SDHC

This article first appeared on GuruFocus. Revenue: $273 million in home closing revenue for Q2 2026, a 22% increase year-over-year. Home Closings: 839 homes closed, up 25% from the prior-year period. Average Sales Price: $325,000 on closed homes. Home Closing Gross Margin: 17.6% on a GAAP basis; 18.7% excluding $3.1 million in inventory impairments. Pretax Income: $1.9 million for the quarter; $9.5 million when adjusting for impairments and lot option contract abandonment charges. Net Income: $1.8 million, or $0.03 per diluted share. Adjusted EBITDA: $13.4 million, or 4.9% of revenue, compared to $19.8 million (8.8% of revenue) in the prior-year period. Adjusted Net Income: $1.4 million, compared to $12.9 million in the same period last year. Net New Home Orders: 970 orders, a 32% increase year-over-year; year-to-date orders of 1,951, up 30%. Backlog: 1,000 homes, up 17% year-over-year, with a contract value of $322.1 million and an average sales price of $322,000. Active Communities: 110 at quarter end, up 20% year-over-year. SG&A Expenses: $41.9 million, or approximately 15.4% of revenue, up $7.2 million year-over-year. Cash and Debt: $14.2 million cash; $66 million total debt; $63 million outstanding on revolving credit facility. Controlled Lots: 22,319 unstarted controlled lots, with only 3% owned on the balance sheet. Share Repurchases: 312,351 shares repurchased for $4.4 million in Q2; approximately $10.1 million repurchased through June 30. Q3 2026 Guidance: Closings between 825 and 900 homes; average sales price between $315,000 and $320,000; gross margin between 16% and 16.5%. Warning! GuruFocus has detected 3 Warning Sign with SDHC. Is SDHC fairly valued? Test your thesis with our free DCF calculator. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Smith Douglas Homes Corp (NYSE:SDHC) reported a 22% increase in home closing revenue to $273 million and a 25% rise in closings to 839 homes, demonstrating strong top-line growth. Net new home orders surged 32% year-over-year to 970, with a consistent sales pace of about three sales per community per month, indicating robust demand. The company's land-light strategy is effective, with only 3% of controlled lots owned on the balance sheet, providing flexibility and downside protection. Construction cycle time averaged 55 days, showcasing operational efficiency that reduces cancellation risk and supports returns. Community count grew 20% year-over-year to 110, and total debt declined 11% despite expansion, highlighting balance sheet strength and scalability. Gross margin declined to 17.6% GAAP (18.7% adjusted) from 19% adjusted in the prior year, pressured by increased incentives and pricing adjustments. Pretax profit fell sharply to $1.9 million from $12.9 million in the prior year, impacted by $3.1 million in inventory impairments and $4.5 million in lot option abandonment charges. Adjusted EBITDA dropped to $13.4 million (4.9% of revenue) from $19.8 million (8.8%) in the prior year, reflecting margin compression. Third-quarter guidance projects gross margin of 16%-16.5%, a further sequential decline, due to continued incentive use and price reductions. The company faces ongoing affordability challenges, with mortgage rates at year-to-date highs and a need to lean into incentives, which could pressure future profitability. Q: Can you provide an update on how July and the beginning of August has trended, and how much of the significant sequential decline in gross margin guidance is due to leaning back into incentives as rates have gone back up? A: Greg Bennett (CEO): June and July have stayed pretty much the same, with the caveat that we have leaned back in a little more on forwards and some rate purchases as rates have gone back up. We continue to underwrite everything to our current environment and remain cautiously optimistic. Demand is there; it's just solving affordability. We continue to push for our pace, and as you can see with the numbers, we've been able to hold our pace pretty steady. Q: Can you help us bucket out the step down in gross margin from 18.7% ex-charges to the 16% to 16.5% guide? How much is related to incentives versus other cost dynamics? A: Russ Devendorf (CFO): The margin compression is really a function of our continued use of incentives and discounting to match pace with, as a land-light builder, kind of take down. We focused in the first half of the year on trying to get one sale per community per week, which matches the takedowns in the majority of our option contracts. It's really just a function of adjusting price and payment through those use of incentives, closing costs, and forward commitments to get that pace. We are cautiously optimistic that we can keep margin steady from here and maybe pull back a little on incentives going forward. Q: Are you seeing continued reductions in direct construction costs, or have you reached the end of that? Is it offsetting any of your incentive spend? A: Greg Bennett (CEO): We've seen about 2.5% to 3% year-over-year hard cost savings, which definitely helps. However, fuel prices and fuel surcharges are starting to creep back into the equation, but we have seen savings in cost. Q: Are you pushing a higher share of ARMs to manage incentive spend, and what is your current strategy on incentives? A: Russ Devendorf (CFO): We haven't gone back into ARMs this quarter. We've been using fixed-rate incentives where we buy forward a fixed rate. Towards the end of the quarter and into the third quarter, we've started to pull back on the rate incentive and are focusing on using the 6% that's allowable for closing costs and spot buydowns. From a base pricing standpoint, we are already priced on the low end of the market in most communities, and it hasn't seemed to slow our pace, so we are slowly pulling back on incentives to see if we can recapture some margin. Q: Can you provide more detail on the inventory impairments taken in the quarter and remind us of your underwriting standards regarding margins versus returns? A: Russ Devendorf (CFO): We go through impairment testing quarterly, first looking at backlog margins and then running cash flows where margins are mid- to high single digits. The process is subjective, but we are consistent. The impairments were not widespread; we took them in about three communities this quarter. We also took a couple of abandonment charges where it made sense. The accounting does not drive any decision we make; everything we do is based on economics and whether it's a good deal for the business. Q: What is the margin difference between a home sold pre-drywall (BTO) and a quick move-in (spec), and is the current 70-30 mix the long-term target? A: Russ Devendorf (CFO): Our long-term target would obviously be 100% sold by drywall. Historically, pre-COVID, that pre-sale rate was about 90%, so we're inching closer to where we want to be. The current environment has pushed those percentages down. The margin difference between a presale and a true spec is about 150 to 200 basis points, which has compressed from a historical 300 basis point difference. Q: Is there any sort of floor you would hold gross margin at, and are there opportunities to work down the SG&A expense ratio outside of just leverage? A: Russ Devendorf (CFO): Our overriding goal is always pace versus price, but we have conversations about what level makes sense. With SG&A around 15%, a 15% gross margin would put us at zero net, so that's probably the floor. Nobody wants to build for practice, but we recognize the need to scale. On SG&A, we are looking at it every day. There are no more new hires unless it's a variable head supporting field operations like sales and construction. We are reducing non-essential costs like travel and meetings. Q: Did the 2Q '26 guide and does the 3Q '26 guide contemplate any inventory impairments or include an allowance for potential impairments? A: Russ Devendorf (CFO): No, we never forecast impairments. If we did, we would have already taken the impairment. We don't assume future impairments in our guidance. Q: Are base price cuts playing an increasing role in the step down in gross margin, and how is that impacting new community openings? A: Russ Devendorf (CFO): We are absolutely taking base price cuts where warranted, but it's a community-by-community analysis. In some communities, we are seeing opportunities to raise prices. We are traditionally the biggest value in our markets, underwriting to at least $10,000 below the lowest competitor. We are trying to look at our incentives to see where we can pull back to recapture or maintain margin. The 4% year-over-year decline in average order price is mostly just trying to find the market, as the product mix is essentially the same. Q: Are you seeing opportunities to execute tuck-in M&A to build scale, and what is the willingness of other builders to sell? A: Russ Devendorf (CFO): There is activity and a consistent flow of packages. Some smaller, not as well-capitalized builders are struggling, which is where bigger builders with balance sheets can take the opportunity to grow market share. We are looking to scale up but are thoughtful about protecting our team strategy. We are exploring new possible markets for greenfield expansion, but any deal has to make sense. We are focused on building out the Southeast and Central, maybe creeping into the Midwest. Q: Is the reduction in competitive spec inventories widespread across all Smith Douglas geographies, and are there any MSAs that stood out in terms of order growth? For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in Smith Douglas Homes Corp.? Here are five stocks we like better. Second-quarter operating results improved: Home-closing revenue rose 22% to $273 million, closings increased 25% to 839 homes, and net new orders jumped 32% to 970. Backlog ended at 1,000 homes valued at $322.1 million. Affordability measures significantly pressured profitability: Incentives, discounts and closing costs reached 780 basis points, while adjusted EBITDA fell to $13.4 million from $19.8 million a year earlier. Inventory impairments and lot-option abandonment charges further reduced reported earnings. Management is prioritizing sales pace and financial discipline: Smith Douglas expects third-quarter gross margin of 16% to 16.5% and is withholding full-year guidance due to demand variability. The company expanded to 110 communities while maintaining a land-light balance sheet, reducing debt and repurchasing $10.1 million of shares through June. Smith Douglas Homes (NYSE:SDHC) reported higher second-quarter home closings, revenue and net new orders, while continued affordability pressures and increased buyer incentives weighed on margins and profitability. The homebuilder generated $273 million in home-closing revenue during the second quarter of 2026, a 22% increase from the prior-year period. Closings rose 25% to 839 homes, while the average closing price was $325,000. Net new orders increased 32% year over year to 970, and the company ended the quarter with 1,000 homes in backlog valued at $322.1 million. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling “Our company executed well in the quarter against the homebuilding backdrop that continues to be marked by uncertainty and affordability challenges for new homebuyers,” CEO and Vice Chairman Greg Bennett said. He said the company maintained a sales pace of roughly three sales per community per month through targeted incentives. Home-closing gross margin was 17.6% on a GAAP basis, or 18.7% excluding $3.1 million of inventory impairment charges included in the cost of closings. The company reported pretax income of $1.9 million and net income of $1.8 million, or $0.03 per diluted share. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Smith Douglas also recorded $4.5 million in lot-option contract abandonment charges and other expense. On an adjusted basis, excluding impairments and lot-option abandonment charges, pretax profit was $9.5 million, according to Bennett. Executive Vice President and CFO Russ Devendorf said margins continued to reflect pricing adjustments and incentives intended to support affordability and preserve sales pace. Closing costs, price discounts and forward-commitment costs represented 780 basis points during the quarter, up from 480 basis points a year earlier and 730 basis points in the first quarter. → No Hangover: Revisiting Microsoft One Week After Earnings Adjusted EBITDA was $13.4 million, or 4.9% of revenue, down from $19.8 million, or 8.8% of revenue, a year earlier. Adjusted net income, calculated using an assumed blended federal and state tax rate of 26.9%, was $1.4 million, compared with $12.9 million in the prior-year quarter. During the question-and-answer session, Devendorf said the company took inventory impairments in three communities. He said Smith Douglas does not forecast future impairments, and that decisions on land and other investments are based on economics rather than accounting considerations. Management said demand remained steady through June and July, though the company has leaned more heavily on forward mortgage commitments and rate-related incentives as mortgage rates increased. Bennett said the central challenge remains solving affordability for buyers. For the third quarter, Smith Douglas expects to close between 825 and 900 homes at an average sales price of $315,000 to $320,000. The company forecast gross margin of 16% to 16.5% and said it was not providing full-year guidance because of continued demand variability. Devendorf said the anticipated margin compression is primarily associated with incentives, price discounts and closing costs rather than significant changes in land or direct construction costs. He noted that hard construction costs have declined roughly 2.5% to 3% year over year, although fuel surcharges and other costs have begun to rise. The company has used fixed-rate incentives rather than adjustable-rate mortgages during the quarter, Devendorf said. More recently, it has sought to reduce rate incentives and focus on closing-cost assistance and spot buydowns within the 6% level it considers allowable. Management said it is selectively cutting base prices where necessary, while identifying communities where price increases may be possible. Devendorf said the company views a gross margin near 15%, approximately in line with its selling, general and administrative expense ratio, as a point where it would evaluate additional operating levers. He said Smith Douglas is also reviewing nonessential overhead costs and limiting new hiring outside positions that directly support sales and construction operations. Smith Douglas ended the quarter with 110 active communities, up 20% from 92 a year earlier. Bennett said the company is pursuing greater scale while remaining disciplined in land acquisition, walking away from transactions that do not meet underwriting standards. The company controlled 23,527 lots at quarter-end, including 1,208 homes under construction, 664 owned lots and 21,655 option lots. Only a small portion of its lot pipeline is owned on the balance sheet, with the company relying heavily on options, land banking agreements and third-party developers. “Our pace over price philosophy continues to guide how we manage the business,” Devendorf said, adding that the company seeks to maintain absorption and inventory turns even when that creates short-term margin pressure. Management said it has seen easing land terms in some cases, though not broad-based reductions in land prices. Bennett said sellers often still view their land as being priced near the top of the market. The company’s construction cycle time averaged 55 days for homes closed during the quarter. Smith Douglas said approximately 70% of homes were sold by the drywall stage, compared with a historical pre-COVID level of about 90%. Management said its long-term objective is to sell as many homes as possible before drywall and all homes before certificates of occupancy. Smith Douglas ended the quarter with $14.2 million in cash, $66 million in total debt and net debt of $51.8 million. Its debt-to-book-capitalization ratio was 13.2%, while net debt-to-net-book capitalization was 10.7%. Despite expanding its community count and increasing closings, total debt declined 11% from a year earlier, according to Devendorf. Total debt per community fell 25%, while real estate inventory per community declined 14%. The company repurchased 312,351 Class A shares for $4.4 million during the second quarter. Including first-quarter activity, Smith Douglas repurchased about $10.1 million of stock through June 30. Management said its capital priorities remain investment in its land pipeline and community growth, maintaining a conservative balance sheet, and opportunistic share repurchases. The company also said it continues to evaluate potential market expansions and acquisition opportunities, particularly in the Southeast and central U.S., while emphasizing that any transaction must fit its operating model and financial discipline. Smith Douglas Homes Corp., together with its subsidiaries, engages in the design, construction, and sale of single-family homes in the southeastern United States. It also provides closing, escrow, and title insurance services. The company sells its products to entry-level and empty-nest homebuyers. Smith Douglas Homes Corp. was founded in 2008 and is headquartered in Woodstock, Georgia. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Smith Douglas Homes Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

ATLANTA, August 06, 2026--(BUSINESS WIRE)--Smith Douglas Homes Corp. (NYSE: SDHC) ("Smith Douglas" or the "Company") today announced second quarter results for the three and six months ended June 30, 2026. Q2 2026 Results as compared to Q2 2025: Home closings increased 25% to 839 Home closing revenue increased 22% to $273.0 million Home closing gross margin of 17.6% compared to 23.2% Net new home orders increased 32% to 970 Backlog homes increased 17% to 1,000 Pretax income of $1.9 million, which includes $7.6 million of real estate inventory impairment and lot option contract abandonment charges, compared to $17.2 million Earnings of $0.03 per diluted share compared to $0.26 Debt-to-book capitalization of 13.2% compared to 9.0% at December 31, 2025 Active community count increased 20% to 110 at quarter end Total controlled lots of 23,527 Repurchased 312,351 shares of Class A common stock for $4.4 million "We delivered another quarter of solid operational execution, generating strong year-over-year growth in both net new home orders and home closings despite a market that remains uncertain and constantly evolving," said Greg Bennett, Chief Executive Officer and Vice Chairman of Smith Douglas Homes. "Our teams continued to help buyers find the right combination of affordability, personalization, and value, while maintaining our disciplined operations and industry-leading build times. We believe this performance reflects the strength of our operating model and positions us well for continued long-term growth." Mr. Bennett continued, "While the housing market continues to face affordability challenges and macroeconomic uncertainty, we remain encouraged by underlying demand and the resilience of today's homebuyer." Russ Devendorf, Executive Vice President and Chief Financial Officer, added, "Our second quarter results demonstrate that we can continue growing while remaining disciplined in how we operate the business. We expanded our community count, increased sales, and continued to execute our land-light land strategy without compromising our underwriting standards. As we scale across the Southeastern and Southern United States, we remain focused on generating attractive returns, preserving balance sheet flexibility, and creating long-term value for our shareholders." Conference Call & Webcast Information Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on August 6, 2026. Interested parties can dial in using the numbers below or access the call via a webcast link provided in the investor relations section of the company’s website. Dial-in Numbers:Local: (+1) 585-542-9983Toll Free: (+1) 833-461-5787Conference ID: 284 191 644 A replay of the call will be available on the Company’s website shortly after the call concludes. About Smith Douglas Homes Headquartered in Woodstock, Georgia, Smith Douglas Homes completed its initial public offering in January 2024. Since its inception, Smith Douglas has been entrusted by over 20,000 families to fulfill their new home dreams. Ranked a top 50 builder nationally for several years and with 2,908 closings in 2025, Smith Douglas currently holds the #33 position on the Builder Magazine Top 100 list. The Smith Douglas communities are primarily targeted to entry-level and empty-nest homebuyers looking to purchase a new home priced below the Federal Housing Administration loan limit in the metro areas of Atlanta, Birmingham, Central Georgia, Charlotte, Chattanooga, Dallas-Fort Worth, Greenville, Houston, Huntsville, Nashville, Raleigh, and the Alabama Gulf Coast. Smith Douglas offers its homebuyers a personalized, affordable buying experience at attractive prices, delivering exceptional value and quality. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding the Company’s performance, growth, strategic plans and opportunities, financial position, ability to navigate the changing homebuilding landscape in the macroeconomic environment, and the timing of any of the foregoing. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. These forward-looking statements are based on management’s current estimates and expectations. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. Non-GAAP Financial Measures In addition to our results determined in accordance with generally accepted accounting principles in the U.S. ("GAAP"), this press release includes net debt-to-net book capitalization and adjusted net income. Net debt-to-net book capitalization Net debt-to-net book capitalization is a supplemental measure of our leverage that is not required by, or presented in accordance with, GAAP and should not be considered as an alternative to debt-to-book capitalization or any other measure derived in accordance with GAAP. We caution investors that amounts presented in accordance with our definition of net debt-to-net book capitalization may not be comparable to similar measures disclosed by our competitors because not all companies and analysts calculate this non-GAAP financial measure in the same manner. We present this non-GAAP financial measure because we consider it to be an important supplemental measure of our leverage and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. We define net debt-to-net book capitalization as: Total debt, less cash and cash equivalents, divided by Total debt, less cash and cash equivalents, plus equity. This non-GAAP financial measure has limitations as an analytical tool in that it subtracts cash and cash equivalents and therefore may imply that the Company has less debt than the most comparable measure determined in accordance with GAAP. Because of this limitation, this non-GAAP financial measure should be considered along with other financial measures presented in accordance with GAAP. The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in the following table: 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 an applicable 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 and comparability to industry peers who record income tax expense on their income before tax as opposed to the income of Smith Douglas Holdings LLC not being taxed at the entity level and, therefore, not reflecting a charge against earnings for income tax expense. Adjusted net income should not be considered as an alternative to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. Our computation of adjusted net income may not be comparable to adjusted net income of other companies. We present adjusted net income because we believe it provides useful information regarding our comparability to peers. The following table presents a reconciliation of adjusted net income to the GAAP financial measure of net income for each of the periods indicated (in thousands): View source version on businesswire.com: https://www.businesswire.com/news/home/20260805457682/en/ Contacts Investor Relations Joe Thomas, SVP of Accounting & [email protected]

Smith Douglas reported strong demand and execution in Q1 with a record 981 net new orders (up 28% YoY), 624 closings, $4.3 million pre-tax income and $0.06 EPS, leaving a backlog of 869 homes at an average price of $332,000. Margins are under pressure despite a solid quarter—adjusted home closing gross margin was 20.3% this quarter but management guided Q2 to 17%–17.5%, citing 730 basis points of incentives/discounts and lot costs up about 300 basis points as key headwinds. The company is pursuing a land-light, presale-focused strategy while maintaining a conservative balance sheet with $28 million cash, $68.5 million debt, ~$195 million revolver availability, and has repurchased roughly $10 million of stock. Interested in Smith Douglas Homes Corp.? Here are five stocks we like better. Smith Douglas Homes (NYSE:SDHC) reported first-quarter 2026 results highlighted by record quarterly net new orders and home closings at the high end of management’s guidance, while the company continued to lean on financing incentives and targeted pricing adjustments to support affordability and sustain sales pace. In prepared remarks, CEO and Vice Chairman Greg Bennett said the company generated $4.3 million in pre-tax income and net income of $0.06 per share. Smith Douglas delivered 624 homes, at the high end of its guidance range, and posted a 19.6% GAAP home closing gross margin, which Bennett said exceeded expectations. → Meta Posted Its Best Sales Growth Since 2021—So Why Did Shares Fall? On the demand side, Bennett said the company generated 981 net new orders, up 28% year over year and a “new quarterly record.” He described orders as “choppy throughout the quarter,” but said sales pace improved sequentially each month, “culminating in a sales pace of 4 homes per community in the month of March.” Bennett emphasized that financing incentives remained “a key selling tool” as buyers sought monthly payments that fit their budgets. He also pointed to “price elasticity” during the quarter, saying incremental pricing adjustments led to higher demand—an indicator, in his view, that underlying demand remains intact despite broader macro uncertainty. → 5 Stocks to Buy in May Before the Next AI Surge Hits Executive Vice President and CFO Russ Devendorf said Smith Douglas recorded $206.4 million in revenue on 624 closings, with an average sales price of $331,000. He cited an adjusted home closing gross margin of 20.3%, which adds back impairments, interest in cost of sales, and purchase accounting adjustments. Devendorf noted a 170 basis-point benefit to gross margin from the reduction of land development accruals tied to the closeout of several communities. In response to analyst questions, Devendorf explained that accrual reversals are typical when communities are closed out and reserves are reduced over a “3 to 6 months” period if costs do not materialize. → Verizon’s Signal Strength: The Turnaround Call Is Loud and Clear He also detailed the impact of incentives and discounts on profitability. Devendorf said closing costs, price discounts, and the cost of forward commitments totaled 730 basis points in the quarter, compared with 430 basis points in the year-ago period and 680 basis points sequentially from the fourth quarter of 2025. He told analysts that price discounts and forward incentives reduce revenue (pressuring average selling price), while closing costs run through cost of goods sold. On construction costs, Devendorf said the company was “getting some benefit on the direct cost side” year over year. However, he identified lot cost as the major driver of margin pressure, saying lot costs as a percentage of revenue were up about 300 basis points versus last year due to higher land deal bases entered into over the past couple of years. In another exchange, management said it had been “pretty successful” pushing back against supplier price increases and that costs were down year over year, while acknowledging that sustained higher fuel prices could bring fuel surcharges. Management said it was holding a “pretty tough line” with trades and suppliers because the market is “not allowing” the company to take price. Devendorf said the company ended the quarter with 869 homes in backlog at an average sales price of $332,000. In addition, the company had 42 home reservations at quarter-end, which allow buyers to reserve a built-to-order home while benefiting from a guaranteed mortgage rate at closing; Devendorf said he expects “most of these reservations to convert to new home orders in the second quarter.” On sales mix, Devendorf reiterated that the company is focused on becoming “more presale,” which he said typically drives higher margins and aligns with Smith Douglas’ emphasis on buyer personalization. He said the company had been averaging roughly 40/60 presale versus spec “every week,” and added that the company has increased the percentage of spec homes sold before reaching the drywall stage—important, he said, because interest-rate locks beyond 60 days can be “almost cost-prohibitive.” Devendorf said the company was running about 70%–80% sold before drywall stage and that spec inventory has been coming down, though he called it “still a battle.” Devendorf said Smith Douglas ended the quarter with $28 million of cash and $68.5 million of total debt, with approximately $195 million available under its revolving credit facility. He reported debt-to-book capitalization of 13.6% and net debt to net book capitalization of 8.5%, describing the company’s approach to leverage as conservative. Management also discussed the company’s land-light strategy and optioned lot structure. Devendorf said that of the lots under option, about 30% are with land bankers and about 40% are with developers, with the remaining portion tied to underlying land sellers at various stages of due diligence. He described a typical land bank structure as averaging a 10% deposit and a 10% walkaway fee if the company exits the option. He also said that on new land bank deals the company does not cross-collateralize, although it may cross-collateralize within a division for some finished lot bank arrangements. Devendorf said the company began executing on its share repurchase authorization in the first quarter and continued into the second quarter. Including repurchases completed in April, the company has repurchased approximately $10 million of stock at an average price of $13.28 per share. For the second quarter, Devendorf guided to 725 to 800 closings, an average sales price of $325,000 to $330,000, and gross margin of 17% to 17.5%. He said the company is not providing full-year guidance given “continued variability in demand conditions.” Asked about the step-down in gross margin guidance, Devendorf said the company was assuming incentives would be “probably about flat sequentially,” and pointed again to lot cost as a key driver, while also noting some variability around the company’s ability to hold vertical costs. On land pricing, Devendorf said the company is “definitely seeing land prices start to moderate” and that negotiations are beginning to “flip from a seller’s market to a buyer’s market.” However, he said it typically takes about 18 months for new land deals to flow through the income statement due to development and construction timing, and he does not expect the increase in lot cost to moderate “for at least a couple of years” at any material level. In Q&A, management also commented on early second-quarter demand. The company said March traffic was strong, while April traffic saw a slight seasonal decline but remained “seasonally good,” holding “pretty steady,” and down approximately 6%–8% from earlier levels. Management reiterated its “pace over price” approach, emphasizing absorption and inventory turns even if margins are pressured in the short term. Devendorf said the company believes this strategy supports market share, cash flow, and continued investment in community growth through the housing cycle. On mortgage-rate incentives, Devendorf said the company shifted toward the end of the quarter and into April from marketing a 4.99% 30-year fixed offer to marketing a 3.99% 5/1 ARM, while still offering both. He said the ARM is partly a traffic driver and helps buyers qualify at a lower payment level, though he added that the 4.99% 30-year fixed remains the most utilized incentive. Smith Douglas Homes Corp., together with its subsidiaries, engages in the design, construction, and sale of single-family homes in the southeastern United States. It also provides closing, escrow, and title insurance services. The company sells its products to entry-level and empty-nest homebuyers. Smith Douglas Homes Corp. was founded in 2008 and is headquartered in Woodstock, Georgia. The article "Smith Douglas Homes Q1 Earnings Call Highlights" was originally published by MarketBeat.

Image source: The Motley Fool. Wednesday, Apr. 29, 2026 at 8:30 a.m. ET Chief Executive Officer — Greg Bennett Chief Financial Officer — Russ Devendorf President — Joe Thomas Need a quote from a Motley Fool analyst? Email [email protected] Greg Bennett: Good morning, and thank you for joining us today to review our results for first quarter of 2026 and provide an update on our operations. Smith Douglas Homes generated $4.3 million in pretax income for the quarter, net income of $0.06 per share. We delivered 624 homes, which came in at the high end of our guidance range, while home closing gross margin exceeded expectations at 19.6% on a GAAP basis. For the quarter, we generated 981 net new orders, up 28% from a year ago and a new quarterly record for the company. While order activity remained choppy throughout the quarter, we experienced a sequential improvement in our sales pace each month of the quarter, culminating in a sales pace of 4 homes per community in the month of March. Financing incentives continue to be a key selling tool as buyers remain motivated to own a home, provided they can secure a monthly mortgage payment that fits their budget. We are encouraged by the price elasticity we experienced during the quarter as incremental adjustments in pricing led to an uptick in demand. We view this as an indicator that underlying demand remains intact across our markets despite broader macroeconomic uncertainty. From an operational standpoint, we remain focused on pace over price philosophy, which means maintaining a consistent cadence of starts, driving efficient inventory turns and driving towards a more presale oriented backlog. Our average build time was 57 days during the quarter, consistent with prior period, and we continue to view our ability to deliver homes quickly and reliably with an offering of home choice and personalization as a key competitive advantage. Our land-light strategy also remains central to how we operate. By relying on third-party lot developers, we're able to allocate capital efficiently and maintain flexibility through varying market conditions. We believe this approach positions us well to manage risk while continuing to scale the business. We also made progress on our growth initiatives during the quarter. Community count expanded to 108 active communities across our markets, up 24% from a year ago, and we continue to ramp operations in our new markets such as Dallas, Chattanooga, Greenville and Alabama Gulf Coast. Our experience in Houston continues to demonstrate that our operating model translates well beyond our legacy footprint, and we remain focused on executing a disciplined and opportunistic expansion strategy over time. As we move through the spring selling season, we are encouraged by sales orders generated during the quarter, which helps rebuild backlog and provide momentum heading into the second quarter. We have continued to see encouraging traffic and order activity early in the second quarter, although demand remains variable week-to-week. We will continue to evaluate pricing and incentives at the community level and adjust as needed to maintain the pace required to support our operating model. While macro conditions remain dynamic, employment trends have been relatively resilient, and we continue to see motivated and engaged buyers in our markets. We believe our focus on attainable pricing, personalization and value put us in a good position to compete for these buyers and drive market share gains over time. Finally, I'd like to thank all of our team members for the hard work during this quarter. We challenged everyone to focus on getting off to a strong start this year, and our results this quarter showed they were up to the challenge. With that, I'd like to turn the call over to Russ, who will provide more color on our financial results this quarter and give an update on our outlook. Russ Devendorf: Thanks, Greg, and good morning. I'll highlight our results for the first quarter and then conclude my remarks with an update on what we are seeing so far this year and our outlook for the second quarter. We finished the first quarter with $206.4 million in revenue on 624 closings at the high end of our guidance range with an average sales price of $331,000. Our home closings gross margin was 19.6% on a GAAP basis and adjusted home closing gross margin was 20.3%, which adds back impairments, interest and cost of sales and purchase accounting adjustments. During the quarter, gross margin benefited by 170 basis points from the reduction of land development accruals on the closeout of several communities. Our margins continue to reflect the use of incentives and targeted pricing adjustments to support affordability and maintain sales pace. During the quarter, closing costs, price discounts and the cost of forward commitments totaled 730 basis points, which compared to 430 basis points in the year ago period and 680 basis points sequentially from the fourth quarter of 2025. Selling, general and administrative expenses for the quarter were $35.9 million or approximately 17.4% of revenue, up $2.9 million compared to the same period last year, reflecting continued investment on our growth markets as well as the impact of lower average sales price. Pretax income for the quarter was $4.3 million, resulting in net income of $0.06 per share. Given the nature of our Up-C organizational structure, our reported net income reflects the allocation of earnings between Smith Douglas Homes Corp. and the noncontrolling interest of Smith Douglas Holdings LLC. Because a significant portion of our earnings is attributable to LLC members and not taxed at the corporate level, the income tax impact reflected in our financial statements can differ from more traditional C corporations. For that reason, we also present adjusted net income, which assumes a blended federal and state effective tax rate of 26.6% as if we operated as a fully public C corporation, which we believe provides a more meaningful comparison to peers. For the quarter, adjusted net income was $3.2 million compared to $14.7 million in the same period last year. Turning to orders. We generated 981 net new home orders during the quarter, an increase of 28% versus the year ago period. We ended the quarter with 869 homes in backlog with an average sales price of $332,000. In addition to backlog, we also had 42 home reservations at the end of the quarter. These reservations allow our buyers to take advantage of buying a built-to-order home while also benefiting from a guaranteed mortgage rate when they close. We expect most of these reservations to convert to new home orders in the second quarter. Turning to the balance sheet. We remain in a strong financial position. We ended the quarter with $28 million of cash and $68.5 million of total debt with approximately $195 million available under our revolving credit facility. Our debt-to-book capitalization was 13.6% and net debt to net book capitalization was 8.5%, reflecting our continued conservative approach to leverage. Our land-light strategy remains a core component of our operating model with the majority of our lots controlled through option agreements, allowing us to maintain flexibility and deploy capital efficiently. As Greg previously mentioned and I explained on our fourth quarter call, I want to reiterate that our pace over price philosophy continues to guide how we manage the business. In the current environment, our focus remains on maintaining absorption and inventory turns even if that requires some pressure on margins in the short term. We believe maintaining sales pace allows us to preserve market share, generate cash flow and continue investing in our community pipeline, which ultimately drives scale and stronger returns over the full housing cycle. From a broader macro perspective, the housing market continues to operate in a challenging environment, driven primarily by affordability pressures and elevated mortgage rates. Recent economic data has been mixed and geopolitical developments continue to contribute to uncertainty. We are also monitoring labor market trends closely as employment remains a key driver of housing demand. Our capital allocation priorities remain unchanged. We will continue to prioritize investing in our land pipeline and community growth while maintaining a conservative balance sheet, and we will also remain opportunistic with share repurchases. During the first quarter, we began executing on our share repurchase authorization and continue to repurchase shares into the second quarter. Including repurchases completed in April, we have repurchased approximately $10 million of stock at an average price of $13.28 per share. We believe these repurchases represent an attractive and disciplined use of capital without limiting the financial flexibility to support our long-term growth strategy. For the second quarter, we currently expect closings between 725 and 800 homes, average sales price between $325,000 and $330,000 and gross margin between 17% and 17.5%. Given the continued variability in demand conditions, we are not providing full year guidance at this time. We believe the primary risk to our outlook remain tied to macroeconomic conditions, including mortgage rates, consumer confidence and employment trends. That said, we believe our affordable product offering, land-light strategy and disciplined operating model position us well to continue gaining market share over time. With that, I'll turn the call over to the operator for instructions on Q&A. Operator: [Operator Instructions] Your first question comes from the line of Michael Rehaut with JPMorgan. Nisarg Kalra: It's Nick Kalra on for Michael. I wanted to start by asking on the gross margin piece, you called out some moving pieces, but would really appreciate any extra color that you have either on the incentive environment and pricing considering like ASPs for the first quarter toward the lower end of your guide as well as on the cost side would be really helpful. Any color you can provide on construction costs, labor, et cetera. Russ Devendorf: Guidance on a GAAP basis -- came in at the high end of guidance on a GAAP basis and we had 170 basis points, as I mentioned, that -- and it's the way land development works. So when we close out communities, we typically have a reserve in land development for anything that over the next 3 to 6 months may come in from a cost perspective. We had closed out some communities in the fourth quarter towards the end of last year. And so those accruals that we had got reversed in the quarter. So that contributed to 170 basis point positive impact to margin. So if you back that out, we would have been right around, I think, 18.1% was -- which I think still was right in line with guidance or in the high end of our guidance range. And then from just some additional costs, as we mentioned, there's 730 basis points that were impacted by, like I said, impairment -- not impairments, excuse me, closing costs, the incentives for forward commitments, so the cost there and price discounts. And just to remind everybody, the price discounts and the forward incentives, that's a reduction to revenue. So ASP, that kind of drives ASP down a little bit and then closing costs run through our cost of goods. So that was up sequentially, as I mentioned, and up year-over-year. And then just from a cost perspective, we're actually getting some benefit on the direct cost side. So that's coming in a little bit better year-over-year. But the big driver still for us in kind of margin degradation is the lot cost. So lot costs were as a percentage of revenue, it's up about 300 basis points versus last year. So that's just the impact of the higher basis for land deals that we entered into in the last couple of years. Nisarg Kalra: Got it. Helpful. And then on anything you could provide? I think you mentioned in your prepared remarks that demand is still looking a little choppy week-to-week. Any color you can provide on that, either on a sequential basis, just a couple of weeks in, but relative to March? Or anything you could provide on April to date, that would be helpful from a demand perspective. Greg Bennett: Yes. Thanks for the question. We're seeing seasonal traffic. We had good strong traffic through March. April has been a slight decline, but still seasonally good as we've gone through all the spring break and all the disruptions there, it's held pretty steady, maybe down of 6% to 8% over what we were seeing earlier. Operator: Your next question comes from the line of Mike Dahl with RBC Capital. Stephen Mea: You've actually got Stephen Mea on for Mike Dahl today. I was hoping we could talk a little bit on the SG&A side of things. I totally understand you all are in a kind of growth phase and there's life cycle charges in there as you're opening up your new divisions and kind of getting all heads in place in there. I was just kind of wondering if you could give us a little more of an overview on where you are in that -- are in those life cycles? Is that good to keep ramping? Or is that something that might start to moderate a little bit in the coming quarters, just kind of a qualitative overview there. Russ Devendorf: Sure. Yes, I think as a percentage of revenue, it should definitely start to moderate because when you look at the gross dollars, we were only up $2 million, $3 million in that range. So it's more a reflection of our ASP is coming down. And again, part of that is increased incentives, like I mentioned, forwards and price discounts are pushing that ASP down, and so it's pushing that top line revenue. So some of that percentage increase is because of the top line revenue. But it is -- the gross dollars, the increase is actually not that bad in my -- from our perspective because we did open, as you recall, so Dallas was a new division last year. We divisionalized Chattanooga. We're opening up the Gulf Coast, which we hope to have some sales here in the next few months. And so we've got a lot of new fresh G&A that's hitting the books without any volume. And so that, again, just reflects our continued growth and scale. And so when you start to see some of that revenue come through, I think it will moderate, right? And again, even if you go back a couple of years, Greenville is a fairly new division. We centralized -- we divisionalized Central Georgia. And so we have expanded the footprint, again, in the drive for additional scale. So it's just -- it's kind of a timing thing. Stephen Mea: No, totally makes sense. I appreciate the response. And secondly, understanding that you're not providing full year guidance, but if there's anything you all could share with us on areas where you may have a little more visibility like your thoughts on your perhaps pace or cadence of community counts and how you're looking at kind of hopping on the previous question, incentives kind of within the guide and just kind of more broadly going forward would be helpful. Russ Devendorf: Sure. Yes, we don't like to give full year now. I mean maybe as we wrap up the second quarter and we're kind of halfway through the year, we will give some more clarity in this. Not like we don't have our internal targets. It's just given the environment, we just don't think it's prudent to provide any full year guidance. I mean, again, especially when it comes to margin or income, I mean, that's -- it's such a wildcard. We're going to continue to push pace. We feel pretty good, especially coming off of March and the quarter. I mean we had a really good beat, exceeded our internal expectations on sales. That's a reflection of us doing some additional price discovery in our communities, really driving our sales folks, credit to them in the field for really pushing on pace. And so it turned out to be a good quarter in sales, which obviously, the increase in backlog, it's going to set us up for -- hopefully, it starts to set us up for a good back half of the year in terms of closings. I think I mentioned on the last call, we were expecting anywhere from 10% to 20% in community count growth for the year. And so you can kind of translate that into what you might expect or as you run your model, what you might expect for closings. But clearly, we're focused on growing closings year-over-year. So we've got some pretty good internal targets, but you can kind of back into the numbers based on what I just told you. Operator: Your next question comes from the line of Trevor Allinson with Wolfe Research. Trevor Allinson: First one is on your expectation for vertical costs going forward. Obviously, oil prices up, quite a bit of fuel prices up, some building products materials have seen price increase announcements. So what are you expecting for vertical costs going forward? And then in terms of some of these price increase announcements from the manufacturers, are you currently taking on any of those price increases? Or have you been able to successfully push back against those? Greg Bennett: Yes. Thanks for the question. We've been pretty successful in pushing a lot of those increases off. We're -- our costs are down year-over-year. We know that if this fuel situation stays higher for longer, we're going to get hit with fuel surcharges and some of those things. But we show up diligent every day to work on our cost and our efficiency. So we'll continue to do that. And the market is not allowing us price, and that message is going through to our trade and our suppliers to say, look, we don't have ability to take price, and so we can't pass that through. So we're holding a pretty tough line on that. Trevor Allinson: Okay. Makes sense. I appreciate that color. And then on your lot portfolio, I mean, clearly, the majority of your lots are held off balance sheet. Can you talk about what portion of those lots are held by land banks and then shed any light on the structure of your land bank agreements perhaps in terms of deposit rates, option maintenance fees as well as your ability to potentially walk away from deals that no longer pencil? Russ Devendorf: Sure. So of the total portfolio, we have about 30% of our lots under option are with land bankers. Then there's about 40% of our lots under option are with developers. And so they're 70%. And then the balance, the other 30% are still deals that are with the underlying land seller. So where we have a contract that we may be in various stages of due diligence, but we control it with varying deposits. And usually, those are pretty small. But just from a land bank perspective and a structure perspective, so we are pretty much on average, it's about a 10% deposit that we have with the land bankers. And then there's typically like a walkaway fee that if you bust out of the option, then you pay another 10% walkaway fee, and that -- we disclosed that in our financials. But we don't -- on all of our new land bank deals, we do not cross-collateralize. We have some finished lot bank where we'll stick some lots when we have some bulky takedowns on active communities that we will put into a finished lot bank, and we may, within a division, cross-collateralize. But honestly, it's -- that's -- we don't view that as any real issue. So it's pretty simple the way we think about it. Operator: Your next question comes from the line of Ryan Gilbert with BTIG. Ryan Gilbert: On the 2Q '26 margin guidance, can you talk about how much of the step down is from higher incentives in the quarter versus higher lot costs or if there's anything else that we should call out? Russ Devendorf: It's -- we're assuming the incentives are probably about flat sequentially, maybe up or down 10, 20 basis points. We're still seeing the same -- and it's been pretty consistent. We're seeing the same percentage of forwards, the use of forwards. So that's probably pretty consistent. But then it's really -- I think there's a little step down in ASP. That again is probably coming from the forwards. But it's lot costs. Again, I think lot costs, you're going to continue to see that trend year-over-year where that's about 300 basis points up. So it's -- lot cost is driving it. And then part of the variable in there is how much -- to the earlier question, what Greg said, how much are we able to hold on vertical costs. Right now, we've done a pretty good job year-over-year. The average sticks and bricks costs are down a bit, but there's some variability there. Ryan Gilbert: Okay. Got it. And can you update us on what you're seeing in terms of, I guess, spot land prices for the deals that you're signing up today? And then if you're getting any relief on pricing, how long that would take to flow through into your income statement? Russ Devendorf: Yes. We're -- it's starting to turn. I think we've been mentioning this for the last couple of quarters. We're definitely seeing land prices start to moderate. We're starting to feel like we have more negotiating power, right, starting to flip from a seller's market to a buyer's market. And that obviously, any new deals that we put under contract in the typical fashion, excluding where we can pick up some finished lots from others that have walked, but it takes 18 months to flow through typically, right, because you've got development for a year and then you've got several months of vertical construction. So it takes some time. So we don't expect the increase in lot cost to moderate for at least a couple of years, right, at any material level. And we -- when we went public, we knew we were guiding everybody. I mean, lot costs were going up just because we knew what we were doing deals at. But now you're starting to see that reverse a little bit. But that's also as we talked about on our call and our pace over price philosophy, that's why it's really important for us to continue to move inventory through the pipeline so that we don't get gummed up with these lots. We can continue to move it through the pipeline so we can start taking advantage of a reset in land basis, land prices. And so that's kind of how we're thinking about it. Ryan Gilbert: Got it. Makes sense. Just one more... Russ Devendorf: One last thing there, and Joe just pointed it out, and he's right, like this is part of the reason why we think it's a reasonable opportunity to enter some of these new markets. Because we're able to start fresh and take advantage of some of these reset bases. So... Ryan Gilbert: Got it. Yes, that makes sense. Yes, just one more for me. It seems like you and the other publics and I guess the industry overall based on the starts number earlier this morning, it seems like there's a reacceleration in starts. I'm just wondering how inventory looks in your markets and if you're seeing any impact from, I guess, the recent increase in starts volume? Russ Devendorf: There hasn't been anything that we've seen materially different that we're hearing from our divisions. I know some of the builders, I mean, I think when you look year-over-year, a lot of the publics spec counts are down. They may be starting, and that could just be relative to maybe some better -- slightly better sales. I mean we had better sales than expected in this first quarter. We were up pretty good. So obviously, our starts are going to be up. But no, from an overall pure inventory standpoint, not seeing any real impact there. Operator: Your next question comes from the line of Natalie Kulasekere from Zelman & Associate. Natalie Kulasekere: So could you talk a little bit about how your incentives trended as the quarter progressed? I know you said it was 730 basis points for the whole quarter on average, but I'm just wondering if March was higher than January and February and if you had to kind of push incentives to achieve that pace of for sales per community? Russ Devendorf: Yes. And I don't have the exact numbers in front of me. And keep in mind, the 730 basis points, that's incentives and discounts that would have mostly come through in Q3, Q4 of last year that are hitting the books. And then from incentives on sales through the quarter, yes, I would just generally say that as we ramped up our pace and pushed for a little bit more price discovery, we probably saw it up a little bit. But honestly, we were -- I think we were pleasantly surprised that it didn't -- it wasn't a huge hit. But it does show that there is some price elasticity. It does -- you can see it ties into increase in volume. So... Natalie Kulasekere: All right. And what share of your closings this quarter were driven by spec sales? And where are you in terms of getting to a more presale heavy business? Russ Devendorf: Yes. I mean that -- presales is a huge driver or a huge focus of ours because traditionally, you're going to make more money on presales. And because of our business model, we really focus on personalization and choice for our buyer, and we have a quick turn from a cycle time perspective. So really for us, we're trying to drive that message to the divisions -- and because we do think that ultimately, that's going to help drive higher margins, but it also gives our buyers a different buying experience than when you go to some other entry-level builders that are more, "hey, you get a vanilla, chocolate, strawberry" type of choice. But we've been averaging -- it's probably still 40, 60 presale versus spec every week. But more importantly, we're getting the contract. We saw an uptick in getting a sale on a spec home before it hits what we call line in the sand, so kind of before it hits drywall stage. So that's really, today, very important because we're still using forward commitments, incentives. And to put an interest rate lock out there for more than 60 days is almost cost prohibitive. So the incentives are still a big driver for some of these buyers in figuring out payment. So even if we have those starts, as long as we're within kind of 60 days and they can get some choice before we hit drywall stage, getting that sale before drywall stage is important. So we're doing a pretty good job there. I'd say we're probably 70%, 80% before drywall stage has got a sale and our spec inventory has been coming down. So it's still a battle, but that's our focus is driving more presale going forward. Operator: Your next question comes from the line of Rafe Jadrosich from Bank of America. Rafe Jadrosich: Just can you -- I know you walked through it a little bit, just the gross margin, it's good to see the backlog sort of stabilize and step up here. The gross margin sequentially flat quarter-over-quarter in 1Q, like just can you help me just understand the accrual call out that you had there and bridge like maybe on a like-for-like basis, 1Q to 2Q? Russ Devendorf: Yes. So if you -- so we had 170 basis points roughly of a benefit because we reversed some land development accruals on closeout communities. So these were several communities that closed out in kind of Q3, Q4. And so our internal policy is we keep -- we start to ratchet down accruals over 3 to 6 months just in case there's any stragglers or any costs out there once we close a community. And so that was 170 basis points to margin. So basically, if you just look operationally, take our margin for the quarter, back out 170 basis points, and that's kind of where you would start with your gross margin, to take out the noise. We had a little bit of impairment in there. So strip that out. I think that was 30 -- I don't know how many basis points that accounted for... Joe Thomas: 70. Russ Devendorf: 70 basis points. So there was 70 basis points of impairment that was a negative impact to margin. Again, you want to strip that out. So when you see our filing, you'll be able -- and I think it's in the notes, it's in the back half of the press release. But when you look at the adjusted margins, you'll be able to see some of that stuff. So that's why when you strip out all the noise, I think sequentially, we're basically calling for about a 50 basis point decline in margin from Q1 to Q2. And again, there was a lot there, but we can walk through any detail if it's -- once you see the numbers, it's -- you have any confusion? Rafe Jadrosich: Okay. That actually -- that's very helpful and makes sense. And that's the sequential from 1Q to 2Q, that you still have land inflation, but incentives sort of flattish and that's getting to it. Russ Devendorf: That's right. Yes. Rafe Jadrosich: Okay. And then on the SG&A side, you said it was really interesting. And obviously, the dollars have stepped up here and continue to grow, but you're expanding communities. You're also moving into new markets. Of the markets that you operate in today, what would you consider to be like at scale versus what you're still trying to get the scale up and are sort of below where you'd expect it to be longer term? Greg Bennett: Yes. Thanks, Rob. I'll take that. We're in still infancy, I would say, in Greenville. -- the same in Dallas, Fort Worth, Gulf Coast. And we're kind of over that hump in Chattanooga, made a lot of growth strides there in the last year. And then Central Georgia would be another that we're still building scale in. It's just kind of a spin-off of Atlanta, but without any real community count as we spun that off. So those are, again, not the scale would be Central Georgia, Greenville, Dallas, Fort Worth and Gulf Coast. Russ Devendorf: Yes. And the only -- what I'd add to that as well is while we have -- we always are targeting a minimum of 2, what we call R-teams, and that's roughly 208 starts per our team. We want to have a minimum 2 R-teams in every division. And so we're not quite there in a couple of our legacy divisions like Charlotte, it's Nashville, we're not there yet. So at a minimum, we want to get there. And then that's just the minimum, but we really feel like in some of those legacy divisions, we should be closer to 3 R-teams, 600 closings specifically Raleigh. I do think Charlotte can get there, 600 plus. We're not there yet. Nashville should be 400 plus. And then obviously, Atlanta and Houston right now are too big from a permit count, right, 2 of the largest markets that we're in. Atlanta, because we peeled out Chattanooga, which was really kind of North, Georgia, pulled back a little bit. But again, Atlanta proper should be close to 1,000 units on a run rate. And then Houston for us, we entered that. We're making a lot of good strides in getting them what I would say is like Smith Douglas-ized from a turns and they've been great. But we're only doing 400 plus or minus closings there. I mean that should be double, right? Within 5 years, we need to -- I mean, that's such a big market. We've had some headwinds, but that should be double. And then what's really shining for us is our Alabama division. They're at pretty good scale between Birmingham and Huntsville, kind of plus or minus 600. So we've got some work to do in scaling up some of the legacy divisions. But like Greg said, a lot of these new ones are just getting going. But that's why you see the G&A, right? When you look at the G&A relative to the community count increase, right, our community count was up 24% and our G&A was only up $2.9 million on a gross dollar basis. So to me, that's pretty efficient. Operator: Your next question comes from the line of Jay McCanless from Citizens Bank. Jay McCanless: First question I had, we've seen some articles in the mainstream press about affordability being even worse than some of the larger cities now, which is forcing some migration out. So I guess my question is, are you guys seeing better demand in your smaller markets, whether it's absorption, traffic, however you want to measure it versus maybe some of the larger markets like Raleigh and Atlanta? Russ Devendorf: Yes. Look, Alabama has done really well. And I would consider that relative, obviously, Birmingham, Huntsville relative to Houston, for instance, yes, we've seen some better demand trends. And again, Texas is its own animal. So yes, I think it's also just -- we're so used to in the Alabama markets. They didn't have the kind of spike up post-COVID. I mean it was good, but it wasn't like you had some of these other markets. So it's -- I almost feel like we're just used to hand-to-hand combat there, and it's just the way we operate. So yes, we saw some better demand there. But it's -- outside of that, like there's nothing that I would say really sticks out with our footprint. I think we're in some pretty good markets kind of in the Southeast and Central U.S., which is -- that's by design. But nothing really that I can say sticks out. I don't know, Greg, if you... Greg Bennett: The only thing, Jay, I'll add to that is the in-migration in some of the bigger metro locations we're in is down. I mean that's been a lot. And so you feel that a little more and some of those smaller markets are not as sensitive to that. Jay McCanless: Got it. Okay. And then the second question I had, ARMs, are you guys still trying to push on those? Is that still having good success with customers? And maybe what your ARM percentage was this quarter? Russ Devendorf: Yes. We shifted really towards the end of the quarter and into April, we moved from a 4.99% incentive that we're kind of marketing across the footprint, a 30-year fixed. We moved to -- just to change it up a little bit and the costs were kind of almost in line. We moved to a 3.99%, 5/1 ARM towards the end of the quarter and really into April. And if you go to our website, I think that's what you'll see at the top of the page. So we're offering -- we're really -- we're still offering both. We're marketing the 3.99% and a lot of that is -- a lot of it really is -- it's more a traffic driver, but it's also designed to give our salespeople as much flexibility, right, when -- because with a 3.99%, 5/1 ARM, the buyers can qualify off of that payment that calculates off the 3.99%. So for our buyer, that's definitely helpful. So we kind of give them some optionality there. But it's -- we're just trying -- seeing what the market is doing, trying to at least compete at that level and give buyers as much affordable options as possible. Joe Thomas: And we're seeing more usage of the 4.99%. Russ Devendorf: Yes. 4.99%, the 30-year fixed 4.99% is probably taken the most of the incentive. Operator: We have reached the end of the Q&A session. I will now turn the call back to Greg Bennett for closing remarks. Greg Bennett: Thank you for joining us on our Q1 results call. I hope everyone has a great day. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Smith Douglas Homes, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Smith Douglas Homes wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $496,797!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,282,815!* Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 200% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of April 30, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Smith Douglas (SDHC) Q1 2026 Earnings Transcript was originally published by The Motley Fool

Management emphasized a 'pace over price' philosophy, prioritizing consistent inventory turns and market share preservation over short-term margin optimization. Performance was driven by price elasticity, where incremental pricing adjustments and financing incentives successfully converted motivated buyers despite macroeconomic uncertainty. The company achieved a record 981 net new orders, a 28% year-over-year increase, supported by a sequential improvement in sales pace throughout the quarter. Operational efficiency remains a core differentiator, with an average build time of 57 days allowing for a quick-turn, personalization-focused business model. The land-light strategy, with 70% of lots controlled via third-party options, provided capital flexibility and risk mitigation during a period of shifting market dynamics. Strategic expansion continued with community counts rising 24% year-over-year as the company ramps operations in new markets like Dallas and the Alabama Gulf Coast. Second quarter guidance assumes closings between 725 and 800 homes with a projected gross margin contraction to between 17% and 17.5%. Management expects lot costs to remain a headwind for at least two years, as higher-basis land deals from previous periods continue to flow through the income statement. The company is shifting toward a more presale-oriented backlog to drive higher margins and leverage its quick cycle times as a competitive advantage. Full-year guidance remains withheld due to continued variability in demand and sensitivity to mortgage rate fluctuations and consumer confidence. Growth strategy focuses on reaching 'at scale' status in new divisions, targeting a minimum of two production teams per market to optimize G&A efficiency. Gross margin in Q1 was bolstered by a 170 basis point benefit from the reversal of land development accruals following the closeout of several communities. Incentive costs, including closing costs and forward mortgage commitments, rose to 730 basis points compared to 430 basis points in the prior year. The company executed $10 million in share repurchases through April at an average price of $13.28, signaling confidence in its valuation and capital position. Lot costs as a percentage of revenue increased by approximately 300 basis points year-over-year, reflecting the impact of land deals signed during peak pricing periods. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management has successfully pushed back against manufacturer price increases, stating that current market conditions do not allow for passing higher costs to consumers. While vertical costs are currently down year-over-year, the company is monitoring fuel surcharges as a potential future risk factor. The land market is beginning to shift from a seller's to a buyer's market, allowing for more aggressive negotiations on new deals. New markets like Dallas and the Gulf Coast offer opportunities to 'reset' the land basis by entering at current, more moderate price points. The company recently introduced a 3.99% 5/1 ARM to drive traffic and help buyers qualify for payments, though the 4.99% 30-year fixed rate remains the most popular choice. Incentives are viewed as essential tools for addressing price elasticity and maintaining the required sales pace for the operating model. Current SG&A reflects 'fresh' costs from new divisions in Dallas and the Gulf Coast that have not yet reached full closing volume. Management expects SG&A as a percentage of revenue to moderate as these new markets scale toward their internal targets of 400-600 annual closings. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

ATLANTA, April 29, 2026--(BUSINESS WIRE)--Smith Douglas Homes Corp. (NYSE: SDHC) ("Smith Douglas" or the "Company") today announced first quarter results for the three months ended March 31, 2026. Q1 2026 Results as compared to Q1 2025: Home closings decreased 7% to 624 Home closing revenue decreased 8% to $206.4 million Home closing gross margin of 19.6% compared to 23.8% Net new home orders increased 28% to 981 Backlog homes increased 10% to 869 Pretax income of $4.3 million compared to $19.6 million Earnings of $0.06 per diluted share compared to $0.30 Debt-to-book capitalization of 13.6% compared to 9.0% at December 31, 2025 Active community count increased 24% to 108 at quarter end Total controlled lots increased 14% to 23,314 Repurchased 449,604 shares of Class A common stock for $5.7 million "Smith Douglas Homes delivered a solid start to 2026, with first quarter deliveries at the high end of our guidance range and home closing gross margin exceeding expectations," said Greg Bennett, Chief Executive Officer and Vice Chairman of Smith Douglas Homes. "While demand conditions remained uneven early in the quarter, we saw steady improvement in our sales pace as the quarter progressed, reflecting the underlying resilience of demand for attainable housing in our markets." Mr. Bennett continued, "Our strategy remains centered on operational discipline and maintaining a steady cadence of home starts that supports quick inventory turns. With company-wide build times averaging approximately 57 business days, we believe our efficient production model continues to be a meaningful competitive advantage, allowing us to respond quickly to shifting market conditions while delivering value to our customers." Russ Devendorf, Executive Vice President and Chief Financial Officer, added, "During the quarter we generated 981 net new orders and experienced sequential improvement in sales pace each month, culminating in a pace of four homes per community in March. Financing incentives remain an important tool in helping buyers manage monthly affordability, and we were encouraged by the positive demand response to modest pricing adjustments." Mr. Devendorf continued, "Our long-term strategy remains focused on disciplined growth, maintaining a land-light balance sheet, and expanding our footprint across high-growth Southern markets. As we continue to scale operations in markets such as Dallas, Chattanooga and the Alabama Gulf Coast, we believe our combination of attainable pricing, customization and operational efficiency positions us well to drive market share gains over time." Conference Call & Webcast Information Management will host a conference call to discuss the Company’s results at 8:30 a.m. Eastern Time on April 29, 2026. Interested parties can dial in using the numbers below or access the call via a webcast link provided in the investor relations section of the company’s website. To pre-register for the call: https://events.q4inc.com/analyst/807396100?pwd=T0pURcqS To join with dial-in: Local: (+1) 585-542-9983 Toll Free: (+1) 833-461-5787 Conference ID: 807396100 A replay of the call will be available on the Company’s website shortly after the call concludes. About Smith Douglas Homes Headquartered in Woodstock, Georgia, Smith Douglas Homes completed its initial public offering in January 2024. Since its inception, Smith Douglas has been entrusted by over 20,000 families to fulfill their new home dreams. Ranked as a top 50 builder nationally for several years and with 2,908 closings in 2025, Smith Douglas currently holds the #32 position on the Builder Magazine Top 100 list. The Smith Douglas communities are primarily targeted to entry-level and empty-nest homebuyers looking to purchase a new home priced below the Federal Housing Administration loan limit in the metro areas of Atlanta, Birmingham, Central Georgia, Charlotte, Chattanooga, Dallas-Fort Worth, Greenville, Houston, Huntsville, Nashville, Raleigh, and the Alabama Gulf Coast. Smith Douglas offers its homebuyers a personalized, affordable buying experience at attractive prices, delivering exceptional value and quality. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding the Company’s performance, growth, strategic plans and opportunities, financial position, ability to navigate the changing homebuilding landscape in the macroeconomic environment, and the timing of any of the foregoing. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. These forward-looking statements are based on management’s current estimates and expectations. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. Non-GAAP Financial Measures In addition to our results determined in accordance with generally accepted accounting principles in the U.S. ("GAAP"), this press release includes net debt-to-net book capitalization and adjusted net income. Net debt-to-net book capitalization Net debt-to-net book capitalization is a supplemental measure of our leverage that is not required by, or presented in accordance with, GAAP and should not be considered as an alternative to debt-to-book capitalization or any other measure derived in accordance with GAAP. We caution investors that amounts presented in accordance with our definition of net debt-to-net book capitalization may not be comparable to similar measures disclosed by our competitors because not all companies and analysts calculate this non-GAAP financial measure in the same manner. We present this non-GAAP financial measure because we consider it to be an important supplemental measure of our leverage and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. We define net debt-to-net book capitalization as: Total debt, less cash and cash equivalents, divided by Total debt, less cash and cash equivalents, plus equity. This non-GAAP financial measure has limitations as an analytical tool in that it subtracts cash and cash equivalents and therefore may imply that the Company has less debt than the most comparable measure determined in accordance with GAAP. Because of this limitation, this non-GAAP financial measure should be considered along with other financial measures presented in accordance with GAAP. The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in the following table: 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 an applicable 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 and comparability to industry peers who record income tax expense on their income before tax as opposed to the income of Smith Douglas Holdings LLC not being taxed at the entity level and, therefore, not reflecting a charge against earnings for income tax expense. Adjusted net income should not be considered as an alternative to, or more meaningful than, net income or any other measure as determined in accordance with GAAP. Our computation of adjusted net income may not be comparable to adjusted net income of other companies. We present adjusted net income because we believe it provides useful information regarding our comparability to peers. The following table presents a reconciliation of adjusted net income to the GAAP financial measure of net income for each of the periods indicated: View source version on businesswire.com: https://www.businesswire.com/news/home/20260428265964/en/ Contacts Investor Relations Joe Thomas [email protected]