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

May 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 May 14, 2024, Smith Douglas Homes Corp. (the “Company”) announced its financial results for the three months ended March 31, 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 May 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: May 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 First Quarter 2024 Results

ATLANTA, May 14, 2024 (Business Wire) – Smith Douglas Homes Corp. (NYSE: SDHC) (“Smith Douglas” or the “Company”) today announced first quarter results for the three months ended March 31, 2024.

Q1 2024 Results as compared to Q1 2023:

•

Net new orders increased 15% to 765

•

Home closings increased 13% to 566

•

Revenue increased 13% to $189.2 million

•

Pre-tax income of $21.4 million

•

Earnings of $0.33 per diluted share

•

Backlog homes increased 19% to 1,110

•

Sales value of backlog homes increased 25% to $381.2 million

•

Debt-to-book capitalization of 1.3%

•

Active community count increased 49% to 70 at quarter end

•

Total controlled lots increased 82% to 14,117

Greg Bennett, Vice Chairman and Chief Executive Officer, commented, “We are pleased by the results this quarter, our first as a public company, during which we completed our IPO in January and concurrently amended and increased the size of our credit facility. We achieved our sales and closings expectations and continue to produce excellent gross margins, coming in at 26.1% for the period.”

Mr. Bennett continued, “During the quarter we also had the opportunity to expand our footprint by contracting for lots in the Central Georgia market in Houston County which includes Perry and Warner Robbins and the surrounding submarket as well as in Chattanooga, Tennessee. We intend to leverage our expansive operations in our Atlanta Division as we scale up the R-teams in these markets.”

Russ Devendorf, Executive Vice President and Chief Financial Officer added, “Having our capital markets transactions behind us, we are in a strong financial position and can now focus on executing our growth strategy. We finished the quarter with almost $33 million of cash, $333 million of stockholders’ equity and zero borrowings under our $250 million unsecured credit facility resulting in a negative net debt position with a net debt-to-net book capitalization of (9.4)%.”

Conference Call & Webcast Information

Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on May 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: 4493724

Replay Numbers:

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

Playback Passcode: 4493724

Replay will expire 7 days following the event

About Smith Douglas Homes

Headquartered in Atlanta, Georgia, Smith Douglas Homes completed its initial public offering in January 2024. Since its inception, Smith Douglas has been entrusted by over 13,000 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, Houston, Huntsville, Nashville, and Raleigh. Smith Douglas offers its homebuyers a personalized, affordable-luxury buying experience at attractive prices.

Investor Relations

Drew Mackintosh

(310) 924-9036

ir@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 March 31,
	2024			2023
Home closing revenue	$	189,209		$	168,144
Cost of home closings		139,749			119,611
Home closing gross profit		49,460			48,533

Selling, general and administrative costs		27,541			19,794
Equity in income from unconsolidated entities		(184	)		(210	)
Interest expense		698			245
Other income, net		(2	)		(122	)
Income before income taxes		21,407			28,826
Provisions for income taxes		921			—
Net income		20,486		$	28,826
Net income attributable to non-controlling interests and LLC members prior to IPO		17,514
Net income attributable to Smith Douglas Homes Corp.	$	2,972

	Period from January 11, 2024 to March 31, 2024
Earnings per share:
Basic	$	0.34
Diluted	$	0.33
Weighted average shares of common stock outstanding:
Basic		8,846,154
Diluted		51,410,397

Smith Douglas Homes

Condensed Consolidated Balance Sheets

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

	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	32,778	$	19,777
Real estate inventory		234,080		213,104
Deposits on real estate under option or contract		64,770		57,096
Real estate not owned		13,617		16,815
Property and equipment, net		1,634		1,543
Goodwill		25,726		25,726
Deferred tax asset, net		13,054		—
Other assets		15,591		18,631
Total assets	$	401,250	$	352,692
Liabilities and Stockholders’/Members’ Equity
Liabilities:
Accounts payable	$	11,510	$	17,318
Customer deposits		8,989		7,168
Notes payable		4,247		75,627
Liabilities related to real estate not owned		13,617		16,815
Accrued expenses and other liabilities		19,371		26,861
Tax receivable agreement liability		10,401		—
Total liabilities		68,135		143,789
Commitments and contingencies (Note 15)
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 March 31, 2024		—		—
Class A common stock, $0.0001 par value – 250,000,000 shares authorized; 8,846,154 shares issued and outstanding as of March 31, 2024		1		—
Class B common stock, $0.0001 par value – 100,000,000 shares authorized; 42,435,897 shares issued and outstanding as of March 31, 2024		4		—
Additional paid-in capital		56,746		—
Retained earnings		2,972		—
Total stockholders’ equity attributable to Smith Douglas Homes Corp.		59,723		—
Non-controlling interests attributable to Smith Douglas Holdings LLC		273,392		—
Total members’/stockholders’ equity		333,115		208,903
Total liabilities and stockholders’/members’ equity	$	401,250	$	352,692

Smith Douglas Homes

Summary Cash Flow Information

(unaudited, dollars in thousands)

Three months ended March 31,	2024			2023
	Amount			Amount
Cash (used in) provided by operating activities	$	(9,273	)	$	26,555
Cash (used in) provided by investing activities	$	(430	)	$	38
Cash provided by (used in) financing activities	$	22,704		$	(43,800	)
Net increase (decrease) in cash and cash equivalents	$	13,001		$	(17,207	)

Smith Douglas Homes

Selected Other Operating Data

(unaudited, dollars in thousands)

Three months ended March 31,	2024			2023			Period over period change
	Amount			Amount			Amount			Percent
Home closings		566			500			66			13.2	%
ASP of homes closed	$	334		$	336		$	(2	)		(0.6	)%
Net new home orders		765			664			101			15.2	%
Contract value of net new home orders	$	259,440		$215,118			$	44,322			20.6	%
ASP of net new home orders	$	339		$324			$	15			4.6	%
Cancellation rate⁽¹⁾		10.6	%		8.9	%		1.7	%		19.1	%
Backlog homes (period end)⁽²⁾		1,110			934			176			18.8	%
Contract value of backlog homes (period end)	$	381,155		$	305,643		$	75,512			24.7	%
ASP of backlog homes (period end)	$	343		$	327			16			4.9	%
Active communities (period end)⁽³⁾		70			47			23			48.9	%
Controlled lots:
Homes under construction		896			638			258			40.4	%
Owned lots		693			370			323			87.3	%
Optioned lots		12,528			6,734			5,794			86.0	%
Total controlled lots		14,117			7,742			6,375			82.3	%

[nm* Not meaningful]

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

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.

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)

Three months ended March 31,	2024						2023
	Home closing revenue		Home closings		ASP of homes closed		Home closing revenue		Home closings		ASP of homes closed
Alabama	$	39,655		132	$	300	$	24,067		81	$	297
Atlanta		62,620		183		342		76,174		235		324
Charlotte		13,464		34		396		12,502		33		379
Houston		24,030		74		325		—		—		—
Nashville		22,030		63		349		23,889		65		368
Raleigh		27,410		80		343		31,512		86		366
Total	$	189,209		566	$	334	$	168,144		500	$	336

As of March 31,	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		172	$	52,198	$	303		151	$	43,928	$	291		21		$	8,270		$	12
Atlanta		434		151,356		349		445		140,209		315		(11	)		11,147			34
Charlotte		93		36,143		389		79		28,229		357		14			7,914			32
Houston		197		63,839		324		—		—		—		197			63,839			324
Nashville		68		25,531		375		116		42,110		363		(48	)		(16,579	)		12
Raleigh		146		52,088		357		143		51,167		358		3			921			(1	)
Total		1,110	$	381,155	$	343		934	$	305,643	$	327		176		$	75,512		$	16

Three months ended March 31,	2024			2023			Period over period change
Net income:
Alabama	$	4,604		$	2,241		$	2,363
Atlanta		14,571			19,549			(4,978	)
Charlotte		1,624			1,933			(309	)
Houston		3,366			—			3,366
Nashville		2,313			3,231			(918	)
Raleigh		4,810			7,231			(2,421	)
Segment total		31,288			34,185			(2,897	)
Corporate⁽¹⁾		(10,802	)		(5,359	)		(5,443	)
Total	$	20,486		$	28,826		$	(8,340	)

⁽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’/members’ 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)	March 31, 2024			December 31, 2023
Notes payable	$	4,247		$	75,627
Stockholders’/Members’ equity		333,115			208,903
Total capitalization	$	337,362		$	284,530
Debt-to-book capitalization		1.3	%		26.6	%
Notes payable	$	4,247		$	75,627
Less: cash and cash equivalents		32,778			19,777
Net debt		(28,531	)		55,850
Stockholders’/Members’ equity		333,115			208,903
Total net capitalization	$	304,584			264,753
Net debt-to-book capitalization		(9.4	)%		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 March 31, (in thousands, except percentages)	2024		2023
Net income	$	20,486	$	28,826
Provision for income taxes		921		—
Income before income taxes		21,407		28,826
Tax-effected adjustments⁽¹⁾		5,352		7,207
Adjusted net income	$	16,055	$	21,619

(1)

For the year ended December 31, 2023 and 2022, 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	May 14, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 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