Smith Douglas Homes Corp (SDHC) (Q1 2024) Earnings Call Transcript Highlights: Key Financials ...

GuruFocus Research
4 min read

In This Article:

  • Pre-tax Income: $21.4 million

  • Earnings Per Share: $0.33 per diluted share

  • Home Sales Revenue: $189 million

  • New Orders: 765 homes

  • Cancellation Rate: 10.6%

  • Average Sales Price: $334,000

  • Homebuilding Gross Margin: 26.1%

  • SG&A: 14.6% of revenue

  • Net Income: Reported at $20.5 million

  • Adjusted Net Income: $16.1 million (non-GAAP)

  • Controlled Lots: Over 14,000, an 86% increase year-over-year

  • Backlog: 1,110 homes with an average selling price of $343,000

  • Cash Position: Approximately $33 million

  • Debt-to-Book Capitalization: 1.3%

  • Net Debt-to-Book Capitalization: Negative 9.4%

Release Date: May 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Smith Douglas Homes Corp reported a pre-tax income of $21.4 million and a $0.33 per diluted share, with home sales revenue of $189 million, reflecting a 13% increase in deliveries.

  • The company experienced strong sales and closing results, exceeding prior guidance, supported by favorable homebuilding conditions and low existing supply.

  • Smith Douglas Homes Corp maintains a focus on affordable housing segments, catering to entry-level buyers and empty-nesters, which has driven both volume growth and profitability.

  • The company's strategic land lot strategy, with 95% of lots controlled via option agreements, allows efficient capital use and quick inventory turnover.

  • Expansion into new markets such as Central Georgia and Chattanooga, Tennessee, leveraging existing operations to scale and potentially increase market share.

Negative Points

  • Smith Douglas Homes Corp noted a cancellation rate of 10.6%, indicating some challenges in converting all new orders to sales.

  • Order trends in April and May showed a slight decrease compared to March, suggesting potential volatility in buyer demand.

  • The company faces risks from delays with municipalities on permitting and plats, which could impact the timing of new community openings and sales.

  • Increased lot and land costs are anticipated, which could affect future margins and pricing strategies.

  • Economic uncertainties, including job market fluctuations, inflation, and interest rates, pose potential risks to maintaining projected sales pace and financial performance.

Q & A Highlights

Q: Can you provide more details on the order trends observed in April and May compared to March? A: (Russell Devendorf - CFO, EVP) In March, we experienced our strongest sales month with about four sales per community. However, in April, the rate dropped slightly to 3.6, consistent with May. This fluctuation is partly seasonal as we moved deeper into the selling season. Overall, foot traffic has been robust, indicating healthy buyer interest.

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