Company Overview

Company Description

We are 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 United States. We employ an efficient land-light, production focused, and conservatively leveraged business model, which we believe results in a compelling combination of strong home closing gross margins, construction cycle times, and returns. Our communities are primarily targeted to entry-level and empty-nest homebuyers. We offer our homebuyers an attractive value proposition by providing a personalized home buying experience at affordable price points. With the goal of becoming one of the most dominant homebuilders in the Southeastern and Southern United States, we intend to grow operations within our existing footprint and to expand into new markets where we can most effectively implement our business strategy and maximize our profit and returns.

Pursuant to our land-light business model, we typically purchase finished lots through lot-option contracts from third-party land developers or land bankers. Our lot acquisition strategy reduces our up-front capital requirements and generally provides for “just-in-time” lot delivery, which closely aligns with our pace of home orders and home starts. 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 June 30, 2023 and December 31, 2022, respectively, 95% and 96% of our unstarted controlled lots were controlled through finished lot option contracts. Our strategy and focus on capital efficiency has delivered strong risk-adjusted returns, as evidenced by our adjusted return on equity and adjusted return on inventory of 71% and 62%, respectively, for the twelve months ended June 30, 2023 and of 81% and 75%, respectively, for the year ended December 31, 2022.

We are a disciplined, process driven, and schedule-oriented company. We utilize a single database 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. Through SMART Builder, we manage all aspects of our construction process and work-flow scheduling in real-time, enhancing our operating efficiency and helping us generate higher returns for our stockholders. Additionally, we approach our homebuilding operations through a partnership-oriented and relationship-based process called Rteam. The key tenet of Rteam is to enhance the collaboration, visibility, and mutual accountability between us and our key business partners, including the developers, suppliers, and trade partners within our production model. The Rteam process is the foundation of our operational success and the key driver of our current strong construction cycle times of approximately 60 business days and high inventory turnover rate of 3.8x for the year ended December 31, 2022. The combination of our production efficiency and real-time construction management capabilities allows us to generate strong home closing gross margins which were 29% for both the six months ended June 30, 2023 and the year ended December 31, 2022.

We pride ourselves on offering our homebuyers a personalized, affordable luxury buying experience at attractive prices. For the six months ended June 30, 2023, our ASP of homes closed was $330,000, providing an attractive price point for our target homebuyers with starting base prices below Federal Housing Administration (“FHA”) loan limits. We construct most of our homes on a pre-sold basis, where our homebuyers choose their homes based on a select number of value-engineered floor plans and are offered flexibility on the selection of home options. The SMART Builder system and Rteam process allows this optionality for homebuyers based on just-in-time modifications. 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 9% and 11% for the six months ended June 30, 2023 and for the year ended December 31, 2022, respectively.

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 five geographical segments; our reportable segments include Atlanta (which includes certain Atlanta suburbs like Dalton, GA), Raleigh, Charlotte, Nashville, and Alabama (which consists of both Birmingham and Huntsville). 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.

We intend to utilize proceeds from this offering to continue the expansion of our communities and the overall growth of our platform. We have demonstrated significant growth since our inception in 2008, joining the Builder Magazine Top 100 list as the 83rd largest builder based on number of closings in 2014 and have grown to be ranked as the 38th largest builder for closings in 2022. Additionally, based off of the Builder Magazine Top 100 list, we believe we are the second largest private builder founded after 2007 and sixth largest builder overall founded after 2007, each based on 2022 home closings. During the year ended December 31, 2022, we closed 2,200 homes as compared to 1,038 homes in the year ended December 31, 2017, representing a 16% CAGR over the last five years. In the same period, our revenue grew at a 26% CAGR from $240.3 million to $755.4 million.

Smith Douglas Homes Corp., was incorporated as a Delaware corporation on June 20, 2023. Our corporate headquarters are located at 110 Village Trail, Suite 215, Woodstock, Georgia 30188. Our telephone number is (770) 213-8067. Our principal website address is www.smithdouglas.com.