Smith Douglas Homes Corp. Class A

Thank you for standing by. My name is Tina and I will be your conference operator today. At this time, I would like to welcome everyone to the Smith Douglas Homes first quarter 2025 earnings call and webcast. 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, SVP 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 first quarter of 2025, 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 Devendorf, our Executive Vice President and CFO. I'd now like to turn the call over to Greg.

Thanks, Joe, and good morning to everyone. Ms. Douglas-Holmes posted another quarter of strong profitability to start the year, generating pre-tax income of $19.6 million, or net earnings of $0.30 per share. Home closing revenue was $225 million in the first quarter, representing a 19% increase over the first quarter of 2024. Home closings gross margin for the quarter came in at 23.8%. which was higher than the guidance range we shared on our last call. We generated 768 net new orders in the first quarter on a sales pace of 3.1 homes per community per month. Overall, I'm very pleased with our execution to start the year and believe Smith Douglas remains on track to achieve our long-term goals. We experienced normal seasonality during the quarter, with the quarter activity improving as we headed into the spring. We had solid traffic throughout the quarter. The sales conversions were negatively impacted by affordability concerns and macro uncertainty. Similar to past quarters, we used financing incentives to overcome these obstacles and solve for monthly payments that would fit our buyers' needs. While there are many factors that affect our business that are out of our control, there are many things we can do to optimize our performance in any demand environment. First, it's controlling land through option agreements rather than owning it outright. At the end of the first quarter, less than 5% of our unstarted controlled lots were owned on balance sheet, while the remainder was tied up through option and land banking agreements. This landline strategy gives us some degree of flexibility with respect to our lot takedown timing if needed and limits our downside risk should market conditions soften. Another factor within our control is how quickly we build our homes. For those of you that followed the Smith Douglas story, you know we're highly focused on improving build times and turning our inventories as fast as possible. Not only does this improve our return on capital, it also limits the possibility of cancellation thanks to a shorter timeframe between sale and close. As of the end of the first quarter, our cycle times averaged 56 days including Houston. We also made further progress during the quarter getting Houston Division and their trade partners on board the R-Team platform, and we expect to see build times move closer to the company average over time. A third factor we focus on at Smith Douglas is limiting the amount of spec inventory for sale in our communities. We believe our business runs better and more profitably when we pre-sell our homes. This gives buyers the ability to make important design decisions for their home and allows us to implement lot premiums and offer higher margin home upgrades to their communities, which we feel reduces our cancellation rate as the buyers become attached to their home they have designed. In summary, while there's more uncertainty today around the economy and our industry than in previous quarters, we built Smith Douglas to weather the ups and downs of this business. We remain focused on our long-term goals of growing our market share and achieving better economies of scale while maintaining a strong balance sheet and focusing on returns. This strategy has worked for our company since its inception, and we believe we'll continue to do so into the future. With that, I'd like to turn the call over to Russ, who will provide more details on our results this quarter and give an update on our outlook.