Sign in

You're signed outSign in or to get full access.

SD

Smith Douglas Homes Corp. (SDHC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record closings and revenue: 836 closings (+28% YoY) and $287.5M revenue (+32% YoY), with home closing gross margin of 25.5% and diluted EPS of $0.46 .
  • Management exceeded prior Q4 guidance on closings and met margin/ASP targets; full-year 2024 closings of 2,867 also beat prior guidance midpoints, with home closing gross margin 26.2% .
  • Near-term margin pressure persists from affordability-driven incentives and higher lot costs (200–300 bps erosion); Q1 2025 gross margin guided to 23.25–23.75% with closings 625–675 and ASP $330–$335K .
  • Estimates: S&P Global consensus for Q4 2024 EPS/revenue was unavailable due to a provider data-access limit; comparisons to Wall Street estimates are not included.
  • Stock-relevant narrative: evidence of scale and operational efficiency (cycle times ~55 days; 96% unstarted lots under option), strong balance sheet (net debt-to-net book capitalization negative 5%) supporting expansion, offset by incentive-driven margin headwinds and lot cost inflation .

What Went Well and What Went Wrong

What Went Well

  • Record quarterly closings and revenue; “well above our stated guidance” with Q4 pretax income of $30M; home closing gross margin in-line at 25.5% .
  • Operational efficiency: cycle times ~55 working days, with R-team philosophy adoption improving construction flow; backlog ASP $340K and expected backlog margin ~24% .
  • Balance sheet strength: ~$22M cash, no revolver borrowings, debt-to-book capitalization 0.8%, net debt-to-net book capitalization −5% .

What Went Wrong

  • Margin pressure from incentives and lot costs; incentives increased in Q4 and into Q1 2025; lot cost inflation eroding 200–300 bps of margins .
  • Demand variability tied to interest rates (30-year mortgage peaked over 7% in January), driving higher incentives and cautious buyers; SG&A elevated in Q4 from bonus accruals (14.9%) .
  • Backlog down year-over-year (homes −24%; contract value −24%); cancellation rate rose to 14.8% in Q4 (vs 14.0% prior year) .

Financial Results

Quarter-over-Quarter Comparison

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$220.933 $277.835 $287.486
Diluted EPS ($USD)$0.40 $0.58 $0.46
Home closing gross margin (%)26.7% 26.5% 25.5%
SG&A (% of revenue)14.4% 12.3% 14.9%
Income before income taxes ($USD Millions)$25.866 $39.585 $30.036

Year-over-Year (Q4 2024 vs Q4 2023)

MetricQ4 2023Q4 2024
Home closings (units)654 836
Home closing revenue ($USD Millions)$217.327 $287.486
Home closing gross margin (%)26.7% 25.5%
Net new home orders (units)524 569
Pretax income ($USD Millions)$29.680 $30.036

Segment Breakdown — Q4 2024

SegmentHome closing revenue ($USD Millions)Home closings (units)ASP of homes closed ($USD Thousands)
Southeast$192.609 537 $359
Central$94.877 299 $317
Total$287.486 836 $344

KPIs (operating)

KPIQ2 2024Q3 2024Q4 2024
Home closings (units)653 812 836
ASP of homes closed ($USD Thousands)$338 $342 $344
Net new home orders (units)715 600 569
Cancellation rate (%)11.8% 11.4% 14.8%
Backlog homes (period end)1,173 961 694
Backlog ASP ($USD Thousands)$345 $346 $340
Active communities (period end)75 74 78
Total controlled lots15,842 17,878 19,522
Optioned lots14,167 16,132 17,746
Owned lots (incl. homes under construction)1,675 1,746 1,776

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / ActualChange
Home closingsQ4 2024750–800 836 (actual) Beat
ASP ($K)Q4 2024$340–$345 $344 (actual) Inline
Home closing gross margin (%)Q4 202425.2–25.7 25.5 (actual) Inline
Home closingsFY 20242,780–2,830 2,867 (actual) Beat
ASP ($K)FY 2024$339–$341 $340 (actual) Maintained
Home closing gross margin (%)FY 202426.0–26.5 26.2 (actual) Maintained
Home closingsQ1 2025N/A625–675 New
ASP ($K)Q1 2025N/A$330–$335 New
Home closing gross margin (%)Q1 2025N/A23.25–23.75 New
Home closingsFY 20253,000–3,250 3,000–3,200 Narrowed (lower upper bound)
Home closing gross margin (%)FY 2025~25% ±25 bps Early margin pressure; backlog ~24% near term Maintained target; near-term lower
SG&A (% of revenue)FY 202413.5–14.0 “Just under 14%” actual commentary Maintained
SG&A (% of revenue)FY 2025N/AExpect leverage; target below 14% New/Improving

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Affordability & incentivesIncentives ~3% of price (more closing costs than price adjustments); demand slightly below seasonality in summer Incentives increased in Q4 and into Q1 2025; backlog margin ~24% reflecting higher incentives Increasing pressure
Lot cost inflationLot cost % of revenue up ~300 bps YoY; expected to rise another $10–$12K/lot in 2025 Lot costs eroding 200–300 bps of margin; competitive land market Persistent headwind
Cycle times & operationsCycle times ~60 days excl. Houston; integration progressing Cycle times ~55 working days; Houston adoption progressing Improving efficiency
Community count & expansionExpect ~15% growth in 2025; Greenville startup; Chattanooga/central GA expansion Ratably growing toward ~90 by YE 2025; clarify ~12% growth and permitting risks Growth, timing risk
Tariffs/macroUncertainty on administration policy; monitoring cost impacts Monitoring; no current impact; some subs discussing surcharges; rates peaked >7% in Jan Watchlist
Houston integrationMargins mid-20s; spec mix higher; cycle times targeted high-50s by YE Back-half demand slower; integration strong, mid-20s margins Stable integration
Mortgage JVNewly announced JV with loanDepot to drive consistency and process control Continued emphasis on capture/closing process via preferred lender/JV Execution focus

Management Commentary

  • “New home deliveries for the quarter totaled 836, which was well above our stated guidance and represented a Company record for quarterly closings. Home closing gross margin came in line with our expectations for the quarter at 25.5%.” — Greg Bennett, CEO .
  • “Adjusted net income… was $22.6 million for the quarter… backlog margin about 24%… incentives increased given affordability; Q1 2025 closings 625–675, ASP $330–$335K, gross margin 23.25–23.75%.” — Russ Devendorf, CFO .
  • “Cycle times… approximately 55 working days… our trade partners and suppliers continue to buy into the R-team philosophy.” — Greg Bennett .
  • “Lot cost… could be 200 to 300 basis points of margin eroding… land is still challenging.” — Russ Devendorf .
  • “We ended the quarter with approximately $22 million of cash and no borrowings… debt to book capitalization 0.8% and net debt to net book capitalization negative 5%.” — Russ Devendorf .

Q&A Highlights

  • Margin trajectory: Backlog margin ~24% reflecting Q4 incentives; CFO sees margin risk primarily from incentives and lot costs, with potential improvement if rates ease later in 2025 .
  • Lot cost inflation outlook: Erosion of 200–300 bps; expected to level off beyond 2025, with vertical costs relatively flat; monitoring potential tariff-related surcharges .
  • Community count cadence: Ratable increase through 2025 toward ~90 communities; clarified growth closer to 12% with permitting/approval timing as key risk .
  • ASP expectations: 2025 ASP range reaffirmed at $335K–$345K; Q1 mix drives ASP $330K–$335K .
  • Incentive mix: Primarily closing costs and rate buydowns; discounting used but closing cost incentives dominate .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 (EPS, revenue, EBITDA) were unavailable due to a provider daily request limit; comparisons to Wall Street consensus are therefore not included. If available, we would anchor all estimate comparisons on S&P Global’s consensus.
  • Implications: Near-term margin guide below prior expectations (Q1 2025 GM 23.25–23.75%) and higher incentives suggest potential downward revisions to 1H25 gross margin/EPS, while stronger-than-expected delivery volume and community growth plans could support revenue estimate resilience .

Key Takeaways for Investors

  • Delivery momentum and scale: Record Q4 closings and full-year beat on volume underscore operational throughput and market position; scale benefits should help SG&A leverage in 2025 .
  • Margin headwinds are real but manageable: Incentives and lot costs are the primary sources of compression; management is prioritizing pace over price to keep the machine at full capacity .
  • Operational execution: Cycle times improved to ~55 days and R-team adoption is broadening; efficiency gains help offset some margin pressure .
  • Balance sheet strength: Minimal leverage (net debt-to-net book capitalization negative 5%) and ample revolver capacity support ongoing land-light growth and community expansions .
  • 2025 setup: Q1 margins guided lower; yearly closings guided 3,000–3,200, community count trending toward ~90, with permitting/macro as the principal risks .
  • Houston integration: Stable mid-20s margins and continued process integration; spec exposure higher in Houston but managed with pricing to meter pace .
  • Monitoring catalysts: Rate trajectory, tariff/labor developments, incentive intensity, and success in bringing new communities online will drive estimate revisions and stock reaction .