Smith Douglas Homes Corp. Class A

Thank you for standing by. My name is Rebecca and I will be your conference operator today. At this time, I would like to welcome everyone to the Smith Douglas Homes third quarter 2024 earnings call. 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 would 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, press star one again. Thank you. I would now like to turn the call over to Joe Thomas, Senior Vice President of Accounting and Finance. Please go ahead.

Good morning and welcome to the earnings conference call for Smith Douglas Homes. We issued a press release this morning outlining our results for the third quarter of 2024, which we will discuss on today's call and which 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 risks, 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 GAAP 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 Stevendorf, our Executive Vice President and CFO. I'd now like to turn the call over to Greg.

Thanks, Joe, and good morning to everyone. Smith Douglas turned in another quarter of solid profitability in the third quarter of 2024, generating pre-tax income of $39.6 million, or $0.58 for diluted share. The primary driver of these results was continuing to deliver on our growth plan with new home deliveries of 812. a record quarter for our company. These closings led to home closing revenue rising 41% year over year to $277.8 million. We also performed well on the margin front in the quarter, with home sales gross margins coming in at the high end of our guidance range at 26.5%. Despite the impact of the continued high interest rates, We have been able to strategically take price where possible while remaining focused on reducing our sticks and bricks costs of homes sold. We're also able to gain operating leverage on our selling, general, and administrative costs, with our SG&A expenses falling to 12.3% of revenue for the quarter. Order activity during the quarter followed normal seasonal patterns with some variation caused by movements in mortgage rates. We continue to see healthy demand trends in our markets driven by a lack of existing home inventory, strong local economies, and steady growth in household formation. We did experience some hesitancy on behalf of buyers beginning in September and into October. As many people in the market expected rates to come down further or had concerns about the outcome of the election, we believe these issues proved to be temporary headwinds to our sales efforts and optimistic that much of the macro uncertainty will be cleared up in time for the spring selling season next year. During the quarter, we made progress solidifying our presence in our more established markets while also gaining a better foothold in our newer markets. Our two biggest markets, Atlanta and Alabama, continued to perform well for us from a unit delivery perspective. but we do continue to face some issues of affordability in Alabama. The Carolinas held steady during the quarter, while demand in Houston was a little softer. We make further headway, ramping up our operations in central Georgia and Chattanooga with additional hires and contracting of future lots. Additionally, we're happy to announce that we've entered Greenville, South Carolina market, where we've recently hired a new division president, and already have five land deals under contract and expect lot deliveries in early 2026. We've been very deliberate and thoughtful in our expansion efforts, targeting markets with great long-term growth prospects that fit our company's operational strategy. We believe our existing geographic presence will serve as an excellent platform to grow and increase the company's size and scale. Driving this growth will be the same operational philosophies that have proven successful since our inception. Type land via option agreements and land banking arrangements, offer quality new homes at affordable prices, allow our customers the ability to personalize their homes, and work with our partners to streamline the construction process and deliver homes in a timely manner. We remain focused on adhering to this operational model and believe it is the key to our long-term success in this industry. As we head into the end of 2024, we believe we're in a great position to achieve our delivery goals for the year and carry that momentum into 2025. Cycle times are back to their pre-COVID levels in most markets and in some instances even better. We have several new communities scheduled to open ahead of spring selling season that we believe will help us drive sales. We also have the advantage of offering some of the most affordable priced homes of any of the publicly traded home builders. Our balance sheet remains in great shape, and we have a real opportunity to gain in market share. Given these positives, I remain very optimistic about the future of the industry and our company. With that, I'd like to turn the call over to Russ, who will provide more detail on our performance this quarter and give an update on our outlook for the year.