Smith Douglas Homes Reports 19% Revenue Growth but Declining Net Income in Q1 2025

Smith Douglas Homes Corp. reported its financial results for the first quarter of 2025, revealing a home closing revenue of $224.7 million, an increase of 19% compared to $189.2 million in the same period last year. The company closed 671 homes during this period, reflecting a similar 19% increase in the number of homes closed. However, net income attributable to Smith Douglas Homes Corp. decreased to $2.7 million, down from $3.0 million in the prior year, resulting in a diluted earnings per share of $0.30, compared to $0.33 in the previous year.

The company's cost of home closings rose to $171.2 million, a 22% increase from $139.7 million, primarily driven by the higher volume of homes closed and a 3% increase in average costs. Consequently, home closing gross profit increased by 8% to $53.5 million, but the gross margin declined to 23.8% from 26.1% due to rising costs. Selling, general, and administrative expenses also increased by 20% to $33.0 million, attributed to higher sales commissions and payroll expenses.

In terms of operational metrics, Smith Douglas Homes reported a cancellation rate of 8.1%, down from 10.6% in the previous year, indicating improved customer retention. The company also expanded its active communities to 87, up from 70 a year earlier, and controlled a total of 20,442 lots, a 44.8% increase year-over-year. The company’s strategic focus on a land-light business model continues to support its growth, with 888 owned unstarted lots representing only 4.3% of its total controlled lot supply.

Looking ahead, Smith Douglas Homes remains optimistic about its growth trajectory, despite uncertainties in the housing market related to interest rates and macroeconomic conditions. The company plans to leverage its efficient construction processes and customer-centric approach to maintain its competitive edge. The management emphasized the importance of expanding operations within existing markets and exploring new opportunities to maximize profitability and returns. The company’s liquidity position is supported by $12.7 million in cash and cash equivalents, alongside availability under its $250 million Amended Credit Facility, which it believes will be sufficient to meet its operational needs over the next 12 months.