Form 8-K - Current report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 14, 2024

Date of Report (Date of earliest event reported)

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Smith Douglas Homes Corp.

(Exact name of registrant as specified in its charter)

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Delaware	001-41917	93-1969003
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

110 Village Trail, Suite 215 Woodstock, Georgia 30188

(Address of principal executive offices) (Zip Code)

[phone]

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock, $0.0001 par value per share	SDHC	The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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Item 2.02.

Results of Operations and Financial Condition.

 

On August 14, 2024, Smith Douglas Homes Corp. (the “Company”) announced its financial results for the three and six months ended June 30, 2024. The full text of the press release issued by the Company in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K (the “Current Report”).

The information contained in Item 2.02 of this Current Report (including Exhibit 99.1 attached hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly provided by specific reference in such a filing.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits

The following exhibit relates to Item 2.02 and shall be deemed to be furnished, and not filed:

Exhibit No.		Description
99.1		Press release dated August 14, 2024
104		Cover Page Interactive Data File (embedded within the inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 14, 2024	SMITH DOUGLAS HOMES CORP.
	By:	/s/ Russell Devendorf
		Russell Devendorf
		Executive Vice President and Chief Financial Officer

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Exhibit 99.1

 

Smith Douglas Homes Reports Second Quarter 2024 Results

 

ATLANTA, August 14, 2024 (Business Wire) – Smith Douglas Homes Corp. (NYSE: SDHC) (“Smith Douglas” or the “Company”) today announced second quarter results for the three and six months ended June 30, 2024.

Q2 2024 Results as compared to Q2 2023:

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Net new orders increased 17% to 715

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Home closings increased 17% to 653

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Revenue increased 22% to $220.9 million

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Pre-tax income of $25.9 million

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Earnings of $0.40 per diluted share

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Backlog homes increased 19% to 1,173

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Sales value of backlog homes increased 23% to $404.7 million

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Debt-to-book capitalization of 1.1%

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Active community count increased 70% to 75 at quarter end

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Total controlled lots increased 81% to 15,842

Greg Bennett, Vice Chairman and Chief Executive Officer, commented, “Despite ongoing affordability challenges for our homebuyers, we have achieved another robust financial quarter due to our team’s unwavering commitment to operational excellence, combined with strong market demand. Our success is highlighted by a 17% year-over-year increase in closings and delivering above industry average gross margins of 26.7% for the quarter, which resulted in a pretax income of $25.9 million.”

Russ Devendorf, Executive Vice President and Chief Financial Officer added, “During the quarter we have continued our prudent capital deployment in support of growth while maintaining our disciplined commitment to our land light strategy.  We grew our total controlled lot position by 12% for the quarter, with 96% of our unstarted controlled lots being controlled via option agreement.  We ended the quarter with over $17 million of cash, nearly $345 million of stockholder’s equity and zero borrowings under our credit facility, resulting in a net-debt-to-net book capitalization of (4.1)%.”

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Conference Call & Webcast Information

Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on August 14, 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 ([phone]

International: ([phone]

Conference ID: 9762287

Replay Numbers:

Toll Free - North America: ([phone]

Playback Passcode: 9762287

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.

Investor Relations

Joe Thomas

908-399-5413

[e-mail]

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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.

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Smith Douglas Homes

Condensed Consolidated Statements of Income

(Unaudited, in thousands, except share and per share amounts)

		Three months ended June 30,								Six months ended June 30,
		2024				2023				2024				2023
Home closing revenue		$	220,933			$	181,522			$	410,142			$	349,666
Cost of home closings			161,875				128,824				301,624				248,435
Home closing gross profit			59,058				52,698				108,518				101,231
Selling, general and administrative costs			31,809				21,928				59,350				41,722
Equity in income from unconsolidated entities			(220	)			(226	)			(404	)			(436	)
Interest expense			591				301				1,289				546
Other expense (income), net			1,012				(46	)			1,010				(168	)
Income before income taxes			25,866				30,741				47,273				59,567
Provision for income taxes			1,132				-				2,053				-
Net income			24,734			$	30,741				45,220			$	59,567
Net income attributable to non-controlling interests and LLC members prior to IPO			21,088								38,602
Net income attributable to Smith Douglas Homes Corp.		$	3,646							$	6,618

		Three months ended June 30, 2024				Period from January 11, 2024 to June 30, 2024
Earnings per share:
Basic		$	0.41			$	0.75
Diluted		$	0.40			$	0.74
Weighted average shares of common stock outstanding:
Basic			8,846,154				8,846,154
Diluted			51,431,974				51,414,509

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Smith Douglas Homes

Condensed Consolidated Balance Sheets

		June 30, 2024				December 31, 2023
		(unaudited)
Assets
Cash and cash equivalents		$	17,298			$	19,777
Real estate inventory			266,553				213,104
Deposits on real estate under option or contract			66,253				57,096
Real estate not owned			13,635				16,815
Property and equipment, net			3,351				1,543
Goodwill			25,726				25,726
Deferred tax asset, net			10,934				-
Other assets			25,504				18,631
Total assets		$	429,254			$	352,692
Liabilities and Stockholders’/Members’ Equity
Liabilities:
Accounts payable		$	21,458			$	17,318
Customer deposits			9,543				7,168
Notes payable			3,859				75,627
Liabilities related to real estate not owned			13,635				16,815
Accrued expenses and other liabilities			25,799				26,861
Tax receivable agreement liability			10,401				-
Total liabilities			84,695				143,789
Commitments and contingencies (Note 9)
Members’ equity:
Class A units			-				206,303
Class C units			-				2,000
Class D units			-				600
Total members’ equity			-				208,903
Stockholders’ equity:
Preferred stock, $0.0001 par value – 10,000,000 shares authorized; none issued and outstanding as of June 30, 2024			-				-
Class A common stock, $0.0001 par value – 250,000,000 shares authorized; 8,846,154 shares issued and outstanding as of June 30, 2024			1				-
Class B common stock, $0.0001 par value – 100,000,000 shares authorized; 42,435,897 shares issued and outstanding as of June 30, 2024			4				-
Additional paid-in capital			55,776				-
Retained earnings			6,321				-
Total stockholders’ equity attributable to Smith Douglas Homes Corp.			62,102				-
Non-controlling interests attributable to Smith Douglas Holdings LLC			282,457				-
Total members’/stockholders’ equity			344,559				208,903
Total liabilities and stockholders’/members’ equity		$	429,254			$	352,692

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Smith Douglas Homes

Summary Cash Flow Information

(Unaudited, dollars in thousands)

 

Six months ended June 30,		2024				2023
Net cash (used in) provided by operating activities		$	(9,234	)		$	35,902
Net cash used in investing activities			(3,153	)			(180	)
Net cash provided by (used in) financing activities			9,908				(53,931	)
Net decrease in cash and cash equivalents			(2,479	)			(18,209	)
Cash and cash equivalents, beginning of period			19,777				29,601
Cash and cash equivalents, end of period		$	17,298			$	11,392

Smith Douglas Homes

Selected Other Operating Data

(Unaudited, dollars in thousands)

 

		Three months ended June 30,								Six months ended June 30,
		2024				2023				2024				2023
Home closings			653				560				1,219				1,060
ASP of homes closed		$	338			$	324			$	336			$	330
Net new home orders			715				612				1,480				1,276
Contract value of net new home orders		$	243,842			$	206,130			$	503,282			$	421,248
ASP of net new home orders		$	341			$	337			$	340			$	330
Cancellation rate(1)			11.8	%			8.7	%			11.2	%			8.8	%
Backlog homes (period end)(2)			1,173				985				1,173				985
Contract value of backlog homes (period end)		$	404,750			$	330,258			$	404,750			$	330,258
ASP of backlog homes (period end)		$	345			$	335			$	345			$	335
Active communities (period end)(3)			75				44				75				44
Controlled lots (period end):
Homes under construction			1,088				706				1,088				706
Owned lots			587				405				587				405
Optioned lots			14,167				7,659				14,167				7,659
Total controlled lots			15,842				8,770				15,842				8,770

(1)	The cancellation rate is the total number of cancellations during the period divided by the total gross new home orders during the period.

(2)	Backlog homes (period end) is the number of homes in backlog from the previous period plus the number of net new home orders generated during the current period minus the number of homes closed during the current period.

(3)	A community becomes active once the model is completed or the community has its first sale. A community becomes inactive when it has fewer than two homes remaining to sell.

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Smith Douglas Homes

Selected Financial Information by Segment

(Unaudited, dollars in thousands)

 

Home Closing Revenue

Three months ended June 30,		2024												2023												Period over period change
		Home closing revenue				Home closings				ASP of homes closed				Home closing revenue				Home closings				ASP of homes closed				Home closing revenue				Home closings				ASP of homes closed
Alabama		$	43,585				145			$	301			$	18,800				66			$	285				132	%			120	%			6	%
Atlanta			80,220				231				347				94,104				302				312				(15	)%			(24	)%			11	%
Charlotte			15,352				43				357				14,369				40				359				7	%			8	%			(1	)%
Houston			31,248				95				329				—				—				—				100	%			100	%			100	%
Nashville			21,707				58				374				28,019				79				355				(23	)%			(27	)%			6	%
Raleigh			28,821				81				356				26,230				73				359				10	%			11	%			(1	)%
Total		$	220,933				653			$	338			$	181,522				560			$	324				22	%			17	%			4	%

Six months ended June 30,		2024												2023												Period over period change
		Home closing revenue				Home closings				ASP of homes closed				Home closing revenue				Home closings				ASP of homes closed				Home closing revenue				Home closings				ASP of homes closed
Alabama		$	83,240				277			$	301			$	42,867				147			$	292				94	%			88	%			3	%
Atlanta			142,840				414				345				170,278				537				317				(16	)%			(23	)%			9	%
Charlotte			28,816				77				374				26,871				73				368				7	%			5	%			2	%
Houston			55,278				169				327				—				—				—				100	%			100	%			100	%
Nashville			43,737				121				361				51,908				144				360				(16	)%			(16	)%			—	%
Raleigh			56,231				161				349				57,742				159				363				(3	)%			1	%			(4	)%
Total		$	410,142				1,219			$	336			$	349,666				1,060			$	330				17	%			15	%			2	%

Backlog

As of June 30,		2024												2023												Period over period change
		Backlog homes				Contract value of backlog homes				ASP of backlog homes				Backlog homes				Contract value of backlog homes				ASP of backlog homes				Backlog homes				Contract value of backlog homes				ASP of backlog homes
Alabama			169			$	50,122			$	297				246			$	73,028			$	297				(31	)%			(31	)%			—	%
Atlanta			492				170,724				347				374				125,606				336				32	%			36	%			3	%
Charlotte			121				49,498				409				70				25,035				358				73	%			98	%			14	%
Houston			200				64,445				322				—				—				—				100	%			100	%			100	%
Nashville			52				20,681				398				129				47,346				367				(60	)%			(56	)%			8	%
Raleigh			139				49,280				355				166				59,243				357				(16	)%			(17	)%			(1	)%
Total			1,173			$	404,750			$	345				985			$	330,258			$	335				19	%			23	%			3	%

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Controlled Lots

As of June 30,		2024												2023												Period over period change
		Owned(1)				Optioned				Total Controlled				Owned(1)				Optioned				Total Controlled				Owned(1)				Optioned				Total Controlled
Alabama			355				1,420				1,775				315				1,483				1,798				13	%			(4	)%			(1	)%
Atlanta			485				7,457				7,942				338				3,384				3,722				43	%			120	%			113	%
Charlotte			144				2,021				2,165				81				1,127				1,208				78	%			79	%			79	%
Houston			384				1,390				1,774				—				—				—				100	%			100	%			100	%
Nashville			93				820				913				207				662				869				(55	)%			24	%			5	%
Raleigh			214				1,059				1,273				170				1,003				1,173				26	%			6	%			9	%
Total			1,675				14,167				15,842				1,111				7,659				8,770				51	%			85	%			81	%

(1)	Includes homes under construction and owned lots.

Net Income

		Three months ended June 30,												Six months ended June 30,
		2024				2023				Period over period change				2024				2023				Period over period change
Alabama		$	5,559			$	1,435			$	4,124			$	10,163			$	3,676			$	6,487
Atlanta			18,012				23,379				(5,367	)			32,583				42,928				(10,345	)
Charlotte			2,380				2,380				—				4,004				4,313				(309	)
Houston			3,446				—				3,446				6,812				—				6,812
Nashville			2,789				4,501				(1,712	)			5,102				7,732				(2,630	)
Raleigh			5,207				5,615				(408	)			10,017				12,846				(2,829	)
Segment total			37,393				37,310				83				68,681				71,495				(2,814	)
Corporate(1)			(12,659	)			(6,569	)			(6,090	)			(23,461	)			(11,928	)			(11,533	)
Total		$	24,734			$	30,741			$	(6,007	)		$	45,220			$	59,567			$	(14,347	)

(1)	Corporate primarily includes corporate overhead costs, such as payroll and benefits, business insurance, information technology, office costs, outside professional services and travel costs, and certain other amounts that are not allocated to the reportable segments.

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.

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

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Total debt, less cash and cash equivalents, divided by

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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:

As of (in thousands, except percentages)		June 30, 2024				December 31, 2023
Notes payable		$	3,859			$	75,627
Stockholders’/ Members’ equity			344,559				208,903
Total capitalization		$	348,418			$	284,530
Debt-to-book capitalization			1.1	%			26.6	%
Notes payable		$	3,859			$	75,627
Less: cash and cash equivalents			17,298				19,777
Net debt			(13,439	)			55,850
Stockholders’/ Members’ equity			344,559				208,903
Total net capitalization		$	331,120			$	264,753
Net-debt-to-net book capitalization			(4.1	)%			21.1	%

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 25.0% federal and state blended tax rate (assuming 100% public ownership to adjust for the impact of taxes on earnings attributable to Smith Douglas Holdings LLC as if Smith Douglas Holdings LLC was a subchapter C corporation in the periods presented).

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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:

		Three months ended June 30,								Six months ended June 30,
		2024				2023				2024				​ 2023
Net income		$	24,734			$	30,741			$	45,220			$	59,567
Provision for income taxes			1,132				—				2,053				—
Income before income taxes			25,866				30,741				47,273				59,567
Tax-effected adjustments(1)			6,467				7,685				11,818				14,892
Adjusted net income		$	19,399			$	23,056			$	35,455			$	44,675

(1)

For the three months ended June 30, 2024 and 2023, our tax expenses assumes a 25.0% federal and state blended tax rate (assuming 100% public ownership to adjust for the impact of taxes on earnings attributable to Smith Douglas Holdings LLC as if Smith Douglas Holdings LLC was a subchapter C corporation in the periods presented).

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Document and Entity Information	Aug. 14, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 14, 2024
Entity File Number	001-41917
Entity Registrant Name	Smith Douglas Homes Corp.
Entity Central Index Key	0001982518
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	93-1969003
Entity Address, Address Line One	110 Village Trail, Suite 215
Entity Address, City or Town	Woodstock
Entity Address, State or Province	GA
Entity Address, Postal Zip Code	30188
City Area Code	770
Local Phone Number	213-8067
Title of 12(b) Security	Class A common stock, $0.0001 par value per share
Trading Symbol	SDHC
Security Exchange Name	NYSE
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false

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