Company: SDHC
Filing Date: 2025-03-21
Form Type: 10-K
Source: 0001982518-25-000007
Chunk: 31

Company: Smith Douglas Homes Corp.
Filing Date: 2025-03-21
Form: 10-K
Item: Item 1
Chunk 31
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Item 1.    Business.

Our Company

We are 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.

Pursuant to our land-light business model, we typically purchase finished lots through lot-option contracts from third-party land developers or land bankers. Our lot acquisition strategy reduces our up-front capital requirements and generally provides for “just-in-time” lot delivery, which closely aligns with our pace of home orders and home starts. We believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own a higher percentage of their land supply on balance sheet. As of both December 31, 2024 and 2023, 96% of our unstarted controlled lots were controlled through lot option contracts.

We are a disciplined, process driven, and schedule-oriented company. We utilize a single database enterprise resource planning (“ERP”) system called SMART Builder (that we exclusively license from an entity affiliated with the Founder Fund) that is fully integrated with our homebuilding operations. Through SMART Builder, we manage all aspects of our construction process and work-flow scheduling in real-time, enhancing our operating efficiency and helping us generate higher returns for our stockholders. Additionally, we approach our homebuilding operations through a partnership-oriented and relationship-based process called Rteam. The key tenet of Rteam is to enhance the collaboration, visibility, and mutual accountability between us and our key business partners, including the developers, suppliers, and trade partners within our production model. The Rteam process is the foundation of our operational success and the key driver of our current strong construction cycle times of approximately 65 business days, or 55 business days excluding our Houston division which was acquired in connection with the Devon Street Homes Acquisition in 2023. We also achieved a high inventory turnover rate of 2