Smith Douglas Homes Corp. Class A

Hello everyone. Thank you for joining us and welcome to the Smith Douglas Homes Second Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Joseph Thomas, Senior Vice President, Accounting and Finance. Joseph, 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 second quarter of 2026, 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.

Good morning, and thank you for joining us today for a review of our business results for the second quarter of 2026. and an update on industry conditions and our company's outlook. Smith Douglas Homes continued to make progress towards our goal of becoming the large-scale builder in the southeastern and southern United States, posting strong year-over-year growth in both net new home orders and home closings in the second quarter. We generated $273 million in home closing revenue for the quarter, representing a 22% increase over the second quarter of 2025. on 839 home closings and an average sales price on closed homes of $325,000. Home closing gross margin for the quarter averaged 17.6% on a gap basis, or 18.7% when you exclude the impact of $3.1 million of inventory impairments included in the cost of home closings. Our pre-tax profit came in at $1.9 million for the quarter. are 9.5 million when adjusting for impairments and lot option contract abandonment charges. Overall, our company executed well in the quarter against a home building backdrop that continues to be marked by uncertainty and affordability challenges for new home buyers. Despite this uncertainty, we were able to post net new home quarter growth of 32% on a year-over-year basis for the quarter for a total of 970 net new home orders. Our team did an excellent job working with buyers to find the right combination of price, personalization, and value to keep our production-oriented building model running smoothly. We saw consistent traffic and a relatively stable sales pace throughout the quarter, averaging roughly three sales per community per month, which we maintained through a targeted use of sales incentives. Our construction cycle time for homes closed averaged 55 days, As we continue to emphasize construction efficiency across our home building platform, this remains a key component of our returns-focused business model and one we feel differentiates our company from the competition. Not only does this discipline allow us to work through our communities efficiently, but it also shortens the time between sale and close, which helps reduce the possibility of cancellations. We continue to expand our presence across our markets. We grew quarter-end community count by 20% on a year-over-year basis to 110 active communities. Home building is a business of scale, and we know higher volume will lead to better expense leverage over time. At the same time, we remain disciplined on our land acquisition front by adhering to our underwriting standards and walking from deals that do not meet those standards. We maintain this balance through our landline strategy, which allows us to control the pipeline of lots through options and land banking agreements, while also providing us downside risk protection. At the end of the second quarter, we had a total of 26,319 unstarted controlled lots, with only 3% of those lots on our balance sheet. As we turn our focus to the back half of the year, we feel cautiously optimistic about the state of the home building industry and our company's positioning. The U.S. consumer has proven to be resilient in the face of rising rates in macroeconomic uncertainty while building conditions continue to be favorable. With a better discipline from builders in terms of stock inventory and through selective and targeted financial incentives to buyers, we continue to be able to compete well against existing home markets. As a result, I remain confident in our long-term outlook for Smith Douglas Homes. Finally, I want to once again recognize and thank our team members for their continued dedication and hard work. Their commitment to serving our customers, executing their strategy, and adapting to a dynamic operating environment has been instrumental to our success. On behalf of the entire leadership team, I want to express a sincere appreciation for everything they do. Now it's time to call over to Russ, who will provide more detail on our financial results this quarter and give an update on our outlook.