Smith Douglas Homes Corp. Class A

Good day, everyone. My name is Ellie, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Smith-Douglas Homes First Quarter 2034 Earnings Call and Webcast Conference. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the star key. Thank you. I'd now like to hand over the call to Eddie Clyde. Eddie, you may now begin your conference.

Good morning and welcome to Smith Douglas' earnings conference call. We issued a press release this morning outlining results for the first quarter of 2024, which we will discuss on today's call. and can be found on our website at investors.smithdouglas.com, or by selecting the Investor Relations link at the bottom of our homepage. Please note this call will be simultaneously webcast on the Investor Relations section of our website. Before the call begins, I would like to remind everyone that certain statements made on this call, which are not historical facts, including statements concerning future financial and operating goals and performance, are forward-looking statements. Actual results could differ materially from such statements due to known and unknown risk, uncertainties, and other important factors as detailed in the company's SEC filings. Except as required by law, the company undertakes no duty to update these forward-looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most Comparable gap measures can be found in our press release located on our website and our SEC filings. Hosting the call this morning are Greg Bennett, the company's CEO and Vice Chairman, and Russ Evendorf, our Executive Vice President and CFO. I'd now like to turn the call over to Greg.

Good morning, and thank you for joining us as we go over our results for the first quarter of 2024 and provide an update on our operations. Miss Douglas Homes has generated pre-tax income of $21.4 million in the first quarter and a $0.33 per diluted share. Home sales revenue came in at $189 million on a 13% increase in deliveries and new orders totaled $765 on a sales pace of 3.6 homes per community per month while our cancellation rate remained low at 10.6%. Our closings and order results came in over the high end of our prior guidance, as our teams did an excellent job selling and closing homes during the quarter. We continue to see favorable home building conditions in our markets, and thanks to low levels of existing supply and positive demand drivers, including healthy job creation, in-migration, and new household formation, The lock-in effect from higher mortgage rates continues to keep existing homeowners in place, which has pushed a greater percentage of the buyers into the new home market. We believe this dynamic will be in place for some time, creating a real opportunity for home builders to take market share. Our focus remains on the more affordable segments of the market, which is reflected in our average sales price of $334,000 for the quarter. We believe it is the most supply-constrained segment of the market and most attractive from a buyer demographic standpoint. We cater our home offerings to entry-level buyers and empty nesters who are looking for a customizable home at an affordable price. This strategy has not only resulted in strong volume growth for our company over the years, but also healthy profitability. as evidenced by our home building gross margin of 26.1% for the quarter. We continue to employ a land lot strategy, with 95% of our lots controlled via option agreement at the end of first quarter. Through our strong relationships with land bankers, land sellers, and developers, we strive to acquire lots in a just-in-time basis. This allows us to turn our inventory more quickly and focus on what we do best. which is build and sell homes. It also allows us to use our capital more efficiently and mitigate some of the risks associated with land development. Our build times in the quarter were in line with expectations at approximately 60 days. Through our smart builder ERP system and our team construction process, we strive to set standard of excellence for home building efficiency. This is a standard their leadership team has refined over several decades in the business and one that requires the coordination of a number of people both inside and outside the organization. We consistently look for ways to reduce cost and number of days it takes to build a home and believe our efficient approach to home building is a key differentiator for our company. The net result of our affordable product focus, our land life strategy, and our proprietary building process is a return on equity profile that ranks at the high end of public builder peer group. We believe our approach to home building can be replicated in a number of markets throughout the southeast and have begun to expand our footprint this quarter by contracting for lots in central Georgia, in Houston County, which includes Perry and Warner Robins, and in Chattanooga, Tennessee, and surrounding submarkets. We plan to initially leverage our expansive Atlanta division operations as we build out our teams in these markets until we eventually drive enough scale to create separate divisions. As we've discussed in the past, our plan is to expand our geographic footprint both organically and through strategic M&A if the opportunity presents itself. Our integration of Devon Street Homes in Houston is progressing. As the team has embraced the Smith Douglas way of doing business, and we couldn't be more pleased with how it has been going. Overall, we feel good about the current state of our operations. We saw solid and improving sales and traffic trends throughout the first quarter. Thus far, order trends have remained good through April and May. although slightly below the absorption pace we saw in March. That said, while buyers appear to have adjusted to the idea rates will likely be higher for longer, and our ability to offer financing incentives has been a key factor to addressing affordability concerns. We remain cautiously optimistic about the strength of the housing market and the general economic conditions for the balance of the year. With that, I'd like to turn the call over to Russ who will provide some additional color on our results this quarter and update our outlook.