Smith Douglas Homes Corp. Q1 FY2026 earnings call

• Generated $4.3 million pre-tax income, $0.06 per share net income. Delivered 624 homes, high end of guidance range. 981 net new orders, up 28% y-o-y. - Encouraged by price elasticity during quarter, underlying demand intact despite macro uncertainty. - Focus on pace over price, average build time 57 days. Landline strategy central, relying on third-party lot developers. - Community count expanded to 108 active communities, ramped operations in new markets. - Progress on growth initiatives, saw encouraging traffic and order activity early in second quarter.

Smith Douglas Homes generated $4.3 million in pre-tax income for the quarter, net income of $0.06 per share. Delivered 624 homes. Generated 981 net new orders, up 28% from a year ago. Revenue was $206.4 million on 624 closings with average sales price of $331,000. Home closings gross margin was 19.6% on GAAP basis, adjusted home closing gross margin was 20.3%. Selling general and administrative expenses were $35.9 million, or approximately 17.4% of revenue. Community count expanded to 108 active communities across markets, up 24% from a year ago.

• Second quarter currently expects closings between 725 and 800 homes, average sales price between $325,000 and $330,000, and gross margin between 17% and 17.5%. - Not providing full-year guidance at this time. - Primary risk tied to macroeconomic conditions including mortgage rates, consumer confidence, and employment trends.

• Primary risk tied to macroeconomic conditions including mortgage rates, consumer confidence, and employment trends. - Lock costs and land price dynamics could impact margins in the short to medium term.

Q: On gross margin piece, color on incentive environment, pricing, ASP, cost side.

A: 170 basis points from reduction of land development accruals. 730 basis points impacted by closing costs, incentives for forward commitments, price discounts. Lot costs up about 300 basis points y-o-y.

Q: On demand choppy week to week, color on sequential basis.

A: Seasonal traffic, good through March, April slight decline but still seasonally good.

Q: On SG&A side, overview on life cycle, moderation.

A: As percentage of revenue should moderate, gross dollars up due to growth in new markets.

Q: On vertical costs, expectation and pushback on price increases.

A: Successful in pushing back, costs down y-o-y, but fuel situation higher for longer may hit with surcharges.

Q: On lot portfolio, portion held by land banks, structure.

A: About 30% of lots under option with land bankers, 40% with developers, 10% deposit, walkaway fee, no cross collateralize on new deals.

Q: On 2Q26 margin guidance, step down from incentives, law costs.

A: 170 basis points benefit from land development accruals, strip out noise, sequentially expect 50 basis point decline.

Q: On share of closings driven by spec sales and pre-sale focus.

A: Pre-sale a focus, averaging 40-60 pre-sale vs spec weekly, trying to drive more pre-sale, 70-80% sales before drywall stage.

Q: On gross margin sequential flat, bridge 1Q to 2Q.

A: 170 basis points from land development accruals reversal, strip out impairment, expect 50 basis point decline from Q1 to Q2.

Q: On scale of markets, which divisions at scale, which not.

A: Alabama division at scale, legacy divisions like Charlotte, Nashville not yet at minimum 2 teams, Atlanta, Houston have work to do in scaling.

Q: On demand in smaller vs larger markets, arm percentage.

A: Smaller markets like Alabama saw better demand, shifted to 399-51 arm towards end of quarter and April, 499 still most used incentive.