Smith Douglas Homes Corp. (NYSE: SDHC) (“Smith Douglas” or the “Company”) today announced third quarter results for the three and nine months ended September 30, 2024.

Q3 2024 Results as compared to Q3 2023:

• Home closings increased 39% to 812
• Home closing revenue increased 41% to $277.8 million
• Home closing gross margin of 26.5%
• Net new home orders increased 6% to 600
• Pretax income of $39.6 million
• Earnings of $0.58 per diluted share
• Debt-to-book capitalization of 0.9%
• Active community count increased 19% to 74 at quarter end
• Total controlled lots increased 54% to 17,878

Greg Bennett, Vice Chairman and Chief Executive Officer, commented, “Our team's commitment to our core operational strategies - offering homebuyers a personalized buying experience, working closely with suppliers and trade partners for an efficient production cycle, and maintaining a land light balance sheet - continues to deliver strong results. We achieved record results in the third quarter, with 812 closings for $277.8 million in home closing revenue, and gross margins of 26.5%, all of which translated to pretax income of $39.6 million.”

Russ Devendorf, Executive Vice President and Chief Financial Officer, added, “During the quarter we further expanded our geographic presence by expanding into Greenville, SC as well as continuing to build our infrastructure in Central Georgia and Chattanooga, TN. This strategic growth reflects our commitment to meeting demand for quality homes in the Southeastern and Southern United States.”

Mr. Devendorf continued, “As we approach the fourth quarter, our financial condition remains strong. As of September 30, 2024, we had 16,743 unstarted controlled lots, 96% of which are controlled via option agreement. We had 74 active communities at quarter end and 961 homes in backlog. We increased our total controlled lot position by 54% year-over-year and ended the quarter with $24 million of cash, $372 million of stockholder’s equity and zero borrowings under our credit facility, resulting in a net debt-to-net book capitalization of (5.8)%.”

Conference Call & Webcast Information

Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on November 12, 2024. Interested parties can dial in using the numbers below or access the call via a webcast link provided in the investor relations section of the company’s website.

Dial-in Numbers:

Toll Free - North America: (+1) 800-715-9871

International: (+1) 646-307-1963

Conference ID: 8743844

Replay Numbers:

Toll Free - North America: (+1) 800-770-2030

Playback Passcode: 8743844

Replay will expire 7 days following the event

About Smith Douglas Homes

Headquartered in Woodstock, Georgia, Smith Douglas Homes completed its initial public offering in January 2024. Since its inception, Smith Douglas has been entrusted by over 15,000 families to fulfill their new home dreams. Ranked a top 50 builder nationally for several years and with 2,297 closings in 2023, Smith Douglas currently holds the #36 position on the Builder Magazine Top 100 list. The Smith Douglas communities are primarily targeted to entry-level and empty-nest homebuyers looking to purchase a new home priced below the Federal Housing Administration loan limit in the metro areas of Atlanta, Birmingham, Charlotte, Chattanooga, Houston, Huntsville, Nashville, and Raleigh. Smith Douglas offers its homebuyers a personalized, affordable-luxury buying experience at attractive prices.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding the Company’s performance, growth, strategic opportunities, and financial position. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. These forward-looking statements are based on management’s current estimates and expectations. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.

Non-GAAP Financial Measures

In addition to our results determined in accordance with generally accepted accounting principles in the U.S. (“GAAP”), this press release includes net debt-to-net book capitalization and adjusted net income.

Net debt-to-net book capitalization

Net debt-to-net book capitalization is a supplemental measure of our leverage that is not required by, or presented in accordance with, GAAP and should not be considered as an alternative to debt-to-book capitalization or any other measure derived in accordance with GAAP. We caution investors that amounts presented in accordance with our definition of net debt-to-net book capitalization may not be comparable to similar measures disclosed by our competitors because not all companies and analysts calculate this non-GAAP financial measure in the same manner. We present this non-GAAP financial measure because we consider it to be an important supplemental measure of our leverage and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry.

We define net debt-to-net book capitalization as:

• Total debt, less cash and cash equivalents, divided by
• Total debt, less cash and cash equivalents, plus stockholders’ equity.

This non-GAAP financial measure has limitations as an analytical tool in that it subtracts cash and cash equivalents and therefore may imply that the Company has less debt than the most comparable measure determined in accordance with GAAP. Because of this limitation, this non-GAAP financial measure should be considered along with other financial measures presented in accordance with GAAP. The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in the following table:

Adjusted net income

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).

Management believes adjusted net income is useful because it allows management to more effectively evaluate our operating performance and comparability to industry peers who record income tax expense on their income before tax as opposed to the income of Smith Douglas Holdings LLC not being taxed at the entity level and, therefore, not reflecting a charge against earnings for income tax expense. Adjusted net income should not be considered as an alternative to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. Our computation of adjusted net income may not be comparable to adjusted net income of other companies. We present adjusted net income because we believe it provides useful information regarding our comparability to peers.

The following table presents a reconciliation of adjusted net income to the GAAP financial measure of net income for each of the periods indicated:

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