Earnings call transcript Q1 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone.

My name is Evelyn, and I will be your conference operator for today.

At this time, I would like to welcome everyone to the Smith Douglas Homes First Quarter 2024 Earnings Call and Webcast Conference.

All lines have been placed on mute, to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer session.

Instructions]. [Operator

you. Thank

to like the to call I'd hand Kleid. Eddy now over

conference. now may you begin Eddy, your

Eddy Kleid

Good to and morning welcome conference call. Smith Douglas' earnings

issued or which bottom this first We be at found today's release the results website can the press the at Investor our for link investors.smithdouglas.com, call, morning and homepage. quarter selecting will of we outlining XXXX, our on discuss by on of a Relations

Relations call this webcast be section of will website. Investor note Please on our simultaneously the

would to including forward-looking are operating remind I future certain begins, made on which performance, that statements. and call call, statements not the Before are like goals and financial statements everyone this facts, historical concerning

as Actual statements results and to such detailed could company's known factors due in filings. SEC materially risk, the and differ from unknown important uncertainties, other

law, Except company as statements. duty undertakes forward-looking these to by the required update no

financial and this GAAP press Additionally, discussed website our measures reconciliations filings. be to comparable release found can measures of in our our the on most non-GAAP on SEC located call

Hosting President the and Executive Bennett, our the Russ Devendorf, this Vice Vice Greg CEO and company's CFO. Chairman; morning and call are

I'd over to the Greg. turn now to like call

Greg Bennett

and our for for morning, over an results Good as of the provide operations. on XXXX, we first you us, update our quarter go and joining thank

has quarter, pre-tax Smith and Douglas share. Homes million first $XX.X generated a income diluted in the of $X.XX per

on a while increase in remained XX% month, orders on rate at $XXX deliveries, a community XXX of sales pace Home low million sales X.X at cancellation came revenue new totaled homes our in XX.X%. per and per

job our quarter. of in teams high homes, during as the our guidance, order selling and Our closing results end came the and closings did an excellent prior over

creation, and low conditions and supply, We in-migration, in of homebuilding job new drivers demand our favorable existing continue including formation. household thanks healthy to to markets, and positive levels see

in buyers existing has The the new rates, greater to place, market. the of from home into homeowners lock-in higher mortgage percentage keep continues a which effect pushed

place in a for homebuilders market be opportunity for will take dynamic this to real creating some believe We time, share.

which of price of segments $XXX,XXX Our average focus more market, remains reflected on our in affordable the quarter. is for the the sales

supply-constrained We market, attractive segment of the standpoint. from believe it buyer a most demographic is and most the

offerings for homes empty-nesters buyers, our at and an price. to customizable entry-level are looking home affordable who cater We

has resulted strategy growth margin only for by our company profitability, quarter. volume evidenced but This the our also not years, of strong in the XX.X% as gross homebuilding for over healthy

We XX% of at continue option to a lots agreement end of controlled strategy, with the employ quarter. land via lot our first

bankers, basis. strive sellers, Through on to a we lots relationship land our and land developers, with acquire just-in-time strong

This homes. do allows us to turn on build we focus our and and is which sell inventory more quickly, best, what

allows It more associated efficiently, risks to us also land our the mitigate some development. with capital and use of

days. at XX Our with were in in line quarter times expectations approximately build the

SMART system construction our Through to we strive excellence Builder set process, team and standards homebuilding of efficiency. our ERP for

standard leadership and several people team our requires over in the of of that a is outside the business, both This that one decades and number inside organization. coordination the a has refined

it takes days build believe homebuilding, for to efficient reduce to our company. of differentiator our key approach costs look a and home to consistently a We for number ways and is

on public builder affordable The a of strategy, group. end that and is our our high lot equity focus, the building net land our at process, product result of ranks return peer proprietary profile

throughout which to Perry Houston can contracting Central begun County, for and homebuilding surrounding be the in of expand have and quarter, We in replicated believe our markets, lots Georgia, Southeast includes footprint and by this our Warner Tennessee a Robins, in and number in approach Chattanooga, to submarkets.

these out create markets teams scale eventually separate operations, as in division Atlanta our build expansive to our divisions. drive leverage initially to we plan until We we enough

strategic through expand discussed our our organically past, M&A if itself. the presents in to is plan footprint opportunity we've the As and geographic both

Our integration Homes of is Street Houston in progressing. Devon

As pleased been how we more couldn't the of be way business, Douglas and has the embraced going. it Smith with doing has team

Overall, good we feel about the of our state current operations.

saw the quarter. and throughout traffic first we sales trends and solid And improving

Thus the absorption below in far, through May, have remained March. April good although trends and order saw pace slightly we

while adjusted addressing the factor a likely for buyers incentives, concerns. said, will to affordability and be of idea That rates, appear higher has have been to longer, financing ability our key to offer to

the and year. We general remain of housing the balance the the for strength about conditions the market, cautiously optimistic economic of

the additional With on who call turn Russ, provide will our that, our outlook. color over to this and update I'd like some results to quarter

Russ Devendorf

Greg. Thanks,

remarks the results first I'm for my highlight expectations, full and of year to of and the second conclude quarter, our quarter and some with going our XXXX. for outlook

million we for As with $XXX closings, homes sales mentioned, of on an of price finished the on XXX quarter $XXX,XXX. revenue closed average Greg

the XX.X%, gross Our was margin of for SG&A was XX.X% revenue. quarter and

We income. finished with $XX.X pre-tax million of

our of X.X% of Up-C an statements. million, our financial face nature structure, income tax organizational effective rate the the on Given net which reflects is our of reported $XX.X

It the financial expense, which which be should is the Corp., Smith ownership our non-controlling XX.X% by the is shareholders to economic the economic as Smith public Homes continuing this Douglas Douglas owners, that tax footnotes attributable of in LLC, Holdings interest, noted equity ownership of XX.X% not income documented statements. controlled our our in controls and

XX% XXX% tax income, we was net had million given subchapter our organizational operating, believe a which $XX.X we corporation. C and non-GAAP as federal structure, public rate, is a assumes ownership and that state as if adjusted is blended measure a Our useful effective

may industry is organizational traditional effectively, income management it peers net comparability structure. useful and allows that because adjusted investors, metric, tax operating more our and believe to a evaluate more We and have a to performance

purchase includes Houston the attributable our of accounting period, costs, acquisition the the of Our sales approximately to for Devon Homes. of $XXX,XXX amortization Street cost operations, of

the stock upsized to our the relates the to facility IPO compensation for approximately and costs, write-off non-cash of expense employees amended SG&A in full-time to time all Additionally, we to with the one-time we of credit of at our period concurrent grants includes IPO, loan January. our and expense made, of $XXX,XXX attributable closed of $XXX,XXX, our unsecured related that, a staking

XX% increase over year the XX% of the controlled finished of over We end. prior just quarter an over with quarter our from and lots, first total XXXX, XX,XXX

investment corporate focus to busy and on review deals, which Our to driving every footprint. scale market land committee, new remain increasing our and share, as approve continues we week meets throughout existing

either meaning land-light XXX True under were our unstarted, of philosophy, to our in or operating our owned, controlled XX% only process, lots work controlled option. of lots that were

would we closings our our X.X over market, between supply to forecasted a stay based targeted normalized XX-month rolling to lot a on In supply, a calculated X.X range, within expect year period.

price backlog, margin gross average of with an selling quarter those expected finished in of We $XXX,XXX, with the an first homes on homes XX.X%. X,XXX approximately

XX here at end we operating currently sit we of communities selling As today, active quarter. XX of the are out the versus

Looking credit $XXX the ended at facility. sheet, approximately million balance no quarter $XX with under our our cash revolving million we of borrowings and

total members' with fees. finished of includes underwriting and million million $XXX which stockholders' and $XXX proceeds IPO, net professional We of equity, our from after

was net Our debt-to-book was and debt-to-book capitalization X.X%. negative our capitalization X.X%,

had available mentioned. as approximately and million Greg our on are growth $XXX execute We on previously well-positioned our unsecured facility, to strategy, credit

second XXXX. our Now to for quarter for year full the outlook, I'd summarize and like

$XXX,XXX and XXX price our margin the home gross second of between and in XX.X% between homes and $XXX,XXX, finish quarter anticipate average range an XX.X%. with to We XXX closings, sales to

our between our guidance and X,XXX to range selling expect to we $XXX,XXX reiterate of $XXX,XXX. For closings the total and home full prior projected now X,XXX homes, price average between XXXX, year

less price to project finish, acquisition, be margin accounting XX.XX% which gross XX.XX%, points to revenue, purchase expect Street to We of Devon allocation. home we adjustments purchase basis given of closing than final our between any inclusive our from XX

we external SG&A Additionally, expense sales ratio, which commissions. for expect year, XX.XX% range full for and to be of XX.XX% in the X.X% internal and approximately includes our the

the projections sales to and bring ability to are online. risks our believe new primary our We our lots pace, and communities around maintain

to call, see flats. mentioned permitting I municipalities delays some on on our and As with prior continue we

Macroeconomic around primarily impacts jobs, and have unforeseen interest factors, to rates, could numbers. also our inflation,

to With I'd Q&A. to on turn call instructions operator that, for over the like the

Operator

you. Thank

Instructions] [Operator

Reid first Fargo. comes Sam question Wells Our from from

Your line open. is now

Sam Reid

Awesome. much, Thanks guys. so

bit and you detail. May unpack in on a to wanted trends the I order April more highlighted,

I think absorption have below, the saw mentioned you you a in might been bit March. rate what

us a you've give what just a as sense, to how in compares you April-May this can period? seen typical So to

those kind traffic any homes might of looking as model sense what in lines, foot like to And your be then relative along to expectations?

Russ Devendorf

the Yes. through I'll you numbers quarter we're give what seeing. the and specific of some

And you typical then can into some this maybe give Greg color, on plays just seasonality. how

So through the traffic first quarter, to continue improve we the sales and throughout saw quarter. trends

into is as seasonal, part got deeper selling of we I season. again, the believe that And

was So - quarter March strongest about a the was month. strongest It four-time.

we I four think per month. sales had

slightly January February X.X, just was and lower. then about was

per sales back so, to then into we X.X And were down moving community. April, a

consistent And what May, trending very in with saw we April. is

The a good, right? did bit. good, traffic's still So it's - March but pop still

where my to peaked say, it's if selling we kind a perspective, that's more as back from again, just But seasonality, and a coming kind of season, in bit. maybe through March we get hard it's of least at little

But foot throughout but is good the to quarter, a trends continue been we were traffic and had some little have good. rates traffic bumpy, - they real

Greg Bennett

add Yes I that. can't Russ, much to

We've seen really strong divisions. our of all traffic across

opening, little and a with a demand And and bulk hard communities of sales. it's think sometimes getting up pinned flats I with releasing

spring. real but for there had March, sales we our there any out sure think And good with anomalies don't was in activity I activity

Sam Reid

helps, that No guys.

here. on And then, wanted quickly to margin touch gross

Devon like going at a tweaked guidance that Street, is you dynamic, be purchasing and sounds least it of to little think I less accounting a headwind. just bit,

margin mindful sure other should think understand be things I any we we fully want as I of to a But just guidance? that? ton. Thanks make about the

Russ Devendorf

Sam. thanks, Yes,

purchase our really, finalize accounting. our week purchase XX-K, so so, about our some did we finalizing accounting, - we we margin had when a from were The and finished we call,

Devon to Street our number that We our week, goodwill had to some call. subsequent on last changes in

now that going be headwinds originally are less price accounting had we the guided on what to. to allocation based so, And from that, final impacted we purchase purchase than, think, those

had I about XX we So, basis said something points. think

to be Now I points, or XX it's going think less. basis

real allocation We little a estate goodwill, did the reduces which inventory. more the book to

when really together, our think time. guidance you roll I period, gross hasn't last from guidance changed the all yes, that last our So margin, margin

of, do said, like we to we XX.XX%. think XX.XX% So kind

I think tick - sit if XX% - the as range here think somewhere in we midpoint. you I would kind that's there, today, of

a estimate. think fair I that's

our numbers. still We fill that sales to see. we've got get backlog, and to we'll But continue to to some with closings have

as sit we or right where today, mentioned, now. the is margin But our and call, mentioned on backlog we XX.X% I as

about So we feel good it.

sales, the with out Anything additional and the to that to get need can we year. fill happen

But hopefully question. that your answers

Sam Reid

helps. No, certainly that

guys. Thanks, I'll on. pass it

Russ Devendorf

Thanks, Sam.

Operator

next from comes from question RBC. Mike Our Dahl

open. Your is now line

Unidentified Analyst

This Clough] for [Chris actually is Hi. Mike.

Just margin gross a follow-up comments. the on

Street, seems outside said I not much change. Devon think I it of like

this guys of the you thinking rest about year? are How incentives pricing into and

baked in guide being terms your in What's of quarter? this quarter, last

any there? Has changes been there

Just talk a that. bit little on

That'd helpful? be

Greg Bennett

changes to of lot Yes. I a incentives. don't see, Mike,

prices. held We've

demand We've with actually areas. increased some prices a in couple

are still incentives. offering We

But the trending seeing what with months. been I it's think we've in past several

Unidentified Analyst

Got it.

Okay.

no the change back in So half.

it this quarter stable? sounds been far to-date, And your like quarter, it's so

Russ Devendorf

been It's consistent. Yes.

we trended saw the in quarter this has through part the second What quarter. first of

as expect don't again, much here that. we And sit change today, in

a happens. But dependent on lot's I be going what rates think and to

election an also it's mean, year. I

So, we'll see.

we mentioned, our But close portion with like up what a we're takes for. backlog, which what we'll XX.X% good is of sitting

all of balance through not that, If the of year. the

good of got So baked. a portion we've that already

current But think yes, what seeing. consistent sales trends with are we've pretty I been

expect don't much change I discounting. in

Unidentified Analyst

that. Appreciate Okay.

a community count outlook. touch as guys your you I just And hoping on follow-up, was could growth

any there? Has there changes been

guys to markets. you announced know I entrance new new a

or community kind there delays relative just that your of to in whether any been changes expectation, count So openings? be has new ramp,

Russ Devendorf

Yes.

changes no today, here roadshow. we on sit we what the from discussed As

the high can't mid XXs. expect we I I in end XXs, to somewhere remember, think to

we'll back and pull maybe the to XX. bit But fourth through had we expected peak Maybe to a count, then get quarter. community

thought consistent we expectations what our the But of year. said, like the are coming I beginning with into

Unidentified Analyst

color. the all Appreciate Understood.

Russ Devendorf

Yes. Thanks, Chris.

Operator

Our of next Jadrosich Rafe America. question comes from Bank from

now Your line is open.

Rafe Jadrosich

Hi. my for questions. Rafe. morning. It's Thanks Good taking

Greg Bennett

Rafe. are you doing? Hey, How

Rafe Jadrosich

to The wanted first - clarify. to - I just want just I Russ,

I said backlog in right? margin Did that gross get the XX.X%. you think was your I

Russ Devendorf

XX.X%. Yes.

Rafe Jadrosich

Got it.

- just the for So you? gross - how long take and the will that

backlog or quarters probably that one two basically, Is out? is - your

that backlog you - year? of long how is much how this that will like Just carry

Russ Devendorf

Yes.

closed we so if do you So math, XXX. the

backlog. got there's X,XXX - You've in

next the quarters. yeah, So couple

close today, to continued we've end the That'll kind quarter. into stuff go not. is of quarter, we're in and that will through close would next selling second quarter, that stuff - what earlier of we if And sell sold

quarter. be of yes, through So that third should most

Rafe Jadrosich

that you're it today, what's margins sounds backlog? you're similar as to And then the homes in seeing like the selling

Russ Devendorf

been It's consistent. Yes. Yes. pretty

Rafe Jadrosich

Got it.

helpful. Very Okay.

of And lot are then I what terms guess in now? seeing you right costs

particularly think we've from bit a heard that builders I of step inflation. there's finished up lots, on sort some little a been in other of

in are prices? lot terms land What and you seeing of

there? change any been there Has

guidance? what assuming in are just of then, level you your And inflation

Greg Bennett

Yes.

increases seeing higher are in that we doing we're definitely are lots, new So at contracts, deals new rates. contracting

with year. deals those back entitlement development of and next Those are timeframes half be that'll timeframes, the - into are

So guided we're it's really for not anything, yet.

increases yes, There's seeing material But some sure. lots. in we're out

the processes little - little a there out there's entitlement a of And a have scarcity. caused bit

of is there great pressure a So on deal those.

Rafe Jadrosich

not Got it. something half something of flows or through second that like XX? P&L But until 'XX,

Greg Bennett

Yes, 'XX. it of would be back half

Rafe Jadrosich

the then last on is Street. And Okay. just Devon question

Now had to expectations how for to markets margins it can relative, your that here, opened? the new you've you quarter in you've and that coming about talk other another are relative

are margins kind there, relative of Where business? core to your

the And do about progression how you think there?

Thank you.

Russ Devendorf

better sure. Yes, coming than we in Margins anticipated. probably are

is Part the to that due accounting. of purchase

some we we'd drag and over through have on the not see which the the did inventory, as we that first months had working margins the as So, their that, some been a would of process, really they allocate the much - books. lots to worked on of XX

in range in around XX% coming it's XX%, But mid-XXs, - the Houston. it's

with volume. that's more pushing us And

Prior little were to they probably focused on Street, more acquiring us Devon a margin.

tell some But our sales implemented we've tools. I of you,

down tool. pushing our We're ERP, our CRM

We're and really pushing doing more in Houston. marketing leads

we side the and And strength with of happy be the from progressed couldn't both how more, sales that's sales. so,

has Houston season. through And selling been this in I just think general, good

been we've pretty really to some how with margins. addition pleased able hold that we've to volume, well, in But pushing good been

credit a team. really it's to So that

embraced said, And Greg again, the really doing Douglas way they've of as Smith business.

any we couldn't have so, as And go - probably couldn't gone better.

happy So with real it.

Rafe Jadrosich

was guys. That very Thanks, helpful.

Operator

comes Alex Housing Our from next from Research question Barron Center.

open. now is line Your

Alex Barron

thank Yes, you.

sure economics. I'm Just the wanted the make of mechanics to understanding

rate is than purposes different tax for EPS, the tax GAAP far As correct? calculating for rate, the as

Russ Devendorf

Yes.

get on won't a I'll and but we - So high it offline, you a - and can level. I basic take give

just to Smith EPS of On financials. on income a against shares Corp. the basic calculation, Homes allocated so the you're Douglas the taking the public face

is calculation on based that. that So

the into converted then, at shares. dilution, shares if diluted the the to takes account when A And actually look EPS B you

a And calculation takes different a so, there's actually that estimate.

Alex, on face we through the of the So but financials, the it's details you a walk offline. complicated little can

Alex Barron

you Okay. call I'll guys to that. through go afterwards

you the terms of what have in end guys And seen incentives quarter? now, right of the after

guys been of roughly they given had increase, April? a you the incentives able bit decrease up the or Have that or went to same, kind to little maintained in

Greg Bennett

on remained with have Incentives QX. par

- on to think, obviously the We're rates. rates, going to less going be up for from we Fed be are longer pullback

over been to same, past be the and we're to continuing things So, forecast the they've the same quarter.

Alex Barron

Okay. Great. Thank you.

Greg Bennett

Thanks.

Operator

McCanless Jay Wedbush. from comes question next Our from

is Your now open. line

Greg Bennett

Hi, Jay, you there?

Jay McCanless

hit Yes, unmute the it - I doesn't button, it? helps

Thank letting you me for on.

couple of A questions.

year. The looks look first one, legacy the if were you closings at versus like Smith it last Douglas down markets,

Could or the you that timing, maybe rates? talk through of just higher impact community

What the was markets? some of older going Smith-Douglas on legacy with

Russ Devendorf

about exclude a Yes, few when you were down we closings Houston. flat,

of things. think I couple it's But a

came quarter. Atlanta in really last year strong with a

out in gapped Nashville. we then, some specifically communities, And in

flats I flat thing, So getting it's coming it's say. communities not - of in Yes, demand a online. of gaps, kind our would gaps timing and

there. on going what's that's So

back getting Like we reiterated hoping said, so to we we're up. X,XXX count that we're the community X,XXX,

has mentioned, Greg as and seeing, market still of we're always we're still risk. outside mentioned, I been As seeing that

other been most been Just risk concerned we've developments with. that timing has of the

Jay McCanless

it. Got

Okay.

backlog the gross pretty margin, then sounds good. And XX.X%,

is what it, or you're having to guess some resell, specs other I some incentives? maybe

what's XX.X% the I to XX.X% in for now? between what's that's guide right delta XQ, the sitting versus backlog guess

Russ Devendorf

Part of just trying conservative. a to it's be little

We don't you disappoint to want guys.

But mostly it's I look, that. think yes,

pretty we what rest and terms And in then out good. the we the of just close, sales, as still about, talked the we sell to and of year filling need feel

said, we consistent. Like incentives, pretty staying we're

Houston. we we're surprised - But pleasantly want to do and with

to as into some But in year half volume year. of the to I next we into to look like do the drive scale, continue feel order and back drive

costs there volume, we land as drive more full. and a there's little seeing, cycle In and our little that think a we're compression our I addition the keep moving, try margin maybe times lot right and to and teams

just generally, margin that's some I where see So compression.

should But, yeah, we're - for XX% not we quarter, or if better. be I'd surprised at second

Jay McCanless

how just the to then how going is year? Okay. the was that's talk you go and And implementation next be there, feel about like my and - maybe Houston, is rest the that of for question, our going going team to

Greg Bennett

Yes. Jay. Good morning,

well. really going It's

to a to kind only a standing weeks there, our to group to there were I We've able travel force Houston - we Houston, trades. complete with out room in few roll with ago, and Tom and trade a had launched and of

And it's been really welcomed.

embraced. to Q&A lot a did well and of We there, it be seems

sales converted We've couple had would anticipated. in our processes over the here past we say going of I things have and are months, than, could better

very be the optimistic of end we're year. by strong that And will the

Jay McCanless

I all guys. had. Okay, great. That's Thanks,

Russ Devendorf

Jay. Thanks,

Greg Bennett

Thanks.

Operator

Right we don't any now questions. have pending

for I'd now back over like remarks. to to hand Bennett call Greg the closing

Greg Bennett

you. Yes, thank

conclude will call that So today. our

us. thank We joining want to for you

a has Hope great everyone day.

through we Relations. us, that if need you And out ask Investor reach you our

Thank you.

Operator

attending Thank call. for today's you

disconnect. now may You

Have day. a wonderful

Smith Douglas Homes (SDHC) 24 May 242024 Q1 Earnings call transcript