Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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)

Smith Douglas Homes Corp.

(Exact name of registrant as specified in its charter)

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)

(770) 213-8067

(Registrant’s telephone number, including area code)

N/A

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

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. ☒

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)

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

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:

•

Net new orders increased 17% to 715

•

Home closings increased 17% to 653

•

Revenue increased 22% to $220.9 million

•

Pre-tax income of $25.9 million

•

Earnings of $0.40 per diluted share

•

Backlog homes increased 19% to 1,173

•

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

•

Debt-to-book capitalization of 1.1%

•

Active community count increased 70% to 75 at quarter end

•

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)%.”

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 (+1) 800-715-9871

International: (+1) 646-307-1963

Conference ID: 9762287

Replay Numbers:

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

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

investors@smithdouglas.com

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.

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

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

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.

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	%

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.

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:

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).

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).

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