Smith Douglas Homes Corp. Q4 FY2024 earnings call

• Greg Bennett noted that the fourth quarter of 2024 had pre-tax income of $30 million, capping a profitable year with $117 million in pre-tax income. 836 homes were delivered in Q4, above guidance, and 2,867 homes were delivered full year. Gross margin for Q4 was 25.5%, midpoint of guidance, and 26.2% full year. Progress on construction efficiency with cycle times ~55 days (excluding Houston). Land-light strategy with 19,522 controlled lots, 96% via auction agreement.
• Russ Devendorf highlighted Q4 results: revenue $287 million, gross margin 25.5%, SG&A 14.9% of revenue, pre-tax income $30 million, net income $28.8 million. Full year 2024: 2,867 homes closed, revenue $975 million, gross margin 26.2%, SG&A under 14% of revenue. Balance sheet in excellent shape with $22 million cash, no borrowings, $402 million in equity. First quarter 2025 outlook: closings 625-675, average sales price $330,000-335,000, gross margin 23.25%-23.75%.

In the fourth quarter of 2024, Smith Douglas Homes had revenue of $287 million, a 32% increase year-over-year, with 836 closings and an average sales price of $344,000. Gross margin was 25.5%. For the full year 2024, the company closed 2,867 homes with revenue of $975 million, a 25% and 28% increase respectively over the prior year. Gross margin for the full year was 26.2%, with adjusted return on equity at 29% for 2024.

• First quarter 2025: Anticipates home closings between 625 and 675 homes, average sales price between $330,000 and $335,000, and gross margin in the range of 23.25% and 23.75%.
• Full year 2025: Expects closings to be between 3,000 and 3,200 homes. Risks to projections include maintaining sales space, bringing new communities and lots online, and macroeconomic factors like jobs, tariffs, inflation, and interest rates.

• Macroeconomic uncertainties such as jobs, tariffs, inflation, and interest rates could impact results.
• Difficulty in maintaining sales space and bringing new communities and lots online.
• Lot cost inflation and uncertainty around vertical construction costs due to tariffs.

Q: Andrew Ozzie asked about bucketing backlog gross margins dynamics and land cost inflation.

A: Russ Devendorf said backlog margin was ~24% due to Q4 incentives for affordability, lot cost is a challenge with flat ASP, and land cost erosion of 200-300 basis points of margin with some leveling off expected.

Q: Sam Reid asked about community count growth path and SG&A leverage.

A: Russ Devendorf said community count growth to be low single digits, ratable throughout the year, and SG&A expected to leverage as top-line grows with team in place.

Q: Trevor Allinson asked about gross margin differences from prior quarter and SG&A leverage.

A: Russ Devendorf said rates increased in Q4 and early 2025 impacting margins, and SG&A was elevated in Q4 due to bonus accruals, expecting SG&A to trend below 14% as top-line grows.

Q: Jay McCanless asked about community count guide delta and growth path.

A: Russ Devendorf said community count growth to be ~12%, organic growth with focus on Chattanooga, Central Georgia, and Greenville, evaluating M&A opportunistically but focusing on organic growth.

Q: Jay McCanless asked about average closing price range.

A: Russ Devendorf said $335 to $345 range remains good, reflective of backlog and mix across divisions.

Q: Alex Barron asked about incentives and broker commissions.

A: Russ Devendorf said incentives primarily in closing costs (including rate buydowns) and broker commissions remain at standard levels.