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SD

Smith Douglas Homes Corp. (SDHC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue grew 1% YoY to $223.9M, with closings up 2% and ASP flat; diluted EPS was $0.26. Gross margin of 23.2% landed at the high end of guidance, but down vs 26.7% last year as higher lot costs and financing incentives weighed on margins .
  • Against consensus, SDHC delivered a clean beat: revenue $223.9M vs $213.9M consensus (+4.7%) and EPS $0.26 vs $0.246 consensus; EBITDA was roughly in line (actual ~$17.8M vs ~$18.1M consensus)* .
  • Management guided Q3 closings to 725–775, ASP $330–$335k, and gross margin 20.5%–21.5% as it maintains a “pace over price” approach and continues rate buydowns (e.g., 4.99% fixed, 3.99% 5/1 ARM) .
  • Strategic expansion advancing: active communities +23% YoY to 92; controlled lots +57% to ~24,824; entry into Dallas–Fort Worth and the Gulf Coast of Alabama expected to support medium‑term scale, while net debt-to-net book cap remains modest at 12.1% .

What Went Well and What Went Wrong

What Went Well

  • High-end gross margin execution within guide: 23.2% in Q2 vs guidance high end, aided by operating discipline; CEO: “Home closings… above our stated guidance range… home closing gross margin of 23.2% was at the high end of the range.” .
  • Community and lot pipeline expansion: active communities +23% YoY to 92; controlled lots +57% YoY to 24,824—positioning for share gains; CFO: “net debt-to-net book capitalization…12.1%… gives me confidence” .
  • Cycle time improvements and targeted incentives supporting demand conversion; CEO: “average cycle time… 54 days, down from 60 days in 2024” and entry into DFW and Gulf Coast to extend footprint .

What Went Wrong

  • Margin pressure YoY from higher lot costs (26.0% of revenue vs 23.9%) and higher incentives (4.8% vs 4.2%); SG&A deleverage to 15.5% of revenue (vs 14.5%) with new division investments .
  • Profitability down YoY: pretax income $17.2M vs $25.9M; net income $16.4M vs $24.7M; diluted EPS $0.26 vs $0.40 .
  • Backlog contracted: 858 homes vs 1,173 YoY (ASP $341k vs $345k), reflecting lower carry‑in and higher spec mix (now ~50%–60% vs historical presale focus), increasing reliance on intra‑quarter selling .

Financial Results

Summary vs prior periods and estimates

MetricQ2 2024Q1 2025Q2 2025
Home closing revenue ($USD Millions)$220.9 $224.7 $223.9
Diluted EPS ($)$0.40 $0.30 $0.26
Home closing gross margin (%)26.7% 23.8% 23.2%
Pretax income ($USD Millions)$25.9 $19.6 $17.2
Net income ($USD Millions)$24.7 $18.7 $16.4
Net new home orders (units)715 768 736
Home closings (units)653 671 669
ASP of homes closed ($USD Thousands)$338 $335 $335
Cancellation rate (%)11.8% 8.1% 10.0%

Q2 2025 vs S&P Global consensus

MetricActualConsensus*Beat/(Miss)*
Revenue ($USD Millions)$223.9 $213.9*+$10.1 (+4.7%)*
Primary EPS ($)$0.26 $0.246*+$0.014 (+5.7%)*
EBITDA ($USD Millions)~$17.8 ~$18.1*(~$0.3) (~1.8%)*

Values with asterisks are retrieved from S&P Global.

Segment breakdown (Q2)

SegmentQ2 2024 Revenue ($M)Q2 2024 ClosingsQ2 2024 ASP ($k)Q2 2025 Revenue ($M)Q2 2025 ClosingsQ2 2025 ASP ($k)
Southeast$124.4 355 350 $141.3 407 347
Central$96.5 298 324 $82.7 262 315
Total$220.9 653 338 $223.9 669 335

KPIs and balance sheet

KPIQ2 2024Q1 2025Q2 2025
Active communities (period end)75 87 92
Total controlled lots15,842 20,442 24,824
Backlog homes (period end)1,173 791 858
Backlog contract value ($M)$404.8 $270.1 $292.9
Cash & cash equivalents ($M)—$12.7 $16.8
Notes payable ($M)—$42.6 $74.1
Debt-to-book capitalization (%)—9.5% 15.2%
Net debt-to-net book capitalization (%)—6.9% 12.1%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Home closings (units)Q3 2025Not previously provided725–775 New
ASP ($)Q3 2025Not previously provided$330k–$335k New
Home closing gross margin (%)Q3 2025Not previously provided20.5%–21.5% New
Community count2H 2025Not previously provided“Grow modestly” New
FY closings target (management goal)FY 2025~3,000 (goal) Maintained as a target Maintained

Notes: Management frames ~3,000 closings as a goal/target contingent on macro demand, not formal guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Affordability & incentivesQ4: affordability issues persist; value proposition vs low existing-home supply . Q1: demand “somewhat inconsistent and still dependent on incentives” .Uneven demand; heavier use of financing incentives including forward commitments (4.99% fixed; 3.99% 5/1 ARM); $0.9M cost in Q2 .Increasing reliance on incentives .
Asset‑light land strategyQ4: 96% unstarted lots optioned; land‑light reiterated . Q1: controlled lots +45% YoY; asset‑light emphasized .Controlled lots +57% YoY to 24,824; 96% of unstarted controlled lots optioned .Strengthening pipeline .
Cycle times/operationsNot highlighted in Q4/Q1 press releases.Cycle time improved to 54 days ex‑Houston (from 60 in 2024); goal of 46 days .Improving build efficiency .
Market expansionQ4/Q1: expanding in existing/new markets (e.g., Greenville, Houston) .Entering DFW and Gulf Coast of Alabama via greenfields; ~600 lots in DFW secured .Accelerating expansion .
Sales mix (spec vs presale)Historically >70% presale pre‑COVID .Spec now ~50%–60%; backlog down, inventories up; focus remains presales longer‑term .Higher spec share near‑term .
Macro/tariffsMacro headwinds/affordability persisted (Q4, Q1) .Affordability, consumer confidence headwinds; no supplier letters yet on potential lumber tariffs .Persistent macro pressure; monitoring tariffs .

Management Commentary

  • “Home closings for the quarter came in above our stated guidance range, while our home closing gross margin of 23.2% was at the high end of the range.” — Greg Bennett, CEO .
  • “Excluding Houston, our average cycle time at the end of the quarter was 54 days, down from 60 days in 2024… we’ll be entering Dallas–Fort Worth and Gulf Coast of Alabama… expect… start selling by year end [DFW].” — CEO .
  • “Gross margin came in at 23.2%… lower YoY reflects higher average lot costs (26.0% vs 23.9%) and rising incentives (4.8% vs 4.2%). SG&A was 15.5% of revenue vs 14.5% last year, driven primarily by new divisions.” — CFO .
  • “We ended the quarter with $16.8M cash and ~$70M drawn on our unsecured revolver; we increased the facility to $325M and extended maturity to May 2029.” — CFO .
  • “We continue to utilize forward commitments to buy down interest rates… fixed 4.99% and a 5/1 ARM at 3.99%… recognized $0.9M of costs in the quarter.” — CFO .

Q&A Highlights

  • Margin/incentives: Q3 margin guide embeds continued incentives (forward commitments) despite a slight recent dip in rates; pace over price remains priority .
  • Land & lots: Controlled lots up broadly across markets (notably Chattanooga, Central Georgia, Greenville, Houston); ~600 lots secured in DFW; land pricing firm but terms more negotiable and retrading increasing .
  • Full‑year volume: ~3,000 closings remains a company goal, dependent on macro demand and incentives; Q3 closings guided to 725–775 with ASP $330–$335k .
  • Mix/backlog: Spec mix elevated (~50%–60%) vs historical presale model; backlog down but inventory up to support intra‑quarter conversion; long‑term aim to return to higher presale mix .
  • Costs/supply chain: “Sticks and bricks” flat in Q2 and down YTD; no lumber tariff letters yet; monitoring potential impacts .

Estimates Context

  • Q2 2025 beats: Revenue $223.9M vs $213.9M consensus (+4.7%); EPS $0.26 vs $0.246 consensus (+5.7%); EBITDA roughly in line (actual ~$17.8M vs ~$18.1M)* .
  • Revisions risk: Q3 margin guide (20.5%–21.5%) and continued incentives may prompt modest consensus margin/EPS trims for H2 despite expected sequential revenue lift from higher Q3 closings .

Values with asterisks are retrieved from S&P Global.

Key Takeaways for Investors

  • Execution solid amid macro pressure: revenue/EPS beat consensus; gross margin at high end of guide despite incentives and higher lot costs .
  • Near‑term margin compression likely: Q3 guide to 20.5%–21.5% reflects ongoing rate buydowns; expect EPS sensitivity to incentive cadence and mix .
  • Growth capacity building: active communities +23% and controlled lots +57% underpin medium‑term volume; DFW and Gulf Coast entries broaden TAM and optionality .
  • Balance sheet flexibility: net debt-to-net book cap 12.1%, revolver upsized to $325M, and $50M repurchase authorization provide tools to navigate volatility and seize opportunities .
  • Watch demand indicators: monthly sales per community dipped in May (2.4), rebounded in June (2.8) and ~2.5 in July; conversion appears responsive to financing incentives—key for Q3 pace .
  • Mix/backlog dynamics: higher spec share supports intra‑quarter closings but elevates margin risk; management still targeting a return to a higher presale model longer‑term .
  • Risk checks: Affordability/consumer confidence, potential lumber tariff impacts, and incentive costs remain swing factors for H2 margin/EPS trajectory .

Appendix: Additional Details

  • Non‑GAAP: Adjusted net income was $12.9M in Q2 vs $19.4M last year; provided to normalize for Up‑C structure (assumes 100% public ownership, 24.9% blended tax rate) .
  • Backlog margin: Company expects ~21.5% gross margin on backlog exiting Q2, consistent with lower guided Q3 margin range .
  • SG&A: Year‑over‑year dollar increase (~$2.9M) largely tied to greenfield startups; CFO indicated a “maybe million couple million dollars” annual run-rate to seed a new division, with scale benefits at ~200 closings per RT team by ~year two .

All facts and figures are sourced from company filings and the Q2 2025 earnings call: 8‑K Q2 2025 press release and exhibits –, Q1 2025 8‑K –, Q4/FY 2024 8‑K –, and the Q2 2025 earnings call transcript –. S&P Global consensus figures are marked with an asterisk and accompanied by the disclaimer above.