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What changed in Smith Douglas Homes Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Smith Douglas Homes Corp.'s 2023 and 2024 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 2024 report.

+385 added−360 removedSource: 10-K (2025-03-21) vs 10-K (2024-04-01)

Top changes in Smith Douglas Homes Corp.'s 2024 10-K

385 paragraphs added · 360 removed · 280 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

67 edited+44 added−8 removed148 unchanged
Biggest changeAs of December 31, 2023 and 2022, respectively, homebuyer deposits averaged approximately 2% and 4% of the average sales price of our backlog homes. 17 Table of contents The following tables present information concerning our new home orders, starts, and closings in each of our markets for the periods set forth below: Year ended December 31, ​ ​ 2023 ​ ​ 2022 ​ ​ Year Over Year Change Market ​ ​ Orders ​ ​ Starts ​ ​ Closings ​ ​ Orders ​ ​ Starts ​ ​ Closings ​ ​ Orders ​ ​ Starts ​ ​ Closings Alabama ​ ​ 494 505 396 ​ ​ 217 ​ ​ 267 ​ ​ 338 ​ ​ 277 ​ ​ 238 ​ ​ 58 Atlanta ​ ​ 962 943 1,016 ​ ​ 997 ​ ​ 1,051 ​ ​ 1,016 ​ ​ (35) ​ ​ (108) ​ ​ — Charlotte ​ ​ 161 159 162 ​ ​ 165 ​ ​ 185 ​ ​ 223 ​ ​ (4) ​ ​ (26) ​ ​ (61) Houston ​ ​ 145 110 94 ​ ​ — ​ ​ — ​ ​ — ​ ​ 145 ​ ​ 110 ​ ​ 94 Nashville ​ ​ 285 285 297 ​ ​ 250 ​ ​ 297 ​ ​ 307 ​ ​ 35 ​ ​ (12) ​ ​ (10) Raleigh ​ ​ 321 324 332 ​ ​ 299 ​ ​ 312 ​ ​ 316 ​ ​ 22 ​ ​ 12 ​ ​ 16 Totals ​ ​ 2,368 2,326 2,297 ​ ​ 1,928 ​ ​ 2,112 ​ ​ 2,200 ​ ​ 440 ​ ​ 214 ​ ​ 97 Our backlog consists of homes under signed purchase contracts with homebuyers who have met the preliminary criteria to obtain mortgage financing and made their deposit but have not yet closed.
Biggest changeThe following tables present information concerning our new home orders, starts, and closings in each of our segments for the periods set forth below: Year ended December 31, 2024 2023 Year Over Year Change Market Orders Starts Closings Orders Starts Closings Orders Starts Closings Southeast 1,599 1,874 1,723 1,444 1,426 1,510 155 448 213 Central 1,050 1,170 1,144 924 900 787 126 270 357 Total 2,649 3,044 2,867 2,368 2,326 2,297 281 718 570 Our backlog consists of homes under signed purchase contracts with homebuyers who have met the preliminary criteria to obtain mortgage financing and made their deposit but have not yet closed.
This allows us to maintain long-term balance sheet durability to withstand multiple cycles and to execute operational and acquisition strategies when access to capital is scarce. We believe our recent IPO diversified our access to capital and enhanced our already strong liquidity position, further supporting our robust future growth plans and providing us with the flexibility to opportunistically deploy capital.
This allows us to maintain long-term balance sheet durability to withstand multiple cycles and to execute operational and acquisition strategies when access to capital is scarce. We believe our IPO diversified our access to capital and enhanced our already strong liquidity position, further supporting our robust future growth plans and providing us with the flexibility to opportunistically deploy capital.
See Note 9—Investments in Unconsolidated Entities to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our investments in unconsolidated entities and the related accounting treatment. Our People We are extremely proud of our employees and their commitment to collaborating as a team to uphold our values.
See Note 5—Investments in Unconsolidated Entities to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our investments in unconsolidated entities and the related accounting treatment. Our People We are extremely proud of our employees and their commitment to collaborating as a team to uphold our values.
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 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 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 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 December 31, 2023 and 2022, 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, 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 primarily acquire finished lots from reputable third-party land developers and land bankers through lot-option contracts, thereby avoiding the financial requirements and risks associated with land ownership and land development. Our primary obligation and potential economic risk for failure to perform under our lot-option contracts is typically limited to the amount of our deposit.
We 11 Table of contents primarily acquire finished lots from reputable third-party land developers and land bankers through lot-option contracts, thereby avoiding the financial requirements and risks associated with land ownership and land development. Our primary obligation and potential economic risk for failure to perform under our lot-option contracts is typically limited to the amount of our deposit.
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.
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 utilize a single database enterprise resource planning (“ERP”) system called SMART Builder (that we nonexclusively 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 (that we exclusively license from an entity affiliated with the Founder Fund) that is fully integrated with our homebuilding operations.
If a homebuyer cancels its contract, we typically keep the deposit and record it as income at the time of cancellation. We believe the combination of our sales process, affordable and personalized product offering, and our industry leading construction cycle times have led to lower cancellation rates on average compared to our industry peers.
If a homebuyer cancels its contract, we typically keep the 19 Table of contents deposit and record it as income at the time of cancellation. We believe the combination of our sales process, affordable and personalized product offering, and our industry leading construction cycle times have led to lower cancellation rates on average compared to our industry peers.
We evaluate potential market expansion opportunities using a set of robust strategic market criteria, including availability of land and unmet 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 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.
In addition, in those cases where wetlands, endangered plant or animal species or sensitive habitats are present, environmental requirements can result in the delay or elimination of development in identified environmentally sensitive areas. 21 Table of contents Corporate Information Smith Douglas Homes Corp., a Delaware corporation, was formed on June 20, 2023.
In addition, in those cases where wetlands, endangered plant or animal species or sensitive habitats are present, environmental requirements can result in the delay or elimination of development in identified environmentally sensitive areas. Corporate Information Smith Douglas Homes Corp., a Delaware corporation, was formed on June 20, 2023.
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.
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.
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.
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.
Our History In 2008, in the wake of the Global Financial Crisis, our founder and Executive Chairman, Tom Bradbury, saw a unique opportunity to re-enter the homebuilding industry, creating Smith Douglas Homes and breaking ground on its first home in Atlanta, Georgia.
Our History In 2008, in the wake of the Global Financial Crisis, our founder and Executive Chairman, Tom Bradbury, saw a unique opportunity to re-enter the homebuilding industry, creating Smith Douglas Homes and breaking ground on its first 10 Table of contents home in Atlanta, Georgia.
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 $333,000 on homes closed during the year ended December 31, 2023.
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.
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 $333,000 for the year ended December 31, 2023.
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.
According to JBREC, the majority of our markets rank among the top ten in the Southeast for positive net migration over the last year. We believe the combination of these compelling trends and our strong presence within these markets will help facilitate the execution of our growth strategy.
The majority of our markets rank among the top ten in the Southeast for positive net migration over the last year. We believe the combination of these compelling trends and our strong presence within these markets will help facilitate the execution of our growth strategy.
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.
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.
Although we build and sell move-in ready homes, approximately 68% of our home closings in the year ended December 31, 2023 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 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.
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, 2023, for example, over 89% 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, 2024, for example, over 87% of our closings were derived from fewer than 30 floor plans.
During the years ended December 31, 2023 and 2022, 76% and 74%, 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, 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.
We hire experienced trade partners to supply labor and procure some or all the building materials required for homebuilding. As is typical in the homebuilding industry, we generally do not have long-term contractual commitments with our trade partners or suppliers.
We hire experienced trade partners to supply labor and procure some or all the building materials required for homebuilding. As is typical in the homebuilding industry, we generally do not have long-term contractual commitments 17 Table of contents with our trade partners or suppliers.
For the years ended December 31, 2023 and 2022, respectively, our share of Ridgeland Title LLC’s income recognized was $0.9 million and $1.1 million and our distributions received were $0.9 million and $1.0 million.
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.
Although we have a wide array of plans in our library, for the year ended December 31, 2023, over 89% of our home closings were from less 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, 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.
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% for each of the years ended December 31, 2023 and 2022.
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 operating model, we have achieved an average construction cycle time of approximately 65 business days, which is among the lowest average construction cycle times in the public homebuilding sector. We believe our Rteam philosophy is the foundation of our operational success.
As a result of our differentiated operating model, we have achieved an average construction cycle time of approximately 55 business days excluding our Houston division, which is among the lowest average construction cycle times in the public homebuilding sector. We believe our Rteam philosophy is the foundation of our operational success.
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 six additional key markets with robust growth outlooks: Raleigh, Charlotte, Birmingham, Houston, Huntsville, and Nashville.
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.
Since establishing our initial presence in Atlanta, we have steadily expanded our footprint into Raleigh, Birmingham, Charlotte, Nashville, Huntsville, and Houston 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, and Greenville over the last nine years.
We believe our build-to-order focus with quick construction cycle times at attractive value gives us a competitive advantage versus our peer group. 13 Table of contents Our active communities As of December 31, 2023, we had 69 active communities, which was 30% higher than the 53 active communities count we had as December 31, 2022.
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 continually monitor our unsold homes under construction based on market demand and will typically limit our communities to no more than five unsold homes under construction. As of December 31, 2023, we had 249 unsold homes under construction, only 44 of which were completed.
We continually monitor our unsold homes under construction based on market demand and will typically limit our communities to no more than five unsold homes under construction. As of December 31, 2024, we had 252 unsold homes under construction, only 102 of which were completed.
Our purpose is to enhance people’s quality of life, whether that be our associates, homebuyers, or trade partners. As of December 31, 2023, we employed 364 full-time employees and 14 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, 2024, we employed 445 full-time employees and 17 part-time employees in the United States.
For the year ended December 31, 2023, we closed 2,297 homes, achieving a 20.2% CAGR on closed homes from 2015 to 2023. 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, 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.
The following tables present our owned real estate inventory status as of the periods set forth below: As of December 31, 2023 ​ 2022 Backlog homes finished or under construction 40 % ​ 47 % Unsold homes under construction 11 % ​ 9 % Unsold completed homes 5 % ​ 4 % Model homes 4 % ​ 5 % Owned unstarted finished lots 40 % ​ 35 % Total 100 % ​ 100 % 15 Table of contents 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, 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.
We believe homebuyers appreciate our value proposition created by the combination of our home affordability and the level of personalization we provide. Furthermore, in the current environment, the recent rise in interest rates has created a significant affordability problem, making our price points even more attractive.
We believe homebuyers appreciate our value proposition created by the combination of our home affordability and the level of personalization we provide. Furthermore, in the current environment, elevated interest rates have continued to create a significant affordability problem, making our price points even more attractive.
We expect this seasonal pattern to continue in the long term. 20 Table of contents 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 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.
In 2023, we were ranked the second largest private builder by 2022 closings by the Atlanta Real Estate Forum, and in 2022, Atlanta became our first market to account for over 1,000 home closings in a calendar year.
In 2023, we were ranked the second largest private builder by 2022 closings by the Atlanta Real Estate Forum, and in 2022, Atlanta became our first market to account for over 1,000 home closings in a calendar year. In 2023, we entered the Houston market with our acquisition of Devon Street Homes.
Ridgeland Title LLC generated a total of $2.2 million and $2.5 million in gross revenue through all channels of products and services during the years ended December 31, 2023 and 2022, respectively.
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.
Our adjusted return on equity was 49% and 81%, respectively, for the years ended December 31, 2023 and 2022, respectively. 10 Table of contents 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 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.
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, 2023 2022 Net new home orders 2,368 1,928 Contract value of net new home orders $ 792,224 $ 667,530 ASP of net new home orders $ 335 $ 346 Cancellation rate 10.5 % 10.9 % As of December 31, 2023 2022 Backlog homes (period end) 912 771 Contract value of backlog homes (period end) $ 310,714 $ 258,718 ASP of backlog homes (period end) $ 341 $ 336 18 Table of contents 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, 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.
As of December 31, 2022, our lot deposits relating to lot and land option contracts, including option contracts with unconsolidated entities, totaled $33.3 million, which controlled 7,848 option lots. 14 Table of contents 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 and sells the finished lots to us, at our option, over a period of time with staggered takedown schedules.
In order to be successful, we encourage each of our employees to embrace our “Our House” philosophy, which holds integrity, people, excellence, teamwork, and continuous improvement as the key values that drive our business.
In order to be successful, we encourage each of our employees to embrace our “Our House” philosophy, which holds integrity, people, excellence, teamwork, and continuous improvement as the key values that drive our business. To uphold our values, we are intensely focused on maintaining our culture, recruiting, retaining, and incentivizing our employees, and employee development and engagement.
As of December 31, 2023, our land bank deposits amounted to $30.6 million, which controlled 2,746 lots. As of December 31, 2022, our land bank deposits amounted to $18.1 million, which controlled 2,097 lots.
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.
We maintain significant liquidity, with $19.8 million of cash and cash equivalents on hand and $75.1 million of undrawn capacity under the Amended Credit Facility (exclusive of outstanding letters of credit) as of December 31, 2023. 11 Table of contents As of December 31, 2023 and 2022, respectively, our debt-to-book capitalization was 27% and 8%, and our net-debt-to-net book capitalization was 21% and (10)%.
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%.
For each of the years ended December 31, 2023 and 2022, our cancellation rate was approximately 11%.
For the years ended December 31, 2024 and 2023, our cancellation rate was approximately 12% and 11%, respectively.
Item 1. Business. Our Company Prior to our IPO, we were one of the nation’s fastest growing private homebuilders by number of closings, and we are 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.
Item 1. Business. Our Company We are 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.
Average monthly sales per community for the year ended December 31, 2023, excluding sales and communities related to the Devon Street Homes Acquisition, were 3.4, an increase from 3.1 average monthly sales per community for the year ended December 31, 2022. 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, 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.
For the year ended December 31, 2023, our ASP of homes closed was approximately $333,000, 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, 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.
While much of the intellectual property we use is owned by us, we also use various third-party licensed software in connection with our business. Although we believe these licenses are sufficient for the operation of our business, these licenses typically limit our use of such third-party software to specific uses and for specific time periods.
Although we believe these licenses are sufficient for the operation of our business, these licenses typically limit our use of such third-party software to specific uses and for specific time periods.
As of December 31, 2023, our lot deposits relating to lot and land option contracts, including option contracts with unconsolidated entities, totaled $57.1 million, which controlled 11,501 option lots.
As of December 31, 2023, our lot deposits relating to lot and land option contracts totaled $57.1 million, which controlled 11,501 option lots with a remaining aggregate purchase price, inclusive of estimated contractual price escalators, of $652.1 million .
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 and high inventory turnover rate of 3.4x for the year ended December 31, 2023, excluding our Houston segment in connection with the Devon Street Homes Acquisition.
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.
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 six geographical segments; our reportable segments include Atlanta (which includes certain Atlanta suburbs like Dalton, GA), Raleigh, Charlotte, Nashville, Alabama (which consists of both Birmingham and Huntsville), and Houston.
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 Products and Customers Our homes and homebuyers We design, sell, and build a range of single-family homes in each of our markets, with a core focus on the entry-level and empty-nest homebuyer segments.
We plan to continue to be prudent with our use of leverage, which we believe is key to the long-term growth and financial stability of our business. 14 Table of contents Our Products and Customers Our homes and homebuyers We design, sell, and build a range of single-family homes in each of our markets, with a core focus on the entry-level and empty-nest homebuyer segments.
This collaboration allows us to provide a superior experience for our homebuyers, because they are part of our team as well. Our culture has been recognized by several industry publications, including Great Place to Work Certifications in 2022 and 2023 and recognition on the Fortune Best Workplaces in Construction list in 2022.
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.
We strive to protect the proprietary information we believe is important to our business. We have registered or applied to register certain of our trademarks in the United States. We pursue the registration of domain names for websites that we use and consider material to our business.
We have registered or applied to register certain of our trademarks in the United States. We pursue the registration of domain names for websites that we use and consider material to our business. While much of the intellectual property we use is owned by us, we also use various third-party licensed software in connection with our business.
Our Rteam model enhances collaboration, visibility, and mutual accountability between us and the stakeholders with whom we do business, including our developers, municipalities, trade partners, and homebuyers. To the extent possible, we structure each Rteam of trade partners within close geographic proximity, creating a more cohesive and efficient working relationship.
To the extent possible, we structure each Rteam of trade partners within close geographic proximity, creating a more cohesive and efficient working relationship.
The combination of our production efficiency and real-time construction management capabilities allows us to generate strong home closing gross margins, which were 28% and 29%, for years ended December 31, 2023 and 2022, respectively. We pride ourselves on offering our homebuyers a personalized, affordable luxury buying experience at attractive prices.
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.
Going forward, we will continue to provide a select variety of home layout options and amenities for our homebuyers in a streamlined and cost-effective manner.
The streamlined floor plans and strong scheduling adherence allow us to offer high-quality homes at affordable prices with short turnaround times. Going forward, we will continue to provide a select variety of home layout options and amenities for our homebuyers in a streamlined and cost-effective manner.
Each of our markets is experiencing strong momentum in housing demand drivers relative to historic averages, and we believe there is significant opportunity to expand our presence in each of our respective markets.
Our Central segment consists of our Alabama, Houston, and Nashville divisions. Each of our markets is experiencing strong momentum in housing demand drivers relative to historic averages, and we believe there is significant opportunity to expand our presence in each of our respective markets. See Note 18 (Segment Information) to our audited consolidated financial statements included with this Annual Report.
Typically, our trade partners are paid every week to ensure regularity and commitment to our shared objectives and all of our trade partners and suppliers are paid via direct deposit, further automating and streamlining the process. 16 Table of contents SMART Builder is the pillar of our Rteam operational model, which views each portion of the home building, selling, and servicing process as integral to every other portion.
Typically, our trade partners are paid every week to ensure regularity and commitment to our shared objectives and all of our trade partners and suppliers are paid via direct deposit, further automating and streamlining the process.
The information on any of our websites is deemed not to be incorporated in this Annual Report on Form 10-K or to be part of this Annual Report on Form 10-K. 22 Table of contents
The information on any of our websites is deemed not to be incorporated in this Annual Report on Form 10-K or to be part of this Annual Report on Form 10-K. 23 Table of contents Information About Our Executive Officers And Directors The following table provides information regarding our executive officers and members of our board of directors (the “Board”) as of the date of this Annual Report on Form 10-K: Name Age Position Thomas L.
As of December 31, 2023, we controlled 11,501 lots through option contracts, representing 96% of our total unstarted controlled lots. Our inventory turnover was 3.4x for the year ended December 31, 2023, excluding our Houston segment acquired in connection with the Devon Street Homes Acquisition, and 3.8x for the year ended December 31, 2022.
As of December 31, 2024, we controlled 17,746 lots through option contracts, representing 96% of our total unstarted controlled lots. Our inventory turnover was 2.9x for the year ended December 31, 2024 and 3.1x for the year ended December 31, 2023.
We have invested significant resources in perfecting approximately 30 value-engineered floor plans that our homebuyers have used in over 89% of total homes closed across all our markets for the year ended December 31, 2023. The streamlined floor plans and strong scheduling adherence allow us to offer high-quality homes at affordable prices with short turnaround times.
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.
SMART Builder also integrates daily expense information on a unit level basis, helping us accurately monitor project costs in real-time and ensure our projects stay within budget.
SMART Builder also integrates daily expense information on a unit level basis, helping us accurately monitor project costs in real-time and ensure our projects stay within budget. Our ability to streamline production and reduce operating costs has resulted in strong home closing gross margins, which were 26% and 28% for the years ended December 31, 2024 and 2023, respectively.
In addition, we have significant experience working across multiple mortgage types including, but not limited to, FHA, U.S.
In addition, we have significant experience working across multiple mortgage types including, but not limited to, FHA, U.S. Department of Agriculture (“USDA”), and conventional mortgages, which allows us to offer financing support tailored to the needs of our homebuyers.
Our home offerings address the strong market demand for an affordable luxury experience that provides homebuyer personalization, through an a-la-carte approach to various home design options, without sacrificing affordability. Our unique affordable luxury business model is designed to balance an optimized and value-driven homebuyer experience with operational efficiency.
Focus on delivering a personalized build-to-order experience at attractive price points We believe a key differentiator of our business is how we redefine affordable luxury for the homebuilding sector. Our home offerings address the strong market demand for an affordable luxury experience that provides homebuyer personalization, through an a-la-carte approach to various home design options, without sacrificing affordability.
To uphold our values, we are intensely focused on maintaining our culture, recruiting, retaining, and incentivizing our employees, and employee development and engagement. 19 Table of contents Our Culture We take pride in our collaborative, win-win culture. From our sales team to our construction managers, trade partners, and support staff, our team works together to deliver each home.
Our Culture We take pride in our collaborative, win-win culture. From our sales team to our construction managers, trade partners, and support staff, our team works together to deliver each home. This collaboration allows us to provide a superior experience for our homebuyers, because they are part of our team as well.
As of December 31, 2023, we have signed agreements covering 4,089 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.
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.
Removed
During the year ended December 31, 2023, we closed 2,297 homes across all our markets while surpassing 12,000 cumulative home closings. 9 Table of contents As part of the next phase of our growth, we intend to expand operations within the Southern United States.
Added
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.
Removed
On July 31, 2023, we acquired substantially all of the assets of Devon Street Homes, a high-quality regional homebuilder based in Houston, Texas that closed 324 homes in 2022.
Added
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 .
Removed
We believe the acquisition of Devon Street Homes will create a launching point for our company within the Texas market and will allow us to pursue expansion opportunities across the Southern United States. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Devon Street Homes Acquisition .
Added
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.
Removed
Our ability to streamline production and reduce operating costs has resulted in high home closing gross margins, which were 28% and 29% for the years ended December 31, 2023 and 2022, respectively, among the highest in the public homebuilding sector.
Added
SMART Builder is the pillar of our Rteam operational model, which views each portion of the home building, selling, and servicing process as integral to every other portion. Our Rteam model enhances collaboration, visibility, and mutual accountability between us and the stakeholders with whom we do business, including our developers, municipalities, trade partners, and homebuyers.
Removed
Department of Agriculture (“USDA”), and conventional mortgages, which allows us to offer financing support tailored to the needs of our homebuyers. 12 Table of contents Focus on delivering a personalized build-to-order experience at attractive price points We believe a key differentiator of our business is how we redefine affordable luxury for the homebuilding sector.
Added
As of both December 31, 2024 and 2023, homebuyer deposits averaged approximately 2% of the average sales price of our backlog homes.
Removed
We plan to continue to be prudent with our use of leverage, which we believe is key to the long-term growth and financial stability of our business.
Added
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.
Removed
As of December 31, 2023, the total purchase price applicable to land under options was $652.1 million, inclusive of estimated contractual price escalators, which controlled 11,501 lots. As of December 31, 2022, the total purchase price applicable to land under options was $423.3 million, inclusive of estimated contractual price escalators, which controlled 7,848 lots.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

126 edited+31 added−20 removed409 unchanged
Biggest changeIf 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.
Biggest changeBecause 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.
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.
This legislation could relate to, for example, matters such as greenhouse gas emissions control and building and other codes that impose energy efficiency standards or require use of energy-saving construction materials. New building or other code requirements that impose stricter energy efficiency standards or requirements for building materials could significantly increase our cost to construct homes.
This legislation could relate to, for example, matters such as greenhouse gas emissions control and building and other codes that impose energy efficiency standards or require use of energy-saving construction materials. New building or other code requirements that impose stricter standards or requirements for building materials could significantly increase our cost to construct homes.
Similarly, climate change-related initiatives or requirements impacting the energy industry affect a wide variety of companies throughout the United States, and because our operations are heavily dependent on significant amounts of raw materials with energy-intensive manufacturing and supply processes, such as lumber, steel and concrete, these initiatives or requirements could increase the costs of such materials and have an adverse impact on our operations and profitability.
Similarly, climate change-related initiatives or requirements impacting the energy industry affect a wide variety of companies throughout the United States, and because our operations are heavily dependent on significant amounts of raw materials with energy-intensive manufacturing and supply processes, such as lumber, steel and concrete, these initiatives or requirements could increase the costs of these materials and have an adverse impact on our operations and profitability.
If the outcome of any such challenge would reasonably be expected to materially and adversely affect the rights and obligations of Continuing Equity Owners under the Tax Receivable Agreement, then we will not be permitted to settle such challenge without the consent (not to be unreasonably withheld or delayed) of Continuing Equity Owners.
If the outcome of any such challenge would reasonably be expected to materially and adversely affect the rights and obligations of the Continuing Equity Owners under the Tax Receivable Agreement, then we will not be permitted to settle such challenge without the consent (not to be unreasonably withheld or delayed) of the Continuing Equity Owners.
The interests of Continuing Equity Owners in any such challenge may differ from or conflict with our interests and your interests, and Continuing Equity Owners may exercise their consent rights relating to any such challenge in a manner adverse to our interests and your interests.
The interests of the Continuing Equity Owners in any such challenge may differ from or conflict with our interests and your interests, and the Continuing Equity Owners may exercise their consent rights relating to any such challenge in a manner adverse to our interests and your interests.
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 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.
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; • 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; • 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.
Regional factors affecting the homebuilding industry in our current and future markets could materially and adversely affect us. Our business strategy is focused on the acquisition of suitable land and the design, construction, and sale of primarily single-family homes in residential subdivisions, including planned communities, in Georgia, Alabama, North Carolina, Tennessee, and Texas.
Regional factors affecting the homebuilding industry in our current and future markets could materially and adversely affect us. Our business strategy is focused on the acquisition of suitable land and the design, construction, and sale of primarily single-family homes in residential subdivisions, including planned communities, in Georgia, Alabama, North Carolina, Tennessee, Texas, and South Carolina.
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 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; 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.
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; • 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 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 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 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 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.
Foreign governments, including China, Canada, and the European Union, have responded by imposing or increasing tariffs, duties, or trade restrictions on U.S. goods, and may consider other measures.
Foreign governments, including China, Canada, Mexico, and the European Union, have responded by imposing or increasing tariffs, duties, or trade restrictions on U.S. goods, and may consider other measures.
We rely on SMART Builder, an enterprise resource planning system that we nonexclusively license from an entity affiliated with the Founder Fund for managing our construction process and work-flow scheduling. If SMART Builder fails to adequately perform these functions or experiences an interruption in its operation, our business and results of operations could be adversely affected.
We rely on SMART Builder, an enterprise resource planning system that we exclusively license from an entity affiliated with the Founder Fund for managing our construction process and work-flow scheduling. If SMART Builder fails to adequately perform these functions or experiences an interruption in its operation, our business and results of operations could be adversely affected.
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. 30 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. 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.
Inflation may also accompany higher interest rates, which could adversely impact a potential homebuyer’s ability to obtain financing on favorable terms, thereby further decreasing demand. If we are unable to raise the prices of our homes to offset the increasing costs of our operations, our margins could decrease.
Inflation may continue to accompany higher interest rates, which could adversely impact a potential homebuyer’s ability to obtain financing on favorable terms, thereby further decreasing demand. If we are unable to raise the prices of our homes to offset the increasing costs of our operations, our margins could decrease.
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.
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.
The efficient operation of our business depends on SMART Builder, an enterprise resource planning system that we nonexclusively license from an entity affiliated with the Founder Fund. We rely on SMART Builder to effectively manage sales, purchasing, scheduling, production, accounting, servicing, and other functions.
The efficient operation of our business depends on SMART Builder, an enterprise resource planning system that we exclusively license from an entity affiliated with the Founder Fund. We rely on SMART Builder to effectively manage sales, purchasing, scheduling, production, accounting, servicing, and other functions.
We believe that, due to anticipated generational shifts, changing demographics, and other factors, the demand for more affordable homes will increase. 33 Table of contents We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through targeted acquisitions, and the anticipated benefits may never be realized.
We believe that, due to anticipated generational shifts, changing demographics, and other factors, the demand for more affordable homes will increase. We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through targeted acquisitions, and the anticipated benefits may never be realized.
We could be required to liquidate one or more of our assets at times which may not permit us to receive an attractive return on our assets in order to meet our debt service obligations. 25 Table of contents The homebuilding industry is highly competitive and, if our competitors are more successful or offer better value to our homebuyers, our business could decline.
We could be required to liquidate one or more of our assets at times which may not permit us to receive an attractive return on our assets in order to meet our debt service obligations. The homebuilding industry is highly competitive and, if our competitors are more successful or offer better value to our homebuyers, our business could decline.
Additionally, we could incur substantial costs, penalties, and damages, including back pay, unpaid benefits, taxes, expense reimbursement and attorneys’ fees, in defending future challenges to our employment classification or compensation practices. 31 Table of contents Poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.
Additionally, we could incur substantial costs, penalties, and damages, including back pay, unpaid benefits, taxes, expense reimbursement and attorneys’ fees, in defending future challenges to our employment classification or compensation practices. Poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.
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 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 33 Table of contents at accessible rates, can be substantially impacted by adverse changes in general economic conditions outside our control.
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.
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.
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.
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.
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.
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.
The directors, whom the Continuing Equity Owners will have the ability to elect through their voting power, have the authority to incur additional debt, issue or repurchase stock, declare dividends, and make other decisions that could be detrimental to stockholders. 45 Table of contents We expect that certain members of our board will continue to be affiliated with the Continuing Equity Owners.
The directors, whom the Continuing Equity Owners will have the ability to elect through their voting power, have the authority to incur additional debt, issue or repurchase stock, declare dividends, and make other decisions that could be detrimental to stockholders. We expect that certain members of our board will continue to be affiliated with the Continuing Equity Owners.
We expect this seasonal pattern to continue over the long term, and we cannot make any assurances as to the degree to which our historical seasonal patterns will occur in the future. 26 Table of contents Changes to population growth rates in certain of the markets in which we operate or plan to operate could affect the demand for homes in these regions.
We expect this seasonal pattern to continue over the long term, and we cannot make any assurances as to the degree to which our historical seasonal patterns will occur in the future. Changes to population growth rates in certain of the markets in which we operate or plan to operate could affect the demand for homes in these regions.
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.
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.
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.
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.
Furthermore, because we lack a controlling interest in our unconsolidated entities we cannot exercise sole decision-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- 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.
Certain litigation or the resolution thereof may affect the availability or cost of some of our insurance coverage, which could materially and adversely impact us, expose us to increased risks that would be uninsured, and materially and adversely impact our ability to attract directors and officers. 52 Table of contents We may suffer uninsured losses or material losses in excess of insurance limits.
Certain litigation or the resolution thereof may affect the availability or cost of some of our insurance coverage, which could materially and adversely impact us, expose us to increased risks that would be uninsured, and materially and adversely impact our ability to attract directors and officers. We may suffer uninsured losses or material losses in excess of insurance limits.
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. If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest.
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. 45 Table of contents If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest.
Slower rates of population growth or population declines in our markets in Atlanta, Birmingham, Charlotte, 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, 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.
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.
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.
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.
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.
These appraisal issues could have a material adverse effect on our business and results of operations. 27 Table of contents If the market value of our inventory or controlled lot position declines, our profits could decrease, and we may incur losses. Inventory risk can be substantial for homebuilders.
These appraisal issues could have a material adverse effect on our business and results of operations. If the market value of our inventory or controlled lot position declines, our profits could decrease, and we may incur losses. Inventory risk can be substantial for homebuilders.
Building material shortages and price increases for building materials could cause delays in and increase our costs of home construction and our construction cycle time, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. 29 Table of contents Utility shortages or price increases could have an adverse impact on operations.
Building material shortages and price increases for building materials could cause delays in and increase our costs of home construction and our construction cycle time, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations. Utility shortages or price increases could have an adverse impact on operations.
As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and purchasers of our Class A common stock bear the risk of our future offerings reducing the market price of our Class A common stock and diluting their ownership interest in our company. 54 Table of contents Item 1B. Unresolved Staff Comments. None.
As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and purchasers of our Class A common stock bear the risk of our future offerings reducing the market price of our Class A common stock and diluting their ownership interest in our company. Item 1B. Unresolved Staff Comments. None.
Cancellations can result from declines or slow appreciation in the market value of homes, increases in the supply of homes available to be purchased, increased competition, higher mortgage interest rates, and adverse changes in economic conditions. During 2022 and part of 2023, demand weakened in response to additional increases in mortgage rates.
Cancellations can result from declines or slow appreciation in the market value of homes, increases in the supply of homes available to be purchased, increased competition, higher mortgage interest rates, and adverse changes in economic conditions. During 2023 and 2024, demand weakened in response to additional increases in mortgage rates.
This decision to opt out of the extended transition period is irrevocable. 49 Table of contents 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.
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.
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 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 37 Table of contents unable to pass through to our homebuyers an increase in price corresponding to such increased costs.
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.
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.
In addition, price volatility may be greater if the public float and trading volume of our Class A common stock is low. 46 Table of contents In the past, following periods of market volatility, stockholders have instituted securities class action litigation.
In addition, price volatility may be greater if the public float and trading volume of our Class A common stock is low. In the past, following periods of market volatility, stockholders have instituted securities class action litigation.
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 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 30 Table of contents options, financing, raw materials, skilled management, and other labor resources, among other things.
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 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 34 Table of contents remaining unpurchased lots and forfeiture of the remaining deposit for the unpurchased lots.
Certain organizations also provide assessments of companies’ ESG practices. Although there are no universally accepted standards for such assessments, they are used by some investors to inform their investment and voting decisions.
Certain organizations also provide assessments of companies’ ESG practices. Although there are no universally accepted standards for such assessments, they are used by some investors to inform their investment and 44 Table of contents voting decisions.
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.
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.
We also had related person receivables of $0.1 million with an entity affiliated with the Founder Fund as of December 31, 2023, 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.
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.
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.
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.
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 . 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.
Bradbury has also supported our growth by hosting numerous events at personal properties that are intended to foster business development and vendor relations. For fiscal year 2023, 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 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.
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.
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.
Accordingly, the Continuing Equity Holders’ interests may conflict with those of the holders of our Class A common stock. 41 Table of contents 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 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.
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 15, 2024, the Founder Fund has 88.2% 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 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.
Mortgage interest rates increased substantially during 2022 and 2023 in response to the Federal Reserve’s actions and future signaling to combat inflationary pressures, which negatively impacted consumer affordability.
Mortgage interest rates increased substantially between 2022 and 2024 in response to the Federal Reserve’s actions and future signaling to combat inflationary pressures, which negatively impacted consumer affordability.
We may incur significant costs in the integration of Devon Street Homes or any future acquisition and may not achieve cost synergies and other benefits sufficient to offset the costs of the Devon Street Homes Acquisition or any future acquired business.
We may incur significant costs in the integration of any future acquisition and may not achieve cost synergies and other benefits sufficient to offset the costs of any future acquired business.
Any such interruptions to SMART Builder could disrupt our business and could result in decreased revenues and increased overhead costs, causing our business and results of operations to suffer. For further discussion on the risks related to our software and information systems, see Part I, Item 1A. Risk Factors—Risks Related to Other Legal, Regulatory, and Tax Matters .
Any such interruptions to SMART Builder could disrupt our business and could result in decreased revenues and increased overhead costs, causing our business and results of operations to suffer. For further discussion on the risks related to our software and information systems, see Part I, Item 1A.
Our information systems, and the information systems of any third-party vendors or suppliers we may use, are subject to 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 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.
These acquisitions would place additional demands on our managerial, operational, financial, and other resources and create operational complexity requiring additional personnel and other resources. 34 Table of contents Furthermore, the integration of Devon Street Homes or any future acquisition may divert management’s time and resources from our core business and disrupt our operations.
These acquisitions would place additional demands on our managerial, operational, financial, and other resources and create operational complexity requiring additional personnel and other resources. Furthermore, the integration of any future acquisition may divert management’s time and resources from our core business and disrupt our operations.
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.
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.
Price-conscious entry-level and empty-nest homebuyers are the primary sources of demand for our new homes. Entry-level homebuyers are generally more affected by the availability of mortgage financing than other potential homebuyers and many of our potential empty-nest homebuyers must sell their existing homes to buy a home from us.
Entry-level homebuyers are generally more affected by the availability of mortgage financing than other potential homebuyers and many of our potential empty-nest homebuyers must sell their existing homes to buy a home from us.
In short, a perceived or actual cybersecurity incident, attack, or other disruption could adversely affect our ability to conduct our business, cause significant legal and financial exposure, damage to our reputation, or a loss of confidence in our security measures.
In short, a perceived or actual cybersecurity incident, attack, or other disruption could adversely affect our ability to conduct our business, cause significant legal and financial exposure, damage to our reputation that causes us to lose existing or future customers, or a loss of confidence in our security measures.
Our governing corporate documents do not contain a limitation on the amount of debt we may incur, and our board of directors may change our target debt levels at any time without the approval of our stockholders. 44 Table of contents 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.
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.
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 individually or in the aggregate, materially and adversely affect our business and our operating results.
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.
Any delay could result in cost increases and could have a material adverse effect on our sales, profitability, stock performance, cash flows, and ability to service our debt obligations. Inflation could adversely affect our business and financial results. Currently, the United States is experiencing inflationary conditions.
Any delay could result in cost increases and could have a material adverse effect on our sales, profitability, stock performance, cash flows, and ability to service our debt obligations. Inflation could adversely affect our business and financial results.
These building material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures, or as a result of broader economic disruptions, such as the COVID-19 pandemic.
These building material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures, or as a result of broader macroeconomic, trade, or geopolitical disruptions.
The outstanding shares are freely tradable without restriction or further registration under the Securities Act, other than any shares held by our affiliates.
The outstanding shares of our Class A common stock are generally freely tradable without restriction or further registration under the Securities Act, other than any shares held by our affiliates.
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.
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.
Given the variety and potential severity of cybersecurity threats, we may not have adequate insurance coverage to compensate against all losses, and we cannot ensure that applicable insurance will continue to be available to us on commercially reasonable terms, or at all, or that our insurer will not deny coverage as to any particular claim. 39 Table of contents Our business is subject to complex and evolving laws and regulations regarding data privacy and cybersecurity.
Given the variety and potential severity of cybersecurity threats, we may not have adequate insurance coverage to compensate against all losses, and we cannot ensure that applicable insurance will continue to be available to us on commercially reasonable terms, or at all, or that our insurer will not deny coverage as to any particular claim.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock. 51 Table of contents Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our Class A common stock to decline.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
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.
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.
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. 43 Table of contents We and Smith Douglas Holdings LLC intend to conduct our operations so that we will not be deemed an investment company.
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.
These physical impacts may have the potential to significantly affect our business and operations and there is no guarantee that any losses incurred would be covered by applicable insurance policies.
These physical impacts may have the potential to significantly affect our business and operations and there is no guarantee that any losses incurred would be covered by applicable insurance policies. Moreover, the cost or availability of applicable insurance may also change as a result of these physical impacts.
Disputes between us and our joint venture partners may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business.
Disputes between us and our joint venture partners may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. In addition, we may be liable for the actions of our joint venture partners in certain circumstances.
New legislation has been enacted, or may be enacted in the future, or considered for enactment at the federal, state, and local levels relating to climate change, greenhouse gas emissions, and energy production and use, including in response to the United States’ reentry into the Paris Agreement and the Biden Administration’s focus on climate change.
New legislation has been enacted, or may be enacted in the future, or considered for enactment at the federal, state, and local levels relating to climate change, greenhouse gas emissions, and energy production and use.
The Continuing Equity Owners control, in the aggregate, approximately 98.0% of the voting power represented by all our outstanding shares of capital stock.
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.
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. 50 Table of contents 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 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.
Investment returns on our assets and our ability to make acquisitions could be adversely affected by our inability to secure additional financing on reasonable terms, if at all. 53 Table of contents Depending on market conditions at the relevant time, we may have to rely more heavily on additional equity financings or on less efficient forms of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities and other purposes.
Depending on market conditions at the relevant time, we may have to rely more heavily on additional equity financings or on less efficient forms of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities and other purposes.
Unfavorable press about, or assessments of, our ESG practices, including the environmental impact of our operations, regardless of whether we comply with applicable legal requirements, may lead to negative investor sentiment toward us. 37 Table of contents A failure to comply with ESG expectations and standards, which are evolving, 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 access to and cost of capital.
See Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence—Tax Receivable Agreement. Although we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the trading market for our Class A common stock.
Although we will retain 15% of the amount of such tax benefits, this and other aspects of our organizational structure may adversely impact the trading market for our Class A common stock.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management measures include: • a risk assessment 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; • the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security controls and cybersecurity awareness training; and • cybersecurity awareness training of our employees, incident response personnel, and senior management.
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.
Our management team’s cybersecurity experience includes previous combined experience of almost 50 years managing and otherwise engaged with IT and internal audit functions at public companies overseeing the development and strengthening of cybersecurity programs inclusive of training, risk assessments, and formal policies and procedures.
As a result, our management team’s cybersecurity experience includes previous combined experience of almost 50 years managing and otherwise engaged with IT and internal audit functions at public companies overseeing the development and strengthening of cybersecurity programs inclusive of training, risk assessments, and formal policies and procedures.
Our cybersecurity risk management measures are integrated into our overall enterprise risk management program 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.
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.
Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has received briefings from management in the past as appropriate (for example, regarding the results of our previous cybersecurity risk assessment).
Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has received briefings from management in the past as appropriate (for example, regarding the results of our previous cybersecurity risk assessment and ongoing enhancement efforts with the involvement of a third-party assessor). Our audit committee oversees management’s implementation of our cybersecurity risk management program.
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We have also previously relied on external experts for our audit committee functions and have recently created an internal audit committee, which will have more focused oversight of cybersecurity and other information technology risks and to which management of such risks will be delegated. The audit committee oversees management’s implementation of our cybersecurity risk management program.
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In addition to our internal resources, our cybersecurity risk management leverages external service providers who we work with to identify and oversee cybersecurity risks. For example, during 2024, we engaged an independent third-party assessor to assist management in identifying cybersecurity risks and developing ongoing procedures to enhance our cybersecurity risk management measures.
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In addition, we use our external providers to assist with endpoint monitoring, alerts, and other security management protocols such as regular backups and encryption.
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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.
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Our Chief Financial Officer, Russell Devendorf, previously oversaw the information technology and risk management functions of a publicly traded homebuilder from 2008 to 2017, overseeing the company’s cybersecurity program and the implementation of an incident response plan and cybersecurity insurance.
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Our management team provides regular updates to our audit committee regarding the results of our cybersecurity risk assessment measures and associated enhancement actions.

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 13,750 square feet of office space under a lease agreement that expires on August 31, 2028. We use this location for our Atlanta Division and corporate employee offices. We also lease local offices in the markets in which we conduct homebuilding operations.
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.
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 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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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.
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant. Recent Sales of Unregistered Securities On June 20, 2023, we issued 100 shares of our common stock, par value $0.0001 per share, to one of our officers for $0.01.
Biggest changeAny such determination will also depend upon our business prospects, results of operations, financial condition, cash requirements and availability and other factors that our board of directors may deem relevant. Recent Sales of Unregistered Securities None. Purchases of equity securities by the issuer and affiliated purchasers None. Item 6. [Reserved].
Dividends We currently intend to retain all available funds and any future earnings to fund the development and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on our Class A common stock in the foreseeable future.
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business, and therefore we do not anticipate declaring or paying any cash dividends on our Class A common stock in the foreseeable future.
There is no public trading market for our Class B common stock. Holders As of March 15, 2024, there was one holder of record of our Class A common stock and two holders of record of our Class B common stock.
There 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.
Removed
The issuance of such shares of common stock was not registered under the Securities Act, because the shares were offered and sold in a transaction by us not involving any public offering exempt from registration under Section 4(a)(2) of the Securities Act. We did not sell any other unregistered equity securities from January 1, 2023 to December 31, 2023.
Removed
Use of Proceeds From Registered Securities 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.
Removed
Offering expenses of approximately $6.0 million were paid by Smith Douglas Holdings LLC. All shares issued and sold were registered pursuant to a registration statement on Form S‑1 (File No. 333-274379), as amended (the “Registration Statement”), declared effective by the SEC on January 10, 2024. J.P.
Removed
Morgan Securities, BofA Securities, Inc., RBC Capital Markets, LLC, and Wells Fargo Securities, LLC acted as representatives of the underwriters for the IPO. The IPO commenced January 10, 2024 and terminated after the sale of all securities registered pursuant to the Registration Statement.
Removed
No offering expenses were paid or are payable, directly or indirectly, to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates.
Removed
We fully used the net proceeds from the IPO to: (i) purchase 6,410,257 newly issued LLC Interests for approximately $125.2 million directly from Smith Douglas Holdings LLC at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount; and (ii) purchase 2,435,897 LLC Interests from the Continuing Equity Owners on a pro rata basis for $47.6 million in aggregate at a price per unit equal to the IPO price per share of Class A common stock less the underwriting discount.
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In turn, Smith Douglas Holdings LLC used the net proceeds from its sale to us of newly issued LLC Interests as follows: (i) to repay approximately $84.0 million of borrowings outstanding under its Prior Credit Facility as part of the Refinancing, (ii) redeem all of its outstanding Class C Units and Class D Units 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.
Removed
Smith Douglas Holdings LLC may also use a portion of the net proceeds to acquire or invest in businesses, products, services, or technologies; however, there are no agreements or commitments for any material acquisitions or investments at this time.
Removed
There has been no material change in the expected use of the net proceeds from our IPO as described under the heading Use of proceeds in our final prospectus, filed with the SEC on January 10, 2024 pursuant to Rule 424(b)(4) relating to our Registration Statement (the “Final Prospectus”). Purchases of equity securities by the issuer and affiliated purchasers None.

Item 7. Management's Discussion & Analysis

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

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Biggest changeComparison of years ended December 31, 2023 and 2022 The following table sets forth our statements of income and other operating data for the years ended December 31, 2023 and 2022, along with the year over year change in dollars and other amounts and percent (amounts in thousands): Year ended December 31, 2023 2022 Year over year change Amount Amount Amount Percent Consolidated Statements of Income Data: Home closing revenue $ 764,631 $ 755,353 $ 9,278 1.2 % Cost of home closings 548,304 532,599 15,705 2.9 % Home closing gross profit 216,327 222,754 (6,427 ) (2.9 )% Selling, general, and administrative costs 92,442 83,006 9,436 11.4 % Equity in income from unconsolidated entities (934 ) (1,120 ) 186 (16.6 )% Interest expense 1,658 997 661 66.3 % Other income, net (19 ) (573 ) 554 (96.7 )% Net income $ 123,180 $ 140,444 $ (17,264 ) (12.3 )% Other operating data (unaudited): Home closings 2,297 2,200 97 4.4 % ASP of homes closed $ 333 $ 343 $ (10 ) (2.9 )% Net new home orders 2,368 1,928 440 22.8 % Contract value of net new home orders $ 792,224 $​ 667,530 $ 124,694 18.7 % ASP of net new home orders $ 335 $​ 346 $ (11 ) (3.2 )% Cancellation rate (1) 10.5 % 10.9 % (0.4 ) (3.7 )% Backlog homes (period end) (2) 912 771 141 18.3 % Contract value of backlog homes (period end) $ 310,714 $ 258,718 $ 51,996 20.1 % ASP of backlog homes (period end) $ 341 $ 336 $ 5 1.5 % Active communities (period end) (3) 69 53 16 30.2 % Controlled lots: Homes under construction 796 623 173 27.8 % Owned lots 524 342 182 53.2 % Optioned lots 11,501 7,848 3,653 46.5 % Total controlled lots 12,821 8,813 4,008 45.5 % 1.
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.
The cancellation rate is the total number of cancellations during the period divided by the total gross new home orders during the period. 2.
(2) The cancellation rate is the total number of cancellations during the period divided by the total gross new home orders during the period.
Management believes EBITDA and EBITDA margin are useful because they allow management to more effectively evaluate our operating performance and compare our results of operations from period to period without regard to our financing methods or capital structure, or other items that impact comparability of financial results from period to period.
Management believes EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are useful because they allow management to more effectively evaluate our operating performance and compare our results of operations from period to period without regard to our financing methods or capital structure, or other items that impact comparability of financial results from period to period.
Backlog homes (period end) is the number of homes in backlog from the previous period plus the number of net new home orders generated during the current period minus the number of homes closed during the current period. 3. A community becomes active once the model is completed or the community has its first sale.
(3) Backlog homes (period end) is the number of homes in backlog from the previous period plus the number of net new home orders generated during the current period minus the number of homes closed during the current period. (4) A community becomes active once the model is completed or the community has its first sale.
Interest expense Interest expense is comprised of interest incurred, but not capitalized on our Prior Credit Facility and other borrowings and amortization of debt issuance costs.
Interest expense Interest expense is comprised of interest incurred, but not capitalized on our Amended Credit Facility and Prior Credit Facility and other borrowings and amortization of debt issuance costs.
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, and higher professional fees related to the Devon Street Homes acquisition and our IPO.
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.
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 request a one-year extension of its maturity date.
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.
We define adjusted net income as net income adjusted for the tax impact using a 25% 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).
We define adjusted net income as net income adjusted for the tax impact using 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).
If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations. 70 Table of contents Critical Accounting Policies and Estimates In preparing our financial statements in conformity with U.S.
If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations. Critical Accounting Policies and Estimates In preparing our financial statements in conformity with U.S.
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.
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.
As of December 31, 2023, we had 524 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, 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.
The contract value of net new home orders represents the sum of the contractual purchase prices of the homes included in net new home orders for the period presented. 59 Table of contents Cancellation rate We record a cancellation when a homebuyer under contract desires to cancel their purchase prior to delivery of the home.
The contract value of net new home orders represents the sum of the contractual purchase prices of the homes included in net new home orders for the period presented. Cancellation rate We record a cancellation when a homebuyer under contract desires to cancel their purchase prior to delivery of the home.
Concurrently with the consummation of the IPO, we repaid the Prior Credit Facility. 67 Table of contents 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.
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.
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.
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.
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.
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.
As of December 31, 2023, we had 524 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, 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 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% for the years ended December 31, 2023 and 2022.
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.
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.
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.
Real estate inventory Real estate inventory consists primarily of the capitalized costs of finished homes, homes under construction, and residential lots. We include the costs of lot acquisitions, development, direct home construction, capitalized interest, closing costs, and direct and certain indirect overhead costs incurred during home construction in inventories.
Our critical accounting estimates include the following: Real estate inventory Real estate inventory consists primarily of the capitalized costs of finished homes, homes under construction, and residential lots. We include the costs of lot acquisitions, development, direct home construction, capitalized interest, closing costs, and direct and certain indirect overhead costs incurred during home construction in inventories.
Subject to certain conditions set forth in the JOBS Act, if as an emerging growth company we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor’s attestation report on our systems of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with the requirement of the PCAOB regarding the communication of critical audit matters in the auditor’s report on the financial statements, and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
Specifically, subject to the satisfaction of certain conditions set forth in the JOBS Act, we are not required to, and do not intend to, among other things, (i) provide an auditor’s attestation report on our systems of internal control over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with the requirement of the PCAOB regarding the communication of critical audit matters in the auditor’s report on the financial statements, and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
In addition, if Smith Douglas Holdings LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired. See Part I—Item 1A. Risk Factors—Risks Related to our Organizational Structure and Part III, Item 13. Certain Relationships and Related Transactions, and Director Independence.
In addition, if Smith Douglas Holdings LLC does not have sufficient funds to make distributions, our ability to declare and pay cash dividends will also be restricted or impaired. See Part I—Item 1A. Risk Factors—Risks Related to our Organizational Structure.
Key Factors Affecting Our Performance We believe our future performance will depend on many factors, including those described below and in Part I, Item 1A. Risk Factors and Forward-Looking Statements .
Key Factors Affecting Our Performance We believe our future performance will depend on many factors, including those described below and in Part I, Item 1A.
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 . 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.
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.
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.
Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 28.3% in 2023 compared to 29.5% in 2022.
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.
The net cash used in investing activities during 2023 is primarily due to the Devon Street Homes Acquisition. Financing activities Net cash used in financing activities was $9.2 million and $128.2 million for the years ended December 31, 2023 and 2022, respectively.
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.
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) 2023 2022 Notes payable $ 75,627 $ 15,000 Members’ equity 208,903 164,511 Total capitalization $ 284,530 $ 179,511 Debt-to-book capitalization 26.6 % 8.4 % Notes payable $ 75,627 $ 15,000 Less: cash and cash equivalents 19,777 29,601 Net debt 55,850 (14,601 ) Members’ equity 208,903 164,511 Total net capitalization $ 264,753 $ 149,910 Net-debt-to-net book capitalization 21.1 % (9.7 )% 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) 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.
EBITDA and EBITDA margin should not be considered as alternatives to, or more meaningful than, net income, net income margin, or any other measure as determined in accordance with GAAP. Our computation of EBITDA and EBITDA margin may not be comparable to EBITDA and EBITDA margin of other companies.
EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin should not be considered as alternatives to, or more meaningful than, net income, net income margin, or any other measure as determined in accordance with GAAP.
Macroeconomic factors Commencing in the first half of 2022, we began to see certain macroeconomic trends that affected our markets and industry such as higher inflation, rising 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, declining government stimulus following the COVID-19 pandemic, and uncertainty regarding an economic recession.
Cash flows from operating, investing, and financing activities – comparison for the years ended December 31, 2023 and 2022 The following table summarizes our cash flows for the years ended December 31, 2023 and 2022 (in thousands): Year ended December 31, 2023 2022 Net cash provided by operating activities $ 76,257 $ 132,095 Net cash (used in)/provided by investing activities (76,832 ) 361 Net cash used in financing activities (9,249 ) (128,195 ) Net (decrease) increase in cash and cash equivalents (9,824 ) 4,261 Cash and cash equivalents, beginning of year 29,601 25,340 Cash and cash equivalents, end of year $ 19,777 $ 29,601 Operating activities We generated $76.3 million and $132.1 million in net cash provided by operating activities for the years ended December 31, 2023 and 2022, respectively.
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.
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.
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.
Our material cash commitments as of December 31, 2023 were our $1.8 million operating lease obligation, which primarily consists of our $1.4 million office lease obligation for our headquarters in Woodstock, Georgia where we lease approximately 13,750 square feet of office space under a lease agreement that expires on August 31, 2028 and, prior to its repayment concurrently with the consummation of the IPO, the interest on our Prior Credit Facility on the amounts outstanding from time to time.
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.
Alabama: The $1.9 million increase in net income compared to the prior year was primarily due to an increase in home closing revenue and gross profit due to a 17.2% increase in homes closed and 2.5% increase in ASP of homes closed, offset by an increase in selling, general, and administrative costs.
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.
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.
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.
Selling, general, and administrative costs Selling, general, and administrative costs for the year ended December 31, 2023 were $92.4 million, an increase of $9.4 million, or 11.4%, from $83.0 million for the year ended December 31, 2022.
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.
For the year ended December 31, 2023, equity in income from unconsolidated entities decreased by $0.2 million from the year ended December 31, 2022, due to slightly lower title insurance revenue generated by the title company.
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.
A community becomes inactive when it has fewer than two homes remaining to sell. 60 Table of contents Home closing revenue Home closing revenue for the year ended December 31, 2023, was $764.6 million, an increase of $9.3 million, or 1.2%, from $755.4 million for the year ended December 31, 2022.
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.
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. See Critical Accounting Policies and Estimates for a description of how we record home closing revenue.
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.
We present this non-GAAP financial measure because we consider it to be an important supplemental measure of our leverage and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. 65 Table of contents We define Net-debt-to-net book capitalization as: • Total debt, less cash and cash equivalents, divided by • Total debt, less cash and cash equivalents, plus stockholders’ equity.
We present this non-GAAP financial measure because we consider it to be an important supplemental measure of our leverage and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry.
We present EBITDA and EBITDA margin because we believe they provide useful information regarding the factors and trends affecting our business.
Our computation of EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin may not be comparable to EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin of other companies. We present EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin because we believe they provide useful information regarding the factors and trends affecting our business.
While we expect the current housing undersupply in the resale market and favorable demographic trends to provide a strong, long-term runway for future new home buying demand, there are several factors beyond our control that could have a significant impact on our business including, but not limited to, rising inflation, future increases in interest rates, availability and cost of land, labor and construction, availability of mortgage and land bank financing, macroeconomic trends and other factors described elsewhere in this Form 10-K. 57 Table of contents Recent Developments IPO We completed our IPO on January 16, 2024, through which we offered 8,846,154 shares of our Class A common stock at a price to the public of $21.00 per share, which includes the exercise in full by the underwriters of their option to purchase an additional 1,153,846 shares of our Class A common stock.
While we expect the current housing undersupply in the resale market and favorable demographic trends to provide a strong, long-term runway for future new home buying demand, there are several factors beyond our control that could have a significant impact on our business including, but not limited to, rising inflation, future increases in interest rates, availability and cost of land, labor and construction, availability of mortgage and land bank financing, macroeconomic trends and other factors described elsewhere in this Form 10-K.
Further, Smith Douglas Holdings LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Smith Douglas Holdings LLC (with certain exceptions), as applicable, exceed the fair value of its assets. 68 Table of contents 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.
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.
See Critical Accounting Policies and Estimates for a description of how we record real estate inventory. Home closing gross profit Home closing gross profit is home closing revenue less cost of home closings for the reported period. Home closing gross margin is home closing gross profit expressed as a percentage of home closing revenue.
Estimates of costs incurred or to be incurred but not paid are accrued and expensed at the time of closing. See Critical Accounting Policies and Estimates for a description of how we record real estate inventory. Home closing gross profit Home closing gross profit is home closing revenue less cost of home closings for the reported period.
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) 2023 ​ ​ 2022 Home closing revenue $ 764,631 $ 755,353 Cost of home closings 548,304 532,599 Home closing gross profit (1) $ 216,327 $ 222,754 Capitalized interest charged to cost of home closings 2,514 2,757 Purchase accounting adjustments included in cost of home closings 1,467 — Adj. home closing gross profit $ 220,308 $ 225,511 Home closing gross margin (2) 28.3 % 29.5 % Adj. home closing gross margin (2) 28.8 % 29.9 % (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. 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.
Surety bonds do not have stated expiration dates, rather, we are released from the bonds as the contractual performance is completed. These bonds, which totaled $26.1 million and $21.4 million as of December 31, 2023 and 2022, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development.
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.
We present adjusted net income because we believe it provides useful information regarding our comparability to peers. 64 Table of contents 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) 2023 ​ 2022 Net income $ 123,180 $ 140,444 Tax-effected adjustments (1) 30,795 35,111 Adjusted net income $ 92,385 $ 105,333 (1) For the year ended December 31, 2023 and 2022, our tax expenses assumes a 25% 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).
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.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act.
Net income for the year ended December 31, 2023 decreased by $17.3 million, or 12.3%.
Net income for the year ended December 31, 2024 decreased by $11.4 million, or 9.2%.
In addition, we may use cash and cash equivalents to enter into strategic transactions, such as potential joint ventures or other unconsolidated entities, or acquisitions.
Material Cash Commitments We expect our future cash requirements will relate to working capital, capital expenditures, benefits expenses, interest expense and debt service obligations. In addition, we may use cash and cash equivalents to enter into strategic transactions, such as potential joint ventures or other unconsolidated entities, or acquisitions.
Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes. 63 Table of contents Adjusted home closing gross profit and adjusted home closing gross margin Adjusted home closing gross profit and adjusted home closing gross margin are non-GAAP financial measures used by management as supplemental measures in evaluating operating performance.
Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
However, increases in the cost of building materials may negatively impact our cost of sales and, in turn, our home closing gross margin and net income to the extent market conditions prevent the recovery of increased costs through higher home order prices. 58 Table of contents Changes in liquidity and land bank financing To effectively manage the acquisition and control of finished lots, we typically enter into lot-option agreements with third-party land bankers or land developers.
However, increases in the cost of building materials may negatively impact our cost of sales and, in turn, our home closing gross margin and net income to the extent market conditions prevent the recovery of increased costs through higher home order prices.
Home closing gross profit Home closing gross profit for the year ended December 31, 2023 was $216.3 million, a decrease of $6.4 million, or 2.9%, from $222.8 million for the year ended December 31, 2022.
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.
(2) Calculated as a percentage of home closing revenue.
We define EBITDA margin as EBITDA as a percentage of home closing revenue.
The following table presents a reconciliation of EBITDA and 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) 2023 ​ ​ 2022 Net income $ 123,180 $ 140,444 Capitalized interest charged to cost of home closings 2,514 2,757 Interest expense 1,658 997 Interest income (174 ) (92 ) Provision for income taxes — — Depreciation 1,081 864 EBITDA $ 128,259 $ 144,970 Net income margin (1) 16.1 % 18.6 % EBITDA margin (1) 16.8 % 19.2 % (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) 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 decrease was primarily due to a decrease in home closing gross profit, primarily driven by a 2.9% decrease in ASP of homes closed due to higher average homebuyer incentives, and a $9.4 million increase in selling, general and administrative costs due to higher commissions and advertising costs.
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.
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.
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.
EBITDA and EBITDA margin EBITDA and EBITDA margin are not measures of net income or net income margin as determined by GAAP. EBITDA 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.
EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation.
Our interest expense increased $0.7 million to $1.7 million for the year ended December 31, 2023 from $1.0 million for the year ended December 31, 2022, which is primarily driven by an increase in the variable interest rate of our Prior Credit Facility, which bore interest at the Prime Rate plus an applicable margin and interest on the note payable related to the Devon Street Homes Acquisition.
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.
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 hereto. For additional information regarding our Prior Credit Facility, see Note 4— Notes Payable to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
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.
Operating cash flows for 2022 benefited from cash generated by net income of $140.4 million primarily offset by a $8.6 million increase in deposits on real estate under option or contract. 69 Table of contents Investing activities We used approximately $76.8 million and generated approximately $0.4 million in net cash from investing activities for the years ended December 31, 2023 and 2022, respectively.
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.
Any worsening of macroeconomic conditions in future periods could have a negative effect on our financial results. 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.
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.
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. Estimates of costs incurred or to be incurred but not paid are accrued and expensed at the time of closing.
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.
Our operations are currently organized into six geographical segments; our reportable segments include Atlanta (which includes certain Atlanta suburbs like Dalton, GA), Raleigh, Charlotte, Nashville, Alabama (which consists of both Birmingham and Huntsville), and Houston.
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 six geographical segments. Our reportable segments include Atlanta (which includes certain Atlanta suburbs like Dalton, GA), Raleigh, Charlotte, Nashville, Alabama (which consists of both Birmingham and Huntsville), and Houston.
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.
We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation. We define EBITDA margin as EBITDA as a percentage of home closing revenue.
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 .
Our adjusted home closing gross profit and adjusted home closing gross margin decreased from 2022 to 2023 primarily as a result of an increase in cost of home closings partially offset by a slight increase in home closing revenue, resulting in a reduction in home closing gross margin as a percentage of home closing revenue.
(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%.
As of December 31, 2023, we had $54.4 million of non-refundable cash deposits under land and lot-option contracts, including option contracts with unconsolidated entities, pertaining to 11,501 lots with a remaining aggregate purchase price of approximately $652.1 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.
The increase in revenue was primarily attributable to a 4.4% improvement in homes closed, primarily driven by our entry into the Houston market through our acquisition of Devon Street Homes, offset by a 2.9% decrease in ASP of homes closed across all reportable segments.
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.
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. These arrangements relate to certain performance or maintenance-related obligations. As of December 31, 2023, there were no outstanding letters of credit.
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.
Nashville: The $8.0 million decrease in net income compared to the prior year was primarily due to a decrease in home closing gross profit margin driven by additional discounting and mix of homes closed, as well as an increase in sales and marketing costs and sales commissions as a percent of home closing revenue.
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.
Company Overview Prior to our IPO, we were one of the nation’s fastest growing private homebuilders by number of closings and are 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. 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.
The following table sets forth our home closing revenue, number of home closings, and ASP of homes closed for the years ended December 31, 2023 and 2022, in each of our reportable segments (dollar amounts in thousands): Year ended December 31, 2023 2022 Home closing revenue Home closings ASP of homes closed Home closing revenue Home closings ASP of homes closed Alabama $ 116,124 396 $ 293 $ 96,660 338 $ 286 Atlanta 331,178 1,016 326 332,102 1,016 327 Charlotte 58,991 162 364 89,310 223 400 Houston 30,661 94 326 — — — Nashville 108,071 297 364 120,243 307 392 Raleigh 119,606 332 360 117,038 316 370 Total $ 764,631 2,297 $ 333 $ 755,353 2,200 $ 343 Cost of home closings Cost of home closings for the year ended December 31, 2023, was $548.3 million, an increase of $15.7 million, or 2.9%, from $532.6 million for the year ended December 31, 2022, which is primarily driven by a 4.4% increase in homes closed, inclusive of the Devon Street Homes Acquisition.
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.
For the year ended December 31, 2023, other income decreased by $0.6 million from the year ended December 31, 2022, which was primarily higher due to income from the sale of a small parcel of land, offset by an increase in interest income associated with higher average rates on our cash and cash equivalent balances. 62 Table of contents Net income The following table sets forth net income by reportable segment for the years ended December 31, 2023 and 2022 (in thousands): Year ended December 31, 2023 2022 Year over year change Alabama $ 12,596 $ 10,694 $ 1,902 Atlanta 82,890 81,403 1,487 Charlotte 9,296 19,209 (9,913 ) Houston 2,370 — 2,370 Nashville 16,901 24,914 (8,013 ) Raleigh 25,372 28,819 (3,447 ) Segment total 149,425 165,039 (15,614 ) Corporate (1) (26,245 ) (24,595 ) (1,650 ) Total $ 123,180 $ 140,444 $ (17,264 ) (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, 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.
The Transactions The historical results of operations discussed in this Annual Report on Form 10-K are those of Smith Douglas Holdings LLC prior to the completion of the Transactions, including the IPO.
The following discussion and analysis reflects the historical results of operations and financial position of Smith Douglas Holdings LLC prior to the IPO and Reorganization Transactions on January 10, 2024 and that of Smith Douglas Homes Corp. and its consolidated subsidiary, Smith Douglas Holdings LLC, following the completion of the IPO and Reorganization Transactions.
Smith Douglas Holdings LLC and Smith Douglas Homes Corp. were not parties to the Prior Credit Facility. The Prior Credit Facility included a $25.0 million accordion feature, subject to additional commitments, and provided that up to $10.0 million could have been used for letters of credit.
Smith Douglas Holdings LLC and Smith Douglas Homes Corp. were not parties to the Prior Credit Facility. Concurrently with the consummation of the IPO, we repaid the Prior Credit Facility.
Removed
A discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously in our Final Prospectus, under the heading Management’s discussion and analysis of financial condition and results of operations .
Added
We rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.
Removed
While inflation and higher interest rates impacted affordability and housing demand during 2022, new home demand picked up in 2023, primarily driven by historically low levels of housing inventory and homebuyers adjusting to a more normalized higher interest rate environment. As a result, our net new orders increased by 23% in the year ended December 31, 2023 compared to 2022.
Added
Changes in liquidity and land bank financing To effectively manage the acquisition and control of finished lots, we typically enter into lot-option agreements with third-party land bankers or land developers.
Removed
We expect the housing undersupply in the resale market and favorable demographic trends to provide a strong, long-term runway for future new home buying demand.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed5 unchanged
Biggest changeAs of March 15, 2024, there were no outstanding borrowings under our Amended Credit Facility. 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.
Biggest changeAs 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.
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. 72 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. 85 Table of contents

Other SDHC 10-K year-over-year comparisons