Despite choppy order activity throughout the first quarter, Smith Douglas Homes delivered results in the high end of its guidance.
Affordability concerns, elevated mortgage rates, and geopolitical developments are continuing to contribute to an uncertain and challenging housing market environment. The steady improvement of order activity and the responsiveness of buyers to financing incentives, though, provided Smith Douglas Homes with encouraging signs that the underlying housing demand remains intact.
“We experienced a sequential improvement in our sales pace each month for the quarter, culminating in a sales pace of four homes per community in the month of March,” CEO and vice chairman Greg Bennett said during the builder’s earnings call. “Financing incentives continued to be a key selling tool. We were encouraged by the price elasticity we experienced during the quarter, as incremental adjustments in pricing led to an uptick in demand.”
Bennett and executive vice president and chief financial officer Russ Devendorf reiterated the company’s focus on pace over price during the earnings call with investors, stressing the importance of maintaining a consistent cadence of starts, efficient inventory turns, and driving toward a more pre-sale oriented backlog.
“Our average build time was 57 days during the quarter, consistent with prior periods, and we continue to view our ability to deliver homes quickly and reliably, with an offering of home choice and personalization as a key competitive advantage,” Bennett said.
Devendorf said in the current market environment, Smith Douglas remains focused on maintaining absorption and inventory turns, even if that results in margin pressure in the short term.
“We believe maintaining sales pace allows us to preserve market share, generate cash flow, and continue investing in our community pipelines, which ultimately drives scale and strong returns over the full housing cycle,” Devendorf said.
In the first quarter, Smith Douglas delivered 624 homes, a 7% decrease compared to the first quarter of 2025, and home closing revenue of $206.4 million, an 8% decline compared to the prior-year period. Devendorf said closing costs, price discounts, and the cost of forward commitments totaled 730 basis points in the first quarter, up from 430 basis points in the first quarter of 2025 and 680 basis points in the fourth quarter.
“As we move through the spring selling season, we’re encouraged by sales orders generated during the quarter, which help rebuild backlog and provide momentum heading into the second quarter,” Bennett said. “We have continued to see encouraging traffic and order activity early in the second quarter, although demand remains variable week to week.”
The positive momentum resulted in 981 net new orders in the first quarter, a quarterly company record and up 28% from the same period a year ago. The builder ended the quarter with 869 homes in backlog, up 10% from a year ago, and with 42 home reservations, allowing buyers to take advantage of a built-to-order home with a guaranteed mortgage rate at closing.
The builder generated pre-tax income of $4.3 million and profit per share of $0.06, down from $19.6 million and $0.30 a year ago.
During the quarter, Smith Douglas also made meaningful progress on its growth initiatives. Community count expanded by 24% on a year-over-year basis to 108 active communities. The builder also scaled up operations in new markets, including Dallas; Chattanooga, Tennessee; Greenville, South Carolina; and the Alabama Gulf Coast.
“Our experience in Houston continues to demonstrate that our operating model translates well beyond our legacy footprint, and we remain focused on executing a disciplined and opportunistic expansion strategy over time,” Bennett said.
