Company: SDHC
Filing Date: 2025-05-14
Form Type: 10-Q
Source: 0001982518-25-000020
Chunk: 52

Company: Smith Douglas Homes Corp.
Filing Date: 2025-05-14
Form: 10-Q
Item: Part I, Item 1
Chunk 52
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 closing gross margin information as a measure of our operating performance may be limited. In addition, other companies may not calculate adjusted home 

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closing gross profit and adjusted home closing margin information in the same manner we do. Accordingly, adjusted home closing gross profit and adjusted home closing gross margin information should be considered only as a supplement to home closing gross profit and home closing gross margin information as a measure of our performance.

The following table presents a reconciliation of adjusted home closing gross profit and adjusted home closing gross margin to the GAAP financial measure of home closing gross profit and home closing gross margin for each of the periods indicated (amounts in thousands):

Three months ended March 31,20252024Home closing revenue$224,722$189,209Cost of home closings171,192139,749Home closing gross profit(1)$53,530$49,460Capitalized interest charged to cost of home closings156721Purchase accounting adjustments included in cost of home closings(152)119Impairment of real estate inventory642—Adj. home closing gross profit$54,176$50,300Home closing gross margin(2)23.8%26.1%Adj. home closing gross margin(2)24.1%26.6%

(1)Home closing gross profit is home closing revenue less cost of home closings.

(2)Calculated as a percentage of home closing revenue.

Our adjusted home closing gross profit increased while adjusted home closing gross margin decreased from the three months ended March 31, 2024 to the same period in 2025. The increase in adjusted home closing gross profit primarily results from an increase in home closings of 19%. The decrease in adjusted home closing gross margin was driven by an increase in the average cost of home closings of 3%.

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 24.9% 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