SDHC 10-K & 10-Q changes, risk factors and insider trading

•civil unrest, acts of terrorism, other acts of violence, threats to national security, global economic and political instability, and conflictsconflicts, suchincluding asin the conflictMiddle between Russia and Ukraine and the Israel-Hamas conflict (including any escalation or expansion),East, escalating global trade tensions, the adoption of trade restrictions, or a public health issue such as COVID-19 or another major epidemic or pandemic;

We cannot predict whether and to what extent the housing markets in the geographic areas in which we operate or may decide to operate in the future will continue to grow, particularly if interest rates for mortgage loans, land costs, and construction costs rise. Other factors that might impact growth in the homebuilding industry include uncertainty in domestic and international financial, credit, and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of the COVID-19 pandemic, tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive homebuyer income and asset documentation requirements, changes to mortgage regulations, population decline or slower rates of population growth in our markets, or Federal Reserve policy changes. Given these factors, we can provide no assurance that the present housing market will continue to be strong, whether overall or in our markets. Because we depend on a limited number of markets for substantially all of our home orders, if these markets, and in particular, Atlanta, Georgia, our largest market,markets experience downturns in the housing market, our business, prospects, and results of operations would be adversely impacted even if conditions in the broader economy or housing market did not suffer such a decline.

If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of the COVID-19 pandemic, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate or may decide to operate in the future, or if interest rates for mortgage loans or home prices rise, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition, and results of operations, including, but not limited to, the number of homes we sell, our ASP of homes closed, and the amount of revenues or profits we generate, and such effect may be material.

Our homebuilding operations are in many areas that are subject to natural and man-made disasters, severe weather, or adverse geologic conditions. These include, but are not limited to, hurricanes, tornadoes, droughts, extreme temperature changes, floods, brushfires, wildfires, prolonged periods of precipitation, landslides, soil subsidence, earthquakes, and other natural and man-made disasters. The occurrence of any of these events could damage our land parcels and projects, cause delays in completion of our communities, reduce consumer demand for housing, cause delays in our supply chain, and cause shortages and price increases in labor or raw materials, any of which could affect our sales and profitability. In addition to directly damaging our land or projects, many of these natural events could damage roads and highways providing access to our assets or affect the desirability of our land or communities, thereby adversely affecting our ability to market or sell homes in those areas and possibly increasing the costs of homebuilding. Furthermore, the occurrence of natural and man-made disasters, severe weather, and other adverse geologic conditions has increased in recent years due to climate change and may continue to increase in the future.

Slower rates of population growth or population declines in our markets in Atlanta, Birmingham, Central Georgia, Charlotte, Chattanooga, Greenville, Huntsville, Nashville, Raleigh, Houston, Dallas-Fort Worth, the Alabama Gulf Coast or other key markets in the United States we may decide to enter in the future, especially as compared to the high population growth rates in prior years, could affect the demand for housing, cause home prices in these markets to fall and adversely affect our plans for growth, business, financial condition, and operating results. Furthermore, while we have recently observed an increase in our business from people moving to more geographically diverse submarkets during the COVID-19 pandemic, we cannot assure you that this trend will continue or not reverse.

Concurrently with the consummation of our IPO, we entered into the Amended Credit Facility, and, as part of the Refinancing, we used a portion of our net proceeds from the IPO for the Debt Repayment. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Amended Credit Facility. If we require working capital greater than that provided by our operations and our Amended Credit Facility, we may be required to seek to increase the amount available under our Amended Credit Facility or to seek alternative financing, which might not be available on terms that are favorable or acceptable or at all. If we are required to seek financing to fund our working capital requirements, volatility in credit or capital markets may restrict our flexibility to successfully obtain additional financing on terms acceptable to us, or at all. If we are at any time unsuccessful in obtaining sufficient capital to fund our planned homebuilding expenditures, we may experience a substantial delay in the completion of homes then under construction, or we may be unable to control or purchase finished building lots. Any delay could result in cost increases and could have a material adverse effect on our sales, profitability, stock performance, cash flows, and ability to service our debt obligations.

The residential construction industry experiences building material shortages from time to time, including shortages in supplies of insulation, drywall, cement, steel, and lumber. These building material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures, or as a result of broader macroeconomic, trade, or geopolitical disruptions. Further, prices of building materials could be affected by the factors discussed above and various other national, regional, local, economic, and political factors, including changes in tariffs. Our success in recently entered markets or those we may choose to enter in the future depends substantially on our ability to source local materials on terms that are favorable to us. In the event of shortages in building materials in such markets, local and suppliers may choose to allocate their resources to homebuilders with an established presence in the market and with whom they have longer-standing relationships. Building material shortages and price increases for building materials could cause delays in and increase our costs of home construction and our construction cycle time, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations.

Conflicts of interest may exist or could arise in the future with the Founder Fund, a trust for which Mr. Bradbury is the co-trustee. As of March 14,6, 2025,2026, the Founder Fund has 88.1% of the combined voting power of our Class A common stock and Class B common stock, voting together as a single class. We have leased, and we expect to continue to lease, office space from JBB Cherokee Holdings LLC, an entity affiliated with the Founder Fund. We also had related person receivables of $0.1 million with an entity affiliated with the Founder Fund as of December 31, 2024,2025, related to various general and administrative expenses, including aviation expenses, and in part, related to insurance that was paid on behalf of the related person who reimbursed us at cost. Historically, Mr. Bradbury has also supported our growth by hosting numerous events at personal properties that are intended to foster business development and vendor relations. For the year ended December 31, 2024,2025, we paid an annual use fee to certain entities affiliated with the Founder Fund for use of facilities and related services. We also charter aircraft services from an entity affiliated with the Founder Fund. We have historically licensed SMART Builder, our ERP system, on an exclusive basis from an entity affiliated with the Founder Fund, on an exclusive, perpetual, and royalty-free basis. Furthermore, some of the third-party vendors we work with source sod directly from an entity affiliated with the Founder Fund.

We intend to grow our operations in existing markets and to strategically expand into new markets or pursue opportunistic purchases of other homebuilders on attractive terms, as such opportunities arise. We may be unable to achieve the anticipated benefits of any such growth or expansion, including through targeted acquisitions or through efficiencies that we may be unable to achieve, the anticipated benefits may take longer to realize than expected, or we may incur greater costs than expected in attempting to achieve the anticipated benefits. In such cases, we will likely need to employ additional personnel or trade partners that are knowledgeable about such markets. There can be no assurance that we will be able to recruit, develop, or retain the necessary personnel or trade partners to successfully implement a disciplined management process and culture with local management, that our expansion operations will be successful, or that we will be able to successfully integrate any acquired homebuilder. This could disrupt our ongoing operations, including our Rteam production model, and divert management resources that would otherwise focus on developing our existing business.

We rely on SMART Builder, an enterprise resource planning system that we exclusively license from an entity affiliated with the Founder FundFund, for managing our construction process and work-flow scheduling. If SMART Builder fails to adequately perform these functions or experiences an interruption in its operation, our business and results of operations could be adversely affected.

While tax laws generally permit significant expenses associated with homeownership, primarily mortgage interest expense and real estate taxes, to be deducted for the purpose of calculating an individual’s federal and, in many cases, state taxable income, the ability to deduct mortgage interest expense and real estate taxes for federal income tax purposes is limited. The federal government or a state government may change its income tax laws by eliminating, limiting, or substantially reducing these income tax benefits without offsetting provisions, which may increase the after-tax cost of owning a new home for many of our potential homebuyers. For example, the Tax Cuts and Jobs Act, which became effective January 1, 2018, contained substantial changes to the Code, including (i) limitations on the ability of our homebuyers to deduct property taxes, (ii) limitations on the ability of our homebuyers to deduct mortgage interest, and (iii) limitations on the ability of our homebuyers to deduct state and local income taxes. The One Big Beautiful Bill Act, which was enacted in July 2025, made permanent the mortgage interest deduction limitation and increased the limit on state and local income tax deductions for tax years 2025 through 2029, subject to income-based phase-out provisions. Any further future changes may have an adverse effect on the homebuilding industry in general. For example, the further loss or reduction of homeowner tax deductions could decrease the demand for new homes. Any such future changes could also have a material adverse impact on our business, prospects, liquidity, financial condition, and results of operations.

Concerns about greenhouse gas emissions and the potential risks associated with climate change have led to increased regulation and other actions that can have an adverse impact on our activities, operations, and profitability and on the availability and price of certain raw materials.

There is a growing concern in certain jurisdictions about the emission of greenhouse gases and other human activities that have caused, and will continue to cause, significant changes in weather patterns and temperatures and increase the frequency and severity of natural disasters. Government mandates, standards, legislation, and regulations enacted in response to these current and projected climate change impacts and concerns could result in restrictions on land development in certain areas or increased energy, transportation, and raw material costs. New legislation has been enacted, or may be enacted in the future, or considered for enactment at the federal, state, and local levels relating to climate change, greenhouse gas emissions, and energy production and use. This legislation could relate to, for example, matters such as greenhouse gas emissions control and building and other codes that impose energy efficiency standards or require use of energy-saving construction materials. New building or other code requirements that impose stricter standards or requirements for building materials could significantly increase our cost to construct homes. As climate change concerns continue to grow, legislation, regulations, mandates, standards, and other requirements of this nature are expected to continue to be enacted and impose additional costs on us. Additionally, certain areas in the United States either have enacted or are considering a ban on the use of natural gas appliances and/or natural gas hookups in new construction. Such bans, if enacted in areas in which we operate or may decide to operate in the future, could affect our cost to construct homes. Similarly, climate change-related initiatives or requirements impacting the energy industry affect a wide variety of companies throughout the United States, and because our operations are heavily dependent on significant amounts of raw materials with energy-intensive manufacturing and supply processes, such as lumber, steel and concrete, these initiatives or requirements could increase the costs of these materials and have an adverse impact on our operations and profitability. Furthermore, according to the Intergovernmental Panel on Climate Change, physical risks from climate change could include, but are not limited to, increased runoff and earlier spring peak discharge in many glacier and snow-fed rivers, warming of lakes and rivers, increases in sea level, and changes and variability in precipitation and in the intensity and frequency of extreme weather events. These physical impacts may have the potential to significantly affect our business and operations and there is no guarantee that any losses incurred would be covered by applicable insurance policies. Moreover, the cost or availability of applicable insurance may also change as a result of these physical impacts.

Increasing scrutinyEvolving and evolvingvaried expectations relating to environmental, social and governance (“ESG”) issues could adversely impact our reputation, access to and cost of capital, and financial results.

A failure to comply with ESG expectations and standards, which are evolving and varied, or if we are perceived to not have responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, could cause reputational harm to our business and could have a material adverse effect on our financial results and access to and cost of capital. In addition, the adoption of new ESG-related regulations applicable to our business, or pressure from key stakeholders to comply with voluntary ESG-related initiatives or frameworks, could require us to make substantial investments which could impact the results of our operations and cash flows. However, these expectations and regulations are not uniform, and in some situations stakeholders (including policymakerslegislators and other government actors at the federal and state level) have sought to constrain companies' consideration of ESG matters. Addressing these issues has inherent costs, and any failure to successfully navigate stakeholder expectations may result in reputational harm, investor or regulatory engagement, or other adverse impacts.

EvenOur ifsuccess and ability to compete depend, in part, on our ability to obtain, maintain, protect, defend, and enforce our intellectual property rights, proprietary information, and technology. We rely, or may in the future rely, on a combination of trademark, trade dress, domain name, copyright, and trade secret protections, and unfair competition laws, as well as confidentiality agreements with our employees, consultants, and third parties with whom we successfullyhave maintainrelationships, theto confidentialityprotect our brand and other intellectual property rights. Such means may afford only limited protection of our trade secrets, intellectual property and othermay not (i) prevent others from independently developing products or services similar to, or duplicative of, ours, (ii) prevent our competitors from gaining access to our proprietary information, competitorsknow-how maytechnologies independentlyand develop productsprocesses, or technologies(iii) thatpermit areus substantiallyto equivalentgain or superiormaintain a competitive advantage. The efforts we have taken to protect our own. Enforcing a claim that a party disclosed proprietary information in an unauthorized manner or infringed, misappropriated, or otherwise violated any intellectual property rights ismay difficult,not expensive,be sufficient or effective, intellectual property laws may change, and time-consuming,certain andagreements themay outcomenot isbe unpredictable.fully enforceable, which could restrict our ability to protect our intellectual property rights. In addition, some courts are less willing or unwilling to protect certain intellectual property rights, and agreement terms that address non-competition are difficult to enforce in many jurisdictions and might not be enforceable in certain cases. If we are unable to maintain the proprietary nature of our technologies or intellectual property, our competitive position, business, financial condition, and results of operations could be harmed.

Our failure to obtain or maintain adequate protection of our trademark or trade name rights for any reason could have a material adverse effect on our business, results of operations and financial condition. Our current and future trademark applications in the United States may not be allowed or may subsequently be opposed. Once filed and registered, our trademarks or trade names may be challenged, infringed, circumvented, or declared generic, or determined to be infringing on other marks. AsWe amay meansnot have adequate resources to enforce our trademarktrademarks rightsagainst competitors or other third parties, and preventany infringement,such weenforcement may be required to file trademark claimsactions against third parties or initiate trademark opposition proceedings. This can be expensive and time-consuming, particularly for a company of our size. We may not be ablesuccessful. toIf we do not adequately protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or homebuyers in our marketstrademarks offrom interest.infringement and unauthorized use, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and our business. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights, or other intellectual property may be ineffective and could result in substantial costs and diversion of resources. Any of the foregoing could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations.

We rely, and expect to continue to relyrely, on,on certain services and intellectual property that we license from third parties for use in our operations, particularly SMART Builder, which we license from an entity affiliated with the Founder Fund. We cannot be certain that our suppliers and licensors are not infringing upon the intellectual property rights of others or that our suppliers and licensors have sufficient rights to the third-party technology used in our business in all jurisdictions in which we may operate. Disputes with licensors over uses or terms could result in the payment of additional royalties or penalties by us, cancellation or non-renewal of the underlying license or litigation. In the event that we cannot renew and/or expand existing licenses, we may be required to discontinue or limit our use of the operations, products, or offerings that include or incorporate the licensed intellectual property. Any such discontinuation or limitation could have a material and adverse impact on our business, financial condition, and results of operation.

We rely on accounting, financial, operational, management, and other information systems to conduct our operations (collectively, with the information systems of any third-party vendors or suppliers we may use, the "IT Systems"). Further, we and certain of our third-party providers collect, maintain, and process data about customers, employees, business partners, and others, including personallyPersonal identifiableInformation information,(defined below), as well as proprietary information belonging to our business such as trade secrets (collectively, "Confidential Information"). Our IT Systems and Confidential Information are vulnerable to a range of cybersecurity risks and threats, including damage or interruption from power outages, computer and telecommunication failures, computer viruses, cybersecurity incidents or attacks (including malware, phishing attacks, ransomware attacks, social engineering and attempts to gain unauthorized access to data or other electronic security breaches or similar events, or cybersecurity attacks carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on systems or websites and rendering them unavailable or ineffective), other security breaches, natural or man-made disasters, usage errors, negligence or intentional misuse by our employees or third parties, and other related risks.

The actual Basis Adjustments and Section 704(c) Allocations and the actual utilization of any resulting tax benefits, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors including: the timing of redemptions or exchanges by the Continuing Equity Owners; the price of shares of our Class A common stock at the time of thesuch exchangeredemptions or exchanges; the extent to which such redemptions or exchanges are taxable; the amount of gain recognized by such Continuing Equity Owners; the amount and timing of the taxable income allocated to us or otherwise generated by us in the future; the portion of our payments under the Tax Receivable Agreement constituting imputed interest; and the federal and state tax rates then applicable.

Our organizational structure, including the Tax Receivable Agreement, confers certain benefits upon the Continuing Equity Owners that doeswill not benefit holders of our Class A common stock to the same extent that it will benefit the Continuing Equity Owners.

We may incur a substantial amount of debt in the future. Our existing indebtedness is recourse to us, and we anticipate that future indebtedness will likewise be recourse. Concurrently with the consummation of the IPO, we repaid the Prior Credit Facility and replaced it with the Credit Facility. We subsequently amended the Credit Facility, referred to herein as the Amended Credit Facility. As of the filing of this Annual Report on Form 10-K, we have no outstanding borrowings under the Amended Credit Facility. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources. Our board of directors will consider several factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets, and the ability of particular assets, and us as a whole, to generate cash flow to cover the expected debt service. Our governing corporate documents do not contain a limitation on the amount of debt we may incur, and our board of directors may change our target debt levels at any time without the approval of our stockholders.

•that certain provisions of amended and restated certificate of incorporation may be amended only by the affirmative vote of holderholders of at least 66 2/3% of the voting power of our then-outstanding capital stock entitled to vote thereon.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters and the federal district courts of the United States are the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

The Federal Deposit Insurance Corporation only insures amounts up to $250,000 per depositor. We maintain the majority of our cash and cash equivalents in accounts with major U.S. financial institutions, and our deposits at certain of these institutions may exceed insured limits from time to time. Market conditions can impact the viability of these institutions, as we have seen recently with the abrupt failurefailures of more than one regional bank.bank in recent years. Although we did not experience any loss related to these failures, if any of the banking institutions in which we deposit funds ultimately fails, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all. The loss of our deposits could reduce the amount of cash we have available to distribute or invest and could result in a decline in the value of our stockholders’ investment.

DespiteDuring continued2025, uncertaintywe inexperienced thesofter‑than‑expected demand driven by sustained elevated mortgage interest rates, which continued to restrict affordability for potential homebuyers and negatively affected consumer sentiment. We responded to these challenges by implementing various financing incentives, such as closing cost credits and mortgage rate environmentbuydowns. duringAs 2024,a result, our net new orders increased by 12%3% in the year ended December 31, 20242025 compared to 2023.2024. We believe our focus on affordable luxury will continue to serve us well as we remain optimistic about long-term demand due to favorable homebuyer demographics. Additionally, we aim to 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. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, 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 12%11% and 11%12% for the years ended December 31, 20242025 and 2023,2024, respectively.

We believe the geographic markets in which we operate demonstrate strong population and employment growth trends, favorable migration patterns, and desirable lifestyle and weather conditions. Our operations are currently organized into eightten geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and NashvilleAlabama Gulf Coast divisions. 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.

Our operations are currently organized into eightten geographical divisions which comprise two reportable segments. Our Southeast segment consists of our Atlanta, Central Georgia, Charlotte, Greenville, and Raleigh divisions. Our Central segment consists of our Alabama, Dallas-Fort Worth, Houston, Nashville, and NashvilleAlabama Gulf Coast divisions.

We continue to experience certain macroeconomic trends that affect our markets and industry such as higher inflation, elevated interest rates and associated decreases in consumer discretionary income, the effects of supply chain challenges, declining government stimulus following the COVID-19 pandemic, and uncertainty regarding an economic recession. Any worsening of macroeconomic conditions in future periods could have a negative effect on our financial results.

Home closing proceeds are generally received from the title company within a few business days after closing. The pace of net new home orders, the ASP, discounts and incentives, and the level of upgrades and options selected by our homebuyer all impact our recognized revenues in a given period. See CriticalNote Accounting1—Description Policiesof the business and Estimatessummary of significant accounting policies for a description of how we record home closing revenue.

Home closing revenue for the year ended December 31, 2024,2025, was $975.5$971.1 million, ana increasedecrease of $210.8$4.3 million, or 27.6%,0.4%, from $764.6$975.5 million for the year ended December 31, 2023.2024. The increasedecrease in revenue was primarily attributable to a 24.8%1.8% improvement in homes closed and a 2.1% increasedecrease in ASP of homes closed, offset by a 1.4% increase in homes closed across both reportable segments.

Home closing gross profit for the year ended December 31, 20242025 was $255.5$212.2 million, ana increasedecrease of $39.2$43.4 million, or 18.1%,17.0%, from $216.3$255.5 million for the year ended December 31, 2023.2024. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 26.2%21.8% in 20242025 compared to 28.3%26.2% in 2023.2024. The decrease in home closing gross margin was primarily driven by a 5.2%3.9% increase in the average cost of homes closed partially offset byand a 2.1%1.8% increasedecrease in ASP of homes closed.

Selling, general, and administrative costs for the year ended December 31, 20242025 were $136.4$139.8 million, an increase of $43.9$3.4 million, or 47.5%,2.5%, from $92.4$136.4 million for the year ended December 31, 2023.2024. The increase was primarily due to an increase in salesdivision commissions and advertising costsoverhead associated with our increaseincreased inactive homescommunity closedcount and relatednewly homeformed closingdivisions, revenue,including increasedCentral payrollGeorgia, Greenville, Alabama Gulf Coast, and performance-basedDallas-Fort bonus compensation expenses on higher employee headcount, stock compensation expense, and higher professional fees related to the Devon Street Homes acquisition and our IPO.Worth.

Equity in income from unconsolidated entities consists primarily of our portion of income from our interest in ourthe title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers and our portion of income from our interest in the company engaged in providing mortgage broker services to our homebuyers. For the year ended December 31, 2024,2025, equity in income from unconsolidated entities increased by $0.2$0.9 million from the year ended December 31, 2023,2024, due to a 19.8%17.1% increase in title insurance revenue generated by the title company.company and $0.7 million of income from the mortgage brokerage company, which ramped up operations in 2025.

Interest expense is comprised of interest incurred, but not capitalizedcapitalized, on our Amended Credit Facility and Prior Credit Facility and other borrowings and amortization of debt issuance costs. Our interest expense increased $0.8$0.7 million to $3.2 million for the year ended December 31, 2025 from $2.5 million for the year ended December 31, 2024 from $1.7 million for the year ended December 31, 2023,2024, which was primarily driven by an increase in unused feesinterest incurred on our Prior Credit Facility and Amended Credit Facility, amortization of deferred financing costs on our Amended Credit Facility,Facility and interest on the note payable relateddue to thea Devonhigher Streetaverage Homesoutstanding Acquisition.balance.

Other expense (income),expense, net

Other expense (income),expense, net primarily consists of interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses. For the year ended December 31, 2024,2025, other expense (income),expense, net increaseddecreased by $1.0$0.6 million from the year ended December 31, 2023,2024, which was primarily due to a $2.3 million charge related to abandonment of certain lot option contracts in the Central region in 2025, which did not occur in 2024, and the change in fair value of the contingent consideration liability related to the Devon Street Homes Acquisition.Acquisition in 2024, which did not recur in 2025.

Net income for the year ended December 31, 20242025 decreased by $11.4$43.4 million, or 9.2%.38.8%. The decrease was primarily due to a decrease in home closing gross profit of $43.4 million, and an increase of $43.9$3.4 million in selling, general and administrative costs due to higher commissions and advertising costs and $5.1 million of income tax expense as a result of our IPO and Reorganization Transactions,costs, partially offset by ana increase$2.6 million decrease in homeincome closingtax gross profit of $39.2 million.expense.

Southeast: The $7.3$38.6 million increasedecrease in net income compared to the prior year was primarily due to a $16.5$28.4 million increasedecrease in gross profit due to a 14.1%2.8% increase in homes closedclosed, and2.5% 4.7% increasedecrease in ASP of homes closed, offsetand by3.9% increase in the average cost of homes closed. Also contributing to lower net income was a $9.2$10.3 million increase in selling, general, and administrative costs.costs primarily due to an increase in division overhead associated with our increased active community count and newly formed divisions, including Central Georgia and Greenville.

Central: The $10.0$19.0 million increasedecrease in net income compared to the prior year was primarily due a $22.7$15.0 million increasedecrease in gross profit due to a 45.4%0.7% increasedecrease in homes closed partially offset byand a 1.2%0.9% decrease in ASP of homes closed,closed offset byand a $10.6$3.8 million increase in selling, general, and administrative costs. The increase in gross profit and selling, general, and administrative costs are largely attributable to thean priorincrease yearin onlydivision reflectingoverhead resultsassociated ofwith operationsour forincreased active community count and newly formed divisions, including Dallas-Fort Worth and the HoustonAlabama divisionGulf for a partial year after the Devon Street Homes Acquisition was completed on July 31, 2023.Coast.

Our adjusted home closing gross profit increased whileand adjusted home closing gross margin decreased from the year ended December 31, 20232024 to 2024.2025. The increase in adjusted home closing gross profitdecrease primarily results from ana 1.4% increase in homehomes closingsclosed ofand 24.8%.a The decrease in adjusted home closing gross margin was driven by an3.9% increase in the average cost of home closings of 5.2% partially offset by an increase in the ASP of homes closed of 2.1%.closed.

EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP. EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation. We define EBITDA margin as EBITDA as a percentage of home closing revenue. We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included in other expense (income), net, and (ix) severance expenses.expenses, and (x) real estate inventory impairment and lot option contract abandonment charges.

For the year ended December 31, 20242025 compared to 2023,2024, EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin decreased primarily as a result of a decrease in net income of 9.2% partially offset by an increase in interest expense of $0.8 million and an increase in provision for income taxes of $5.1 million.38.8%. A decrease in home closing margin of 2.1%4.3% also contributed to the decreases in EBITDA margin and adjusted EBITDA margin.

Looking beyond the next 12 months, our primary funding needs will continue to center around home construction, finished lot acquisitions necessary to maintain a minimum four-year lot supply, growing active community count, growth into new and existing markets, and principal and interest payments on our Amended Credit Facility. We expect our existing cash reserves, along with generated cash flows and availability under our Amended Credit Facility, will be sufficient to fund our ongoing operational activities and provide the necessary capital for future lot purchases and related growth strategies.

Credit Facility and Amended Credit Facility

Concurrently with the consummation of the IPO and pursuant to the Refinancing, Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries entered into the Amended Credit Facility, which amended and replaced the Prior Credit Facility, and conducted the Debt Repayment, pursuant to which we used a portion of the net proceeds from the IPO to repay the $84.0 million outstanding under our Prior Credit Facility. Smith Douglas Homes Corp. is not a party to the Amended Credit Facility.

The Amended Credit Facility, among other things, increasesincreased the aggregate principal amount of our revolving credit commitments to $250.0 million and extendsextended the maturity date to January 16, 2027, provided that the borrowers may request a one-year extension of its maturity date. The Amended Credit Facility also includes a $100.0 million accordion feature, subject to additional commitments, and provides that up to $20.0 million may be used for letters of credit.

The Amended Credit Facility contains certain financial covenants, among others, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a) $130.0$286.1 million, (b) 32.5% of positive pre-taxpre‑tax income earned in any fiscal quarter after JuneMarch 30,31, 2023,2025, and (c) 75%50% of the equity proceeds of Smith Douglas Homes Corp. and its subsidiaries from the IPO and (d) 50% ofany new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries at any time after theMarch IPO,31, 2025, (ii) a maximum leverage ratio of 60%, (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of $15.0 million. The Amended Credit Facility also contains various covenants that, among other restrictions, limit the ability of Smith Douglas Homes LLC and the other borrowers to incur additional debt and to make certain investments and distributions. Additionally, the Amended Credit Facility contains certain covenants that restrict certain activities of Smith Douglas Homes Corp. The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenants and breach of representations. If an event of default occurs and is continuing, the borrowers may be required to immediately to repay all amounts outstanding under the Amended Credit Facility. As of December 31, 2024,2025, we were in compliance with all covenants related to the Amended Credit Facility.

As of December 31, 2024,2025, there were no$40.0 million of outstanding borrowings or letters of credit under the Amended Credit Facility. As of March 14,6, 2025,2026, outstanding borrowings under our Amended Credit Facility totaled $44.0$80.0 million. As of both December 31, 2025 and March 6, 2026, outstanding letters of credit approximated $0.5 million.

The foregoing description of the Amended Credit Facility is qualified in its entirety by reference to the Amended Credit Facility, a copy of which is filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended MarchJune 31,30, 2024.2025.

In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement. We expect the amount of the cash payments that we will be required to make under the Tax Receivable Agreement will be significant. The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by thesuch Continuing Equity Owners, the amount and timing of the taxable income weallocated generateto us or otherwise generated by us in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

We generatedused $19.1$31.3 million and $76.3generated $19.1 million in net cash from operating activities for the years ended December 31, 20242025 and 2023,2024, respectively. Operating cash flows for 2025 benefited from cash generated by net income of $68.4 million primarily offset by a $46.2 million increase in real estate inventory, a $37.4 million increase in deposits on real estate under option or contract, and a $15.3 million decrease in accounts payable. Operating cash flows for 2024 benefited from cash generated by net income of $111.8 million primarily offset by a $53.7 million increase in real estate inventory and a $45.9 million increase in deposits on real estate under option or contract. Operating cash flows for 2023 benefited from cash generated by net income of $123.2 million primarily offset by a $33.7 million increase in real estate inventory and a $16.6 million increase in deposits on real estate under option or contract.

We used $4.7$6.6 million and $76.8$4.7 million in net cash in investing activities for the years ended December 31, 20242025 and 2023,2024, respectively. The net cash used in investing activities during 2024both years was primarily due to purchases of property and equipment and investments in unconsolidated entities. The net cash used in investing activities during 2023 was primarily due to the $75.9 million used to fund the Devon Street Homes Acquisition.

We expect our future cash requirements will relate to working capital, capital expenditures, benefits expenses, interest expense and debt service obligations. In addition, we may use cash and cash equivalents to enter into strategic transactions, such as potential joint ventures or other unconsolidated entities, or acquisitions. Our material cash commitments as of December 31, 20242025 were our $3.2$2.0 million operating lease obligation, which primarily consists of our $1.2division million office lease obligation for our headquarters in Woodstock, Georgia where we lease approximately 26,800 square feet of office space under a lease agreement that expires on August 31, 2028offices and the interest on our Amended Credit Facility on the amounts outstanding from time to time.

As of December 31, 2024,2025, we had $85.4$136.8 million of non-refundable cash deposits under land and lot-option contracts pertaining to 10,13214,888 lots with a remaining aggregate purchase price of approximately $707.8$1.07 million.billion.

From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers. These arrangements relate to certain performance or maintenance-related obligations. As of December 31, 2024, there were no2025, outstanding letters of credit.credit approximated $0.5 million. Surety bonds do not have stated expiration dates, rather, we are released from the bonds as the contractual performance is completed. These bonds, which totaled $32.1$47.4 million and $26.1$32.1 million as of December 31, 20242025 and 2023,2024, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development. If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations.

Real estate inventory is stated at cost unless the community is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (ASC) Topic 360-10, Property, Plant, and Equipment. We review our real estate inventory for indicators of potential impairment on a quarterly basis at the community level considering market and economic conditions, current sales absorption rates, and recent profitability of new home orders. When an indicator of impairment is identified, we prepare and analyze cash flows at the community level on an undiscounted basis. If the undiscounted cash flows are less than the community’s carrying value, we generally estimate the fair value using the estimated future discounted cash flows of respective inventories. A community with a fair value less than its carrying value is written down to such fair value and resulting losses are reported within home closing gross profit. During the year ended December 31, 2025, we recognized an inventory impairment charge of $2.6 million in the Central reporting segment, which is included within cost of home closings in the accompanying consolidated statements of income. No impairments were recognized during the yearsyear ended December 31, 2024 and 2023.2024.

In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which requires expanded disclosure of the Company’s income rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company for annual periods beginning after January 1, 2025. The Company is currently evaluating the impactadopted ASU 2023-09 for the annual period beginning January 1, 2025, and will haveadopt onfor itsinterim financialperiods statementbeginning disclosures.January 1, 2026. ASU 2023-09 is applied retrospectively to all prior periods presented.

In the first quarter of 2026, we continued to see affordability challenges related to elevated mortgage interest rates impact our potential homebuyers. In response to these challenges, we have offered various financing incentives, such as closing cost credits and mortgage rate buydowns. As a result, we achieved a 28% increase in net new home orders and a 10% increase in the number of homes in backlog over the same period of the prior year. We aim to 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. Our SMART Builder enterprise resource planning system and efficient construction process, which we call Rteam, allows us to provide this optionality for homebuyers based on just-in-time modifications. As a result of our differentiated value proposition and efficient construction cycle times, we typically achieve a high level of homebuyer satisfaction and experience low cancellation rates, which were 9%13% and 8%10% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

At the core of our land-light operating strategy lies the principle and discipline of primarily acquiring finished lots from a diverse pool of third-party land developers or land bankers through the effective utilization of lot-option contracts. Our lot acquisition strategy reduces our upfront capital requirements and generally seeks to provide for “just-in-time” lot delivery, better aligning our pace of home orders and home starts. While using land bankers and third-party developers comes at an additional cost, we believe our lot acquisition strategy reduces our operational and financial risk relative to other homebuilders that own a higher percentage of their land supply. As of MarchJune 31,30, 2026, we had 750664 owned unstarted lots in real estate inventory on our balance sheetsheet, which represented only 3.2%2.8% of our total controlled lot supply.

Comparison of three and six months ended MarchJune 31,30, 2026 and 2025

Home closing revenue for the three months ended MarchJune 31,30, 2026, was $206.4$273.0 million, aan decreaseincrease of $18.3$49.1 million, or 8%,22%, from $224.7$223.9 million for the three months ended MarchJune 31,30, 2025. Home closing revenue for the six months ended June 30, 2026, was $479.5 million, an increase of $30.8 million, or 7%, from $448.6 million for the six months ended June 30, 2025. The decreaseincrease in revenue wasfor both periods is primarily attributable to a decrease of 7%increases in the number of homes closed.closed, which increased by 25% and 9% for the three and six months ended June 30, 2026, respectively, while ASP of homes closed decreased by 3% and 2%, respectively, for the three and six months ended June 30, 2026. The decreasegrowth in the number of homes closed for the current year periods as compared to the three and six months ended MarchJune 31,30, 2025 reflectedwere decreasesprimarily due to increases of 9%25% and 9%, respectively, in our Southeast segmentsegment, and 5%increases of 26% and 10%, respectively, in our Central segment.

Cost of home closings for the three months ended MarchJune 31,30, 2026, was $166.0$225.1 million, aan decreaseincrease of $5.2$53.1 million, or 3%,31%, from $171.2$172.0 million for the three months ended MarchJune 31,30, 2025, which was primarily driven by a 7%25% decreaseincrease in home closings partially offset byand a 4% increase in the average cost of home closings. Cost of home closings for the six months ended June 30, 2026, was $391.1 million, an increase of $47.9 million, or 14%, from $343.2 million for the six months ended June 30, 2025, which was primarily driven by a 9% increase in home closings and a 4% increase in the average cost of home closings.

Home closing gross profit for the three months ended MarchJune 31,30, 2026 was $40.5$47.9 million, a decrease of $13.1$4.0 million, or 24%,8%, from $53.5$51.9 million for the three months ended MarchJune 31,30, 2025. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 19.6%17.6% in the three months ended MarchJune 31,30, 2026 compared to 23.8%23.2% in the same period in 2025. Home closing gross profit for the six months ended June 30, 2026 was $88.4 million, a decrease of $17.1 million, or 16%, from $105.5 million for the six months ended June 30, 2025. Home closing gross margin, expressed as a percentage and calculated as home closing gross profit divided by home closing revenue, was 18.4% in the six months ended June 30, 2026 compared to 23.5% in the same period in 2025.

The decrease in home closing gross margin for each of the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods of the prior year was for each period primarily driven by ana 4% increase of 4% in the average cost of home closings while the ASP of homes closed decreased 1%.by 3% and 2%, respectively.

Selling, general, and administrative costs for the three months ended MarchJune 31,30, 2026 were $35.9$41.9 million, an increase of $2.9$7.2 million, or 9%,21%, from $33.0$34.7 million for the three months ended MarchJune 31,30, 2025. Selling, general, and administrative costs for the six months ended June 30, 2026 were $77.8 million, an increase of $10.1 million, or 15%, from $67.7 million for the six months ended June 30, 2025.

The increase for the three and six months ended MarchJune 31,30, 2026 compared to the same periods of the prior year was for each period primarily due to an increase in sales commissionscommissions, advertising costs, and advertisingdivision costsoverhead associated with our increase in activehomes communityclosed count,and related home closing revenue, an increase in division overhead relatedprimarily primarilydue to our recently formed divisions, Dallas-Fort Worth,Worth and Alabama Gulf Coast, and increased compensation expenseexpenses onattributable to higher employee headcount.

Equity in income from unconsolidated entities consists primarily of our portion of income from our interest in the title company in which we hold a 49% interest and which operates in certain of our markets to provide title insurance to our homebuyers and our portion of income from our interest in the company engaged in providing mortgage broker services to our homebuyers. For the three and six months ended MarchJune 31,30, 2026, equity in income from unconsolidated entities increased $0.3$0.2 million and $0.5 million from the three and six months ended MarchJune 31,30, 2025, respectively, in each case primarily due to an increase in income from the mortgage brokerage company, which ramped up operations in 2025.

Interest expense is comprised of interest incurred, but not capitalized on our Amended Credit Facility, other borrowings, and amortization of debt issuance costs. Our interest expense increased $0.2 million to $0.8 million forFor the three months ended MarchJune 31,30, 20262026, frominterest $0.7expense decreased $0.1 million forfrom the three months ended MarchJune 31,30, 2025, whichprimarily wasdue to higher interest eligible for capitalization. For the six months ended June 30, 2026, interest expense increased $0.1 million from the six months ended June 30, 2025, primarily drivendue byto anhigher increaseoutstanding in interest incurredborrowings on our Amended Credit Facility due to a higher average outstanding balance.Facility.

Other expense (income) expense,, net

Other expense (income) expense,, net primarily consists of interest income, credit card rebates, insurance settlements, and other miscellaneous income and expenses. For the three and six months ended MarchJune 31,30, 2026, other expense (income) expense,, net decreasedincreased by $0.6$4.4 million and $3.8 million, respectively, from $0.5the millionthree ofand netsix expensemonths toended $(0.1)June million30, of net income, which was2025, primarily drivendue by a $0.7 millionto lot option contract abandonment chargecharges of $4.5 million during the three and six months ended MarchJune 31,30, 2025,2026 whichcompared didto notnone recurand in$0.7 million during the currentthree year.and six months ended June 30, 2025.

Smith Douglas Homes Corp. is subject to U.S. federal, state, and local income taxes with respect to its allocable share of taxable income of Smith Douglas Holdings LLC assessed at the prevailing corporate tax rates. Smith Douglas Holdings LLC operates as a limited liability company and is treated as a partnership for income tax purposes. Accordingly, it incurs no significant liability for federal or state income taxes, since the taxable income or loss is passed through to its members. Provision for income taxes was $0.3$0.1 million and $0.9$0.7 millionmillion, respectively, for the three months ended MarchJune 31,30, 2026 and 2025, respectively, which reflects an effective tax rate of 5.9%5.4% and 4.3%, respectively. Provision for income taxes was $0.4 million and $1.6 million, respectively, for the six months ended June 30, 2026 and 2025, which reflects an effective tax rate of 5.7% and 4.4%, respectively. The increase in the effective tax rate is primarily related to an increase in state income taxes.

(1)Other primarily includes homebuilding operations in non-reportable segments, corporate overhead costs,costs such as payroll and benefits, business insurance, information technology, office costs, outside professional services and travel costs, and certain other amounts that are not allocated to the reportable segments.

Net income for the three and six months ended MarchJune 31,30, 2026 decreased by $14.6$14.7 million, or 78%89% and $29.3 million, or 83%, respectively, from the same periodperiods of the prior year. The decrease was primarily due to a decreasedecreases of $13.1$4.0 million and $17.1 million in home closing gross profitprofit, respectively, and an increaseincreases of $2.9$7.2 million and $10.1 million in selling, general and administrative costs.costs and in other expense (income), net of $4.4 million and $3.8 million, respectively.

Our adjusted home closing gross profit and adjusted home closing gross margin decreased from both the three and six months ended MarchJune 31,30, 2025 to the same periodperiods in 2026. The decreasedecreases in adjusted home closing gross profit primarily results from a decrease in home closings of 7%. The decrease inand adjusted home closing gross margin waswere drivenprimarily bydue anto increaseincreases in the average cost of home closings of 4%.4% in both periods.

(1)For the three and six months ended MarchJune 31,30, 2026 and 2025, our tax expenses assume a 26.6%26.9% and 24.9% federal and state blended tax rate, respectively, (assuming 100% public ownership to adjust for the impact of taxes on earnings attributable to Smith Douglas Holdings LLC as if Smith Douglas Holdings LLC was a subchapter C corporation in the periods presented).

EBITDA, EBITDA margin, adjusted EBITDA, and adjusted EBITDA margin are not measures of net income or net income margin as determined by GAAP. EBITDA and adjusted EBITDA are supplemental non-GAAP financial measures used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies. We define EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, and (v) depreciation. We define EBITDA margin as EBITDA as a percentage of home closing revenue. We define adjusted EBITDA as net income before (i) interest income, (ii) capitalized interest charged to cost of home closings, (iii) interest expense, (iv) income tax expense, (v) depreciation, (vi) share-based payment expense, (vii) adjustments resulting from the application of purchase accounting included in cost of sales, (viii) adjustments resulting from the application of purchase accounting included in other expense (income) expense,, net, and (ix) real estate inventory impairment and lot option contract abandonment charges. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of home closing revenue.

Our EBITDA and EBITDA margin decreased from the three and six months ended MarchJune 31,30, 2025 to the same periodperiods in 2026, primarily as a result of a $14.6 million decreasedecreases in net income andof $0.4$14.7 million increaseand in$29.3 capitalizedmillion, interest charge to cost of home closings.respectively. Our adjusted EBITDA and adjusted EBITDA margin also decreased from the three and six months ended MarchJune 31,30, 2025 to the same periodperiods in 2026, primarily as a result of the underlying decrease in EBITDA,net asincome welldescribed as a $0.6 million increase in share-based payment expense,above, partially offset by athe $0.4 million decreaseincreases in the add-back for real estate inventory impairment and lot option contract abandonment charges.charges of $7.6 million and $7.2 million, respectively.

As of MarchJune 31,30, 2026, we had $28.0$14.2 million of cash and cash equivalents. We believe existing cash and cash equivalents, availability under our Amended Credit FacilityFacility, and positive cash flows from operations will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. We have historically generated cash and fund our operations primarily from cash flows from operating activities as well as availability under our credit facilities and other borrowings. We exercise strict controls and have a prudent strategy for our cash management, including those related to cash outlays for lot acquisitions and deposits on lot-option contracts. We require multiple party account control and authorization for payments. We competitively bid each phase of the development and construction process and closely manage production schedules and payments. Land acquisitions are reviewed and analyzed by our senior management team and ultimately approved by our Chief Executive Officer and Chief Financial Officer. Additionally, our land-light business model reduces our upfront capital requirements and generally provides for “just-in-time” lot delivery, which better aligns our pace of home orders and home starts. Our principal uses of cash include deposits on lot-option contracts, acquisition of finished lots, home construction, operating expenses, and the payment of interest and routine liabilities.

In the coming 12 months, our primary funding needs will revolve around the construction of homes, acquisition of finished lots under new and existing contracts, and operating expenses. Additionally, we may seek to use our capital to enter new markets through acquisition or greenfield startup if we believe such markets fit our business model. To address these short-term liquidity requirements, we anticipate relying on our existing cash and cash equivalents, as well as the net cash flows generated by our operationsoperations, and availability under our Amended Credit Facility.

As of MarchJune 31,30, 2026, the Company has a $325.0 million unsecured revolving credit facility that was entered into concurrently with the IPO and amended in May 2025 (the Amended Credit Facility). The Amended Credit Facility matures in May 2029, except that the Company may request a one-year extension of such maturity date. The Amended Credit Facility also includes a $100.0 million accordion feature, subject to additional commitments. The Amended Credit Facility provides that up to $20.0 million of the commitments may be used for letters of credit.

The borrowings and letters of credit outstanding under the Amended Credit Facility may not exceed the borrowing base as defined in the Amended Credit Facility. The borrowing base primarily consists of a percentage of commercial land, land held for development, lots under developmentdevelopment, and finished lots held by Smith Douglas Holdings LLC and certain of its wholly-owned subsidiaries.

The Amended Credit Facility contains certain financial covenants, among others, including requirements to maintain (i) a minimum tangible net worth equal to the sum of (a) $286.1 million, (b) 32.5% of positive pre-taxpre‑tax income earned in any fiscal quarter after March 31, 2025, and (c) 50% of any new equity proceeds of Smith Douglas Homes Corp. and its subsidiaries at any time after March 31, 2025, (ii) a maximum leverage ratio of 60%, (iii) a minimum ratio of EBITDA to interest incurred of 2.00 to 1.00, and (iv) a minimum liquidity requirement of $15.0 million. The Amended Credit Facility also contains various covenants that, among other restrictions, limit the ability of Smith Douglas Holdings LLC and the other borrowers to incur additional debt and to make certain investments and distributions. Additionally, the Amended Credit Facility contains certain covenants that restrict certain activities of Smith Douglas Homes Corp. The Amended Credit Facility also contains customary events of default relating to, among other things, failure to make payments, breach of covenantscovenants, and breach of representations. If an event of default occurs and is continuing, the borrowers may be required to immediately to repay all amounts outstanding under the Amended Credit Facility. As of MarchJune 31,30, 2026, wethe wereCompany was in compliance with all covenants related to the Amended Credit Facility.

As of MarchJune 31,30, 2026 and AprilDecember 24,31, 2026,2025, there were $65.0$63.0 million and $77.0$40.0 millionmillion, respectively, of outstanding borrowings under the Amended Credit Facility, respectively.Facility. As of bothJune March 31,30, 2026 and AprilDecember 24,31, 2026,2025, there were $0.8 million and $0.5 million of outstanding letters of credit.credit, respectively.

In addition, under the Tax Receivable Agreement, we are required to make cash payments to the Continuing Equity Owners equal to 85% of the tax benefits, if any, that we actually realize (or in certain circumstances are deemed to realize), as a result of (i) Basis Adjustments; (ii) Section 704(c) Allocations; and (iii) certain tax benefits (such as interest deductions) arising from payments made under the Tax Receivable Agreement. We expect the amount of the cash payments that we will be required to make under the Tax Receivable Agreement will be significant. The actual amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors, including the timing of redemptions or exchanges by the Continuing Equity Owners, the amount of gain recognized by the Continuing Equity Owners, the amount and timing of the taxable income we generate in the future, and the federal tax rates then applicable. Any payments made by us to the Continuing Equity Owners under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Cash flows from operating, investing, and financing activities – comparison for the threesix months ended MarchJune 31,30, 2026 and 2025

We generated $0.3$4.9 million and used $34.9$63.8 million in net cash in operating activities for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Operating cash flows for the threesix months ended MarchJune 31,30, 2026 benefited from cash generated by net income of $4.1$5.8 million,million and non-cash operating expenses of $3.6$14.3 million, and a $21.3 million increase in accounts payable, which were more thanpartially offset by a $22.0$32.9 million increase in real estate inventory, $3.2$5.0 million increase in deposits on real estate under option or contract, and $4.0$25.0 million increase in otheraccounts assets.payable. Operating cash flows for the threesix months ended MarchJune 31,30, 2025 benefited from cash generated by net income of $18.7$35.1 million,million and non-cash operating expenses of $3.3$5.4 million, and a $2.7 million increase in accounts payable, which were more than offset by a $19.5$64.0 million increase in real estate inventory, $17.0$30.1 million increase in deposits on real estate under option or contract, $11.5 million increase in other assets, and $11.9$10.3 million decrease in accrued expenses and other liabilities.

We used $0.6$1.2 million and $2.1$4.2 million in net cash in investing activities for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The net cash used in investing activities during the threesix months ended MarchJune 31,30, 2026 was primarily due to $0.5$1.1 million in purchases of property and equipment. The net cash used in investing activities during the threesix months ended MarchJune 31,30, 2025 was primarily due to $1.0$3.2 million in purchases of property and equipment and $1.1 million in investments in unconsolidated entities.

We generatedused $15.5$2.2 million and $27.3generated $62.5 million in net cash from financing activities for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The net cash used in financing activities during the six months ended June 30, 2026 was primarily due to $23.0 million in net borrowings under the Amended Credit Facility, $16.1 million in payments related to repurchases of real estate not owned, $10.1 million in share repurchases, and $8.9 million in tax distributions, which were partially offset by $12.3 million in proceeds from sale of real estate not owned. The net cash provided by financing activities during the threesix months ended MarchJune 31,30, 20262025 was primarily due to $25.0$68.9 million in net borrowings under the Amended Credit Facility and $4.9$27.1 million in net cash inflowsproceeds from sale of real estate not owned transactions,owned, partially offset by $7.1$23.6 million in tax distributionsdistributions, and $5.7$6.8 million in sharepayments repurchases. The net cash provided by financing activities during the three months ended March 31, 2025 was primarily duerelated to $40.0repurchases of real estate not owned, and $2.2 million in netdebt borrowingsissuance under the Amended Credit Facility, partially offset by $13.9 million in tax distributions.costs.

While using land bankers and third-party developers as part of our land-light operating strategy comes at an additional cost, we believe our lot acquisition strategy reduces our operating and financial risk relative to other homebuilders that own and develop a higher percentage of their land supply. As of MarchJune 31,30, 2026, we had 750664 owned unstarted lots in real estate inventory on our balance sheet which represented only 3.2%2.8% of our total controlled lot supply.

As of MarchJune 31,30, 2026, we had $140.2$134.8 million of non-refundable cash deposits under land and lot-option contracts pertaining to 14,92513,986 lots with a remaining aggregate purchase price of approximately $1.11$1.05 billion.

From time to time, we may enter into surety bond and letter of credit arrangements with local municipalities, government agencies and developers. These arrangements relate to certain performance or maintenance-related obligations. As of bothJune March 31,30, 2026 and December 31, 2025, there were $0.8 million and $0.5 million outstanding letters of credit. Surety bonds do not have stated expiration dates,dates; rather, we are released from the bonds as the contractual performance is completed. These bonds, which totaled $55.9$56.6 million and $47.4 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively, are typically outstanding over a period of approximately one to five years depending on the pace of development. If banks were to decline to issue letters of credit or surety companies were to decline to issue surety bonds, our ability to operate could be restricted and could have an adverse effect on our business and results of operations.