Company: SDHC
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001982518-25-000020
Chunk: 44

Company: Smith Douglas Homes Corp.
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 1
Chunk 44
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, including those set forth in Part I, Item 1A. Risk Factors of our Annual Report.

Company Overview

Smith Douglas is engaged in the design, construction, and sale of single-family homes in some of the highest growth and most desirable markets in the Southeastern and Southern United States. We employ an efficient land-light, production focused, and conservatively leveraged business model, which we believe results in a compelling combination of strong home closing gross margins, construction cycle times, and returns. Our communities are primarily targeted to entry-level and empty-nest homebuyers. We offer our homebuyers an attractive value proposition by providing a personalized home buying experience at affordable price points. With the goal of becoming one of the most dominant homebuilders in the Southeastern and Southern United States, we intend to grow operations within our existing footprint and to expand into new markets where we can most effectively implement our business strategy and maximize our profit and returns.

While we continue to see uncertainty among potential homebuyers, particularly around interest rates and the macroeconomic environment, we achieved 671 homes closed for a total of $224.7 million in home closing revenue for the three months ended March 31, 2025, which reflects an increase of 19% in both the number of homes closed and home closing revenue over the same period of the prior year. Our net new home orders and contract value of net new home orders remained constant period over period.

We construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows us to provide this optionality for homebuyers based on just-in-time modifications. As a result of our differentiated value proposition and efficient construction cycle times, we believe we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 8% and 11% for the three months ended March 31, 2025 and 2024, respectively.

At the core of our land-light operating strategy lies the principle and discipline of primarily acquiring finished lots from a diverse pool of third-party land developers or land bankers through the effective utilization of lot-option contracts. Our lot acquisition strategy reduces our upfront capital requirements and generally seeks to provide for “just-in-time” lot delivery, better aligning our pace of home orders and home starts. While using land bankers and third-party developers