six months ended June 30, 2024 was primarily driven by an increase in unused fees incurred on our Prior Credit Facility and Amended Credit Facility, amortization of deferred financing costs on our Amended Credit Facility, and interest on the note payable related to the Devon Street Homes Acquisition.

Current wording

Theincrease in interest expense for the three and nine months ended September 30, 2024 was primarily driven by an increase in unused fees incurred on our Prior Credit Facility and Amended Credit Facility, amortization of deferred financing costs on our Amended Credit Facility, and interest on the note payable related to the Devon Street Homes Acquisition.

Previous wording

Other expense (income), net primarily consists of interest income, credit card rebates, insurance settlements, changes in fair value of contingent consideration related to the Devon Street Homes Acquisition, and other miscellaneous income and expenses. For the three and six months ended June 30, 2024, other expense, net increased by $1.1 million and $1.2 million, respectively, from other income, net of $46,000 and $0.2 million for the three and six months ended June 30, 2023, respectively, which was primarily driven by the change in fair value of the contingent consideration liability related to the Devon Street Homes Acquisition during the three and six months ended June 30, 2024.

Current wording

$49,000 to $0.2 million, which was primarily driven by an increase in interest income on our cash and cash equivalents. For the nine months ended September 30, 2024, other income, netdecreased by$1.0 million, respectively, from other income, net of$0.2 million to other expense, net of$0.8 million, which was primarily driven by the change in fair value of the contingent consideration liability related to the Devon Street Homes Acquisition during the nine months ended September 30, 2024.

Previous wording

Net income for the three and six months ended June 30, 2024 decreased by $6.0 million, or 20%, and $14.3 million, or 24%, respectively. The decrease was primarily due to increases of $9.9 million and $17.7 million, respectively, in selling, general and administrative costs due to higher commissions and advertising costs and $1.1 million and $2.0 million of income tax expense incurred for the three and six months ended June 30, 2024, respectively, after our IPO and Reorganization Transactions, partially offset by increases in home closing gross profit of $6.4 million and $7.3 million, respectively.

Current wording

Net income for the three months ended September 30, 2024 increased by$3.9 million, or 11% from the same period of the prior year. Theincrease was primarily due to anincrease of$16.6 millionin home closing gross profit, partially offset by an increase of$11.2 million in selling, general and administrative costs due to higher commissions and advertising costs and$1.8 million of income tax expense incurred for the three months ended September 30, 2024 as a result of our IPO and Reorganization Transactions.

Previous wording

Alabama: The $4.1 million and $6.5 million increases in net income for the three and six months ended June 30, 2024 compared to the same periods in the prior year were primarily due to an increase in home closing revenue and gross profit due to increases in homes closed of 120% and 88%, respectively, and increases in ASP of homes closed of 6% and 3%, respectively, partially offset by increases in selling, general, and administrative costs.

Current wording

Alabama: The$0.3 million and$6.8 million increases in net income for the three and nine months ended September 30, 2024 compared to the same periods in the prior year were primarily due to an increase in home closing revenue and gross profit due to increases in homes closed of 13% and 56%, respectively, and increases in ASP of homes closed of 1% and 2%, respectively, partially offset by increases in selling, general, and administrative costs.

Previous wording

Raleigh: The $0.4 million decrease in net income for the three months ended June 30, 2024 compared to the same period in the prior year is primarily due to a slight increase in home closing gross profit of 3% offset by an increase in selling, general, and administrative costs of 28%. The $2.8 million decrease in net income for the six months ended June 30, 2024 compared to the same period in the prior year is primarily due to a decrease in home closing gross profit of 12% and an increase in selling, general, and administrative costs of 15%.

Current wording

Atlanta: The$7.6 million increase in net income for the three months ended September 30, 2024 compared to the same period in the prior year was primarily due to a 51% increase in homes closed partially offset by a 5% increase in the average cost of homes closed and additional selling, general and administrative costs associated with increased home closing revenue. The $2.7 million decrease in net income for the nine months ended September 30, 2024 compared to the same period in the prior year was primarily due to a slight decrease in home closings of 1%, partially offset by an increase in ASP of homes closed of 6%.

Previous wording

Charlotte: Net income in Charlotte was consistent for the three months ended June 30, 2024 compared to the same period of the prior year and decreased slightly for the six months ended June 30, 2024 compared to the same period of the prior year due to slight increases in home closing gross profit of 8% and 3%, respectively, offset by increases in selling, general, and administrative costs of 19% and 15%, respectively.

Current wording

Charlotte: Net income in Charlotte increased $2.8 million and $2.5 million, respectively, for the three and nine months ended September 30, 2024 compared to the same periods of the prior year due to slight increases in home closing gross profit of 86% and 33%, respectively, offset by increases in selling, general, and administrative costs of 43% and 26%, respectively.

Previous wording

Nashville: The $1.7 million and $2.6 million decreases in net income for the three and six months ended June 30, 2024 compared to the same periods in the prior year were primarily due to decreases in home closing gross profit of 23% and 24%, respectively, driven by higher average lot costs on the mix of homes closed.

Current wording

Raleigh: The$1.0 million and$3.9 million decreases in net income for the three and nine months ended September 30, 2024 compared to the same periods in the prior year were primarily due to decreases in home closing gross profit of 5% and 10%, respectively, and increases in selling, general, and administrative costs of 20% and 17%, respectively.

Previous wording

Our adjusted home closing gross profit increased slightly while adjusted home closing gross margin decreased from both the three and six months ended June 30, 2023 to the same periods in 2024. The increase in adjusted home closing gross profit primarily results from increases in home closings of 17% and 15%, respectively. The decrease in adjusted home closing gross margin is driven by increases in the average cost of home closings of 8% and 6%, respectively, partially offset by increases in the ASP of homes closed of 4% and 2%, respectively.

Current wording

Our adjusted home closing gross profit increased while adjusted home closing gross margin decreased from both the three and nine months ended September 30, 2023 to the same periods in 2024. Theincrease in adjusted home closing gross profit primarily results from increases in home closings of 39% and 24%, respectively. Thedecrease in adjusted home closing gross margin is driven byincreases in the average cost of home closings of 4% and 5%, respectively, partially offset byincreases in the ASP of homes closed of 1% and 2%, respectively.

Previous wording

Adjusted net income is not a measure of net income or net income margin as determined by GAAP. Adjusted net income is a supplemental non-GAAP financial measure used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define adjusted net income as net income adjusted for the tax impact using a 25.0% federal and state blended tax rate (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

Adjusted net income is not a measure of net income or net income margin as determined by GAAP. Adjusted net income is a supplemental non-GAAP financial measure used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define adjusted net income as net income adjusted for the tax impact using a 24.5% federal and state blended tax rate (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) adjustments resulting from the application of purchase accounting included in cost of sales, and (vii) adjustments resulting from the application of purchase accounting included in other expense (income), net. 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) adjustments resulting from the application of purchase accounting included in cost of sales, and (vii) adjustments resulting from the application of purchase accounting included in other (income) expense, net. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of home closing revenue.

Previous wording

Our EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin decreased from the three and six months ended June 30, 2023 to the same periods in 2024 primarily as a result of decreases in net income of 20% and 24%, respectively, partially offset by increases in interest expense of $0.3 million and $0.8 million, respectively, and increases in provision for income taxes of $1.1 million and $2.0 million, respectively.

Current wording

Our EBITDA and adjusted EBITDA increased from the three months ended September 30, 2023 to the same period in 2024, primarily as a result of a 11% increase in net income and $1.8 million increase in provision for income taxes after our IPO and Reorganization Transactions. EBITDA margin and adjusted EBITDA margin decreased from the three months ended September 30, 2023 to the same period in 2024, primarily as a result of a 2.4% decrease in home closing gross margin.

Previous wording

On January 16, 2024, in connection with our IPO, we issued and sold 8,846,154 shares of our Class A common stock at a price to the public of $21.00 per share, resulting in gross proceeds to us of approximately $185.8 million and net proceeds to us of approximately $172.8 million, after deducting the underwriting discount of approximately $13.0 million. We used the net proceeds from the IPO to: (i) purchase 6,410,257 newly issued LLC Interests for approximately $125.2 million directly from Smith Douglas Holdings LLC at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount; and (ii) purchase 2,435,897 LLC Interests from the Continuing Equity Owners on a pro rata basis for $47.6 million in aggregate at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount).

Current wording

On January 16, 2024, in connection with our IPO, we issued and sold 8,846,154 shares of our Class A common stock at a price to the public of$21.00 per share, resulting in gross proceeds to us of approximately$185.8 million and net proceeds to us of approximately$172.8 million, after deducting the underwriting discount of approximately$13.0 million. We used the net proceeds from the IPO to: (i) purchase 6,410,257 newly issued LLC Interests for approximately$125.2 million directly from Smith Douglas Holdings LLC at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount; and (ii) purchase 2,435,897 LLC Interests from the Continuing Equity Owners on a pro rata basis for$47.6 million in aggregate at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount).

Previous wording

As of June 30, 2024, we had $17.3 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, 2024, we had$23.7 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

Cash flows from operating, investing, and financing activities – comparison for the six months ended June 30, 2024 and 2023

Current wording

Cash flows from operating, investing, and financing activities – comparison for the nine months ended September 30, 2024 and 2023

Previous wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes our cash flows for the periods presented (in thousands):

Previous wording

We used approximately $9.2 million and generated approximately $35.9 million in net cash from operating activities for the six months ended June 30, 2024 and 2023, respectively. Operating cash flows for the six months ended June 30, 2024 benefited from cash generated by net income of $45.2 million, which was more than offset by a $50.3 million increase in real estate inventory, $9.2 million increase in deposits on real estate under option or contract, and $4.6 million increase in other assets. Operating cash flows for the six months ended June 30, 2023 benefited from cash generated by net income of $59.6 million primarily offset by a $21.3 million increase in real estate inventory.

Current wording

We generated approximately$13.7 million and $55.0 million in net cash from operating activities for thenine months ended September 30, 2024 and 2023, respectively. Operating cash flows for thenine months ended September 30, 2024 benefited from cash generated by net income of$83.0 million, non-cash operating expenses of $7.9 million, and a $6.2 million increase in accounts payable, which were partially offset by a$61.5 million increase in real estate inventory and$23.1 million increase in deposits on real estate under option or contract. Operating cash flows for thenine months ended September 30, 2023 benefited from cash generated by net income of$93.5 million and non-cash operating expenses of $2.8 million, which were primarily offset by a$34.3 million increase in real estate inventory and$6.5 million increase indeposits on real estate under option or contract.

Previous wording

We used approximately $3.2 million and $0.2 million in net cash in investing activities for the six months ended June 30, 2024 and 2023, respectively. The net cash used in investing activities during the six months ended June 30, 2024 was primarily due to purchases of property and equipment and investments in unconsolidated entities. The net cash used in investing activities during the six months ended June 30, 2023 was primarily due to purchases of property and equipment partially offset by distributions of capital from unconsolidated entities.

Current wording

We used approximately$3.8 million and$75.6 million in net cash in investing activities for thenine months ended September 30, 2024 and 2023, respectively. The net cash used in investing activities during thenine months ended September 30, 2024 was primarily due to purchases of property and equipment and investments in unconsolidated entities. The net cash used in investing activities during thenine months ended September 30, 2023 was primarily due to$74.9 million used to fund the Devon Street Homes Acquisition.

Previous wording

Net cash provided by (used in) financing activities was approximately $9.9 million and $(53.9 million) for the six months ended June 30, 2024 and 2023, respectively. The $63.8 million increase in cash provided by financing activities was primarily attributable to net proceeds from the IPO and Reorganization Transactions of $115.7 million and a $20.1 million decrease in distributions to members of Smith Douglas Holdings LLC, partially offset by a $66.0 million increase in net repayments under revolving credit facility.

Current wording

Net cash (used in) provided by financing activities was approximately$(5.9) million and$1.5 million for thenine months ended September 30, 2024 and 2023, respectively. The$7.4 million increase in cash used in financing activities was primarily attributable to net proceeds from the IPO and Reorganization Transactions of $115.7 million and a$30.9 million decrease in distributions to members of Smith Douglas Holdings LLC, partially offset by a$127.0 million increase in net repayments under revolving credit facility and a$23.3 million increase in net cash used in in real estate not owned transactions.

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, 2024, we had 587 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.7% 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, 2024, we had 611 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.4% of our total controlled lot supply.

Previous wording

As of June 30, 2024, we had $62.8 million of non-refundable cash deposits under land and lot-option contracts pertaining to 8,551 lots with a remaining aggregate purchase price of approximately $545.6 million.

Current wording

As of September 30, 2024, we had$73.9 million of non-refundable cash deposits under land and lot-option contracts pertaining to 9,572 lots with a remaining aggregate purchase price of approximately$612.8 million.

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, 2024, there were no 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 $33.0 million and $26.1 million as of June 30, 2024 and December 31, 2023, 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, 2024, there were no 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$32.7 million and$26.1 million as of September 30, 2024 and December 31, 2023, 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.

Previous wording

After the IPO and Reorganization Transactions, we are the sole managing member of Smith Douglas Holdings LLC. The non-controlling interests in the unaudited condensed consolidated statement of income for the three and six months ended June 30, 2024 represent the portion of earnings attributable to the economic interest in Smith Douglas Holdings LLC held by the Continuing Equity Owners. The non-controlling interests in the unaudited condensed consolidated balance sheet as of June 30, 2024 represent the portion of the net assets of the Company attributable to the Continuing Equity Owners, based on the portion of the LLC Interests owned by such unit holders. As of June 30, 2024, the non-controlling interests were 82.7%.

Current wording

After the IPO and Reorganization Transactions, we are the sole managing member of Smith Douglas Holdings LLC. The non-controlling interests in the unaudited condensed consolidated statement of income for thethree andnine months ended September 30, 2024 represent the portion of earnings attributable to the economic interest in Smith Douglas Holdings LLC held by the Continuing Equity Owners. The non-controlling interests in the unaudited condensed consolidated balance sheet as of September 30, 2024 represent the portion of the net assets of the Company attributable to the Continuing Equity Owners, based on the portion of the LLC Interests owned by such unit holders. As of September 30, 2024, the non-controlling interests were 82.7%.