Smith Douglas Homes Corp.
For the period ended Mar 31, 2025. Filed May 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 14, 2025
SDHC$9.81-4.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001982518-24-000005
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0001982518-25-000020
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 157 previous paragraphs and 128 current paragraphs.
85 unchanged; 37 reworded; 6 added; 33 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Our operations are currently organized into eight geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Houston, and Nashville divisions.
Current report
Selling, general, and administrative costs for the three months ended March 31, 2025 were$33.0 million, anincrease of$5.5 million, or 20%, from$27.5 million for the three months ended March 31, 2024.
Current report
Other expense (income), net
Current report
Central: The$3.3 million decrease in net income for the three months ended March 31, 2025 compared to the same period in the prior year was primarily due to an increase in home closing revenue and gross profit due to an increase in homes closed of 4%, partially offset by a decrease in ASP of homes closed of 3% and an increase in selling, general, and administrative costs.
Current report
As of March 31, 2025, there were $40.0 million of outstanding borrowings under the Amended Credit Facility. As of May 9, 2025, there were $52.0 million of outstanding borrowings under the Amended Credit Facility. As of March 31, 2025 and May 9, 2025, there wereno outstanding letters of credit.
Current report
We generated$27.3 million and$22.7 million in net cash from financing activities for thethree months ended March 31, 2025 and 2024, respectively. The net cash provided by financing activities during thethree months ended March 31, 2025 was primarily due to$40.0 million in net borrowings under the Amended Credit Facility, partially offset by $13.9 million in tax distributions. The net cash provided by financing activities during thethree months ended March 31, 2024 was primarily due to$116.3 million in net proceeds from the IPO and Reorganization Transactions, partially offset by $71.4 million in net repayments under the Prior Credit Facility and $16.3 million in distributions.
Removed paragraphs (33)
Previous report
During thenine months ended September 30, 2024 compared to the same period of the prior year, the number of homes closed increased 24%, and home closing revenue increased 26%. Our net new home orders increased 13% and contract value of net new home orders increased by 15%.
Previous report
Recent Developments
Previous report
IPO
Previous report
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 report
The Transactions
Previous report
The results of operations discussed in this Quarterly Report on Form 10-Q include those of Smith Douglas Holdings LLC prior to the completion of the Transactions, including the IPO. As a result, the historical consolidated financial data may not give you an accurate indication of what our actual results would have been if the transactions described in Basis of Presentation—The Transactions had been completed at the beginning of the periods presented or of what our future results of operations are likely to be. See Basis of Presentation—The Transactions.
Previous report
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 report
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 report
Cost of home closings for the three months ended September 30, 2024, was$204.1 million, an increase of$63.6 million, or 45%, from$140.5 million for the three months ended September 30, 2023, which was primarily driven by a
Previous report
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 report
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 report
Other (income) expense, net
Previous report
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 report
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 report
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 report
Houston: Net income in Houston increased$3.4 million and$10.2 million for the three and nine months ended September 30, 2024 compared to the same periods of the prior year, which is primarily due to the prior year only reflecting results of operations for a partial year beginning with the Devon Street Homes Acquisition which occurred on July 31, 2023.
Previous report
Nashville: The$2.1 million and$4.7 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 the number of homes closed of 26% and 19%, respectively, and increases in the average cost of homes closed of 12% and 6%, respectively.
Previous report
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 report
For the nine months ended September 30, 2024 compared to the same period in 2023, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin decreased primarily as a result of adecrease in net income of 11%partially offset by anincrease in interest expense of$0.9 millionand anincrease in provision for income taxes of$3.8 million. Adecrease in home closing margin of 2.4% also contributed to the decreases in EBITDA margin and adjusted EBITDA margin.
Previous report
IPO
Previous report
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 report
We only retained the net proceeds that were used to purchase newly issued LLC Interests from Smith Douglas Holdings LLC, which, in turn, Smith Douglas Holdings LLC used as follows: (i) to repay approximately $84.0 million of borrowings outstanding under our Prior Credit Facility as part of the Refinancing, (ii) redeem all outstanding Class C Units and Class D Units of Smith Douglas Holdings LLC at par aggregating $2.6 million, (iii) repay $0.9 million in notes payable to related parties, and (iv) the remainder for general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in businesses, products, services, or technologies; however, we do not have agreements or commitments for any material acquisitions or investments at this time.
Previous report
Prior Credit Facility
Previous report
On October 28, 2021, certain of our wholly-owned subsidiaries entered into a $175.0 million unsecured revolving credit facility with Wells Fargo Bank, National Association, as administrative agent for the Lenders, as amended on December 19, 2022, and as amended concurrently with the consummation of the IPO to the Amended Credit Facility. Smith Douglas Holdings LLC and Smith Douglas Homes Corp. were not parties to the Prior Credit Facility. Concurrently with the consummation of the IPO, we repaid the Prior Credit Facility.
Previous report
Concurrently with the consummation of the IPO and pursuant to the Refinancing, Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries entered into the Amended Credit Facility, which amended and replaced the Prior Credit Facility, and conducted the Debt Repayment, pursuant to which we used a portion of the net proceeds from the IPO to repay the $84.0 million outstanding under our Prior Credit Facility. Smith Douglas Homes Corp. is not a party to the Amended Credit Facility.
Previous report
As of September 30, 2024, there were no outstanding borrowings or letters of credit under the Amended Credit Facility.
Previous report
Net cash (used in) provided by financing activities was approximately$(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 report
Income Taxes
Previous report
In calculating the provision for interim income taxes, in accordance with ASC Topic 740, Income Taxes, an estimated annual effective tax rate is applied to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year. This differs from the method utilized at the end of an annual period.
Previous report
For annual periods, income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In assessing the realizability of deferred tax assets, we consider whether it is more-likely-than-not that the deferred tax assets will be realized. Deferred tax assets and liabilities are calculated by applying existing tax laws and the rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the year of the enacted rate change.
Previous report
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. As of September 30, 2024 and December 31, 2023, there were no known items which would result in a significant accrual for uncertain tax positions.
Previous report
Non-controlling interests
Previous report
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%.
Reworded paragraphs (37)
Previous wording
Prior to our IPO, we were one of the nation’s fastest growing private homebuilders by number of closings and are engaged in the design, construction, and sale of single-family homes in some of the highest growth and most desirable markets in the Southeastern and Southern United States. We employ an efficient land-light, production focused, and conservatively leveraged business model, which we believe results in a compelling combination of strong home closing gross margins, construction cycle times, and returns. Our communities are primarily targeted to entry-level and empty-nest homebuyers. We offer our homebuyers an attractive value proposition by providing a personalized home buying experience at affordable price points. With the goal of becoming one of the most dominant homebuilders in the Southeastern and Southern United States, we intend to grow operations within our existing footprint and to expand into new markets where we can most effectively implement our business strategy and maximize our profit and returns.
Current wording
Smith Douglas is engaged in the design, construction, and sale of single-family homes in some of the highest growth and most desirable markets in the Southeastern and Southern United States. We employ an efficient land-light, production focused, and conservatively leveraged business model, which we believe results in a compelling combination of strong home closing gross margins, construction cycle times, and returns. Our communities are primarily targeted to entry-level and empty-nest homebuyers. We offer our homebuyers an attractive value proposition by providing a personalized home buying experience at affordable price points. With the goal of becoming one of the most dominant homebuilders in the Southeastern and Southern United States, we intend to grow operations within our existing footprint and to expand into new markets where we can most effectively implement our business strategy and maximize our profit and returns.
Previous wording
Despite continued uncertainty in the mortgage interest rate environment, we achieved strong results with 812 homes closed for a total of $277.8 million in home closing revenue for thethree months ended September 30, 2024, which reflect increases of 39%in the number of homes closed and 41% in home closing revenue over the same period of the prior year. Our net new home orders and contract value of net new home orders increased by 6%.
Current wording
While we continue to see uncertainty among potential homebuyers, particularly around interest rates and the macroeconomic environment, we achieved 671 homes closed for a total of $224.7 million in home closing revenue for the three months ended March 31, 2025, which reflects an increase of 19%in both the number of homes closed andhome closing revenue over the same period of the prior year. Our net new home orders and contract value of net new home orders remained constant period over period.
Previous 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.
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 were 8% and 11% for the three months ended March 31, 2025 and 2024, 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 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.
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 March 31, 2025, we had 888 owned unstarted lots in real estate inventory on our balance sheet which represented only 4.3% 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 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.
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 divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Houston, and Nashville divisions. We believe there is significant opportunity to expand our presence in each of our respective markets.
Previous wording
Comparison of three and nine months ended September 30, 2024 and 2023
Current wording
Comparison of three months ended March 31, 2025 and 2024
Previous wording
(1)Earnings per share for the nine months ended September 30, 2024 is calculated for the period from January 11, 2024, the date of the IPO, to September 30, 2024.
Current wording
(1)Earnings per share for the three months ended March 31, 2024 is calculated for the period from January 11, 2024, the date of the IPO, to March 31, 2024.
Previous wording
Home closing revenue for the three months ended September 30, 2024, was$277.8 million, anincrease of$80.2 million, or 41%, from$197.6 million for the three months ended September 30, 2023. The increase in revenue was primarily attributable toincreases of 39% in the number of homes closed and 1% in the ASP of homes closed. The growth in the number of homes closed as compared to the three months ended September 30, 2023 reflected increases of 13%, 51%, 86%, 213%, and 11% in our Alabama, Atlanta, Charlotte, Houston, and Raleigh homebuilding reporting segments, respectively, partially offset by a decrease of 26% in our Nashville segment.
Current wording
Home closing revenue for the three months ended March 31, 2025, was$224.7 million, anincrease of$35.5 million, or 19%, from$189.2 million for the three months ended March 31, 2024. The increase in revenue was primarily attributable to anincrease of 19% in the number of homes closed. The growth in the number of homes closed as compared to the three months ended March 31, 2024 reflected increases of 32% in our Southeast segment and 4% in our Central segment.
Previous 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.
Current wording
Cost of home closings for the three months ended March 31, 2025, was$171.2 million, an increase of$31.4 million, or 22%, from$139.7 million for the three months ended March 31, 2024, which was primarily driven by a 19% increase in home closings and an 3% increase in the average cost of home closings.
Previous 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.
Current wording
Home closing gross profit for the three months ended March 31, 2025 was$53.5 million, an increase of$4.1 million, or 8%, from$49.5 million for the three months ended March 31, 2024. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 23.8% in the three months ended March 31, 2025 compared to 26.1% in the same period in 2024.
Previous 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.
Current wording
The decrease in home closing gross margin for the three months ended March 31, 2025 compared to the same period of the prior year was primarily driven by an increase of 3% in the average cost of home closings while the ASP of homes closed remained constant.
Previous 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.
Current wording
Theincrease for the three months ended March 31, 2025 compared to the same periods of the prior year was primarily due toan increase in sales commissions and advertising costs associated with our increase in homes closed and related home closing revenue and increased payroll and performance-based bonus compensation expenses on higher employee headcount.
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 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.
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 and our portion of income from our interest in thecompany engaged in providing mortgage broker services to our homebuyers. For the three months ended March 31, 2025, equity in income from unconsolidated entities increased slightly from the three months ended March 31, 2024, due to slightly higher title insurance revenue generated by the title company.
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$0.1 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.
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 remained constant at $0.7 million for both of the three months ended March 31, 2025 and March 31, 2024.
Previous 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.
Current 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 months ended March 31, 2025, other expense (income), net decreased by$0.5 million from$2,000 to $0.5 million, which was primarily driven by a $0.7 million lot option contract abandonment charge duringthe three months ended March 31, 2025, while there wereno such charges in the same period of the prior year, as well as an increase in interest income on our cash and cash equivalents.
Previous wording
After consummation of the IPO, Smith Douglas Homes Corp. became 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.
Current wording
After consummation of the IPO, Smith Douglas Homes Corp. became 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$0.9 million for both thethree months ended March 31, 2025 and 2024, which reflects an effective tax rate of 4.5% and 4.3%, respectively.
Previous wording
Net income for the nine months ended September 30, 2024 decreased by$10.5 million, or 11% from the same period of the prior year. Thedecrease was primarily due to anincrease of$28.8 millionin selling, general and administrative costs due to higher commissions and advertising costs and$3.8 million of income tax expense incurred for the nine months ended September 30, 2024 as a result of our IPO and Reorganization Transactions, partially offset by anincrease in home closing gross profit of$23.9 million.
Current wording
Net income for the three months ended March 31, 2025 decreased by$1.8 million, or 9% from the same period of the prior year. Thedecrease was primarily due toan increase of$5.5 million in selling, general and administrative costs, partially offset by anincrease of$4.1 millionin home closing gross profit.
Previous 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.
Current wording
Southeast: The$2.9 million increase in net income for the three months ended March 31, 2025 compared to the same period in the prior year was primarily due to an increase in home closing revenue and gross profit due to an increase in homes closed of 32% and an increase in ASP of homes closed of 1%, partially offset by an increase in selling, general, and administrative costs.
Previous 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.
Current wording
Our adjusted home closing gross profit increased while adjusted home closing gross margin decreased from the three months ended March 31, 2024 to the same period in 2025. Theincrease in adjusted home closing gross profit primarily results from anincrease in home closings of 19%. Thedecrease in adjusted home closing gross margin was driven by anincrease in the average cost of home closings of 3%.
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 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).
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 24.9% 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
(1)For the three and nine months ended September 30, 2024 and 2023, our tax expenses assumes 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).
Current wording
(1)For the three months ended March 31, 2025 and 2024, our tax expenses assumes a 24.9% and 25.0% 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) 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.
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 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.
Previous 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.
Current wording
Our EBITDA and EBITDA margin decreased from the three months ended March 31, 2024 to the same period in 2025, primarily as a result of a$1.8 million decrease in net income and $0.6 million decrease in capitalized interest charge to cost of home closings. Our adjusted EBITDA and adjusted EBITDA margin decreased from the three months ended March 31, 2024 to the same period in 2025, primarily as a result of a$1.4 million increase in real estate inventory impairment and lot option contract abandonment charges.
Previous wording
•Total debt, less cash and cash equivalents, plus stockholders’ equity.
Current wording
•Total debt, less cash and cash equivalents, plus equity.
Previous 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.
Current wording
As of March 31, 2025, we had$12.7 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
Looking beyond the next 12 months, our primary funding needs will continue to center around home construction, finished lot acquisitions necessary to maintain a minimum four-year lot supply, growing active community count, growth into new and existing markets, and interest payments on our Amended Credit Facility. We expect our existing cash reserves, along with generated cash flows and availability under our Amended Credit Facility, will be sufficient to fund our ongoing operational activities and provide the necessary capital for future lot purchases and related growth strategies.
Current wording
Looking beyond the next 12 months, our primary funding needs will continue to center around home construction, finished lot acquisitions necessary to maintain a minimum four-year lot supply, growing active community count, growth into new and existing markets, and principal and interest payments on our Amended Credit Facility. We expect our existing cash reserves, along with generated cash flows and availability under our Amended Credit Facility, will be sufficient to fund our ongoing operational activities and provide the necessary capital for future lot purchases and related growth strategies.
Previous wording
The Amended Credit Facility, among other things, increases the aggregate principal amount of our revolving credit commitments to $250.0 million and extends the maturity date to January 16, 2027, provided that the borrowers may request a one-year extension of its maturity date. The Amended Credit Facility also includes a $100.0 million accordion feature, subject to additional commitments, and provides that up to $20.0 million may be used for letters of credit.
Current wording
As of March 31, 2025, the Company has a $250.0 million unsecured revolving credit facility that was entered into concurrently with the IPO (the Amended Credit Facility), which replaced the previous $175.0 million unsecured revolving credit facility. The Amended Credit Facility matures in January 2027, except that the Company may request a one-year extension of such maturity date. The Amended Credit Facility also includes a $100.0 million accordion feature, subject to additional commitments, and provides that up to $20.0 million may be used for letters of credit.
Previous wording
See Part I—Item 1A. Risk Factors—Risks Related to our Organizational Structure and Part III, Item 13. Certain Relationships and Related Transactions, and Director Independenceof our Annual Report.
Current wording
See Part I—Item 1A. Risk Factors—Risks Related to our Organizational Structure of our Annual Report and Certain Relationships and Related Person Transactionsof our Proxy Statement.
Previous wording
Cash flows from operating, investing, and financing activities – comparison for the nine months ended September 30, 2024 and 2023
Current wording
Cash flows from operating, investing, and financing activities – comparison for the three months ended March 31, 2025 and 2024
Previous 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.
Current wording
We used$34.9 million and $9.3 million in net cash in operating activities for thethree months ended March 31, 2025 and 2024, respectively. Operating cash flows for thethree months ended March 31, 2025 benefited from cash generated by net income of$18.7 million, non-cash operating expenses of $3.3 million, and a $2.7 million increase in accounts payable, which were more than offset by a$19.5 million increase in real estate inventory,$17.0 million increase in deposits on real estate under option or contract,$11.5 million increase in other assets, and $11.9 million decrease in accrued expenses and other liabilities. Operating cash flows for thethree months ended March 31, 2024 benefited from cash generated by net income of$20.5 million and non-cash operating expenses of $2.5 million, which were more than offset by a$17.8 million increase in real estate inventory,$7.7 million increase indeposits on real estate under option or contract, and$7.2 million decrease in accrued expenses and other liabilities.
Previous 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.
Current wording
We used$2.1 million and$0.4 million in net cash in investing activities for thethree months ended March 31, 2025 and 2024, respectively. The net cash used in investing activities during thethree months ended March 31, 2025 was primarily due to$1.0 million inpurchases of property and equipment and$1.1 million ininvestments in unconsolidated entities. The net cash used in investing activities during thethree months ended March 31, 2024 was primarily due topurchases of property and equipment.
Previous wording
There have been no material changes to the material cash commitments described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report.
Current wording
Other than with respect to the interest on the outstanding borrowings under our Amended Credit Facility, as described above, there have been no material changes to the material cash commitments described in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report.
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 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.
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 March 31, 2025, we had 888 owned unstarted lots in real estate inventory on our balance sheet which represented only 4.3% of our total controlled lot supply.
Previous 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.
Current wording
As of March 31, 2025, we had$114.5 million of non-refundable cash deposits under land and lot-option contracts pertaining to 13,385 lots with a remaining aggregate purchase price of approximately$920.1 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 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.
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 March 31, 2025, there wereno 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 $38.9 million and $32.1 million as of March 31, 2025 and December 31, 2024, 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
Our significant accounting policies are described in Note 1—Description of the business and summary of significant accounting policies to our accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition, or results of operations. There have been no material changes to the Company’s critical accounting estimates since our Annual Report, except as described below.
Current wording
Our significant accounting policies are described in Note 1—Description of the business and summary of significant accounting policies to our accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Some of those significant accounting policies require us to make difficult, subjective, or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (i) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition, or results of operations. There have been no material changes to the Company’s critical accounting estimates since our Annual Report.
Previous wording
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if as an emerging growth company we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our systems of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with the requirement of the PCAOB regarding the communication of critical audit matters in the auditor’s report on the financial statements, and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply until we no longer meet the requirements of being an emerging growth company. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
Current wording
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Specifically, subject to the satisfaction of certain conditions set forth in the JOBS Act, we are not required to, and do not intend to, among other things, (i) provide an auditor’s attestation report on our systems of internal control over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with the requirement of the PCAOB regarding the communication of critical audit matters in the auditor’s report on the financial statements, and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. These exemptions will apply until we no longer meet the requirements of being an emerging growth company. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Other (income) expense, 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 months ended September 30, 2024, other income, netincreased by$0.2 million from
Previous report — wording carried elsewhere
After consummation of the IPO, Smith Douglas Homes Corp. became 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.