Smith Douglas Homes Corp.

Previous 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.

Current wording

In the second quarter of 2025, we continued to see softening in the market as mortgage interest rates remain elevated and potential homebuyers raised concerns about affordability and macroeconomic uncertainty. In response, we have used financing incentives, such as closing cost credits and mortgage rate buydowns, to address these concerns. We achieved 669 homes closed for a total of $223.9 million in home closing revenue for the three months ended June 30, 2025, which reflects an increase of 2% in the number of homes closed and 1% in home closing revenue over the same period of the prior year. Our net new home orders increased 3% and contract value of net new home orders increased 1% 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 were 8% and 11% for the three months ended March 31, 2025 and 2024, 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 were 10% and 12% for the three months ended June 30, 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 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.

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 June 30, 2025, we had 834 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 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.

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 think there is significant opportunity to expand our presence in each of our respective markets.

Previous wording

Comparison of three months ended March 31, 2025 and 2024

Current wording

Comparison of three and six months ended June 30, 2025 and 2024

Previous 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.

Current wording

(1)Earnings per share for the six months ended June 30, 2024 is calculated for the period from January 11, 2024, the date of the IPO, to June 30, 2024.

Previous 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.

Current wording

Home closing gross profit for the three months ended June 30, 2025 was$51.9 million, a decrease of$7.1 million, or 12%, from$59.1 million for the three months ended June 30, 2024. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 23.2% in the three months ended June 30, 2025 compared to 26.7% in the same period in 2024. Home closing gross profit for thesix months ended June 30, 2025 was$105.5 million, adecrease of$3.0 million, or 3%, from$108.5 million for thesix months ended June 30, 2024. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 23.5% in thesix months ended June 30, 2025 compared to 26.5% in the same period in 2024.

Previous 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.

Current wording

The decrease in home closing gross margin for each of the three and six months ended June 30, 2025 compared to the same periods of the prior year was for each period primarily driven by a 4% increase in the average cost of home closings while the ASP of homes closed remained constant.

Previous 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.

Current wording

Theincrease for thethree and six months ended June 30, 2025 compared to the same periods of the prior year was for each period primarily dueto an increase in sales commissions, advertising costs, and division overhead associated with our increase in homes closed and related home closing revenue and increased payroll and performance-based bonus compensation expenses attributable to 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 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.

Current wording

Equity in income from unconsolidated entities consists primarily of our portion of income from our interest in the title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers and our portion of income from our interest in thecompany engaged in providing mortgage broker services to our homebuyers. For each of the three and six months ended June 30, 2025, equity in income from unconsolidated entities increased $0.4 million from the three and six months ended June 30, 2024, in each case primarily due to 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 remained constant at $0.7 million for both of the three months ended March 31, 2025 and March 31, 2024.

Current wording

Interest expense is comprised of interest incurred, but not capitalized on our Prior Credit Facility, Amended Credit Facility, other borrowings, and amortization of debt issuance costs. For the three and six months ended June 30, 2025, interest expense increased $0.2 million and $0.1 million, respectively, from the three and six months ended June 30, 2024, in each case primarily due to higher outstanding borrowings on our Amended Credit Facility.

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 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.

Current wording

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 and six months ended June 30, 2025, other (income) expense, net reflected a positive impact of $1.1 million and $0.6 million, respectively, from the three and six months ended June 30, 2024, primarily due to remeasurement of contingent liability charges of $1.2 million and $1.3 million during the three and six months ended June 30, 2024, respectively, which did not recur in 2025.

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. 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.

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$0.7 million and $1.1 million, respectively, for thethree months ended June 30, 2025 and 2024, which reflects an effective tax rate of 4.3% and 4.4%, respectively. Provision for income taxes was $1.6 million and $2.1 million, respectively, for the six months ended June 30, 2025 and 2024, which reflects an effective tax rate of 4.4% and 4.3%, respectively.

Previous wording

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

Current wording

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

Previous wording

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%.

Current wording

Our adjusted home closing gross profit and adjusted home closing gross margin decreased from both the three and six months ended June 30, 2024 to the same periods in 2025. The decreases in adjusted home closing gross profit and adjusted home closing gross margin were primarily due to increases in the average cost of home closings of 4% in both periods.

Previous 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).

Current wording

(1)For the three and six months ended June 30, 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) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included inother expense (income), net, and (ix) real estate inventory impairment and lot option contract abandonment charges. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of home closing revenue.

Current wording

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

Previous wording

Our EBITDA and EBITDA margin decreased from the three 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.

Current wording

Our EBITDA and EBITDA margin decreased from the three and six months ended June 30, 2024 to the same periods in 2025, primarily as a result of decreases in net income of $8.3 million and $10.1 million, respectively. Our adjusted EBITDA and adjusted EBITDA margin decreased from the three and six months ended June 30, 2024 to the same periods in 2025, primarily as a result of remeasurement of contingent consideration liability [related to the Devon Street Homes Acquisition] during the three and six months ended June 30, 2024 which did not recur in 2025.

Previous 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.

Current wording

As of June 30, 2025, we had$16.8 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

However, the opportunity to purchase substantially finished lots in desired locations is becoming increasingly more competitive. As a result, we remain open to seeking additional capital if necessary to enhance our liquidity position, further enable the acquisition of additional finished lot inventory in anticipation of improving market conditions and the competitive landscape and fortify our long-term capital structure.

Current wording

However, the opportunity to purchase substantially finished lots in desired locations is becoming increasingly more competitive. As a result, we remain open to seeking additional capital if necessary to enhance our liquidity position, further enable the acquisition of additional finished lot inventory in anticipation of improving market conditions, and fortify our long-term capital structure.

Previous 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.

Current wording

As of June 30, 2025, the Company has a $325.0 million unsecured revolving credit facility under the Amended Credit Facility. On May 15, 2025, the Company entered into the Amended Credit Facility to, among other things, (i) increase the total revolving commitments from $250.0 million to $325.0 million, (ii) increase certain thresholds and sublimits in the borrowing base to allow for additional borrowing flexibility, (iii) extend the revolving loan maturity date from January 16, 2027 to May 15, 2029, and (iv) revise certain financial covenants. The Amended Credit Facility matures on May 15, 2029, 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. The Amended Credit Facility provides that up to $20.0 million may be used for letters of credit.

Previous wording

The Amended Credit Facility contains certain financial covenants, among others, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a) $130.0 million, (b) 32.5% of positive pre-tax income earned in any fiscal quarter after June 30, 2023, (c) 75% of the equity proceeds of Smith Douglas Homes Corp. and its subsidiaries from the IPO and (d) 50% of new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries after the IPO, (ii) a maximum leverage ratio of 60%, (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of $15.0 million. The Amended Credit Facility also contains various covenants that, among other restrictions, limit the ability of Smith Douglas Homes LLC and the other borrowers to incur additional debt and to make certain investments and distributions. Additionally, the Amended Credit Facility contains certain covenants that restrict certain activities of Smith Douglas Homes Corp. The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations. If an event of default occurs and is continuing, the borrowers may be required immediately to repay all amounts outstanding under the Amended Credit Facility. As of March 31, 2025, we were in compliance with all covenants related to the Amended Credit Facility.

Current wording

The Amended Credit Facility contains certain financial covenants, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a) $286.1 million, (b) 32.5% of pre‑tax income earned in any fiscal quarter after March 31, 2025, and (c) 50% of any new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries at any time after March 31, 2025, (ii) a maximum leverage ratio of 60%, (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of $15.0 million. The Amended Credit Facility also contains various covenants that, among other restrictions, limit the ability of Smith Douglas Homes LLC and the other borrowers to incur additional debt and to make certain investments and distributions. Additionally, the Amended Credit Facility contains certain covenants that restrict certain activities of Smith Douglas Homes Corp. The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenants, and breach of representations. If an event of default occurs and is continuing, the borrowers may be required to immediately repay all amounts outstanding under the Amended Credit Facility. As of June 30, 2025, the Company was in compliance with all covenants related to the Amended Credit Facility.

Previous wording

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 wording

As of June 30, 2025, there were $68.9 million of outstanding borrowings under the Amended Credit Facility. As of August 1, 2025, there were $66.9 million of outstanding borrowings under the Amended Credit Facility. As of June 30, 2025 and August 1, 2025, there wereno outstanding letters of credit.

Previous wording

In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement. We expect the amount of the cash payments that we will be required to make under the Tax Receivable Agreement will be significant. The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Current wording

In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement. We expect the amount of the cash payments we will be required to make under the Tax Receivable Agreement will be significant. The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Previous wording

If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent we are unable to make payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement. In addition, if Smith Douglas Holdings LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired.

Current wording

If we do not have sufficient funds to pay taxes or other liabilities or to fund our operations, we may have to borrow funds, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders. To the extent we are unable to make payments under the Tax Receivable Agreement for any reason, such payments generally will be deferred and will accrue interest until paid. However, nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement. In addition, if Smith Douglas

Previous wording

Cash flows from operating, investing, and financing activities – comparison for the three months ended March 31, 2025 and 2024

Current wording

Cash flows from operating, investing, and financing activities – comparison for the six months ended June 30, 2025 and 2024

Previous 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.

Current wording

We used$63.8 million and $9.2 million in net cash in operating activities for thesix months ended June 30, 2025 and 2024, respectively. Operating cash flows for thesix months ended June 30, 2025 benefited from cash generated by net income of$35.1 million and non-cash operating expenses of $5.4 million, which were more than offset by a$64.0 million increase in real estate inventory,$30.1 million increase in deposits on real estate under option or contract, and a $10.3 million decrease in accrued expenses and other liabilities. Operating cash flows for thesix months ended June 30, 2024 benefited from cash generated by net income of$45.2 million and non-cash operating expenses of $5.1 million, which were more than offset by a$50.3 million increase in real estate inventory and a$9.2 million increase indeposits on real estate under option or contract.

Previous 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.

Current wording

We used$4.2 million and$3.2 million in net cash in investing activities for thesix months ended June 30, 2025 and 2024, respectively. The net cash used in investing activities during thesix months ended June 30, 2025 was primarily due to$3.2 million inpurchases of property and equipment and$1.1 million ininvestments in unconsolidated entities. The net cash used in investing activities during thesix months ended June 30, 2024 was primarily due to$2.6 million inpurchases of property and equipment and$0.6 million ininvestments in unconsolidated entities.

Previous wording

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.

Current wording

We generated$62.5 million and$9.9 million in net cash from financing activities for thesix months ended June 30, 2025 and 2024, respectively. The net cash provided by financing activities during thesix months ended June 30, 2025 was primarily due to$68.9 million in net borrowings under the Amended Credit Facility and $27.1 million in proceeds from sale of real estate not owned, partially offset by $23.6 million in tax distributions, $6.8 million in payments related to repurchases of real estate not owned, and $2.2 million of debt issuance costs. The net cash provided by financing activities during thesix months ended June 30, 2024 was primarily due to$115.7 million in net proceeds from the IPO and Reorganization Transactions, partially offset by $71.0 million in net repayments under the Prior Credit Facility and $28.1 million in distributions.

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 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.

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 June 30, 2025, we had 834 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 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.

Current wording

As of June 30, 2025, we had $127.0 million of non-refundable cash deposits under land and lot-option contracts pertaining to 16,177 lots with a remaining aggregate purchase price of approximately $1,085.0 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 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.

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 June 30, 2025, 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 $42.8 million and $32.1 million as of June 30, 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.