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What changed in Smith Douglas Homes Corp.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Smith Douglas Homes Corp.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+346 added−325 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-21)

Top changes in Smith Douglas Homes Corp.'s 2025 10-K

346 paragraphs added · 325 removed · 290 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

109 edited+13 added−6 removed144 unchanged
Biggest changeLand-light business model that allows for both risk mitigation and enhanced returns Core to our success is the capital efficient, land-light operating strategy we have employed since our inception. We believe this approach mitigates risk and, consistent with our efficiency focused culture, enhances our returns.
Biggest changeOur ability to streamline production and reduce operating costs has resulted in strong home closing gross margins, which were approximately 22% and 26% for the years ended December 31, 2025 and 2024, respectively. 11 Table of contents Land-light business model that allows for both risk mitigation and enhanced returns Core to our success is the capital efficient, land-light operating strategy we have employed since our inception.
We primarily employ two variations of our land-light land financing strategy—finished lot option contracts and land bank option contracts—pursuant to which we secure the right to purchase finished lots at market prices from various land sellers 15 Table of contents and land bank partners, including through our unconsolidated entities, by paying deposits based on the aggregate purchase price of the finished lots (typically ranging between 5.0-20.0%) and, in the case of land bank option contracts, interest on the price of the outstanding lots to the land bank partner.
We primarily employ two variations of our land-light land financing strategy—finished lot option contracts and land bank 15 Table of contents option contracts—pursuant to which we secure the right to purchase finished lots at market prices from various land sellers and land bank partners, including through our unconsolidated entities, by paying deposits based on the aggregate purchase price of the finished lots (typically ranging between 5.0-20.0%) and, in the case of land bank option contracts, interest on the price of the outstanding lots to the land bank partner.
When a land seller desires to sell finished lots in bulk or does not wish to develop finished lots, we often enter into land bank option contracts with land bank partners whereby we assign the underlying finished lot option or raw land purchase contract to a land bank partner, who then funds the land development costs and sells the finished lots to us, at our option, over a period of time with staggered takedown schedules.
When a land seller desires to sell finished lots in bulk or does not wish to develop finished lots, we often enter into land bank option contracts with land bank partners whereby we assign the underlying finished lot option or raw land purchase contract to a land bank partner, who then funds the land development costs (in the case of raw land) and sells the finished lots to us, at our option, over a period of time with staggered takedown schedules.
Walker served as Chief Operating Officer of Hines Global Income Trust, Inc., a publicly held real estate investment trust investing globally in commercial real estate, from June 2019 until her retirement from such position in June 2024, and has served as a part-time consultant for a privately held vertically-integrated retail investment company since June 2024.
Walker served as Chief Operating Officer of Hines Global Income Trust, Inc., a publicly held real estate investment trust investing globally in commercial real estate, from June 2019 until her retirement from such position in April 2024, and has served as a part-time consultant for a privately held vertically-integrated retail investment company since June 2024.
Our culture has been recognized by several industry publications, including Great Place to Work Certifications in 2022, 2023, and 2024, as well as placements on the Fortune Best Workplaces in Construction list in 2022, 2023, and 2024, and the Fortune Best Medium Workplaces list in 2024.
Our culture has been recognized by several industry publications, including Great Place to Work Certifications in 2022, 2023, 2024, and 2025, as well as placements on the Fortune Best Workplaces in Construction list in 2022, 2023, 2024, and 2025 and the Fortune Best Medium Workplaces list in 2024.
The key tenet of Rteam is to enhance the collaboration, visibility, and mutual accountability between us and our key business partners, including the developers, suppliers, and trade partners within our production model.
The key tenet of Rteam is to enhance the collaboration, visibility, and mutual accountability between and among us and our key business partners, including the developers, suppliers, and trade partners within our production model.
We believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own a higher percentage of their land supply on balance sheet. As of both December 31, 2024 and 2023, 96% of our unstarted controlled lots were controlled through lot option contracts. We are a disciplined, process driven, and schedule-oriented company.
We believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own a higher percentage of their land supply on balance sheet. As of both December 31, 2025 and 2024, 96% of our unstarted controlled lots were controlled through lot option contracts. We are a disciplined, process driven, and schedule-oriented company.
In general, our model homes are distinguished by well-landscaped entryways, digital sales kiosk with touchscreen displays, and design option selection areas for the homebuyer to create their personalized home. The sales centers are staffed with in-house commissioned sales personnel who have in-depth knowledge of our products, communities, and the markets in which they work.
In general, our model homes are distinguished by well-landscaped entryways, digital sales kiosks with touchscreen displays, and design option selection areas for the homebuyer to create their personalized home. The sales centers are staffed with in-house commissioned sales personnel who have in-depth knowledge of our products, communities, and the markets in which they work.
Our geographic footprint is concentrated in markets that demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions. Our operations are currently organized into eight geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions.
Our geographic footprint is concentrated in markets that demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions. Our operations are currently organized into ten geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions.
These option contracts allow us, at our option, to forfeit our right to purchase the option lots for any reason. Our sole legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to such option contracts and any related fees paid to the land bank partner.
These option contracts allow us, at our option, to forfeit our right to purchase the option lots for any reason. Our typical legal obligation and economic loss as a result of such forfeitures is limited to the amount of the deposits paid pursuant to such option contracts and any related fees paid to the land bank partner.
Our markets exhibit attractive demographic trends, including high employment growth, strong supply and demand fundamentals, positive net migration, home price appreciation, favorable land pricing, and low costs of living, which we believe will support the long-term growth of new home orders.
We target markets which exhibit attractive demographic trends, including high employment growth, strong supply and demand fundamentals, positive net migration, home price appreciation, favorable land pricing, and low costs of living, which we believe will support the long-term growth of new home orders.
It typically takes us approximately 64 business days to construct a single-family home. Our materials are subject to price fluctuations until construction on a home begins, at which point prices for that home are locked in via purchase orders.
It typically takes us approximately 57 business days to construct a single-family home. Our materials are subject to price fluctuations until construction on a home begins, at which point prices for that home are locked in via purchase orders.
Jackson served as President and Chief Executive Officer of PGT Innovations, a publicly held building materials manufacturer and supplier, from 2018 to May 2024 and held various other roles at PGT Innovations since 2005, including Chief Financial Officer from 2005 to 2014 and Chief Operation Officer from 2014 to 2018. Prior to PGT Innovations, Mr.
Jackson served as President and Chief Executive Officer of PGT Innovations, a publicly held building materials manufacturer and supplier, from 2018 to May 2024 and held various other roles at PGT Innovations since 2005, including Chief Financial Officer from 2005 to 2014 and Chief Operating Officer from 2014 to 2018. Prior to PGT Innovations, Mr.
Our unique affordable luxury business model is designed to balance an optimized and value-driven homebuyer experience with operational efficiency. We have invested significant resources in perfecting approximately 30 value-engineered floor plans that our homebuyers have used in over 87% of total homes closed across all our markets for the year ended December 31, 2024.
Our unique affordable luxury business model is designed to balance an optimized and value-driven homebuyer experience with operational efficiency. We have invested significant resources in perfecting approximately 30 value-engineered floor plans that our homebuyers have used in 87% of total homes closed across all our markets for the year ended December 31, 2025.
Furthermore, to drive greater inventory turnover, we utilize financial incentive structures within our market divisions to target no more than approximately two months of finished lots and four months of started lots at any given time.
Furthermore, to drive greater inventory turnover, we utilize financial incentive structures within our market divisions to target our goal of having no more than approximately two months of finished lots and four months of started lots at any given time.
We utilize a single database enterprise resource planning (“ERP”) system called SMART Builder (that we exclusively license from an entity affiliated with the Founder Fund) that is fully integrated with our homebuilding operations.
We utilize a single database enterprise resource planning (“ERP”) system called SMART Builder, which we exclusively license from an entity affiliated with the Founder Fund and that is fully integrated with our homebuilding operations.
Under his leadership, Colony Homes grew into one of the largest homebuilders in the Southeastern United States focused on entry-level homebuyers and was ultimately sold to KB Home in 2003. Our President, Chief Executive Officer, and Vice Chairman, Greg Bennett, has spent most of his career working alongside Mr.
Under his leadership, Colony Homes grew into one of the largest homebuilders in the Southeastern United States focused on entry-level homebuyers and was ultimately sold to KB Home in 2003. Our President, Chief Executive Officer, and Vice Chairman, 12 Table of contents Greg Bennett, has spent most of his career working alongside Mr.
We may also be subject to periodic delays or may be precluded 22 Table of contents entirely from developing in certain communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Local and state governments also have broad discretion regarding the imposition of development fees for projects in their jurisdiction.
We may also be subject to periodic delays or may be precluded entirely from developing in certain communities due to building moratoriums or “slow-growth” or “no-growth” initiatives that could be implemented in the future. Local and state governments also have broad discretion regarding the imposition of development fees for projects in their jurisdiction.
None of our employees are represented by a labor union or are party to a collective bargaining agreement, and we have had no labor-related work stoppages. We believe we have good relationships with our employees.
None of our full-time employees are represented by a labor union or are party to a collective bargaining agreement, and we have had no labor-related work stoppages. We believe we have good relationships with our employees.
Our Executive Vice 12 Table of contents President and Chief Financial Officer, Russell Devendorf, has previously served as Chief Financial Officer at WCI Communities, where he helped spearhead the restructuring and turnaround of the company from 2008 to its successful initial public offering in 2013 and its eventual sale to Lennar in 2017.
Our Executive Vice President and Chief Financial Officer, Russell Devendorf, has previously served as Chief Financial Officer at WCI Communities, where he helped spearhead the restructuring and turnaround of the company from 2008 to its successful initial public offering in 2013 and its eventual sale to Lennar in 2017.
We believe our online marketing efforts have become a key strength of our business, allowing us to reach a broad range of potential homebuyers at relatively low cost compared to traditional advertising platforms. In particular, we are focused on capturing potential homebuyers when we are contemplating opening a new community.
We believe our online marketing efforts have become a 18 Table of contents key strength of our business, allowing us to reach a broad range of potential homebuyers at relatively low cost compared to traditional advertising platforms. In particular, we are focused on capturing potential homebuyers when we are contemplating opening a new community.
It is our goal to resolve any homebuyer warrantable claims within 14 days of receipt. 21 Table of contents Competition The homebuilding industry is characterized by moderately low barriers to entry. Among other things, homebuilders compete for homebuyers, desirable lots, financing, raw materials, and skilled labor.
It is our goal to resolve any homebuyer warrantable claims within 14 days of receipt. Competition The homebuilding industry is characterized by moderately low barriers to entry. Among other things, homebuilders compete for homebuyers, desirable lots, financing, raw materials, and skilled labor.
Our revenue and capital requirements are generally similar across our second, third, and fourth quarters. As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular quarter, especially the first quarter, are not necessarily representative of the results we expect for the year.
Our revenue and capital requirements are generally similar across our second, third, and fourth quarters. 22 Table of contents As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular quarter, especially the first quarter, are not necessarily representative of the results we expect for the year.
Prior to that, he was the Chief Credit Officer at First Covenant Bank from September 2007 to July 2008 and the Executive Vice President of Suntrust Banks (now Truist) from 1983 to 2007. Mr. Wedewer has a Bachelor of Arts from The Citadel. We believe Mr.
Prior to that, he was the Chief Credit Officer at First Covenant 26 Table of contents Bank from September 2007 to July 2008 and the Executive Vice President of SunTrust Banks (now Truist) from 1983 to 2007. Mr. Wedewer has a Bachelor of Arts from The Citadel. We believe Mr.
As a result of our differentiated value proposition and efficient construction cycle times, we believe we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 12% and 11% for the years ended December 31, 2024 and 2023, respectively.
As a result of our differentiated value proposition and efficient construction cycle times, we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 11% and 12% for the years ended December 31, 2025 and 2024, respectively.
Perdue has served as the 14th chancellor of the University System of Georgia since February 2022, overseeing all public colleges and universities. 25 Table of contents Prior to this, Dr. Perdue was the 31st Secretary of the U.S. Department of Agriculture from April 2017 to January 2021.
Perdue has served as the 14th chancellor of the University System of Georgia since February 2022, overseeing all public colleges and universities. Prior to this, Dr. Perdue was the 31st Secretary of the U.S. Department of Agriculture from April 2017 to January 2021.
Additionally, because we offer a consistent, optimized set of floor plans and home options across our markets, we can reduce costs, shorten construction cycle times, and ultimately deliver a high-quality personalized home at an attractive price point, which averaged approximately $340,000 on homes closed during the year ended December 31, 2024.
Additionally, because we offer a consistent, optimized set of floor plans and home options across our markets, we can reduce costs, shorten construction cycle times, and ultimately deliver a high-quality personalized home at an attractive price point, which averaged approximately $334,000 on homes closed during the year ended December 31, 2025.
We believe the fundamental drivers at both the national level and, more specifically, in our local markets have created an increased demand for entry-level priced homes, which we believe makes us well positioned to fulfill this demand as a result of our ASP of homes closed, which was approximately $340,000 for the year ended December 31, 2024.
We believe the fundamental drivers at both the national level and, more specifically, in our local markets have created an increased demand for entry-level priced homes, which we believe makes us well positioned to fulfill this demand as a result of our ASP of homes closed, which was approximately $334,000 for the year ended December 31, 2025.
Our management’s experience adds a level of expertise, governance, and accountability that we believe is distinct for companies of our size. Our management continue to own the majority of outstanding common stock, creating long-term alignment of interests between management and stockholders.
Our management’s experience adds a level of expertise, governance, and accountability that we believe is distinct for companies of our size. Our management team continues to own the majority of outstanding common stock, creating long-term alignment of interests between management and stockholders.
While we occasionally utilize traditional printed media, digital marketing is the primary component of our marketing strategy, and we have refined our digital sales efforts in recent years through the work of our dedicated digital sales 18 Table of contents coordinators as well as our automated homebuyer assistance tools.
While we occasionally utilize traditional printed media, digital marketing is the primary component of our marketing strategy, and we have refined our digital sales efforts in recent years through the work of our dedicated digital sales coordinators as well as our automated homebuyer assistance tools.
Although we build and sell move-in ready homes, approximately 63% of our home closings in the year ended December 31, 2024 were built-to-order. Our streamlined and efficient building process, gives our homebuyers the ability to personalize and change home features, including kitchen cabinets, flooring, and other design options, late into the construction phase of their home.
Although we build and sell move-in ready homes, approximately 46% of our home closings in the year ended December 31, 2025 were built-to-order. Our streamlined and efficient building process, gives our homebuyers the ability to personalize and change home features, including kitchen cabinets, flooring, and other design options, late into the construction phase of their home.
We pride ourselves on offering our homebuyers a personalized, affordable luxury buying experience at attractive prices. For the year ended December 31, 2024, our ASP of homes closed was approximately $340,000, providing an attractive price point for our target homebuyers with starting base prices below Federal Housing Administration (“FHA”) loan limits.
We pride ourselves on offering our homebuyers a personalized, affordable luxury buying experience at attractive prices. For the year ended December 31, 2025, our ASP of homes closed was approximately $334,000, providing an attractive price point for our target homebuyers with starting base prices below Federal Housing Administration (“FHA”) loan limits.
Wedewer is qualified to serve on Smith Douglas’ Board due to his operational background and his knowledge of strategy, finance, and management. 26 Table of contents
Wedewer is qualified to serve on Smith Douglas’ Board due to his operational background and his knowledge of strategy, finance, and management. 27 Table of contents
During the years ended December 31, 2024 and 2023, 75% and 76%, respectively, of our gross new orders had a third-party broker. Our sales efforts are supported by our sales centers which are typically housed within our professionally decorated model homes demonstrating the features of the homes in each of our communities.
During the years ended December 31, 2025 and 2024, 73% and 75%, respectively, of our gross new orders had a third-party broker. Our sales efforts are supported by our sales centers which are typically housed within our professionally decorated model homes demonstrating the features of the homes in each of our communities.
We believe Mr. Bennett is qualified to serve on Smith Douglas’ Board due to his business expertise, extensive industry experience, and daily insight into our business as our President, Chief Executive Officer, and Vice Chairman. Russell Devendorf Russell Devendorf has served as the Chief Financial Officer and Executive Vice President of Smith Douglas since 2017.
Bennett is qualified to serve on Smith Douglas’ Board due to his business expertise, extensive industry experience, and daily insight into our business as our President, Chief Executive Officer, and Vice Chairman. Russell Devendorf Russell Devendorf has served as the Chief Financial Officer and Executive Vice President of Smith Douglas since 2017. Prior to joining Smith Douglas, Mr.
As of both December 31, 2024 and 2023, homebuyer deposits averaged approximately 2% of the average sales price of our backlog homes.
As of both December 31, 2025 and 2024, homebuyer deposits averaged approximately 2% of the average sales price of our backlog homes.
The Rteam process is the foundation of our operational success and the key driver of our current strong construction cycle times of approximately 65 business days, or 55 business days excluding our Houston division which was acquired in connection with the Devon Street Homes Acquisition in 2023.
The Rteam process is the foundation of our operational success and the key driver of our current strong construction cycle times of approximately 57 business days (or 52 business days excluding our Houston division which was acquired in connection with the Devon Street Homes Acquisition in 2023).
Before founding Greg Bennett Homes, Mr. Bennett served as Executive Vice President for the Atlanta market of KB Home between 2003 and 2004 after the acquisition of Colony Homes, where he previously served in various roles from 1983 onwards, culminating in Region President between 1999 and 2003. Mr. Bennett holds a Construction Management degree from Georgia Northwestern Technical College.
Bennett served as Executive Vice President for the Atlanta market of KB Home between 2003 and 2004 after the acquisition of Colony Homes, where he previously served in various roles from 1983 onwards, culminating in Region President between 1999 and 2003. Mr. Bennett holds a Construction Management degree from Georgia Northwestern Technical College. We believe Mr.
We achieve economies of scale across our production model by offering a consistent set of core floor plan options across all our markets, which in turn creates a streamlined process for our construction partners. For the year ended December 31, 2024, for example, over 87% of our closings were derived from fewer than 30 floor plans.
We achieve economies of scale across our production model by offering a consistent set of core floor plan options across all our markets, which in turn creates a streamlined process for our construction partners. For the year ended December 31, 2025, for example, 87% of our closings were derived from 30 floor plans.
Our adjusted return on equity was 29% and 50%, respectively, for the years ended December 31, 2024 and 2023, respectively. Established presence in attractive, high growth markets We are focused on favorable, high growth housing markets primarily in the Southeastern and Southern United States.
Our adjusted return on equity was 13% and 29%, respectively, for the years ended December 31, 2025 and 2024. Established presence in attractive, high growth markets We are focused on favorable, high growth housing markets primarily in the Southeastern and Southern United States.
Prior to his time at Smith Douglas, Mr. Steele was the Vice President and Chief Legal Officer for Habitat for Humanity in Atlanta, Inc. from 2015 to 2018 and the Associate General Counsel and Chief Compliance Officer for Beazer Homes USA, Inc. from 2007 to 2015. At the outset of his career, Mr.
Steele was the Vice President and Chief Legal Officer for Habitat for Humanity in Atlanta, Inc. from 2015 to 2018 and the Associate General Counsel and Chief Compliance Officer for Beazer Homes USA, Inc. from 2007 to 2015. At the outset of his career, Mr.
For the years ended December 31, 2024 and 2023, our cancellation rate was approximately 12% and 11%, respectively.
For the years ended December 31, 2025 and 2024, our cancellation rate was approximately 11% and 12%, respectively.
Although we have a wide array of plans in our library, for the year ended December 31, 2024, over 87% of our home closings were from fewer than 30 house plans. Most of our homes are available at a variety of elevations, allowing us to create different and appealing streetscapes across our communities with a streamlined lineup of floor plans.
Although we have a wide array of plans in our library, for the year ended December 31, 2025, nearly 87% of our home closings were from 30 house plans. Most of our homes are available at a variety of elevations, allowing us to create different and appealing streetscapes across our communities with a streamlined lineup of floor plans.
Ridgeland Title LLC 20 Table of contents generated a total of $2.6 million and $2.2 million in gross revenue through all channels of products and services during the years ended December 31, 2024 and 2023, respectively.
Ridgeland Title LLC 20 Table of contents generated a total of $3.1 million and $2.6 million in gross revenue through all channels of products and services during the years ended December 31, 2025 and 2024, respectively.
Prior to the expiration of our negotiated inspection period, the division leadership presents each land acquisition opportunity to the Corporate Investment Committee (the “CIC”). The CIC consists of our Chief Executive Officer, Chief Financial Officer, General Counsel, Executive Vice President of Sales & Marketing, Corporate Vice President of Operations, and other members of senior management.
Prior to the expiration of our negotiated inspection period, the division leadership presents each land acquisition opportunity to the Corporate Investment Committee (the “CIC”). The CIC consists of our Chief Executive Officer, Chief Financial Officer, General Counsel, Executive Vice President of Sales & Marketing, and other members of senior management across various internal disciplines.
The following tables present our owned real estate inventory status as of the periods set forth below: As of December 31, 2024 2023 Backlog homes finished or under construction 31% 40% Unsold homes under construction 14% 11% Unsold completed homes 6% 5% Model homes 4% 4% Owned unstarted finished lots 45% 40% Total 100% 100% Homebuilding, Marketing, and Sales Process Construction We are focused on providing value, quality, and satisfaction to our homebuyers and are committed to providing them affordable homes of enduring value.
The following tables present our owned real estate inventory status as of the periods set forth below: As of December 31, 2025 2024 Backlog homes finished or under construction 21% 31% Unsold homes under construction 14% 14% Unsold completed homes 12% 6% Model homes 6% 4% Owned unstarted finished lots 47% 45% Total 100% 100% Homebuilding, Marketing, and Sales Process Construction We are focused on providing value, quality, and satisfaction to our homebuyers and are committed to providing them affordable homes of enduring value.
Average monthly sales per community for the year ended December 31, 2024 were 3.0, a slight decrease from 3.4 average monthly sales per community for the year ended December 31, 2023. Land Acquisition Strategy Locating and acquiring quality land positions is critical to our overall success and profitability.
Average monthly sales per community for the year ended December 31, 2025 were 2.6, a slight decrease from 3.0 average monthly sales per community for the year ended December 31, 2024. Land Acquisition Strategy Locating and acquiring quality land positions is critical to our overall success and profitability.
Prior to joining Smith Douglas, Mr. Devendorf was a Senior Advisor at Whelan Advisory, a boutique investment bank, from 2017 to 2018, before which he was the Senior Vice President and Chief Financial Officer for WCI Communities, a publicly traded homebuilder, from 2008 through 2017.
Devendorf was a Senior Advisor at Whelan Advisory, a boutique investment bank, from 2017 to 2018, before which he was the Senior Vice President and Chief Financial Officer for WCI Communities, a publicly traded homebuilder, from 2008 through 2017.
We believe our build-to-order focus with quick construction cycle times at attractive value gives us a competitive advantage versus our peer group. Our active communities As of December 31, 2024, we had 78 active communities, which was 13% higher than the 69 active communities count we had as of December 31, 2023.
We believe our build-to-order focus with quick construction cycle times at attractive value gives us a competitive advantage versus our peer group. Our active communities As of December 31, 2025, we had 100 active communities, which was 28% higher than the 78 active communities count we had as of December 31, 2024.
We also achieved a high inventory turnover rate of 2.9x for the year ended December 31, 2024. The combination of our production efficiency and real-time construction management capabilities allows us to generate strong home closing gross margins, which were 26% and 28%, for years ended December 31, 2024 and 2023, respectively.
We also achieved a high inventory turnover rate of 2.6x for the year ended December 31, 2025. The combination of our production efficiency and real-time construction management capabilities allows us to generate strong home closing gross margins, which were approximately 22% and 26%, for years ended December 31, 2025 and 2024, respectively.
All land opportunities are presented to it by our divisions and reviewed by the CIC. Typically, multiple members of our senior management team have physically toured every new deal location before the deal is presented and reviewed by the CIC. The Chief Executive Officer and Chief Financial Officer, with input from the other CIC members, approve all new deals.
Typically, multiple members of our senior management team have physically toured every new deal location before the deal is presented and reviewed by the CIC. The Chief Executive Officer and Chief Financial Officer, with input from the other CIC members, approve all new deals.
We have experienced rapid organic growth since our inception in 2008, expanding our geographic presence from our headquarters in Atlanta, a market where we are currently one of the largest homebuilders, to nine additional key markets with robust growth outlooks: Raleigh, Charlotte, Birmingham, Huntsville, Nashville, Houston, Central Georgia, Chattanooga, and Greenville.
We have experienced rapid organic growth since our inception in 2008, expanding our geographic presence from our headquarters in Atlanta, a market where we are currently one of the largest homebuilders, to eleven additional key markets with robust growth outlooks: Raleigh, Charlotte, Birmingham, Huntsville, Nashville, Houston, Central Georgia, Chattanooga, Greenville, Dallas-Fort Worth, and the Alabama Gulf Coast.
We believe there remains significant opportunity to increase market share and meaningfully grow within our existing markets, driving economies of scale and overall platform growth. Opportunistically expand to new markets We see attractive growth opportunities, particularly in the Southeastern and Southern United States, and intend to opportunistically expand into new geographies through organic growth and platform acquisitions.
We believe there remains significant opportunity to increase market share and meaningfully grow within our existing markets, driving economies of scale and overall platform growth. 13 Table of contents Opportunistically expand to new markets We see attractive growth opportunities, particularly in the Southeastern and Southern United States, and intend to opportunistically expand into new geographies through organic growth and strategic platform acquisitions that align with our strategy.
Bradbury also chaired its board of directors. Mr. Bradbury holds a bachelor’s degree in business administration from the University of Georgia. We believe Mr. Bradbury is qualified to serve on Smith Douglas’ Board due to his business expertise, extensive industry experience, and daily insight into our business as our founder and Executive Chairman. Gregory S. Bennett Gregory S.
During his time at Colony Homes, Mr. Bradbury also chaired its board of directors. Mr. Bradbury holds a bachelor’s degree in business administration from the University of Georgia. We believe Mr. Bradbury is qualified to serve on Smith Douglas’ Board due to his business expertise, extensive industry experience, and daily insight into our business as our founder and Executive Chairman.
We expect this seasonal pattern to continue in the long term. Intellectual Property and Other Proprietary Rights To establish and protect our proprietary rights, we rely on a combination of trademark, copyright, and trade secret laws, and contractual restrictions such as confidentiality agreements and licenses. We strive to protect the proprietary information we believe is important to our business.
We expect this seasonal pattern to continue in the long term. Intellectual Property and Other Proprietary Rights To establish and protect our intellectual property and other proprietary rights, we rely on a combination of trademark, copyright, and trade secret laws, as well as contractual restrictions such as confidentiality agreements and licenses.
Our purpose is to enhance people’s quality of life, whether that be our associates, homebuyers, or trade partners. As of December 31, 2024, we employed 445 full-time employees and 17 part-time employees in the United States.
Our purpose is to enhance people’s quality of life, whether that be our associates, homebuyers, or trade partners. As of December 31, 2025, we employed 510 full-time employees and 18 part-time employees in the United States.
Bradbury served as a consultant with KB Home, a privately held home building company, until 2005. Prior to this, Mr. Bradbury served as the Chief Executive Officer of Colony Homes of Atlanta, a privately held home building company which he founded in 1975, until 2003 when it was sold to KB Home. During his time at Colony Homes, Mr.
Bradbury served as a consultant with KB Home, a 24 Table of contents privately held home building company, until 2005. Prior to this, Mr. Bradbury served as the Chief Executive Officer of Colony Homes of Atlanta, a privately held home building company which he founded in 1975, until 2003 when it was sold to KB Home.
In 2020, we continued to scale within our markets, completing over 900 annual home closings in Atlanta while also closing on over 200 homes in each of our other markets. In addition, in that year we continued our organic expansion by entering the Huntsville market.
In 2020, we continued to scale within our markets, completing over 900 annual home closings in Atlanta while also closing on over 200 homes in each of our other markets. In addition, in that year we continued our organic expansion by entering the Huntsville market. In 2023, we entered the Houston market with our acquisition of Devon Street Homes.
Walker 52 Director Neil B. Wedewer 71 Director Executive Officers and Directors Thomas L. Bradbury Thomas L. Bradbury is the founder and Executive Chairman of Smith Douglas and has served as a member of our Board since its formation and as the Chairman of Smith Douglas Holdings, LLC’s board of managers since 2016.
Wedewer 72 Director Executive Officers and Directors Thomas L. Bradbury Thomas L. Bradbury is the founder and Executive Chairman of Smith Douglas and has served as a member of our Board since its formation and as the Chairman of Smith Douglas Holdings, LLC’s board of managers since 2016.
For the years ended December 31, 2024 and 2023, respectively, our share of Ridgeland Title LLC’s income recognized was $1.2 million and $0.9 million and our distributions received were $1.1 million and $0.9 million.
For the years ended December 31, 2025 and 2024, respectively, our share of Ridgeland Title LLC’s income recognized was $1.4 million and $1.2 million and our distributions received were $1.4 million and $1.1 million.
Adherence to these standards is monitored in the ordinary course of business by our construction managers, and we do regular inspections and evaluations of our trade partners to ensure these standards are being met.
We require all our vendors and trade partners to adhere to our work quality standards. Adherence to these standards is monitored in the ordinary course of business by our construction managers, and we do regular inspections and evaluations of our trade partners to ensure these standards are being met.
As of December 31, 2024, our lot deposits and investments relating to lot and land option contracts, including option contracts with unconsolidated entities, totaled $103.6 million, which controlled 17,746 option lots with a remaining aggregate purchase price, inclusive of estimated contractual price escalators, of $1,107.7 million .
As of December 31, 2024, our lot deposits relating to lot and land option contracts totaled $103.6 million, which controlled 17,746 option lots with a remaining aggregate purchase price, inclusive of estimated contractual price escalators, of $1.11 billion.
We offer a variety of floor plans ranging from 1,100 square feet to over 3,000 square feet. Our plan library includes popular open-concept homes with single-level living, modern villas, and townhomes, and functional two and three-story homes, with extra space for conveniences like laundry, flex offices, and lofts upstairs.
We offer a variety of floor plans ranging from 1,100 square feet to over 3,000 square feet. Our plan library includes popular open-concept homes with single-level living, modern villas, and townhomes, and functional two and three-story homes.
Devendorf has been a member of the Florida State University Department of Accounting's Professional Advisory Board since 2024. Mr. Devendorf is a Certified Public Accountant and a Certified Treasury Professional (inactive). 24 Table of contents Brett A. Steele Brett A. Steele has served as our Vice President, General Counsel, and Secretary since 2018.
Devendorf has been a member of the Florida State University Department of Accounting's Professional Advisory Board since 2024. Mr. Devendorf is a Certified Public Accountant and a Certified Treasury Professional (inactive). Brett A. Steele Brett A. Steele has served as our Vice President, General Counsel, and Secretary since 2018. Prior to his time at Smith Douglas, Mr.
SMART Builder and Rteam We incorporate technology into our construction process through SMART Builder, a customized enterprise resource planning (“ERP”) system that is a schedule driven, real time, single data base, customized construction and homebuyer relationship management software and the backbone of our process.
We compete with other homebuilders for qualified construction managers, trade partners, and raw materials. SMART Builder and Rteam We incorporate technology into our construction process through SMART Builder, a customized enterprise resource planning (“ERP”) system that is a schedule driven, real time, single data base, customized construction and homebuyer relationship management software and the backbone of our process.
The following tables present information concerning our net new home orders, cancellation rate, and ending backlog for the periods (and at the end of the period) set forth below (dollar amounts in thousands): As of December 31, 2024 2023 Net new home orders 2,649 2,368 Contract value of net new home orders $ 899,586 $ 792,224 ASP of net new home orders $ 340 $ 335 Cancellation rate 12.1 % 10.5 % As of December 31, 2024 2023 Backlog homes (period end) 694 912 Contract value of backlog homes (period end) $ 235,869 $ 310,714 ASP of backlog homes (period end) $ 340 $ 341 Sourcing and Supply Chain We use various materials and components in our construction process and are dependent upon building material suppliers for continuous product availability.
The following tables present information concerning our net new home orders, cancellation rate, and ending backlog for the periods (and at the end of the period) set forth below (dollar amounts in thousands): As of December 31, 2025 2024 Net new home orders 2,726 2,649 Contract value of net new home orders $ 907,095 $ 899,586 ASP of net new home orders $ 333 $ 340 Cancellation rate 11.1 % 12.1 % As of December 31, 2025 2024 Backlog homes (period end) 512 694 Contract value of backlog homes (period end) $ 172,523 $ 235,869 ASP of backlog homes (period end) $ 337 $ 340 Sourcing and Supply Chain We use various materials and components in our construction process and are dependent upon building material suppliers for continuous product availability.
Since establishing our initial presence in Atlanta, we have steadily expanded our footprint into Raleigh, Birmingham, Charlotte, Nashville, Huntsville, Houston, Central Georgia, Chattanooga, and Greenville over the last nine years.
Since establishing our initial presence in Atlanta, we have steadily expanded our footprint into Raleigh, Birmingham, Charlotte, Nashville, Huntsville, Houston, Central Georgia, Chattanooga, Greenville, Dallas-Fort Worth, and the Alabama Gulf Coast over the last decade.
As part of our operating philosophy, we maintain a high level of transparency, communication, and partnership between our employees and our business partners, including our developers, our suppliers, and our trade partners.
We believe our Rteam philosophy is the foundation of our operational success. As part of our operating philosophy, we maintain a high level of transparency, communication, and partnership between and among employees and business partners, including developers, suppliers, and trade partners.
In Atlanta, we have rapidly and profitably grown our presence, celebrating our 5,000th cumulative closing in 2020. We have successfully scaled our business while maintaining strong margins by targeting markets where we can replicate our land-light strategy and Rteam production model, and also leverage our strong relationships with local developers, suppliers, and municipalities to grow communities.
We have successfully scaled our business while maintaining strong margins by targeting markets where we can replicate our land-light strategy and Rteam production model, and also leverage our strong relationships with local developers, suppliers, and municipalities to grow communities.
During the year ended December 31, 2024, we closed 2,867 homes, achieving a 20.8% CAGR on closed homes from 2015 to 2024. Going forward, we intend to apply our management team’s strong execution capabilities to capitalize on growth opportunities within our existing markets and new markets.
During the year ended December 31, 2025, we closed 2,908 homes, achieving a 18.7% compound annual growth rate on closed homes from 2015 to 2025. Going forward, we intend to apply our management team’s strong execution capabilities to capitalize on growth opportunities within our existing markets and new markets.
We maintain significant liquidity, with $22.4 million of cash and cash equivalents on hand and $219.8 million of undrawn capacity under the Amended Credit Facility as of December 31, 2024. As of December 31, 2024 and 2023, respectively, our debt-to-book capitalization was 1% and 27%, and our net debt-to-net book capitalization was (5)% and 21%.
We maintain significant liquidity, with $12.7 million of cash and cash equivalents on hand and $176.5 million of undrawn capacity under the Amended Credit Facility as of December 31, 2025. As of December 31, 2025 and 2024, respectively, our debt-to-book capitalization was 9% and 1%, and our net debt-to-net book capitalization was 7% and (5)%.
We entered the Greenville market in 2024 and continued to build our infrastructure around Atlanta by expanding into Central Georgia and Chattanooga. During the year ended December 31, 2024, we closed 2,867 homes across all our markets while surpassing 17,500 cumulative home closings.
We entered the Greenville market in 2024 and continued to build our infrastructure around Atlanta by expanding into Central Georgia and Chattanooga. In 2025, we entered the Dallas-Fort Worth and the Alabama Gulf Coast markets through organic expansion. During the year ended December 31, 2025, we closed 2,908 homes across all our markets while surpassing 19,500 cumulative home closings.
As of December 31, 2024, our deposits and investments relating to land and lot option contracts with unconsolidated entities amounted to $2.8 million , which controlled 220 lots. As of December 31, 2023, we did not have any land or lot option contracts with unconsolidated entities.
As of December 31, 2025, our deposits and investments relating to land and lot option contracts with unconsolidated entities amounted to $8.3 million , which controlled 550 lots. As of December 31, 2024, our deposits and investments relating to land and lot option contracts with unconsolidated entities amounted to $2.8 million , which controlled 220 lots.
We have implemented standard model home design features that offer consistency to homebuyers across all our communities. Backlog, Orders, and Closings Home construction generally does not start without a binding sales agreement; however, we employ a limited speculative homebuilding program where we construct a home without an associated contract.
We have implemented standard model home design features that offer consistency to homebuyers across all our communities. Backlog, Orders, and Closings Historically, we prefer to begin home construction after entering into a binding sales agreement; however, we employ a limited speculative homebuilding program where we construct a home without an associated contract when warranted by market conditions.
Within each Rteam, every trade partner is responsible for ensuring the job is complete before handing it off to the next trade partner and not starting a job until the specifications, as designated by the team, are correct.
Within each Rteam, every trade partner is responsible for not starting their work until the specifications, as designated by the team, are correct and for ensuring their work is complete before the next trade partner can begin their work.
As of December 31, 2024, we have signed agreements covering 7,614 lots included in our total controlled lots which we are still in the due diligence and investigation period and for which our earnest money deposits are still refundable. 16 Table of contents Total controlled lots and real estate inventory status The following tables present our total controlled lots, which includes both our owned and optioned lots, by segment as of the periods set forth below: As of December 31, 2024 2023 Owned (1) Optioned Total Controlled Owned (1) Optioned Total Controlled Southeast 881 12,210 13,091 486 7,907 8,393 Central 895 5,536 6,431 834 3,594 4,428 Total 1,776 17,746 19,522 1,320 11,501 12,821 (1) Includes homes under construction.
As of December 31, 2025, we have signed agreements covering 5,668 lots included in our total controlled lots which we are still in the due diligence and investigation period and for which our earnest money deposits are still refundable. 16 Table of contents Total controlled lots and real estate inventory status The following tables present our total controlled lots, which includes both our owned and optioned lots, by segment as of the periods set forth below: As of December 31, 2025 2024 Owned (1) Optioned Total Controlled Owned (1) Optioned Total Controlled Southeast 932 13,938 14,870 881 12,210 13,091 Central 780 6,618 7,398 895 5,536 6,431 Total 1,712 20,556 22,268 1,776 17,746 19,522 (1) Includes homes under construction.
Under various environmental requirements, current or former owners of real estate, as well as certain other categories of parties, may be required to investigate and clean up spills or releases of hazardous substances or petroleum products and may be held strictly and/or jointly and severally liable to a governmental entity or to third parties for related damages, including for property damage, bodily injury, the cost of investigation and cleanup in connection with the contamination, and damages to natural resources.
Environmental requirements, including those relating to climate change, can also have an adverse impact on the availability and price of certain raw materials, such as lumber, and may increase our energy costs. 23 Table of contents Under various environmental requirements, current or former owners of real estate, as well as certain other categories of parties, may be required to investigate and clean up spills or releases of hazardous substances or petroleum products and may be held strictly and/or jointly and severally liable to a governmental entity or to third parties for related damages, including for property damage, bodily injury, the cost of investigation and cleanup in connection with the contamination, and damages to natural resources.
Bradbury 80 Executive Chairman and Director Gregory S. Bennett 59 President, Chief Executive Officer, Vice Chairman, and Director Russell Devendorf 51 Executive Vice President and Chief Financial Officer Brett A. Steele 55 Vice President, General Counsel, and Secretary Julie Bradbury 50 Director Neill B. Faucett 80 Director Jeffrey T. Jackson 59 Director George Ervin Perdue III 78 Director Janice E.
Bennett 60 President, Chief Executive Officer, Vice Chairman, and Director Russell Devendorf 52 Executive Vice President and Chief Financial Officer Brett A. Steele 56 Vice President, General Counsel, and Secretary Julie Bradbury 51 Director Neill B. Faucett 81 Director Jeffrey T. Jackson 60 Director George Ervin Perdue III 79 Director Janice E. Walker 53 Director Neil B.
We evaluate potential market expansion opportunities using a set of robust strategic market criteria, including availability of land and unmet 13 Table of contents demand in suburban-plus areas, as well as the ability to pursue a similar lot option strategy, house plans, and construction process while leveraging our Rteam philosophy.
We evaluate potential market expansion opportunities using a set of robust strategic market criteria, including availability of land, unmet demand in suburban-plus areas, lot option opportunities, house plan synchronicity, and a construction process leveraging our Rteam philosophy.
As of December 31, 2024, our land bank deposits amounted to $34.2 million , which controlled 3,232 lots. As of December 31, 2023, our land bank deposits amounted to $30.6 million , which controlled 2,746 lots.
As of December 31, 2025, our land bank deposits amounted to $62.8 million , which controlled 5,637 lots. As of December 31, 2024, our land bank deposits amounted to $34.2 million , which controlled 3,232 lots.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs climate change concerns continue to grow, legislation, regulations, mandates, standards, and other requirements of this nature are expected to continue to be enacted and impose additional costs on us. Additionally, certain areas in the United States either have enacted or are considering a ban on the use of natural gas appliances and/or natural gas hookups in new construction.
Biggest changeAdditionally, certain areas in the United States either have enacted or are considering a ban on the use of natural gas appliances and/or natural gas hookups in new construction. Such bans, if enacted in areas in which we operate or may decide to operate in the future, could affect our cost to construct homes.
We may not be able to recover these increased costs by raising prices, because of weak market conditions and because the price of each home we sell is usually set several months before the home is delivered, as many homebuyers sign their home purchase contracts before construction begins.
We may not be able to recover these increased costs by raising prices, because of weak market conditions and because the price of each home we sell is usually set several months before the home is delivered, as many homebuyers sign their home purchase contracts before construction begins.
In the event of shortages in building materials in such markets, local and suppliers may choose to allocate their resources to homebuilders with an established presence in the market and with whom they have longer-standing relationships.
In the event of shortages in building materials in such markets, local suppliers may choose to allocate their resources to homebuilders with an established presence in the market and with whom they have longer-standing relationships.
You may not be able to resell your shares at or above the price that you paid for them due to a number of factors included herein, including the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • technology changes, changes in consumer behavior in our industry; • security breaches related to our systems or those of our affiliates or strategic partners; • changes in economic conditions for companies in our industry; • changes in market valuations of, or earnings and other announcements by, companies in our industry; • declines in the market prices of stocks generally, particularly those of residential construction; • strategic actions by us or our competitors; • announcements by us, our competitors or our strategic partners of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures or other unconsolidated entities, other strategic relationships, or capital commitments; • changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the residential construction environment; • changes in business or regulatory conditions; • future sales of our Class A common stock or other securities; • investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives; 55 Table of contents • the public’s response to press releases or other public announcements or filings by us or third parties, including filings with the SEC; • announcements relating to litigation or governmental investigations; • guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance; • the ongoing development and sustainability of an active trading market for our stock; • changes in accounting principles; and • other events or factors, including those resulting from system failures and disruptions, natural or man-made disasters, extreme weather events, war, acts of terrorism, an outbreak of highly infectious or contagious diseases, such as COVID-19, or responses to these events.
You may not be able to resell your shares at or above the price that you paid for them due to a number of factors included herein, including the following: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • technology changes, changes in consumer behavior in our industry; 57 Table of contents • security breaches related to our systems or those of our affiliates or strategic partners; • changes in economic conditions for companies in our industry; • changes in market valuations of, or earnings and other announcements by, companies in our industry; • declines in the market prices of stocks generally, particularly those of residential construction; • strategic actions by us or our competitors; • announcements by us, our competitors or our strategic partners of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures or other unconsolidated entities, other strategic relationships, or capital commitments; • changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the residential construction environment; • changes in business or regulatory conditions; • future sales of our Class A common stock or other securities; • investor perceptions of the investment opportunity associated with our Class A common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements or filings by us or third parties, including filings with the SEC; • announcements relating to litigation or governmental investigations; • guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance; • the ongoing development and sustainability of an active trading market for our stock; • changes in accounting principles; and • other events or factors, including those resulting from system failures and disruptions, natural or man-made disasters, extreme weather events, war, acts of terrorism, an outbreak of highly infectious or contagious diseases, such as COVID-19, or responses to these events.
The actual Basis Adjustments and Section 704(c) Allocations and the actual utilization of any resulting tax benefits, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors including: the timing of redemptions by the Continuing Equity Owners; the price of shares of our Class A common stock at the time of the exchange; the extent to which such exchanges are taxable; the amount of gain recognized by such Continuing Equity Owners; the amount and timing of the taxable income allocated to us or otherwise generated by us in the future; the portion of our payments under the Tax Receivable Agreement constituting imputed interest; and the federal and state tax rates then applicable.
The actual Basis Adjustments and Section 704(c) Allocations and the actual utilization of any resulting tax benefits, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors including: the timing of redemptions or exchanges by the Continuing Equity Owners; the price of shares of our Class A common stock at the time of such redemptions or exchanges; the extent to which such redemptions or exchanges are taxable; the amount of gain recognized by such Continuing Equity Owners; the amount and timing of the taxable income allocated to us or otherwise generated by us in the future; the portion of our payments under the Tax Receivable Agreement constituting imputed interest; and the federal and state tax rates then applicable.
A failure to comply with ESG expectations and standards, which are evolving and varied, or if we are perceived to not have responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, could cause reputational harm to our business and could have a material adverse effect on our financial results and access to and cost of capital.
A failure to comply with ESG expectations and standards, which are evolving and varied, or if we are perceived to not have responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, could cause reputational harm to our business and could have a material adverse effect on our financial results and cost of capital.
Concurrently with the consummation of our IPO, we entered into the Amended Credit Facility, and, as part of the Refinancing, we used a portion of our net proceeds from the IPO for the Debt Repayment. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Amended Credit Facility .
Concurrently with the consummation of our IPO, we entered into the Credit Facility, and, as part of the Refinancing, we used a portion of our net proceeds from the IPO for the Debt Repayment. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facility .
Further, if, due to credit or consumer lending market conditions, reduced liquidity, increased risk retention or minimum capital level obligations and/or regulatory restrictions related to certain regulations, laws or other factors or business decisions, these lenders refuse or are unable to provide mortgage loans to our homebuyers, or increase the costs to borrowers to obtain such loans, the number of homes we close and our business, prospects, liquidity, financial condition, and results of operations may be materially adversely affected. 29 Table of contents Price-conscious entry-level and empty-nest homebuyers are the primary sources of demand for our new homes.
Further, if, due to credit or consumer lending market conditions, reduced liquidity, increased risk retention or minimum capital level obligations and/or regulatory restrictions related to certain regulations, laws or other factors or business decisions, these lenders refuse or are unable to provide mortgage loans to our homebuyers, or increase the costs to borrowers to obtain such loans, the number of homes we close and our business, prospects, liquidity, financial condition, and results of operations may be materially adversely affected. 30 Table of contents Price-conscious entry-level and empty-nest homebuyers are the primary sources of demand for our new homes.
Concerns about greenhouse gas emissions and the potential risks associated with climate change have led to increased regulation and other actions that can have an adverse impact on our activities, operations, and profitability and on the availability and price of certain raw materials.
Concerns about greenhouse gas emissions and the potential risks associated with climate change have led to regulation and other actions that can have an adverse impact on our activities, operations, and profitability and on the availability and price of certain raw materials.
We may incur a substantial amount of debt in the future. Our existing indebtedness is recourse to us, and we anticipate that future indebtedness will likewise be recourse. Concurrently with the consummation of the IPO, we repaid the Prior Credit Facility and replaced it with the Amended Credit Facility.
We may incur a substantial amount of debt in the future. Our existing indebtedness is recourse to us, and we anticipate that future indebtedness will likewise be recourse. Concurrently with the consummation of the IPO, we repaid the Prior Credit Facility and replaced it with the Credit Facility.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • allocation of expenses to and among different jurisdictions; • changes to our assessment about our ability to realize, or in the valuation of, our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations, or interpretations thereof; • the outcome of current and future tax audits, examinations, or administrative appeals; 51 Table of contents • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • allocation of expenses to and among different jurisdictions; • changes to our assessment about our ability to realize, or in the valuation of, our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • costs related to intercompany restructurings; • changes in tax laws, regulations, or interpretations thereof; • the outcome of current and future tax audits, examinations, or administrative appeals; • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that does not benefit holders of our Class A common stock to the same extent that it will benefit the Continuing Equity Owners.
Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that will not benefit holders of our Class A common stock to the same extent that it will benefit the Continuing Equity Owners.
These trading conflicts and related escalating governmental actions that result in additional tariffs, duties, or trade restrictions could cause disruptions or shortages in our supply chains, increase our construction costs or home-building costs generally, or negatively impact the U.S., regional, or local economies and 42 Table of contents individually or in the aggregate, including as it concerns consumer confidence and spending, and materially and adversely affect our business and our operating results.
These trading conflicts and related escalating governmental actions that result in additional 43 Table of contents tariffs, duties, or trade restrictions could cause disruptions or shortages in our supply chains, increase our construction costs or home-building costs generally, or negatively impact the U.S., regional, or local economies and individually or in the aggregate, including as it concerns consumer confidence and spending, and materially and adversely affect our business and our operating results.
Incurring a substantial amount of debt could have important consequences for our business, including: • making it more difficult for us to satisfy our obligations with respect to our debt or to our trade or other creditors; • increasing our vulnerability to adverse economic or industry conditions; • limiting our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is limited; 53 Table of contents • requiring a substantial portion of our cash flows from operations and the proceeds from our IPO for the payment of interest on our debt and reducing our ability to use our cash flows and the proceeds from our IPO to fund working capital, capital expenditures, acquisitions, and general corporate requirements; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • placing us at a competitive disadvantage to less leveraged competitors.
Incurring a substantial amount of debt could have important consequences for our business, including: • making it more difficult for us to satisfy our obligations with respect to our debt or to our trade or other creditors; • increasing our vulnerability to adverse economic or industry conditions; • limiting our ability to obtain additional financing to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is limited; • requiring a substantial portion of our cash flows from operations and the proceeds from our IPO for the payment of interest on our debt and reducing our ability to use our cash flows and the proceeds from our IPO to fund working capital, capital expenditures, acquisitions, and general corporate requirements; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • placing us at a competitive disadvantage to less leveraged competitors.
In addition, we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), but our amended and restated certificate of incorporation provides that engaging in any of a broad range of business combinations with any “interested” stockholder (generally defined as any stockholder with 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such stockholder) for a period of three years following the time on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions (except with respect to the Continuing Equity Owners and any of their respective affiliates and any of their respective direct or indirect transferees of our common stock).
In addition, we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), but our amended and restated certificate of incorporation provides that engaging in any of a broad range of business combinations with any “interested” stockholder (generally defined as any stockholder with 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such stockholder) for a period of three years following the time on which the stockholder became an “interested” 60 Table of contents stockholder is prohibited, subject to certain exceptions (except with respect to the Continuing Equity Owners and any of their respective affiliates and any of their respective direct or indirect transferees of our common stock).
These provisions provide for, among other things: • the ability of our board of directors to issue one or more series of preferred stock without stockholder approval; • at any time prior to the Sunset Date, our stockholders may take action by consent without a meeting, and from and after the occurrence of the Sunset Date, our stockholders may not take action by consent without a meeting, but may only take action at a meeting of stockholders; • vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders; • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; 57 Table of contents • at any time prior to the Sunset Date, the Secretary (or other officer or our board of directors) at the request of any Continuing Equity Owner owning at least 5% of the voting power of all of the then outstanding shares of capital stock entitled to vote thereon may call a special meeting of stockholders, and from and after the occurrence of the Sunset Date, our stockholders will be unable to call a special meeting of stockholders; • no cumulative voting in the election of directors; • prior to the Sunset Date, directors may be removed at any time with or without cause upon the affirmative vote of the holders of a majority of the voting power of our outstanding shares of capital stock entitled to vote thereon, and from and after the occurrence of the Sunset Date, directors may be removed with or without cause and only upon the affirmative vote of holders of at least 66 2/3% of the voting power of our outstanding shares of capital stock entitled to vote thereon; and • that certain provisions of amended and restated certificate of incorporation may be amended only by the affirmative vote of holder of at least 66 2/3% of the voting power of our then-outstanding capital stock entitled to vote thereon.
These provisions provide for, among other things: • the ability of our board of directors to issue one or more series of preferred stock without stockholder approval; • at any time prior to the Sunset Date, our stockholders may take action by consent without a meeting, and from and after the occurrence of the Sunset Date, our stockholders may not take action by consent without a meeting, but may only take action at a meeting of stockholders; • vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders; • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; • at any time prior to the Sunset Date, the Secretary (or other officer or our board of directors) at the request of any Continuing Equity Owner owning at least 5% of the voting power of all of the then outstanding shares of capital stock entitled to vote thereon may call a special meeting of stockholders, and from and after the occurrence of the Sunset Date, our stockholders will be unable to call a special meeting of stockholders; • no cumulative voting in the election of directors; • prior to the Sunset Date, directors may be removed at any time with or without cause upon the affirmative vote of the holders of a majority of the voting power of our outstanding shares of capital stock entitled to vote thereon, and from and after the occurrence of the Sunset Date, directors may be removed with or without cause and only upon the affirmative vote of holders of at least 66 2/3% of the voting power of our outstanding shares of capital stock entitled to vote thereon; and • that certain provisions of amended and restated certificate of incorporation may be amended only by the affirmative vote of holders of at least 66 2/3% of the voting power of our then-outstanding capital stock entitled to vote thereon.
Our IT Systems and Confidential Information are vulnerable to a range of cybersecurity risks and threats, including damage or interruption from power outages, computer and telecommunication failures, computer viruses, cybersecurity incidents or attacks (including malware, phishing attacks, ransomware attacks, social engineering and attempts to gain unauthorized access to data or other electronic security breaches or similar events, or cybersecurity attacks carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on systems or websites and rendering them unavailable or ineffective), other security breaches, natural or man-made disasters, usage errors, negligence or intentional misuse by our employees or third parties, and other related risks.
Our IT Systems and Confidential Information are vulnerable to a range of cybersecurity risks and threats, including damage or interruption from power outages, computer and telecommunication failures, computer viruses, cybersecurity 48 Table of contents incidents or attacks (including malware, phishing attacks, ransomware attacks, social engineering and attempts to gain unauthorized access to data or other electronic security breaches or similar events, or cybersecurity attacks carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on systems or websites and rendering them unavailable or ineffective), other security breaches, natural or man-made disasters, usage errors, negligence or intentional misuse by our employees or third parties, and other related risks.
Risks Related to the Operation of Our Business Our business model, which is dependent upon our ability to purchase and develop land at competitive prices and the ability of our homebuyers to be able to finance their home purchases through mortgage financing 33 Table of contents at accessible rates, can be substantially impacted by adverse changes in general economic conditions outside our control.
Risks Related to the Operation of Our Business Our business model, which is dependent upon our ability to purchase and develop land at competitive prices and the ability of our homebuyers to be able to finance their home purchases through mortgage financing 34 Table of contents at accessible rates, can be substantially impacted by adverse changes in general economic conditions outside our control.
Warranty and construction defect matters can also result in negative publicity, including on social media platforms, which could damage our reputation and negatively affect our ability to sell homes. 36 Table of contents Further, the coverage offered by, and the availability of, general liability insurance for completed operations and construction defects are currently limited and costly.
Warranty and construction defect matters can also result in negative publicity, including on social media platforms, which could damage our reputation and negatively affect our ability to sell homes. 37 Table of contents Further, the coverage offered by, and the availability of, general liability insurance for completed operations and construction defects are currently limited and costly.
This may give our competitors an advantage in marketing their products, securing lots, materials, and labor at lower prices, and allowing their homes to be delivered to homebuyers more quickly and at more favorable prices. We compete for homebuyers, desirable lots and lot 30 Table of contents options, financing, raw materials, skilled management, and other labor resources, among other things.
This may give our competitors an advantage in marketing their products, securing lots, materials, and labor at lower prices, and allowing their homes to be delivered to homebuyers more quickly and at more favorable prices. We compete for homebuyers, desirable lots and lot 31 Table of contents options, financing, raw materials, skilled management, and other labor resources, among other things.
Furthermore, because we lack a controlling interest in our unconsolidated entities we cannot exercise sole decision- 38 Table of contents making authority, which could create the potential risk of impasses on decisions and prevent the unconsolidated entity from taking, or not taking, actions that we believe may be in our best interests.
Furthermore, because we lack a controlling interest in our unconsolidated entities we cannot exercise sole decision- 39 Table of contents making authority, which could create the potential risk of impasses on decisions and prevent the unconsolidated entity from taking, or not taking, actions that we believe may be in our best interests.
For example, certain areas of North Carolina have experienced temporary disruptions to sewer system capacity and development in response to municipal infrastructure delays. 35 Table of contents Additionally, municipalities may restrict or place moratoriums on the availability of utilities, such as electricity, natural gas, water, and sewer taps.
For example, certain areas of North Carolina have experienced temporary disruptions to sewer system capacity and development in response to municipal infrastructure delays. 36 Table of contents Additionally, municipalities may restrict or place moratoriums on the availability of utilities, such as electricity, natural gas, water, and sewer taps.
Risk Factors—Risks Related to Other Legal, Regulatory, and Tax Matters . 41 Table of contents Risks Related to Other Legal, Regulatory, and Tax Matters Any limitation on, or reduction or elimination of, tax benefits associated with homeownership would have an adverse effect upon the demand for homes, which could be material to our business.
Risk Factors—Risks Related to Other Legal, Regulatory, and Tax Matters . 42 Table of contents Risks Related to Other Legal, Regulatory, and Tax Matters Any limitation on, or reduction or elimination of, tax benefits associated with homeownership would have an adverse effect upon the demand for homes, which could be material to our business.
As a result, the Continuing Equity Owners exercise significant influence over all matters on which holders of Class B common stock are entitled to vote, including the election and removal of directors (subject to the rights of the holders of preferred stock, if any), amendments to our amended and restated certificate of incorporation or amended and restated bylaws, and any approval of significant corporate transactions (including a sale of all or substantially all of our assets), and have 54 Table of contents significant control over our business, affairs, and policies, including the appointment of our management, through their influence over the board composition.
As a result, the Continuing Equity Owners exercise significant influence over all matters on which holders of Class B common stock are entitled to vote, including the election and removal of directors (subject to the rights of the holders of preferred stock, if any), amendments to our amended and restated certificate of incorporation or amended and restated bylaws, and any approval of significant corporate transactions (including a sale of all or substantially all of our assets), and have significant control over our business, affairs, and policies, including the appointment of our management, through their influence over the board composition.
Further, the costs associated with any such potential changes could have a significant effect on our results of operations and financial condition if we were 37 Table of contents unable to pass through to our homebuyers an increase in price corresponding to such increased costs.
Further, the costs associated with any such potential changes could have a significant effect on our results of operations and financial condition if we were 38 Table of contents unable to pass through to our homebuyers an increase in price corresponding to such increased costs.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters and the federal district courts of the United States are the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters and the federal district courts of the United States are the exclusive forum for the resolution of any complaint asserting a cause of action arising under the 63 Table of contents Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Other factors that might impact growth in the homebuilding industry include uncertainty in domestic and international financial, credit, and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of the COVID-19 pandemic, tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive homebuyer income and asset documentation requirements, changes to mortgage regulations, population decline or slower rates of population growth in our markets, or Federal Reserve policy changes.
Other factors that might impact growth in the homebuilding industry include uncertainty in domestic and international financial, credit, and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive homebuyer income and asset documentation requirements, changes to mortgage regulations, population decline or slower rates of population growth in our markets, or Federal Reserve policy changes.
If, ultimately, we do not exercise our option to purchase, the seller then would have the option to terminate the agreement, which would then result in the loss of the option to purchase all 34 Table of contents remaining unpurchased lots and forfeiture of the remaining deposit for the unpurchased lots.
If, ultimately, we do not exercise our option to purchase, the seller then would have the option to terminate the agreement, which would then result in the loss of the option to purchase all 35 Table of contents remaining unpurchased lots and forfeiture of the remaining deposit for the unpurchased lots.
If inflationary conditions continue into future periods, it could materially adversely affect our business and financial results. 32 Table of contents Our geographic concentration could materially and adversely affect us if the homebuilding industry in our current markets should decline.
If inflationary conditions continue into future periods, it could materially adversely affect our business and financial results. 33 Table of contents Our geographic concentration could materially and adversely affect us if the homebuilding industry in our current markets should decline.
Even if we successfully maintain the confidentiality of our trade secrets, intellectual property and other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own.
Even if we are able to secure our intellectual property and successfully maintain the confidentiality of our trade secrets and other proprietary information, competitors may independently develop products or technologies that are substantially equivalent or superior to our own.
Laws and regulations governing data privacy, cybersecurity, and the unauthorized disclosure of personal information pose increasingly complex compliance challenges, including the potential for inconsistent interpretation, new or amended laws or regulations regarding Personal Information, and the implementation and maintenance of compliance measures may potentially elevate our costs by requiring us to implement new processes, or change our handling of information and business operations.
Laws and regulations governing data privacy, cybersecurity, and the unauthorized disclosure of personal information pose increasingly complex compliance challenges, including the potential for inconsistent interpretation, 49 Table of contents new or amended laws or regulations regarding Personal Information, and the implementation and maintenance of compliance measures may potentially elevate our costs by requiring us to implement new processes, or change our handling of information and business operations.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due 49 Table of contents under the Tax Receivable Agreement.
To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement resulting in the acceleration of payments due under the Tax Receivable Agreement.
The speed at which negative publicity can be disseminated has increased dramatically with the capabilities of electronic communication, including social media outlets, websites, blogs, newsletters, and other 64 Table of contents digital platforms. Our success in maintaining, extending, and expanding our brand image depends on our ability to adapt to this rapidly changing media environment.
The speed at which negative publicity can be disseminated has increased dramatically with the capabilities of electronic communication, including social media outlets, websites, blogs, newsletters, and other digital platforms. Our success in maintaining, extending, and expanding our brand image depends on our ability to adapt to this rapidly changing media environment.
However, Smith Douglas Holdings LLC’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which Smith Douglas Holdings LLC is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering 48 Table of contents Smith Douglas Holdings LLC insolvent.
However, Smith Douglas Holdings LLC’s ability to make such distributions may be subject to various limitations and restrictions, such as restrictions on distributions that would either violate any contract or agreement to which Smith Douglas Holdings LLC is then a party, including debt agreements, or any applicable law, or that would have the effect of rendering Smith Douglas Holdings LLC insolvent.
If we default on several of our debt agreements or any single significant debt agreement, it could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. We expect to use leverage in executing our business strategy, which may adversely affect the return on our assets.
If we default on several of our debt agreements or any single significant debt agreement, it could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. 55 Table of contents We expect to use leverage in executing our business strategy, which may adversely affect the return on our assets.
Environmental Protection Agency (the “EPA”) or OSHA, and similar federal, state, or local agencies review land developers’ and homebuilders’ compliance with environmental, health, and safety laws, statutes, ordinance, rules, and regulations, including those relating to the storage, handling or discharge of hazardous substances or the control of storm water discharges during construction.
Environmental Protection Agency (the “EPA”) or OSHA, and similar federal, state, or local agencies review land developers’ and homebuilders’ compliance with environmental, health, and 44 Table of contents safety laws, statutes, ordinance, rules, and regulations, including those relating to the storage, handling or discharge of hazardous substances or the control of storm water discharges during construction.
Failure to comply with such 43 Table of contents laws, statutes, ordinances, rules, and regulations may result in civil and criminal fines and penalties, injunctions, suspension of our activities, remedial obligations, third-party claims, enforcement actions or other sanctions, or additional requirements for future compliance as a result of past failures.
Failure to comply with such laws, statutes, ordinances, rules, and regulations may result in civil and criminal fines and penalties, injunctions, suspension of our activities, remedial obligations, third-party claims, enforcement actions or other sanctions, or additional requirements for future compliance as a result of past failures.
Our failure to obtain or maintain adequate protection of our trademark or trade name rights for any reason could have a material adverse effect on our business, results of operations and financial condition. Our current and future trademark applications in the United States may not be allowed or may subsequently be opposed.
Our failure to obtain or maintain adequate protection of our trademark or trade name rights for any reason could have a material adverse effect on our business, results of operations and financial condition. Our current and 47 Table of contents future trademark applications in the United States may not be allowed or may subsequently be opposed.
We have not obtained key person life insurance that would provide us with proceeds in the event of the death or disability of any of our key management personnel. 52 Table of contents Experienced employees in the homebuilding, land acquisition, development, and construction industries are fundamental to our ability to generate, obtain, and manage opportunities.
We have not obtained key person life insurance that would provide us with proceeds in the event of the death or disability of any of our key management personnel. Experienced employees in the homebuilding, land acquisition, development, and construction industries are fundamental to our ability to generate, obtain, and manage opportunities.
Our homebuilding operations are in many areas that are subject to natural and man-made disasters, severe weather, or adverse geologic conditions. These include, but are not limited to, hurricanes, tornadoes, droughts, floods, brushfires, wildfires, prolonged periods of precipitation, landslides, soil subsidence, earthquakes, and other natural and man-made disasters.
Our homebuilding operations are in many areas that are subject to natural and man-made disasters, severe weather, or adverse geologic conditions. These include, but are not limited to, hurricanes, tornadoes, droughts, extreme temperature changes, floods, brushfires, wildfires, prolonged periods of precipitation, landslides, soil subsidence, earthquakes, and other natural and man-made disasters.
Our business can be substantially affected by adverse changes in general economic or business conditions, and other events and conditions that are outside of our control, including: • increases in short- and long-term interest rates; • high inflation; • supply-chain disruptions and the cost or availability of building materials; • the availability of trade partners, vendors, or other third parties; • housing affordability; • the availability and cost of financing for homebuyers; • federal and state income and real estate tax laws, including limitations on, or the elimination of, the deduction of mortgage interest or property tax payments; • employment levels, job and personal income growth and household debt-to-income levels; • consumer confidence generally and the confidence of potential homebuyers in particular; • the ability of homeowners to sell their existing homes at acceptable prices; • tariffs on building supplies; • the U.S. and global financial systems and credit markets, including stock market and credit market volatility; • inclement weather and natural and man-made disasters, including risks associated with global climate change, such as increased frequency or intensity of adverse weather events; • environmental, health, and safety laws and regulations, and the environmental conditions of our properties; • civil unrest, acts of terrorism, other acts of violence, threats to national security, global economic and political instability, and conflicts such as the conflict between Russia and Ukraine and the Israel-Hamas conflict (including any escalation or expansion), escalating global trade tensions, the 27 Table of contents adoption of trade restrictions, or a public health issue such as COVID-19 or another major epidemic or pandemic; • mortgage financing programs and regulation of lending practices; • housing demand from population growth, household formations and demographic changes (including immigration levels and trends or other costs of home ownership in urban and suburban migration); • demand from foreign homebuyers for our homes; • the supply of available new or existing homes and other housing alternatives; • energy prices; and • the supply of developable land in our markets and in the United States generally.
Our business can be substantially affected by adverse changes in general economic or business conditions, and other events and conditions that are outside of our control, including: • increases in short- and long-term interest rates; • high inflation; • supply-chain disruptions and the cost or availability of building materials; • the availability of trade partners, vendors, or other third parties; • housing affordability; • the availability and cost of financing for homebuyers; • federal and state income and real estate tax laws, including limitations on, or the elimination of, the deduction of mortgage interest or property tax payments; • employment levels, job and personal income growth and household debt-to-income levels; • consumer confidence generally and the confidence of potential homebuyers in particular; • the ability of homeowners to sell their existing homes at acceptable prices; • tariffs on building supplies; • the U.S. and global financial systems and credit markets, including stock market and credit market volatility; • inclement weather and natural and man-made disasters, including risks associated with global climate change, such as increased frequency or intensity of adverse weather events; • environmental, health, and safety laws and regulations, and the environmental conditions of our properties; • civil unrest, acts of terrorism, other acts of violence, threats to national security, global economic and political instability, and conflicts, including in the Middle East, escalating global trade 28 Table of contents tensions, the adoption of trade restrictions, or a public health issue such as COVID-19 or another major epidemic or pandemic; • mortgage financing programs and regulation of lending practices; • housing demand from population growth, household formations and demographic changes (including immigration levels and trends or other costs of home ownership in urban and suburban migration); • demand from foreign homebuyers for our homes; • the supply of available new or existing homes and other housing alternatives; • energy prices; and • the supply of developable land in our markets and in the United States generally.
These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of Class A common stock or other securities. 63 Table of contents In the future, we may also issue securities in connection with investments, acquisitions, or capital raising activities.
These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of Class A common stock or other securities. In the future, we may also issue securities in connection with investments, acquisitions, or capital raising activities.
Any such issuance of additional securities in the future may result in additional dilution to you or may adversely impact the price of our Class A common stock. General Risk Factors We are subject to litigation, arbitration, or other claims which could materially and adversely affect us.
Any such issuance of additional securities in the future may result in additional dilution to you or may adversely impact the price of our Class A common stock. 65 Table of contents General Risk Factors We are subject to litigation, arbitration, or other claims which could materially and adversely affect us.
We may not have access to such equity or debt capital on favorable terms at the desired times, or at all. 65 Table of contents The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.
We may not have access to such equity or debt capital on favorable terms at the desired times, or at all. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments.
If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of management from our business regardless of the outcome of such litigation. We cannot predict the effect our dual class structure may have on the market price of our Class A common stock.
If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of management from our business regardless of the outcome of such litigation. 58 Table of contents We cannot predict the effect our dual class structure may have on the market price of our Class A common stock.
Because of the seasonal nature of our business, our quarterly operating results fluctuate. We have historically experienced, and expect to continue to experience, variability in our results of operations from quarter to quarter due to the seasonal nature of the homebuilding industry. We generally close more homes in our second, third, and fourth quarters.
Because of the seasonal nature of our business, our quarterly operating results fluctuate. We have historically experienced, and expect to continue to experience, variability in our results of operations from quarter to quarter due to the seasonal nature of the homebuilding industry. We generally close more 32 Table of contents homes in our second, third, and fourth quarters.
Holder generally 56 Table of contents will be subject to U.S. federal income tax on any gain realized on a sale or disposition of shares of our Class A common stock unless our Class A common stock is regularly traded on an established securities market and such Non-U.S.
Holder generally will be subject to U.S. federal income tax on any gain realized on a sale or disposition of shares of our Class A common stock unless our Class A common stock is regularly traded on an established securities market and such Non-U.S.
We applied for and, on May 1, 2020, received a Paycheck Protection Program Loan in the amount of $5.1 million (the “PPP Loan”), under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), as administered by the SBA.
We applied for and, on May 1, 2020, received a Paycheck Protection Program Loan in the amount of $5.1 million (the “PPP Loan”), under the Coronavirus Aid, Relief and Economic Security Act (the 56 Table of contents “CARES Act”), as administered by the SBA.
There is a growing concern about the emission of greenhouse gases and other human activities that have caused, and will continue to cause, significant changes in weather patterns and temperatures and increase the frequency and severity of natural disasters.
There is growing concern in certain jurisdictions about the emission of greenhouse gases and other human activities that have caused, and will continue to cause, significant changes in weather patterns and temperatures and increase the frequency and severity of natural disasters.
Conflicts of interest may exist or could arise in the future with the Founder Fund, a trust for which Mr. Bradbury is the co-trustee. As of March 14, 2025, the Founder Fund has 88.1% of the combined voting power of our Class A common stock and Class B common stock, voting together as a single class.
Conflicts of interest may exist or could arise in the future with the Founder Fund, a trust for which Mr. Bradbury is the co-trustee. As of March 6, 2026, the Founder Fund has 88.1% of the combined voting power of our Class A common stock and Class B common stock, voting together as a single class.
Slower rates of population growth or population declines in our markets in Atlanta, Birmingham, Central Georgia, Charlotte, Chattanooga, Greenville, Huntsville, Nashville, Raleigh, Houston, or other key markets in the United States we may decide to enter in the future, especially as compared to the high population growth rates in prior years, could affect the demand for housing, cause home prices in these markets to fall and adversely affect our plans for growth, business, financial condition, and operating results.
Slower rates of population growth or population declines in our markets in Atlanta, Birmingham, Central Georgia, Charlotte, Chattanooga, Greenville, Huntsville, Nashville, Raleigh, Houston, Dallas-Fort Worth, the Alabama Gulf Coast or other key markets in the United States we may decide to enter in the future, especially as compared to the high population growth rates in prior years, could affect the demand for housing, cause home prices in these markets to fall and adversely affect our plans for growth, business, financial condition, and operating results.
Bradbury has also supported our growth by hosting numerous events at personal properties that are intended to foster business development and vendor relations. For the year ended December 31, 2024, we paid an annual use fee to certain entities affiliated with the Founder Fund for use of facilities and related services.
Bradbury has also supported our 40 Table of contents growth by hosting numerous events at personal properties that are intended to foster business development and vendor relations. For the year ended December 31, 2025, we paid an annual use fee to certain entities affiliated with the Founder Fund for use of facilities and related services.
As of the filing of this Annual Report on Form 10-K, we have no outstanding borrowings under the Amended Credit Facility. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.
We subsequently amended the Credit Facility, referred to herein as the Amended Credit Facility. As of the filing of this Annual Report on Form 10-K, we have no outstanding borrowings under the Amended Credit Facility. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.
We also had related person receivables of $0.1 million with an entity affiliated with the Founder Fund as of December 31, 2024, related to various general and administrative expenses, including aviation expenses, and in part, 39 Table of contents related to insurance that was paid on behalf of the related person who reimbursed us at cost. Historically, Mr.
We also had related person receivables of $0.1 million with an entity affiliated with the Founder Fund as of December 31, 2025, related to various general and administrative expenses, including aviation expenses, and in part, related to insurance that was paid on behalf of the related person who reimbursed us at cost. Historically, Mr.
Because we depend on a limited number of markets for substantially all of our home orders, if these markets, and in particular, Atlanta, Georgia, our largest market, experience downturns in the housing market, our business, prospects, and results of operations would be adversely impacted even if conditions in the broader economy or housing market did not suffer such a decline. 28 Table of contents If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of the COVID-19 pandemic, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate or may decide to operate in the future, or if interest rates for mortgage loans or home prices rise, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition, and results of operations, including, but not limited to, the number of homes we sell, our ASP of homes closed, and the amount of revenues or profits we generate, and such effect may be material.
Because we depend on a limited number of markets for substantially all of our home orders, if these markets experience downturns in the housing market, our business, prospects, and results of operations would be adversely impacted even if conditions in the broader economy or housing market did not suffer such a decline. 29 Table of contents If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate or may decide to operate in the future, or if interest rates for mortgage loans or home prices rise, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition, and results of operations, including, but not limited to, the number of homes we sell, our ASP of homes closed, and the amount of revenues or profits we generate, and such effect may be material.
Smith Douglas Holdings LLC is currently subject to debt instruments or other agreements that restrict its ability to make distributions to us, which may in turn affect Smith Douglas Holdings LLC’s ability to pay distributions to us and thereby adversely affect our cash flows.
Smith Douglas Holdings LLC is currently subject to debt instruments or other 50 Table of contents agreements that restrict its ability to make distributions to us, which may in turn affect Smith Douglas Holdings LLC’s ability to pay distributions to us and thereby adversely affect our cash flows.
If we are unable to accomplish these objectives in a 58 Table of contents timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired.
If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired.
As a result, our revenues may fluctuate on a quarterly basis, and we 31 Table of contents may have higher capital requirements in our second, third, and fourth quarters in order to maintain our inventory levels.
As a result, our revenues may fluctuate on a quarterly basis, and we may have higher capital requirements in our second, third, and fourth quarters in order to maintain our inventory levels.
An inactive market may also impair our ability to raise capital to continue to fund operations by 61 Table of contents selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
Further, we and certain of our third-party providers collect, maintain, and process data about customers, employees, business partners, and others, including personally identifiable information, as well as proprietary information belonging to our business such as trade secrets (collectively, "Confidential Information").
Further, we and certain of our third-party providers collect, maintain, and process data about customers, employees, business partners, and others, including Personal Information (defined below), as well as proprietary information belonging to our business such as trade secrets (collectively, "Confidential Information").
If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.
If some investors find our Class A 62 Table of contents common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.
As of March 14, 2025, the Continuing Equity Owners control, in the aggregate, approximately 97.9% of the voting power represented by all our outstanding shares of capital stock.
As of March 6, 2026, the Continuing Equity Owners control, in the aggregate, approximately 97.9% of the voting power represented by all our outstanding shares of capital stock.
Any further future changes may have an adverse effect on the homebuilding industry in general. For example, the further loss or reduction of homeowner tax deductions could decrease the demand for new homes. Any such future changes could also have a material adverse impact on our business, prospects, liquidity, financial condition, and results of operations.
For example, the further loss or reduction of homeowner tax deductions could decrease the demand for new homes. Any such future changes could also have a material adverse impact on our business, prospects, liquidity, financial condition, and results of operations.
There can be no assurance that we will be 50 Table of contents able to fund or finance our obligations under the Tax Receivable Agreement.
There can be no assurance that we will be able to fund or finance our obligations under the Tax Receivable Agreement.
Increasing scrutiny and evolving expectations relating to environmental, social and governance (“ESG”) issues could adversely impact our reputation, access to and cost of capital, and financial results. Certain institutional investors, financial markets participants, policymakers, consumers, and other stakeholders have become increasingly focused on companies’ management of climate, human capital, and other ESG issues.
Evolving and varied expectations relating to environmental, social and governance (“ESG”) issues could adversely impact our reputation, cost of capital, and financial results. Certain institutional investors, financial markets participants, policymakers, consumers, and other stakeholders have become increasingly focused on companies’ management of climate, human capital, and other ESG issues. Certain organizations also provide assessments of companies’ ESG practices.
The regulatory environment surrounding data privacy and cybersecurity is constantly evolving and can be subject to significant 47 Table of contents change.
The regulatory environment surrounding data privacy and cybersecurity is constantly evolving and can be subject to significant change.
This decision to opt out of the extended transition period is irrevocable. We cannot predict if investors will find our Class A common stock less attractive as a result of our decision to take advantage of some or all of the reduced disclosure requirements above.
We cannot predict if investors will find our Class A common stock less attractive as a result of our decision to take advantage of some or all of the reduced disclosure requirements above.
For so long as we are an “emerging growth company,” we will, among other things: • not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; • not be required to hold a nonbinding advisory stockholder vote on executive compensation pursuant to Section 14A(a) of the Exchange Act; • not be required to seek stockholder approval of any golden parachute payments not previously approved pursuant to Section 14A(b) of the Exchange Act; • be exempt from the requirement of the Public Company Accounting Oversight Board (the “PCAOB”) regarding the communication of critical audit matters in the auditor’s report on the financial statements; and • be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. 60 Table of contents In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
For so long as we are an “emerging growth company,” we will, among other things: • not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; • not be required to hold a nonbinding advisory stockholder vote on executive compensation pursuant to Section 14A(a) of the Exchange Act; • not be required to seek stockholder approval of any golden parachute payments not previously approved pursuant to Section 14A(b) of the Exchange Act; • be exempt from the requirement of the Public Company Accounting Oversight Board (the “PCAOB”) regarding the communication of critical audit matters in the auditor’s report on the financial statements; and • be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Furthermore, some of the third-party vendors we work with source sod directly from an entity affiliated with the Founder Fund. Conflicts of interest may exist or could arise in the future with Founder Fund-affiliated entities. These transactions may not be on terms that are as attractive as those we might be able to achieve if we sought other partners.
Conflicts of interest may exist or could arise in the future with Founder Fund-affiliated entities. These transactions may not be on terms that are as attractive as those we might be able to achieve if we sought other partners.
However, if we were to cease participation in the management of Smith Douglas Holdings LLC, or if Smith Douglas Holdings LLC itself becomes an investment company, our interest in Smith Douglas Holdings LLC could be deemed an “investment security” for purposes of the 1940 Act.
However, if we were to cease participation in the management of Smith Douglas Holdings LLC, or if Smith Douglas Holdings LLC itself becomes an investment company, our interest in Smith Douglas Holdings LLC could be deemed an “investment security” for purposes of the 1940 Act. 54 Table of contents We and Smith Douglas Holdings LLC intend to conduct our operations so that we will not be deemed an investment company.
We also charter aircraft services from an entity affiliated with the Founder Fund. We have historically licensed SMART Builder, our ERP system, on an exclusive basis from an entity affiliated with the Founder Fund, on an exclusive, perpetual, and royalty-free basis.
We also charter aircraft services from an entity affiliated with the Founder Fund. We have historically licensed SMART Builder, our ERP system, from an entity affiliated with the Founder Fund, on an exclusive, perpetual, and royalty-free basis. Furthermore, some of the third-party vendors we work with source sod directly from an entity affiliated with the Founder Fund.
The success of our business depends on our ability to obtain, maintain, protect, and enforce our intellectual property rights. Our success depends, in part, on our ability protect our intellectual property, proprietary information, and technology.
Our success and ability to compete depend, in part, on our ability to obtain, maintain, protect, defend, and enforce our intellectual property rights, proprietary information, and technology.
Adverse publicity or negative commentary from any media outlets could damage our reputation and reduce the demand for our homes, which would adversely affect our business. Changes in accounting rules, assumptions, and/or judgments could materially and adversely affect us. Accounting rules and interpretations for certain aspects of our financial reporting are highly complex and involve significant assumptions and judgment.
Adverse publicity or negative commentary from any media outlets could damage our reputation and reduce the demand for our homes, which would adversely affect our business. 66 Table of contents Changes in accounting rules, assumptions, and/or judgments could materially and adversely affect us.
Market conditions can impact the viability of these institutions, as we have seen recently with the abrupt failure of more than one regional bank.
Market conditions can impact 67 Table of contents the viability of these institutions, as we have seen with the abrupt failures of more than one regional bank in recent years.
There can be no assurance that we will be able to recruit, develop, or retain the necessary personnel or trade partners to successfully implement a disciplined management process and culture with local management, that our 40 Table of contents expansion operations will be successful, or that we will be able to successfully integrate any acquired homebuilder.
There can be no assurance that we will be able to recruit, develop, or retain the necessary personnel or trade partners to successfully implement a disciplined management process and culture with local management, that our expansion operations will be successful, or that we will be able to successfully integrate any acquired homebuilder. 41 Table of contents This could disrupt our ongoing operations, including our Rteam production model, and divert management resources that would otherwise focus on developing our existing business.
Enforcing a claim that a party disclosed proprietary information in an unauthorized manner or infringed, misappropriated, or otherwise violated any intellectual property rights is difficult, expensive, and time-consuming, and the outcome is unpredictable.
Enforcing a claim that a party disclosed proprietary information in an unauthorized manner or infringed, diluted, misappropriated, or otherwise violated any of our intellectual property rights is difficult, expensive, and time-consuming, and the outcome is unpredictable. Even if we do detect violations, we may not be effective in preventing unauthorized use of our intellectual property.
Additionally, any fluctuation in the credit rating of us or our subsidiaries may impact our ability to access debt markets in the future or increase our cost of future debt, which could have a material adverse effect on our operations and financial condition, which in return, may adversely affect the trading price of shares of our Class A common stock.
If one or more of these analysts stops covering us or fails to publish reports on us regularly, we could lose visibility in the market, which, in turn, could cause our stock price or trading volume to decline. 64 Table of contents Additionally, any fluctuation in the credit rating of us or our subsidiaries may impact our ability to access debt markets in the future or increase our cost of future debt, which could have a material adverse effect on our operations and financial condition, which in return, may adversely affect the trading price of shares of our Class A common stock.
Access to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could adversely affect our ability to maximize our returns.
Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. Access to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could adversely affect our ability to maximize our returns.
Accordingly, any such expansion, including through acquisitions, could expose us to significant risks beyond those associated with operating our existing business and may adversely affect our business, prospects, liquidity, financial condition, and results of operations.
We can give no assurance that we will be able to successfully identify, acquire, or implement these new strategies in the future. Accordingly, any such expansion, including through acquisitions, could expose us to significant risks beyond those associated with operating our existing business and may adversely affect our business, prospects, liquidity, financial condition, and results of operations.
We also rely on non-registered proprietary information, technology, and intellectual property rights, including with respect to our home designs, such as unregistered copyrights, confidential information, trade secrets, know-how and technical information.
If we are unable to maintain the proprietary nature of our technologies or intellectual property, our competitive position, business, financial condition, and results of operations could be harmed. We also rely on non-registered proprietary information, technology, and intellectual property rights, including with respect to our home designs, such as unregistered copyrights, confidential information, trade secrets, know-how and technical information.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+1 added−2 removed7 unchanged
Biggest changeOur cybersecurity risk management measures include: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • cybersecurity awareness training of our employees, incident response personnel, and senior management.
Biggest changeThe Board of Directors and management are committed to enhancing our cybersecurity risk management measures, which are included in our enterprise risk management processes and share common methodologies, reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. 68 Table of contents Our cybersecurity risk management measures include: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; • improving cybersecurity and monitoring capabilities, including enhancements to endpoint detection and response, implementation of zero trust solutions, and deployment of new network operations center and security operations center capabilities. • cybersecurity awareness training of our employees, incident response personnel, and senior management.
Item 1C. Cybersecurity. Cybersecurity Risk Management and Strategy We have developed and implemented several cybersecurity risk management measures intended to protect the confidentiality, integrity, and availability of our critical systems and information. We work to continuously refine, strengthen, and supplement these measures.
Item 1C. Cybersecurity. Cybersecurity Risk Management and Strategy We have developed and implemented several cybersecurity risk management measures designed to protect the confidentiality, integrity, and availability of our critical systems and information. We work to refine, strengthen, and supplement these measures.
Our management team provides regular updates to our audit committee regarding the results of our cybersecurity risk assessment measures and associated enhancement actions.
Our management team provides regular updates to our audit committee regarding the results of our cybersecurity risk assessment measures and associated enhancement actions. 69 Table of contents
Our management team, including the Vice President of IT and the Chief Financial Officer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Our management team, including the Chief Information Officer and the Chief Financial Officer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants.
Removed
The Board of Directors and management are committed to enhancing our cybersecurity risk management measures, which are integrated into our enterprise risk management processes and share common methodologies, 66 Table of contents reporting channels, and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
Added
Our Chief Information Officer, Dave Fazio, oversees the Company’s information technology strategy, including network infrastructure, systems development, cybersecurity, and enterprise platforms, with more than 30 years of experience in technology across multiple industries.
Removed
Our Vice President of IT, Randy Jepsen, oversees infrastructure, procurement, development, and IT support, with over 25 years of experience in the IT industry and 19 years at Smith Douglas and The SMART Builder Solutions designing and enhancing internal enterprise applications.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We are headquartered in Woodstock, Georgia where we lease approximately 26,800 square feet of office space under a lease agreement that expires on August 31, 2028. We use this location for our Atlanta Division, which 67 Table of contents is a part of our Southeast segment, and corporate employee offices.
Biggest changeItem 2. Properties. We are headquartered in Woodstock, Georgia where we own a building consisting of approximately 26,800 square feet of office space. We use this location for our Atlanta Division, which is a part of our Southeast segment, and corporate employee offices. We lease local offices in the markets in which we conduct homebuilding operations.
We also lease local offices in the markets in which we conduct homebuilding operations. We believe these facilities are sufficient to meet our current and anticipated future needs and that suitable additional space will be available as needed to accommodate expansion of our operations.
We believe these facilities are sufficient to meet our current and anticipated future needs and that suitable additional space will be available as needed to accommodate expansion of our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeWe do not believe that any existing claims or proceedings will have a material effect on our business, consolidated financial condition or results of operations. Item 4. Mine Safety Disclosures. Not Applicable. 68 Table of contents PART II
Biggest changeWe do not believe that any existing claims or proceedings will have a material effect on our business, consolidated financial condition or results of operations. Item 4. Mine Safety Disclosures. Not Applicable. 70 Table of contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere is no public trading market for our Class B common stock. Holders As of March 14, 2025, there were two holders of record of our Class A common stock and two holders of record of our Class B common stock. Dividends Since the IPO, we have not declared or paid any cash dividends on our common stock.
Biggest changeThere is no public trading market for our Class B common stock. Holders As of March 6, 2026, there were two holders of record of our Class A common stock and two holders of record of our Class B common stock. Dividends Since the IPO, we have not declared or paid any cash dividends on our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+14 added−7 removed110 unchanged
Biggest changeSpecifically, as a smaller reporting company, we choose to present only the two most recent fiscal years of audited financial statements in our Annual Report. 72 Table of contents Comparison of years ended December 31, 2024 and 2023 The following table sets forth our statements of income and other operating data for the years ended December 31, 2024 and 2023, along with the year over year change in dollars and other amounts and percent (amounts in thousands): Year ended December 31, Year over year change 2024 2023 Amount Percent Consolidated Statements of Income Data: Home closing revenue $ 975,463 $ 764,631 $ 210,832 27.6% Cost of home closings 719,921 548,304 171,617 31.3% Home closing gross profit 255,542 216,327 39,215 18.1% Selling, general, and administrative costs 136,382 92,442 43,940 47.5% Equity in income from unconsolidated entities (1,161) (934) (227) 24.3% Interest expense 2,489 1,658 831 50.1% Other expense (income), net 938 (19) 957 (5036.8)% Income before income taxes 116,894 123,180 (6,286) (5.1)% Provision for income taxes 5,065 — 5,065 100.0% Net income 111,829 $ 123,180 $ (11,351) (9.2)% Net income attributable to non-controlling interests and LLC members prior to IPO 95,759 Net income attributable to Smith Douglas Homes Corp. $ 16,070 Earnings per share (1) : Basic $ 1.82 Diluted $ 1.81 Other operating data: Home closings 2,867 2,297 570 24.8% ASP of homes closed $ 340 $ 333 $ 7 2.1% Net new home orders 2,649 2,368 281 11.9% Contract value of net new home orders $ 899,586 $ 792,224 $ 107,362 13.6% ASP of net new home orders $ 340 $ 335 $ 5 1.5% Cancellation rate (2) 12.1% 10.5% 1.6% 15.2% Backlog homes (period end) (3) 694 912 (218) (23.9)% Contract value of backlog homes (period end) $ 235,869 $ 310,714 $ (74,845) (24.1)% ASP of backlog homes (period end) $ 340 $ 341 $ (1) (0.3)% Active communities (period end) (4) 78 69 9 13.0% Controlled lots (period end): Homes under construction 973 796 177 22.2% Owned lots 803 524 279 53.2% Optioned lots 17,746 11,501 6,245 54.3% Total controlled lots 19,522 12,821 6,701 52.3% (1) Earnings per share for the year ended December 31, 2024 is calculated for the period from January 11, 2024, the date of the IPO, to December 31, 2024.
Biggest changeSpecifically, as a smaller reporting company, we choose to present only the two most recent fiscal years of audited financial statements in our Annual Report. 74 Table of contents Comparison of years ended December 31, 2025 and 2024 The following table sets forth our statements of income and other operating data for the years ended December 31, 2025 and 2024, along with the year over year change in dollars and other amounts and percent (amounts in thousands): Year ended December 31, Year over year change 2025 2024 Amount Percent Consolidated Statements of Income Data: Home closing revenue $ 971,116 $ 975,463 $ (4,347) (0.4)% Cost of home closings 758,945 719,921 39,024 5.4% Home closing gross profit 212,171 255,542 (43,371) (17.0)% Selling, general, and administrative costs 139,780 136,382 3,398 2.5% Equity in income from unconsolidated entities (2,078) (1,161) (917) 79.0% Interest expense 3,194 2,489 705 28.3% Other expense, net 374 938 (564) (60.1)% Income before income taxes 70,901 116,894 (45,993) (39.3)% Provision for income taxes 2,492 5,065 (2,573) (50.8)% Net income 68,409 $ 111,829 $ (43,420) (38.8)% Net income attributable to non-controlling interests and LLC members prior to IPO 57,715 95,759 (38,044) (39.7)% Net income attributable to Smith Douglas Homes Corp. $ 10,694 $ 16,070 $ (5,376) (33.5)% Earnings per share (1) : Basic $ 1.19 $ 1.82 $ (0.63) (34.6)% Diluted $ 1.19 $ 1.81 $ (0.62) (34.4)% Other operating data: Home closings 2,908 2,867 41 1.4% ASP of homes closed $ 334 $ 340 $ (6) (1.8)% Net new home orders 2,726 2,649 77 2.9% Contract value of net new home orders $ 907,095 $ 899,586 $ 7,509 0.8% ASP of net new home orders $ 333 $ 340 $ (7) (2.1)% Cancellation rate (2) 11.1% 12.1% (1.0)% (8.3)% Backlog homes (period end) (3) 512 694 (182) (26.2)% Contract value of backlog homes (period end) $ 172,523 $ 235,869 $ (63,346) (26.9)% ASP of backlog homes (period end) $ 337 $ 340 $ (3) (0.9)% Active communities (period end) (4) 100 78 22 28.2% Controlled lots (period end): Homes under construction 908 973 (65) (6.7)% Owned lots 804 803 1 0.1% Optioned lots 20,556 17,746 2,810 15.8% Total controlled lots 22,268 19,522 2,746 14.1% (1) Earnings per share for the year ended December 31, 2024 is calculated for the period from January 11, 2024, the date of the IPO, to December 31, 2024.
We rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
We rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations. If an event of default occurs and is continuing, the borrowers may be required immediately to repay all amounts outstanding under the Amended Credit Facility.
The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations. If an event of default occurs and is continuing, the borrowers may be required to immediately repay all amounts outstanding under the Amended Credit Facility.
Looking beyond the next 12 months, our primary funding needs will continue to center around home construction, finished lot acquisitions necessary to maintain a minimum four-year lot supply, growing active community count, growth into new and existing markets, and interest payments on our Amended Credit Facility.
Looking beyond the next 12 months, our primary funding needs will continue to center around home construction, finished lot acquisitions necessary to maintain a minimum four-year lot supply, growing active community count, growth into new and existing markets, and principal and interest payments on our Amended Credit Facility.
Specifically, as a smaller reporting company, we choose to present only the two most recent fiscal years of audited financial statements in our Annual Report. 69 Table of contents Company Overview Smith Douglas is engaged in the design, construction, and sale of single-family homes in some of the highest growth and most desirable markets in the Southeastern and Southern United States.
Specifically, as a smaller reporting company, we choose to present only the two most recent fiscal years of audited financial statements in our Annual Report. 71 Table of contents Company Overview Smith Douglas is engaged in the design, construction, and sale of single-family homes in some of the highest growth and most desirable markets in the Southeastern and Southern United States.
Risk Factors and Forward-Looking Statements . 70 Table of contents Availability of finished lots The availability of finished lots in the markets where we operate is significantly influenced by a number of factors generally beyond our control, which if constrained, may lead to a decrease in the number of homes we can build and sell.
Risk Factors and Forward-Looking Statements . 72 Table of contents Availability of finished lots The availability of finished lots in the markets where we operate is significantly influenced by a number of factors generally beyond our control, which if constrained, may lead to a decrease in the number of homes we can build and sell.
As a result of our differentiated value proposition and efficient construction cycle times, we believe we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 12% and 11% for the years ended December 31, 2024 and 2023, respectively.
As a result of our differentiated value proposition and efficient construction cycle times, we believe we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 11% and 12% for the years ended December 31, 2025 and 2024, respectively.
In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest 81 Table of contents deductions) arising from payments made under the Tax Receivable Agreement.
In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement.
Amended Credit Facility Concurrently with the consummation of the IPO and pursuant to the Refinancing, Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries entered into the Amended Credit Facility, which amended and replaced the Prior Credit Facility, and conducted the Debt Repayment, pursuant to which we used a portion of the net proceeds from the IPO to repay the $84.0 million outstanding under our Prior Credit Facility.
Credit Facility and Amended Credit Facility Concurrently with the consummation of the IPO and pursuant to the Refinancing, Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries entered into the Credit Facility, which amended and replaced the Prior Credit Facility, and conducted the Debt Repayment, pursuant to which we used a portion of the net proceeds from the IPO to 82 Table of contents repay the $84.0 million outstanding under our Prior Credit Facility.
The Smith Douglas LLC Agreement provides for the payment of certain distributions to the Continuing Equity Owners and to us in amounts sufficient to cover the income taxes imposed on such members with respect to the allocation of taxable income from Smith Douglas Holdings LLC as well as to cover our obligations under the Tax Receivable Agreement and other administrative expenses.
The Smith Douglas LLC Agreement provides for the payment of certain 83 Table of contents distributions to the Continuing Equity Owners and to us in amounts sufficient to cover the income taxes imposed on such members with respect to the allocation of taxable income from Smith Douglas Holdings LLC as well as to cover our obligations under the Tax Receivable Agreement and other administrative expenses.
We are choosing to “opt out” of this provision and, as a result, we will adopt new or revised accounting 84 Table of contents standards upon or prior to required public company adoption dates. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
We are choosing to “opt out” of this provision and, as a result, we will adopt new or revised accounting standards upon or prior to required public company adoption dates. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
Operating cash flows for 2024 benefited from cash generated by net income of $111.8 million primarily offset by a $53.7 million increase in real estate inventory and a $45.9 million increase in deposits on real estate under option or contract.
Operating cash flows for 2024 84 Table of contents benefited from cash generated by net income of $111.8 million primarily offset by a $53.7 million increase in real estate inventory and a $45.9 million increase in deposits on real estate under option or contract.
GAAP, we must make decisions that impact the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. Such decisions include the selection of 83 Table of contents the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates.
GAAP, we must make decisions that impact the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates.
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.
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.
These bonds, which totaled $32.1 million and $26.1 million as of December 31, 2024 and 2023, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development.
These bonds, which totaled $47.4 million and $32.1 million as of December 31, 2025 and 2024, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development.
We only retained the net proceeds that were used to purchase newly issued LLC Interests from Smith Douglas Holdings LLC, which, in turn, Smith Douglas Holdings LLC used as follows: (i) to repay approximately $84.0 million of borrowings outstanding under our Prior Credit Facility as part of the Refinancing, (ii) redeem all outstanding Class C Units and Class D Units of Smith Douglas Holdings LLC at par aggregating $2.6 million, (iii) repay $0.9 million in notes payable to related parties, and (iv) the remainder for general corporate purposes.
We only retained the net proceeds that were used to purchase newly issued LLC Interests from Smith Douglas Holdings LLC, which, in turn, Smith Douglas Holdings LLC used as follows: (i) to repay approximately $84.0 million of borrowings outstanding under our Prior Credit Facility as part of the Refinancing, (ii) redeem all outstanding Class C Units and Class D Units of Smith Douglas Holdings LLC at par aggregating $2.6 million, (iii) repay $0.9 million in notes payable to related parties, and (iv) the remainder for general corporate purposes. 81 Table of contents Overview As of December 31, 2025, we had $12.7 million of cash and cash equivalents.
As of December 31, 2024, we had 803 owned unstarted lots in real estate inventory on our balance sheet which represented only 4.1% of our total controlled lot supply. We believe the geographic markets in which we operate demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions.
As of December 31, 2025, we had 804 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.6% of our total controlled lot supply. We believe the geographic markets in which we operate demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions.
The foregoing description of the Amended Credit Facility is qualified in its entirety by reference to the Amended Credit Facility, a copy of which is filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024.
The foregoing description of the Amended Credit Facility is qualified in its entirety by reference to the Amended Credit Facility, a copy of which is filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2025.
Investing activities We used $4.7 million and $76.8 million in net cash in investing activities for the years ended December 31, 2024 and 2023, respectively. The net cash used in investing activities during 2024 was primarily due to purchases of property and equipment and investments in unconsolidated entities.
Investing activities We used $6.6 million and $4.7 million in net cash in investing activities for the years ended December 31, 2025 and 2024, respectively. The net cash used in investing activities during both years was primarily due to purchases of property and equipment and investments in unconsolidated entities.
Smith Douglas Homes Corp. is not a party to the Amended Credit Facility. The Amended Credit Facility, among other things, increases the aggregate principal amount of our revolving credit commitments to $250.0 million and extends the maturity date to January 16, 2027, provided that the borrowers may 80 Table of contents request a one-year extension of its maturity date.
Smith Douglas Homes Corp. is not a party to the Credit Facility. The Credit Facility, among other things, increased the aggregate principal amount of our revolving credit commitments to $250.0 million and extended the maturity date to January 16, 2027, provided that the borrowers may request a one-year extension of its maturity date.
The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable.
The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by such Continuing Equity Owners, the amount and timing of taxable income allocated to us or otherwise generated by us in the future, and the federal tax rates then applicable.
We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included in other expense (income), net, and (ix) severance expenses .
We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included in other expense (income), net, (ix) severance expenses, and (x) real estate inventory impairment and lot option contract abandonment charges .
As of December 31, 2024, we had 803 owned unstarted lots in real estate inventory on our balance sheet which represented only 4.1% of our total controlled lot supply. Under the umbrella of our land-light strategy, we generally seek to avoid engaging in land development.
As of December 31, 2025, we had 804 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.6% of our total controlled lot supply. Under the umbrella of our land-light strategy, we generally seek to avoid engaging in land development.
The Amended Credit Facility contains certain financial covenants, among others, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a) $130.0 million, (b) 32.5% of positive pre-tax income earned in any fiscal quarter after June 30, 2023, (c) 75% of the equity proceeds of Smith Douglas Homes Corp. and its subsidiaries from the IPO and (d) 50% of new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries after the IPO, (ii) a maximum leverage ratio of 60%, (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of $15.0 million.
The Amended Credit Facility contains certain financial covenants, among others, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a) $286.1 million , (b) 32.5% of pre‑tax income earned in any fiscal quarter after March 31, 2025 , and (c) 50% of any new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries at any time after March 31, 2025 , (ii) a maximum leverage ratio of 60% , (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of $15.0 million .
The following table presents a reconciliation of adjusted net income to the GAAP financial measure of net income for each of the periods indicated: Year ended December 31, (in thousands, except percentages) 2024 2023 Net income $ 111,829 $ 123,180 Provision for income taxes 5,065 — Income before income taxes 116,894 123,180 Tax-effected adjustments (1) 28,756 30,302 Adjusted net income $ 88,138 $ 92,878 (1) For the year ended December 31, 2024 and 2023, our tax expenses assumes a 24.6% 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). 77 Table of contents EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP.
The following table presents a reconciliation of adjusted net income to the GAAP financial measure of net income for each of the periods indicated: Year ended December 31, (in thousands, except percentages) 2025 2024 Net income $ 68,409 $ 111,829 Provision for income taxes 2,492 5,065 Income before income taxes 70,901 116,894 Tax-effected adjustments (1) 17,427 28,756 Adjusted net income $ 53,474 $ 88,138 (1) For the year ended December 31, 2025 and 2024, our tax expenses assumes a 24.6% 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). 79 Table of contents EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP.
Our operations are currently organized into eight geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Houston, and Nashville divisions.
Our operations are currently organized into ten geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and Alabama Gulf Coast divisions.
Segments Our operations are currently organized into eight geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Houston, and Nashville divisions.
Segments Our operations are currently organized into ten geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and Alabama Gulf Coast divisions.
See Critical Accounting Policies and Estimates for a description of how we record home closing revenue. 71 Table of contents Cost of home closings Cost of home closings includes the costs of lot acquisition, development, direct home construction, capitalized interest, closing costs, direct and certain indirect overhead costs and estimated warranty for the homes.
See Note 1—Description of the business and summary of significant accounting policies for a description of how we record home closing revenue. 73 Table of contents Cost of home closings Cost of home closings includes the costs of lot acquisition, development, direct home construction, capitalized interest, closing costs, direct and certain indirect overhead costs and estimated warranty for the homes.
These arrangements relate to certain performance or maintenance-related obligations. As of December 31, 2024, there were no outstanding letters of credit. Surety bonds do not have stated expiration dates, rather, we are released from the bonds as the contractual performance is completed.
These arrangements relate to certain performance or maintenance-related obligations. As of December 31, 2025, outstanding letters of credit approximated $0.5 million. Surety bonds do not have stated expiration dates, rather, we are released from the bonds as the contractual performance is completed.
Equity in income from unconsolidated entities Equity in income from unconsolidated entities consists of our portion of income from our interest in our title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers.
Equity in income from unconsolidated entities Equity in income from unconsolidated entities consists primarily of our portion of income from our interest in the title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers and our portion of income from our interest in the company engaged in providing mortgage broker services to our homebuyers.
No impairments were recognized during the years ended December 31, 2024 and 2023. Recent accounting pronouncements In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" (ASU 2023-07), which requires expanded disclosure of significant segment expenses and other segment items on an annual and interim basis.
Recent accounting pronouncements In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" (ASU 2023-07), which requires expanded disclosure of significant segment expenses and other segment items on an annual and interim basis.
We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in the following table: Year ended December 31, (in thousands, except percentages) 2024 2023 Notes payable $ 3,060 $ 75,627 Equity 401,727 208,903 Total capitalization $ 404,787 $ 284,530 Debt-to-book capitalization 0.8 % 26.6 % Notes payable $ 3,060 $ 75,627 Less: cash and cash equivalents 22,363 19,777 Net debt (19,303) 55,850 Equity 401,727 208,903 Total net capitalization $ 382,424 $ 264,753 Net debt-to-net book capitalization (5.0 %) 21.1% Liquidity and Capital Resources IPO On January 16, 2024, in connection with our IPO, we issued and sold 8,846,154 shares of our Class A common stock at a price to the public of $21.00 per share, resulting in gross proceeds to us of approximately $185.8 million and net proceeds to us of approximately $172.8 million, after deducting the underwriting discount of approximately $13.0 million.
We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure in the following table: Year ended December 31, (in thousands, except percentages) 2025 2024 Notes payable $ 44,075 $ 3,060 Equity 444,136 401,727 Total capitalization $ 488,211 $ 404,787 Debt-to-book capitalization 9.0 % 0.8 % Notes payable $ 44,075 $ 3,060 Less: cash and cash equivalents 12,741 22,363 Net debt 31,334 (19,303) Equity 444,136 401,727 Total net capitalization $ 475,470 $ 382,424 Net debt-to-net book capitalization 6.6 % (5.0)% Liquidity and Capital Resources IPO On January 16, 2024, in connection with our IPO, we issued and sold 8,846,154 shares of our Class A common stock at a price to the public of $21.00 per share, resulting in gross proceeds to us of approximately $185.8 million and net proceeds to us of approximately $172.8 million, after deducting the underwriting discount of approximately $13.0 million.
As of December 31, 2024, we had $85.4 million of non-refundable cash deposits under land and lot-option contracts pertaining to 10,132 lots with a remaining aggregate purchase price of approximately $707.8 million. Surety Bonds and Letters of Credit From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers.
As of December 31, 2025, we had $136.8 million of non-refundable cash deposits under land and lot-option contracts pertaining to 14,888 lots with a remaining aggregate purchase price of approximately $1.07 billion. 85 Table of contents Surety Bonds and Letters of Credit From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers.
Cash flows from operating, investing, and financing activities – comparison for the years ended December 31, 2024 and 2023 The following table summarizes our cash flows for the years ended December 31, 2024 and 2023 (in thousands): Year ended December 31, 2024 2023 Net cash provided by operating activities $ 19,132 $ 76,257 Net cash used in investing activities (4,706) (76,832) Net cash used in financing activities (11,840) (9,249) Net increase (decrease) in cash and cash equivalents 2,586 (9,824) Cash and cash equivalents, beginning of period 19,777 29,601 Cash and cash equivalents, end of period $ 22,363 $ 19,777 Operating activities We generated $19.1 million and $76.3 million in net cash from operating activities for the years ended December 31, 2024 and 2023, respectively.
Cash flows from operating, investing, and financing activities – comparison for the years ended December 31, 2025 and 2024 The following table summarizes our cash flows for the years ended December 31, 2025 and 2024 (in thousands): Year ended December 31, 2025 2024 Net cash (used in) provided by operating activities $ (31,337) $ 19,132 Net cash used in investing activities (6,634) (4,706) Net cash provided by (used in) financing activities 28,349 (11,840) Net (decrease) increase in cash and cash equivalents (9,622) 2,586 Cash and cash equivalents, beginning of period 22,363 19,777 Cash and cash equivalents, end of period $ 12,741 $ 22,363 Operating activities We used $31.3 million and generated $19.1 million in net cash from operating activities for the years ended December 31, 2025 and 2024, respectively.
JOBS Act We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act, enacted on April 5, 2012. Section 102 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
Section 102 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
As of December 31, 2024, we were in compliance with all covenants related to the Amended Credit Facility. As of December 31, 2024, there were no outstanding borrowings or letters of credit under the Amended Credit Facility. As of March 14, 2025, outstanding borrowings under our Amended Credit Facility totaled $44.0 million.
As of December 31, 2025 , we were in compliance with all covenants related to the Amended Credit Facility. As of December 31, 2025, there were $40.0 million of outstanding borrowings under the Amended Credit Facility. As of March 6, 2026, outstanding borrowings under our Amended Credit Facility totaled $80.0 million.
Despite continued uncertainty in the mortgage interest rate environment during 2024, our net new orders increased by 12% in the year ended December 31, 2024 compared to 2023. We believe our focus on affordable luxury will continue to serve us well as we remain optimistic about long-term demand due to favorable homebuyer demographics.
As a result, our net new orders increased by 3% in the year ended December 31, 2025 compared to 2024. We believe our focus on affordable luxury will continue to serve us well as we remain optimistic about long-term demand due to favorable homebuyer demographics.
The decrease was primarily due to an increase of $43.9 million in selling, general and administrative costs due to higher commissions and advertising costs and $5.1 million of income tax expense as a result of our IPO and Reorganization Transactions, partially offset by an increase in home closing gross profit of $39.2 million.
The decrease was primarily due to a decrease in home closing gross profit of $43.4 million, and an increase of $3.4 million in selling, general and administrative costs due to higher commissions and advertising costs, partially offset by a $2.6 million decrease in income tax expense.
Overview As of December 31, 2024, we had $22.4 million of cash and cash equivalents. We believe existing cash and cash equivalents, availability under our Amended Credit Facility and positive cash flows from operations will be sufficient to 79 Table of contents support working capital and capital expenditure requirements for at least the next 12 months.
We believe existing cash and cash equivalents, availability under our Amended Credit Facility and positive cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.
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 78 Table of contents measure derived in accordance with GAAP.
A decrease in home closing margin of 4.3% also contributed to the decreases in EBITDA margin and adjusted EBITDA margin. 80 Table of contents 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.
The increase in revenue was primarily attributable to a 24.8% improvement in homes closed and a 2.1% increase in ASP of homes closed across both reportable segments.
The decrease in revenue was primarily attributable to a 1.8% decrease in ASP of homes closed, offset by a 1.4% increase in homes closed across both reportable segments.
Accordingly, adjusted home closing gross profit and adjusted home closing gross margin information should be considered only as a supplement to home closing gross profit and home closing gross margin information as a measure of our performance. 76 Table of contents The following table presents a reconciliation of adjusted home closing gross profit and adjusted home closing gross margin to the GAAP financial measure of home closing gross profit and home closing gross margin for each of the periods indicated: Year ended December 31, (in thousands, except percentages) 2024 2023 Home closing revenue $ 975,463 $ 764,631 Cost of home closings 719,921 548,304 Home closing gross profit (1) $ 255,542 $ 216,327 Capitalized interest charged to cost of home closings 1,521 2,514 Purchase accounting adjustments included in cost of home closings (1,023) 1,467 Adj. home closing gross profit $ 256,040 $ 220,308 Home closing gross margin (2) 26.2% 28.3% Adj. home closing gross margin (2) 26.2% 28.8% (1) Home closing gross profit is home closing revenue less cost of home closings.
Accordingly, adjusted home closing gross profit and adjusted home closing gross margin information should be considered only as a supplement to home closing gross profit and home closing gross margin information as a measure of our performance. 78 Table of contents The following table presents a reconciliation of adjusted home closing gross profit and adjusted home closing gross margin to the GAAP financial measure of home closing gross profit and home closing gross margin for each of the periods indicated: Year ended December 31, (in thousands, except percentages) 2025 2024 Home closing revenue $ 971,116 $ 975,463 Cost of home closings 758,945 719,921 Home closing gross profit (1) $ 212,171 $ 255,542 Capitalized interest charged to cost of home closings 2,049 1,521 Purchase accounting adjustments included in cost of home closings 81 (1,023) Impairment of real estate inventory 2,575 — Adj. home closing gross profit $ 216,876 $ 256,040 Home closing gross margin (2) 21.8% 26.2% Adj. home closing gross margin (2) 22.3% 26.2% (1) Home closing gross profit is home closing revenue less cost of home closings.
The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under development and finished lots held by Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries.
The borrowings and letters of credit outstanding under the Amended Credit Facility may not exceed the borrowing base as defined in the Amended Credit Facility. The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under development and finished lots held by Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries.
Selling, general, and administrative costs Selling, general, and administrative costs for the year ended December 31, 2024 were $136.4 million, an increase of $43.9 million, or 47.5%, from $92.4 million for the year ended December 31, 2023.
Selling, general, and administrative costs Selling, general, and administrative costs for the year ended December 31, 2025 were $139.8 million, an increase of $3.4 million, or 2.5%, from $136.4 million for the year ended December 31, 2024.
The following table presents a reconciliation of EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin to the GAAP financial measure of net income and net income margin for each of the periods indicated: Year ended December 31, (in thousands, except percentages) 2024 2023 Net income $ 111,829 $ 123,180 Capitalized interest charged to cost of home closings 1,521 2,514 Interest expense 2,489 1,658 Interest income (859) (174) Provision for income taxes 5,065 — Depreciation 1,825 1,081 EBITDA $ 121,870 $ 128,259 Share-based payment expense 4,361 — Purchase accounting adjustments included in cost of home closings (1,023) 1,467 Remeasurement of contingent consideration liability 1,718 — Severance expenses 1,378 — Adjusted EBITDA $ 128,304 $ 129,726 Net income margin (1) 11.5% 16.1% EBITDA margin (1) 12.5% 16.8% Adjusted EBITDA margin (1) 13.2% 17.0% (1) Calculated as a percentage of home closing revenue.
The following table presents a reconciliation of EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin to the GAAP financial measure of net income and net income margin for each of the periods indicated: Year ended December 31, (in thousands, except percentages) 2025 2024 Net income $ 68,409 $ 111,829 Capitalized interest charged to cost of home closings 2,049 1,521 Interest expense 3,194 2,489 Interest income (401) (859) Provision for income taxes 2,492 5,065 Depreciation 2,549 1,825 EBITDA $ 78,292 $ 121,870 Share-based payment expense 3,669 4,361 Purchase accounting adjustments included in cost of home closings 81 (1,023) Remeasurement of contingent consideration liability — 1,718 Severance expenses — 1,378 Real estate inventory impairment and lot option contract abandonment charges 4,871 — Adjusted EBITDA $ 86,913 $ 128,304 Net income margin (1) 7.0% 11.5% EBITDA margin (1) 8.1% 12.5% Adjusted EBITDA margin (1) 8.9% 13.2% (1) Calculated as a percentage of home closing revenue.
Backlog homes The following table sets forth our backlog homes and contract value and ASP of backlog homes by reportable segment as of December 31, 2024 and 2023, along with their year-to-year change in percent (dollar amounts in thousands): As of December 31, 2024 2023 Year over year change Backlog homes Contract value of backlog homes ASP of backlog homes Backlog homes Contract value of backlog homes ASP of backlog homes Backlog homes Contract value of backlog homes ASP of backlog homes Southeast 410 $ 146,436 $ 357 534 $ 188,406 $ 353 (23) % (22) % 1 % Central 284 89,433 315 378 122,308 324 (25) % (27) % (3) % Total 694 $ 235,869 $ 340 912 $ 310,714 $ 341 (24) % (24) % — % 75 Table of contents Controlled lots The following table sets forth our total controlled lots, which includes both our owned and optioned lots, by reportable segment as of the periods set forth below: As of December 31, 2024 2023 Year over year change Owned (1) Optioned Total Controlled Owned (1) Optioned Total Controlled Owned (1) Optioned Total Controlled Southeast 881 12,210 13,091 486 7,907 8,393 81 % 54 % 56 % Central 895 5,536 6,431 834 3,594 4,428 7 % 54 % 45 % Total 1,776 17,746 19,522 1,320 11,501 12,821 35 % 54 % 52 % Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we have provided information in this Annual Report on Form 10-K relating to “adjusted home closing gross profit,” “adjusted home closing gross margin,” “adjusted net income,” “EBITDA”, “EBITDA margin”, “adjusted EBITDA”, “adjusted EBITDA margin”, and “net debt-to-net book capitalization.” We believe these non-GAAP financial measures are useful in evaluating our operating performance.
Backlog homes The following table sets forth our backlog homes and contract value and ASP of backlog homes by reportable segment as of December 31, 2025 and 2024, along with their year-to-year change in percent (dollar amounts in thousands): As of December 31, 2025 2024 Year over year change Backlog homes Contract value of backlog homes ASP of backlog homes Backlog homes Contract value of backlog homes ASP of backlog homes Backlog homes Contract value of backlog homes ASP of backlog homes Southeast 265 $ 91,748 $ 346 410 $ 146,436 $ 357 (35) % (37) % (3) % Central 247 80,775 327 284 89,433 315 (13) % (10) % 4 % Total 512 $ 172,523 $ 337 694 $ 235,869 $ 340 (26) % (27) % (1) % 77 Table of contents Controlled lots The following table sets forth our total controlled lots, which includes both our owned and optioned lots, by reportable segment as of the periods set forth below: As of December 31, 2025 2024 Year over year change Owned (1) Optioned Total Controlled Owned (1) Optioned Total Controlled Owned (1) Optioned Total Controlled Southeast 932 13,938 14,870 881 12,210 13,091 6 % 14 % 14 % Central 780 6,618 7,398 895 5,536 6,431 (13) % 20 % 15 % Total 1,712 20,556 22,268 1,776 17,746 19,522 (4) % 16 % 14 % Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we have provided information in this Annual Report on Form 10-K relating to “adjusted home closing gross profit,” “adjusted home closing gross margin,” “adjusted net income,” “EBITDA”, “EBITDA margin”, “adjusted EBITDA”, “adjusted EBITDA margin”, and “net debt-to-net book capitalization.” We believe these non-GAAP financial measures are useful in evaluating our operating performance.
Macroeconomic and geopolitical factors We continue to experience certain macroeconomic trends that affect our markets and industry such as higher inflation, elevated interest rates and associated decreases in consumer discretionary income, the effects of supply chain challenges, declining government stimulus following the COVID-19 pandemic, and uncertainty regarding an economic recession.
Macroeconomic and geopolitical factors We continue to experience certain macroeconomic trends that affect our markets and industry such as higher inflation, elevated interest rates and associated decreases in consumer discretionary income, the effects of supply chain challenges, and uncertainty regarding an economic recession. Any worsening of macroeconomic conditions in future periods could have a negative effect on our financial results.
A community becomes inactive when it has fewer than two homes remaining to sell. 73 Table of contents Home closing revenue Home closing revenue for the year ended December 31, 2024, was $975.5 million, an increase of $210.8 million, or 27.6%, from $764.6 million for the year ended December 31, 2023.
A community becomes inactive when it has fewer than two homes remaining to sell. 75 Table of contents Home closing revenue Home closing revenue for the year ended December 31, 2025, was $971.1 million, a decrease of $4.3 million, or 0.4%, from $975.5 million for the year ended December 31, 2024.
Central: The $10.0 million increase in net income compared to the prior year was primarily due a $22.7 million increase in gross profit due to a 45.4% increase in homes closed partially offset by a 1.2% decrease in ASP of homes closed, offset by a $10.6 million increase in selling, general, and administrative costs.
Central: The $19.0 million decrease in net income compared to the prior year was primarily due a $15.0 million decrease in gross profit due to a 0.7% decrease in homes closed and a 0.9% decrease in ASP of homes closed and a $3.8 million increase in selling, general, and administrative costs.
The following table sets forth our home closing revenue, number of home closings, and ASP of homes closed for the years ended December 31, 2024 and 2023, in each of our reportable segments (dollar amounts in thousands): Year ended December 31, 2024 2023 Home closing revenue Home closings ASP of homes closed Home closing revenue Home closings ASP of homes closed Southeast $ 609,624 1,723 $ 354 $ 509,775 1,510 $ 338 Central 365,839 1,144 320 254,856 787 324 Total $ 975,463 2,867 $ 340 $ 764,631 2,297 $ 333 Cost of home closings Cost of home closings for the year ended December 31, 2024, was $719.9 million, an increase of $171.6 million, or 31.3%, from $548.3 million for the year ended December 31, 2023, which was primarily driven by a 24.8% increase in homes closed and a 5.2% increase in the average cost of homes closed.
The following table sets forth our home closing revenue, number of home closings, and ASP of homes closed for the years ended December 31, 2025 and 2024, in each of our reportable segments (dollar amounts in thousands): Year ended December 31, 2025 2024 Home closing revenue Home closings ASP of homes closed Home closing revenue Home closings ASP of homes closed Southeast $ 610,773 1,772 $ 345 $ 609,624 1,723 $ 354 Central 360,343 1,136 317 365,839 1,144 320 Total $ 971,116 2,908 $ 334 $ 975,463 2,867 $ 340 Cost of home closings Cost of home closings for the year ended December 31, 2025, was $758.9 million, an increase of $39.0 million, or 5.4%, from $719.9 million for the year ended December 31, 2024, which was primarily driven by a 1.4% increase in homes closed and a 3.9% increase in the average cost of homes closed.
Operating cash flows for 2023 benefited from cash generated by net income of $123.2 million primarily offset by a $33.7 million increase in real estate inventory and a $16.6 million increase in deposits on real estate under option or contract.
Operating cash flows for 2025 benefited from cash generated by net income of $68.4 million primarily offset by a $46.2 million increase in real estate inventory, a $37.4 million increase in deposits on real estate under option or contract, and a $15.3 million decrease in accounts payable.
Our interest expense increased $0.8 million to $2.5 million for the year ended December 31, 2024 from $1.7 million for the year ended December 31, 2023, which was primarily driven by an increase in unused fees incurred on our Prior Credit Facility and Amended Credit Facility, amortization of deferred financing costs on our Amended Credit Facility, and interest on the note payable related to the Devon Street Homes Acquisition. 74 Table of contents Other expense (income), net Other expense (income), net primarily consists of interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses.
Our interest expense increased $0.7 million to $3.2 million for the year ended December 31, 2025 from $2.5 million for the year ended December 31, 2024, which was primarily driven by an increase in interest incurred on our Amended Credit Facility due to a higher average outstanding balance. 76 Table of contents Other expense, net Other expense, net primarily consists of interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses.
As a result of the adoption, there was no impact on our consolidated balance sheets or consolidated statements of income. Note 18 (Segment Information) was updated to comply with the new disclosure requirements.
As a result of the adoption, there was no impact on our consolidated balance sheets or consolidated statements of income.
Net income for the year ended December 31, 2024 decreased by $11.4 million, or 9.2%.
Net income for the year ended December 31, 2025 decreased by $43.4 million, or 38.8%.
Southeast: The $7.3 million increase in net income compared to the prior year was primarily due to a $16.5 million increase in gross profit due to a 14.1% increase in homes closed and 4.7% increase in ASP of homes closed, offset by a $9.2 million increase in selling, general, and administrative costs.
Southeast: The $38.6 million decrease in net income compared to the prior year was primarily due to a $28.4 million decrease in gross profit due to a 2.8% increase in homes closed, 2.5% decrease in ASP of homes closed, and 3.9% increase in the average cost of homes closed.
Net income The following table sets forth net income by reportable segment for the years ended December 31, 2024 and 2023 (in thousands): Year ended December 31, 2024 2023 Year over year change Southeast $ 124,837 $ 117,558 $ 7,279 Central 41,891 31,867 10,024 Segment total 166,728 149,425 17,303 Corporate (1) (54,899) (26,245) (28,654) Total $ 111,829 $ 123,180 $ (11,351) (1) Corporate primarily includes corporate overhead costs, such as payroll and benefits, business insurance, information technology, office costs, outside professional services and travel costs, and certain other amounts that are not allocated to the reportable segments.
Net income The following table sets forth net income by reportable segment for the years ended December 31, 2025 and 2024 (in thousands): Year ended December 31, 2025 2024 Year over year change Southeast $ 86,241 $ 124,837 $ (38,596) Central 22,870 41,891 (19,021) Segment total 109,111 166,728 (57,617) Corporate (1) (40,702) (54,899) 14,197 Total $ 68,409 $ 111,829 $ (43,420) (1) Corporate primarily includes corporate overhead costs, such as payroll and benefits, business insurance, information technology, office costs, outside professional services and travel costs, and certain other amounts that are not allocated to the reportable segments.
The pace of net new home orders, the ASP, discounts and incentives, and the level of upgrades and options selected by our homebuyer all impact our recognized revenues in a given period.
Components of Results of Operations Home closing revenue Home closing proceeds are generally received from the title company within a few business days after closing. The pace of net new home orders, the ASP, discounts and incentives, and the level of upgrades and options selected by our homebuyer all impact our recognized revenues in a given period.
For the year ended December 31, 2024, equity in income from unconsolidated entities increased by $0.2 million from the year ended December 31, 2023, due to a 19.8% increase in title insurance revenue generated by the title company.
For the year ended December 31, 2025, equity in income from unconsolidated entities increased by $0.9 million from the year ended December 31, 2024, due to a 17.1% increase in title insurance revenue generated by the title company and $0.7 million of income from the mortgage brokerage company, which ramped up operations in 2025.
(2) Calculated as a percentage of home closing revenue. Our adjusted home closing gross profit increased while adjusted home closing gross margin decreased from the year ended December 31, 2023 to 2024. The increase in adjusted home closing gross profit primarily results from an increase in home closings of 24.8%.
(2) Calculated as a percentage of home closing revenue. Our adjusted home closing gross profit and adjusted home closing gross margin decreased from the year ended December 31, 2024 to 2025. The decrease primarily results from a 1.4% increase in homes closed and a 3.9% increase in the average cost of homes closed.
Additionally, we construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows this optionality for homebuyers based on just-in-time modifications.
Additionally, we aim to construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options.
For the year ended December 31, 2024, other expense (income), net increased by $1.0 million from the year ended December 31, 2023, which was primarily due to the change in fair value of the contingent consideration liability related to the Devon Street Homes Acquisition.
For the year ended December 31, 2025, other expense, net decreased by $0.6 million from the year ended December 31, 2024, which was primarily due to a $2.3 million charge related to abandonment of certain lot option contracts in the Central region in 2025, which did not occur in 2024, and the change in fair value of the contingent consideration liability related to the Devon Street Homes Acquisition in 2024, which did not recur in 2025.
For the year ended December 31, 2024 compared to 2023, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin decreased primarily as a result of a decrease in net income of 9.2% partially offset by an increase in interest expense of $0.8 million and an increase in provision for income taxes of $5.1 million.
For the year ended December 31, 2025 compared to 2024, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin decreased primarily as a result of a decrease in net income of 38.8%.
Any worsening of macroeconomic conditions in future periods could have a negative effect on our financial results. Moreover, potential tariffs, including on building materials, geopolitical conflicts, and war have increased global economic and political uncertainty, which has caused dramatic fluctuations in global financial markets.
Moreover, potential tariffs, including on building materials, geopolitical conflicts, and war have increased global economic and political uncertainty, which has caused dramatic fluctuations in global financial markets. A significant escalation or expansion of economic disruption could continue to impact consumer sentiment and spending, broaden inflationary costs, and could have a material adverse effect on our results of operations.
The Amended Credit Facility also includes a $100.0 million accordion feature, subject to additional commitments, and provides that up to $20.0 million may be used for letters of credit. The borrowings and letters of credit outstanding under the Amended Credit Facility may not exceed the borrowing base as defined in the Amended Credit Facility.
The Amended Credit Facility matures in May 2029 , except that the Company may request a one -year extension of such maturity date. The Amended Credit Facility also includes a $100.0 million accordion feature, subject to additional commitments. The Amended Credit Facility provides that up to $20.0 million of the commitments may be used for letters of credit.
Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 26.2% in 2024 compared to 28.3% in 2023.
Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 21.8% in 2025 compared to 26.2% in 2024. The decrease in home closing gross margin was primarily driven by a 3.9% increase in the average cost of homes closed and a 1.8% decrease in ASP of homes closed.
Home closing gross profit Home closing gross profit for the year ended December 31, 2024 was $255.5 million, an increase of $39.2 million, or 18.1%, from $216.3 million for the year ended December 31, 2023.
Home closing gross profit Home closing gross profit for the year ended December 31, 2025 was $212.2 million, a decrease of $43.4 million, or 17.0%, from $255.5 million for the year ended December 31, 2024.
In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which requires expanded disclosure of the Company’s income rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company for annual periods beginning after January 1, 2025.
Note 18 (Segment Information) was updated to comply with the new disclosure requirements. 86 Table of contents In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which requires expanded disclosure of the Company’s income rate reconciliation and income taxes paid.
Our material cash commitments as of December 31, 2024 were our $3.2 million operating lease obligation, which primarily consists of our $1.2 million office lease obligation for our headquarters in Woodstock, Georgia where we lease approximately 26,800 square feet of office space under a lease agreement that expires on August 31, 2028 and the interest on our Amended Credit Facility on the amounts outstanding from time to time.
Our material cash commitments as of December 31, 2025 were our $2.0 million operating lease obligation, which primarily consists of our division offices and the interest on our Amended Credit Facility on the amounts outstanding from time to time.
The net cash used in investing activities during 2023 was primarily due to the $75.9 million used to fund the Devon Street Homes Acquisition. Financing activities Net cash used in financing activities was $11.8 million and $9.2 million for the years ended December 31, 2024 and 2023, respectively.
Financing activities We generated $28.3 million and used $11.8 million in net cash in financing activities during the years ended December 31, 2025 and 2024, respectively.
The $2.6 million increase in cash used in financing activities was primarily attributable to a $126.6 82 Table of contents million increase in net repayments under the revolving credit facility and a $25.4 million increase in net cash used in real estate not owned transactions, partially offset by net proceeds from the IPO and Reorganization Transactions of $117.5 million and a $38.8 million decrease in distributions to members of Smith Douglas Holdings LLC.
The net cash used in financing activities during the year ended December 31, 2024 was primarily due to $117.5 million in net proceeds from the IPO and Reorganization Transactions, which were more than offset by $111.0 million in net repayments under the Prior Credit Facility, $40.0 million in distributions, and $15.9 million in payments related to repurchases of real estate not owned.
Removed
A significant escalation or expansion of economic disruption could continue to impact consumer sentiment and spending, broaden inflationary costs, and could have a material adverse effect on our results of operations. Components of Results of Operations Home closing revenue Home closing proceeds are generally received from the title company within a few business days after closing.
Added
During 2025, we experienced softer‑than‑expected demand driven by sustained elevated mortgage interest rates, which continued to restrict affordability for potential homebuyers and negatively affected consumer sentiment. We responded to these challenges by implementing various financing incentives, such as closing cost credits and mortgage rate buydowns.
Removed
The decrease in home closing gross margin was primarily driven by a 5.2% increase in the average cost of homes closed partially offset by a 2.1% increase in ASP of homes closed.
Added
Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows this optionality for homebuyers based on just-in-time modifications.
Removed
The increase was primarily due to an increase in sales commissions and advertising costs associated with our increase in homes closed and related home closing revenue, increased payroll and performance-based bonus compensation expenses on higher employee headcount, stock compensation expense, and higher professional fees related to the Devon Street Homes acquisition and our IPO.
Added
The increase was primarily due to an increase in division overhead associated with our increased active community count and newly formed divisions, including Central Georgia, Greenville, Alabama Gulf Coast, and Dallas-Fort Worth.
Removed
The increase in gross profit and selling, general, and administrative costs are largely attributable to the prior year only reflecting results of operations for the Houston division for a partial year after the Devon Street Homes Acquisition was completed on July 31, 2023.
Added
Also contributing to lower net income was a $10.3 million increase in selling, general, and administrative costs primarily due to an increase in division overhead associated with our increased active community count and newly formed divisions, including Central Georgia and Greenville.
Removed
The decrease in adjusted home closing gross margin was driven by an increase in the average cost of home closings of 5.2% partially offset by an increase in the ASP of homes closed of 2.1%. Adjusted net income Adjusted net income is not a measure of net income or net income margin as determined by GAAP.
Added
The increase in selling, general, and administrative costs are largely attributable to an increase in division overhead associated with our increased active community count and newly formed divisions, including Dallas-Fort Worth and the Alabama Gulf Coast.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. Market risk is the risk of economic losses due to adverse changes in financial market prices and rates. Our primary market risks are described below. We do not have material exposure to commodity risk. Interest Rate Fluctuation Risk Our operations are interest rate sensitive.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. Market risk is the risk of economic losses due to adverse changes in financial market prices and rates. Our primary market risks are described below. We do not have material exposure to commodity risk. 87 Table of contents Interest Rate Fluctuation Risk Our operations are interest rate sensitive.
We attempt to pass through to our homebuyers any increases in our costs through increased sales prices. However, during periods of soft housing market conditions, we may not be able to offset our cost increases with higher selling prices. 85 Table of contents
We attempt to pass through to our homebuyers any increases in our costs through increased sales prices. However, during periods of soft housing market conditions, we may not be able to offset our cost increases with higher selling prices. 88 Table of contents
As of March 14, 2025, outstanding borrowings under our Amended Credit Facility totaled $44.0 million. We do not enter into, nor do we intend to enter into in the future, derivative financial instruments for trading or speculative purposes to hedge against interest rate fluctuations. Inflation Our results of operations and financial condition are presented based on historical cost.
As of March 6, 2026, outstanding borrowings under our Amended Credit Facility totaled $80.0 million. We do not enter into, nor do we intend to enter into in the future, derivative financial instruments for trading or speculative purposes to hedge against interest rate fluctuations. Inflation Our results of operations and financial condition are presented based on historical cost.

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