Smith Douglas Homes Corp. (NYSE:SDHC) reported weaker-than-expected third-quarter results on Wednesday, as declining margins and softer home closings offset progress in expanding the builder’s community footprint across the South.
The company posted earnings of $0.24 per diluted share, sharply below analyst expectations of $0.67, while revenue fell 6% year-over-year to $262 million, compared with $277.8 million in the same period last year.
Home closings declined 3% to 788 units, and gross margin on home closings contracted to 21.0%, down from 26.5% in the third quarter of 2024, reflecting continued pricing and cost pressures.
“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,” said Greg Bennett, Vice Chairman and Chief Executive Officer. “We made further progress in establishing our presence in newer markets, while continuing to invest and expand our homebuilding footprint in our existing markets.”
Despite the earnings miss, the company posted several encouraging metrics. Net new home orders rose 15% to 690, while the active community count surged 32% to 98 by quarter-end. Total controlled lots grew 36% to 24,300, signaling strong future supply potential.
“We feel our Company is in great shape as we head into the end of 2025,” said Russ Devendorf, Executive Vice President and Chief Financial Officer. “Our net debt-to-net book capitalization stood at 8.4% at the end of the third quarter, while our active community count was up 32% compared to last year.”
The company’s total debt-to-book capitalization increased to 11.2%, compared to 0.8% at December 31, 2024, as Smith Douglas stepped up investments to support its expansion strategy.
While growth initiatives continue to gain traction, the margin contraction and weaker earnings underscore near-term profitability challenges as the company balances scale with cost control.