Smith Douglas Homes delivered results in line with expectations during the fiscal third quarter, growing orders year over year while experiencing declines in closings and closings revenue.
“Smith Douglas Homes continued to execute on its long-term goal of becoming a large-scale builder of choice in key markets throughout the South,” vice chairman and CEO Greg Bennett said to investors during the builder’s earnings call. “Our operating strategy is straightforward, but hard to replicate thanks to our operating discipline and culture. We focus on providing our customers with quality homes at affordable prices while maintaining tight cost controls and leading cycle times.”
In the quarter, home closings decreased 3% year-over-year to 788 homes while home closings revenue declined 6% to $262.0 million. The average sales price of closings declined to $333,000 from $342,000 in the third quarter of 2024. Bennett noted that while mortgage rates came down in the period, demand remained soft, indicating buyer psyche and consumer confidence remain the main headwinds for the housing sector. As a result, financing incentives remain an important sales tool for Smith Douglas Homes and builder anticipates this will continue into the fourth quarter.
“Closing cost incentives totaled $9,500 per closing, up from $6,600 per closing the year ago period. Pricing discounts were 1.8% of revenue, up from 1.2% last year,” said executive vice president and chief financial officer Russ Devendorf. “We utilized forward commitment programs to buy down interest rates, which we believe helped boost conversion rates. During the quarter, we recognized $3.9 million in costs on forward commitments, compared to $185,000 in the year ago period and $0.9 million the second quarter of this year.”
Net new home orders increased 15.0% to 690 homes in the third quarter and Smith Douglas reported a cancellation rate of 11.2%, up marginally from 11.4% in the third quarter of 2024. Smith Douglas ended the period with 760 homes in backlog.
The builder reported third quarter profit per share of $0.24 in the third quarter, down from $0.58 per share in the same period a year ago.
At the end of the quarter, Smith Douglas had 24,300 lots owned and optioned, a 36% increase compared to the third quarter of 2024. Of the builder’s total lots, 22,561 lots were controlled via option.
During the call, Bennett also provided an update on the company’s expansion progress into Greenville, South Carolina, Dallas, and the Gulf Coast.
“We began vertical construction on homes in the Greenville market, started generating interest lists for our communities in the Dallas market, and expect the Gulf Coast markets to be up and running in the middle of next year,” Bennett said. “These markets fit nicely into our business model and will be key contributors to our volume goals in the coming year.”
