Hello, and welcome to Smith-Douglas Holmes' second quarter 2025 call and webcast. Please note that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star, followed by one on your telephone keypad. Thank you. I'd like to hand the call over to Joe Thomas. You may now go ahead, please.

Good morning, and welcome to the earnings conference call for Smith-Douglas Holmes. We issued a press release this morning outlining our results for the second quarter of 2025, which we will discuss on today's call and which can be found on our website at investors.smithdouglas.com or by selecting the Investor Relations link at the bottom of our homepage. Please note this call will be simultaneously webcast on the Investor Relations section of our website. Before the call begins, I would like to remind everyone that certain statements made on this call, which are not historical facts, including statements concerning future financial and operating goals and performance or forward-looking statements. Actual results could differ materially from such statements due to known and unknown risks, uncertainties, and other important factors as detailed in the company's SEC filings. Except as required by law, the company undertakes no duty to update these forward-looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable gap measures can be found in our press release located on our website and our SEC filings. Hosting the call this morning are Greg Bennett, the company's CEO and Vice Chairman, and Russ Stevendorf, our Executive Vice President and CFO. I'd now like to turn the call over to Greg.

Thanks, Joe, and good morning to everyone. Smith Douglas Holmes turned in another strong operational performance in the second quarter of 2025, generating pre-tax income of $17.2 million and an earnings of $0.26 per diluted share. Home sales revenue was $224 million for the quarter on home closings of $669, which exceeded the guidance range we gave last quarter. Home closing gross margin came in at the high end of our guidance range at 23.2%, and net new orders for the quarter totaled 736 homes. Overall, I'm proud of our company's performance this quarter, despite a challenging macroeconomic backdrop for home building, and believe it once again demonstrates the strength of our asset-life operational model focused on turning inventory quickly. Inconsistent demand trends during the quarter, but stretches of solid order activity followed by periods of softness. While we believe there's a strong desire and need for new homes in our markets, affordability constraints, declining consumer confidence, and lack of urgency from buyers continues to be a headwind for our industry. As a result, we remain intensely focused on operating elements that are within our control, which include making our homes as affordable as possible while giving our buyers the choice and customization they desire. Our average sales price on homes closed this quarter came in at $335,000, which is one of the lowest ASPs of our peers. We ended the second quarter with 92 active communities, a 23% increase over the second quarter of 2024, and improved our control of lot count by 57% compared to a year ago to almost $25,000. AssetLot strategy, which gives us operational and financial flexibility to adjust to challenging market conditions, option lots accounted for 96% of our unstarted controlled lot count at the end of the quarter. We continue to focus on growing our operations in existing markets while exploring strategic expansion opportunities where we can deploy our operating model to further increase our overall market share of new home sales and achieve better economies of scale and operating leverage. To that end, I'm happy to share that we'll be entering Dallas-Fort Worth and Gulf Coast of Alabama markets through Greenfield startups. We have been working to secure several finished lot positions in DFW over the last six months and expect closing our first lots and start selling by year end additionally we've been working on several opportunities to acquire lots in greater baldwin county area of southern alabama and expect to close on several land deals that would have us targeting communities opening in the second half of 2026. we believe in the long-term growth prospects of these markets and they fit nicely into the geographic footprint where we can continue to deliver first-time homebuyers affordable high quality personalized homes production efficiency continues to be another major focus area of our company excluding houston our average cycle time at the end of the quarter was 54 days which is down from 60 days in second quarter of 2024 we continue to make headway in the quarter bringing Houston Division on board with these principles and look forward to them achieving cycle times closer to the company average in the near future. Despite the challenging sales backdrop, we feel our balance sheet remains in great shape with our net debt to net book capitalization ratio coming in at 12.1% at the end of the quarter. The strength of our balance sheet allows us to operate from a position of strength and remain opportunistic when the market dislocations occur previously announced 50 million dollar share repurchase authorization we also have the flexibility to buy our stock back should the opportunity present itself as we head into the second half of the year i feel good about our company's outlook even as the macroeconomic and interest rate environments continue to remain uneven and uncertain. We have many well-located communities in some of the best markets in the country and deliver homes at an average selling price that represents a good value. We continue to look for ways to curb costs and our build times continue to improve, which will help us turn our inventories. Despite Despite the uneven sales environment in the second quarter, our can rate was actually down year over year at 10% for the quarter, which is a testament to the appeal of our homes and the shortened time between sales and closings. We also have several new communities opening at the start of the third quarter, which will serve as a tailwind for our sales efforts. Given these positives, I remain optimistic about the future of Smith Douglas homes. Now, I'd like to turn the call over to Russ, who will provide more detail on our financial and operational performance this quarter and give an update on our outlook for third quarter.

Thanks, Greg. I'll now walk through our financial results for the second quarter and then provide an update on our outlook for the third quarter. We closed 669 homes during the second quarter, up 2% from 653 closings in the same quarter last year. Home building revenue was $223.9 million, an increase of 1% over the prior year. Our average sales price was approximately $335,000, which is down slightly year-over-year due to slightly higher discounts and shifts in geographic and product mix. Gross margin came in at 23.2%, which was at the high end of our guidance range and compares to 26.7% in the prior year. Our lower year-over-year margin reflects the impact of higher average lot costs, which were 26% in the current quarter, versus 23.9% of revenue in the year-ago period, as well as rising incentives and promotional activity, which totals 4.8% of revenue this quarter, up slightly from 4.2% a year ago. sgna was up 2.9 million versus prior year and was 15.5 percent of revenue compared to 14.5 percent last year driven primarily by increased payroll and associated expenses with a sizable portion of the increase coming from the opening of new divisions over the last few quarters net income for the quarter was 16.4 million compared to 24.7 million in the prior year and pre-tax income was 17.2 million versus 25.9 million. Adjusted net income was 12.9 million compared to 19.4 million in the prior year. As a reminder, given the nature of our up-sea organizational structure, our reported net income reflects an effective tax rate of 4.3% this quarter, which is attributable to the approximate 18% economic ownership held by the public shareholders through Smith-Douglas Homes Court and Smith-Douglas Holdings, LLC. Because the majority of our earnings are allocated to our class b members which is shown as income attributable to non-controlling interests on our income statement we provide adjusted net income which assumes 100 public ownership and a 24.9 blended federal and state effective tax rate we believe this measure is helpful in evaluating our results relative to peers with more traditional c corporation structures additional details on our structure and related income tax treatment can be found in the footnotes to our financial statements. Turning to the balance sheet, we ended the quarter with $16.8 million in cash and had approximately $70 million outstanding on our unsecured revolver with $189 million available to draw. As I mentioned on our last earnings call, we finalized the amendment to our credit facility, which included, among other things, an increase in total size to $325 million and extended the maturity to May 2029. Our debt-to-book capitalization was 15.2% and our net debt to net book capitalization was 12.1 percent. Backlog at the end of the quarter was 858 homes with an average sales price of $341,000 and an expected gross margin of approximately 21.5 percent. Monthly sales per community went from 2.8 in April to 2.4 in May and 2.8 in June. In July we saw that average dip back to approximately 2.5 sales per community. Affordability remains a key challenge for our buyers, and we continue to lean into targeted incentives to support sales. Continuing our program from late March, we utilize forward commitments to buy down interest rates, which we believe help boost conversion rates. During the quarter, we recognized $0.9 million of costs on forward commitments, which is recorded as an offset to revenue. We expect to continue to utilize these rate buy downs through the end of the year as we focus on a pace over price velocity. Turning to our third quarter outlook, we We expect to close between 725 and 775 homes with an average sales price between $330,000 and $335,000. Gross margin is projected to be in the range of 20.5% to 21.5%. While incentives will continue to pressure margins, we are maintaining discipline in how and where we deploy them. We ended the second quarter with 92 active communities and expect to see that number continue to grow modestly throughout the remainder of the year. we're actively opening new communities across multiple divisions and remain focused on supporting a stable and scalable growth platform before i conclude i want to reiterate that while we're pleased with our results through the first half of the year our outlook does include several risks as always our ability to achieve these results will depend on maintaining an adequate pace of sales bringing new lots and communities online as scheduled and managing cost pressures particularly in labor and materials. Additionally, broader macroeconomic factors such as inflation, employment trends, interest rates, and consumer confidence could create headwinds to demand and impact the timing of our volume of sales and closings. We remain focused on executing what we can control and believe our land light model, steady operations, and financial strength position us well to navigate these challenges over the long term. With that, I'll turn the call over to the operator for questions.

We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. Please keep your question to one question and one follow-up. Your first question comes from the line of Sam Reid of Wells Fargo. Your line is now open.

Awesome. Thanks so much. Definitely great to see the gross margin come in at the high end of the guide for the second quarter. Just curious what you're seeing from a stick-and-brick labor standpoint or either of those tailwinds relative to expectations in the quarter. And then looking to your third quarter guide, it does look like the homes you're planning to sell and close into your quarter will be carrying a lower margin relative to your backlog. I'm just curious what's embedded in your gross margin assumptions from an incentive standpoint, especially as it sounds like you're stepping up finance incentives.

Yeah, good morning, Sam. The sticks and bricks were flat here in Q2. They're down year-to-date a little. I'll let Russ hit a little bit on the gross margin pressure.

Yeah, so what we assume for Q3 is continued incentives, particularly on the forward commitments. So we've had some success with the rate buy-down. So we implemented, we started really back at the end of the first quarter and carried it through second quarter. So we've seen that it's a pretty good traffic driver. So we've been buying rates down to, you know, on a fixed basis to $4.99. We started to implement a 5-1 arm at a $3.99, and it's been pretty good from a traffic standpoint. points. So that's really the expectation is we'll at least continue that through the third quarter and really just kind of monitor it as we move along. The nice thing is we did see a little bit of a tick down in rates and certainly the cost of the forward. So that was nice this past week, but that's kind of our assumptions going forward.

Yeah, that's helpful. And then maybe switching gears, just touching on lots. So it looks like your controlled lot position is up almost about 60 or so percent year over year um maybe just break out you know kind of what that looks like in your existing markets versus how much of that might have come from some of the newer markets that you're looking to enter like dallas and the gulf coast just so we can kind of contextualize what that looks like you know in the context of your existing operations thanks sure um yeah not Nothing yet from the Gulf Coast, but for Dallas, we're probably 600 or so lots, I believe, in there.

And then we had a significant bump in Chattanooga over the last, you know, six to 12 months, which is part of our Atlanta division. But really, it's something that we're looking at as a possible standalone division in the future. So, you know, we've got some growth in there. Central Georgia as well, which we also mentioned about six months ago, we divisionalized that. That's kind of another split from Atlanta because of the continued growth in our largest division. But middle Georgia, central Georgia is, you know, Perry Macon that, you know, is really, really kind of south of I-20, if you know the Atlanta market. And so we've picked up quite a few lot positions. And then obviously Greenville was another division that we opened last year and we continue to pick up a lot. So it's it's coming. I mean, it's it's actually a pretty good spread across the footprint of the company. You know, Houston, clearly we continue to drive growth. We think, you know, going from, you know, close to 400 closings last year, you know, we've got a view that that can be another thousand unit market for us in the next next few years. so we continue to add lot positions. So it is spread across the company, but hopefully that gives you a little bit of color in some of the newer spots that we're entering. Thanks, Sam.

No, thanks so much.

Oh, go on.

No, that was it. That was it. No, thanks so much, guys. Really appreciate it. I'll pass it on. Thanks.

Your next question comes from the line of Mike Dahl of RBC Capital Markets.

Your line is now open. hey good morning everyone you've actually got steve and mia on for mike doll today thanks for taking my questions um wanted to start by kind of checking in on your thoughts for the outlook for the full year obviously third guide third quarter guide super helpful and want to fully respect the volatility in the current macro with everything going on out there but i was kind of hoping you could share with us how you're thinking about the kind of 3,000 to 3,100 ish homes target you gave this last quarter and kind of what may have changed if that is that's kind of still a good guide post and if there's any more details you could give us from there you're thinking about the balance of the year that'd be helpful thanks sure um yeah obviously we feel a lot better about

you know giving q3 guidance it's it's you know just given the environment it's it's pretty difficult to forecast you know too far out uh obviously you know we we put out three thousand that that's a that's a goal for us as a company um it's definitely achievable uh we certainly have the lot positions um you know we've got the community count so it's really going to depend on on demand for us and and look we're as greg mentioned i mean we we've got a a pace over price philosophy so for us it's really just finding that price at which we can continue to clear um you know inventory and continue to push sales but you know three thousand is in our sites you know, 3000 plus would be great. And so, you know, it's really, you know, going to depend on the on the demand and more of the macro environment. If we can get there, you know, we did, we felt like we, we, we had a pretty good balance this quarter and we've started using incentives and driving traffic. And, you know, the nice thing is, is just this past week we had, I don't know if it was a contribution of kind of where rates moved last week, but we did see a nice uptick in traffic and had a pretty good week of sales this past week. So we'll see, but it's still a target of ours.

That's super helpful. Appreciate the context there. Secondly, I had a question on the land side. You mentioned last quarter that you were starting to see some cracks in sellers out there.

So just wondering kind of from a higher level, what your current view of the land landscape is and what may have changed from last quarter to this quarter and overall views on that thanks yeah thanks i'll take that we're uh you know we are seeing some some softness in the land uh it's uh really not a lot of pullback on price uh we are seeing the ability to go back on some terms and more favorable negotiating, but on the land itself, it's still holding, but there's a fair amount of retrading going on currently, and I think we'll see that continue probably through the end of the year yet.

Got it. Super helpful, guys. I'll pass it on.

Next question comes from the line of Andrew Ozzie of J.P. Morgan. Your line is now open.

Hi, guys. thank you for taking my question uh appreciate the time here uh would love to kind of focus in on um you know maybe get an update for how are you thinking about community account growth i mean i think with obviously i don't think you necessarily got it to 3 000 but uh if that were the case that would imply a nice year-over-year growth and closings in four queues so just wanted to see if you guys can expand on that any any further thank you sure yeah look it was it clearly that was a little bit of a soft guide I gave on on the last uh the last question but like I said it's uh it's good to have goals right so you know that three thousands uh uh a

target for us we we'd like to get there um you know as far as community count so like I said we've got the community count um you know the other the other thing to to keep in mind with some of our community the way we count it um we've got a few communities in Houston where we've got in different lot sizes uh more or less the same same product so there's you know there's probably our community accounts may be overstated or or it includes really like probably three communities where where you've got a couple lot sizes but we do count them as separate communities so um you typically don't get the same absorption pace um in where you've got a couple of um you know different single family lot sizes so i just want to you know um at least highlight that but yeah we we think that uh there'll be some some moderate growth uh with with community count um you know through the back half of the year and and you're right i mean fourth quarter you know we've got some some expectations we've got the inventory in the ground you know when you look at our our uh you know spec levels uh today they're a little more elevated than than we normally have you know we're we're primarily a pre-sale builder um but you know with the way that we we operate from a really an assembly line manufacturing approach. You know, we continue to watch our inventory levels, but we're pushing pace and pushing incentives so that we can, you know, target our, you know, absorptions and, you know, try and get to our closing number. So hopefully that gives you a little color.

Thanks, Rob. It's always helpful. I guess for my second question, I just wanted to expand on, maybe if you can expand on the decision to enter DFW. Obviously, I think that's positive, a net positive, but given kind of the inventory dynamics there and potentially some oversupply, what drove that decision and kind of your strategy going forward for Greenfields there and into other markets in the future?

Yeah, I'll take that. You know, if we entered Houston, part of that message was kind of it's a launch pad for us across Texas with DSW being in the site. We've actually been on the ground in DSW for several months now, working on some opportunities and trying to be opportunistic where it was available and feel like we've got some really good positions there. We understand the dynamics in that market presently but feel like as in any of our markets we're in a we're in a good place with those those lots that we've secured.

Yeah the only other thing I'd add there is obviously with our our business model we we maintain a pretty conservative balance sheet and there was a a really good opportunity to pick up finished lots and we're definitely seeing some dislocation in the market there like you said i think there's there's some builders uh that are struggling you know our hope is that clearly we're we're we're getting it at a time where we think there's opportunity um you know could there be some continued softness sure but um you know we just feel like with our balance sheet and and really our long-term philosophy you know we're gonna we know we're gonna be there uh just felt like the the right time and we can pick up finish lots with some pretty low deposits And so it really limits the risk, but it's a good time for us to start taking advantage of some opportunity.

That makes a lot of sense. I appreciate the call, guys. I'll pass it on.

Thanks. The next question comes from the line of Rafe Jadrasek of Bank of America. Your line is now open.

Great. Thank you. Hi. Good morning. Thanks for taking my questions.

Good morning, Rafe.

Good morning. I first wanted to ask, just with the DFW and Gulf Coast entries, how do we think about just the SG&A run rate from here? Is there any sort of incremental investment as you ramp up into some new markets here? And then how do we think about, you know, you have a building strategy, which is very efficient. How do we think about when those markets are able to get scale and you're able to, like, implement your R-team? At what level of, you know, deliveries you need to get to before that hits that run rate?

Sure. Like we mentioned in the prepared remarks, probably about half of where we saw the year-over-year increase in SG&A was really from some of these new divisions. And so, you know, it's really payroll. It's headcount costs. That's the big driver when you're doing a greenfield startup is just putting some boots on the ground there. So, yeah, I think, look, the cost is – there's a cost. It's moderate, but, you know, maybe a couple million dollars in the first year to really get a division going before you start seeing some significant, you know, sales closings. But when we do a greenfield startup, you know, the plan is within the first two years we'd like to get, and, you know, the way that we do business with our R-team model, kind of our geographic pause. But within the first two years, the plan is always to get to a run rate of about that 200 closings, which is one full R team. So it's usually about two years before you start generating some profits. The hope is that those first 12 to 18 months, you're going to get to kind of a break even and then kind of get that run rate of 200. and then every, you know, call it 18 months or so, you'd like to see adding another R-team, so another 200 units and get to 400. I mean, that's our approach is that we want to enter markets where we can get at least two full R-teams. And certainly with Dallas, you know, that's the largest market in the country. You know, that's a market where we'd love to see within, you know, five years plus, you know, a thousand. We hope that we can get to a thousand deliveries there, just kind of like where we're targeting in Houston when we did that acquisition. So that's really the thought process and how that math works for us.

That's really helpful. And then we look at the backlog is obviously down quite a bit year over year. How do you think about the percentage of spec going forward here? Where has it been historically? where was it in the quarter and how do we think about it going forward and your comfort level in spec, shifting to a little bit more spec versus BTO?

Yeah, historically, really pre-COVID, we really are 70 plus percent pre-sale versus spec. And before we hit drywall, which we call line in the sand where normally you know 90 plus percent of our our homes have a contract on it so again we are we continue to be focused uh heavily focused on pre-sale it's just um really it's the market that's kind of driving a little higher spec levels for us and and what we're seeing in our new home competitors uh just with the specs on the ground um and and that's where a lot of the opportunities are for for buyers you know from an incentive standpoint so we're probably closer to you know 50 60 percent right now um but we are we we continue to push and and have some ideas to try and uh continue to push you know more pre-sale i mean that's that's obviously a focus but we've been successful uh you know we do have some higher levels of inventory so while the backlog is down you will see our inventories up up a bit but again um we've just been selling you know at a higher you know spec rate so uh you know backlog turnover is obviously uh you know increased uh in and but we're getting you know some higher spec sales so again given our guidance for the for the third quarter and you know a little bit of that soft guidance again for the back half of the year uh feel like we can get to our numbers but uh our focus is and and always will be uh pre-sales but it's just uh it's really kind of the market that's driving a little bit of that shift right now, and we're focused on getting back to, you know, higher presale levels when the market starts to, you know, hopefully move in our direction. Great. Thank you. Appreciate it.

Your next question comes from the line of Jane McAnlis of Wedbush. Your line is now open.

Hey, Jay. Jay, you there? On mute. there we go works better when the mute's not on um there you go sorry about that no worries so russ if you don't mind i heard the june and the july absorption numbers but could you give the april and may please um joe's pulling it up i think april was three in fact if i recall because i think we gave that on the last i think it was 2.8 and 2.5 yeah yeah yeah it was higher in april trended down to maybe flat May and then kind of, you know, as we move through the summer. But can't get good help, Jake. You know, it's taken Joe a while to pull up numbers. We'll circle, but when Joe gets it, we'll circle back.

Yeah, I'll follow it backwards.

Yep.

No problem on that. And then I guess the next question I had, so with the loose kind of 3,000 closing number you called out, that's what, almost 970, 980, you're going to need to close in the fourth quarter. Does that feel achievable? And do you think you're going to have to lean into the incentives and hit the gross margin to sell some of this excess spec inventory? Is that kind of how you guys are thinking about the rest of the year?

Yeah, for sure. I mean, look, again, we're pace over price. So it's clearly a matter of just leaning into incentives to the extent that it's needed to to drive that that pace um like i mentioned it's not a it's not a community count issue um it's not a it's not an construction issue our cycle times actually continue to improve so you know credit to you know our operators out in the field um it's really it's really just trying to you know hit a price that that can get that demand going so you know again our goal is 3 000 you know could it be 2900 sure it's just um you know a lot of it's just going to depend on price and incentives and you know that's why i haven't touched margin uh because you know who who it's real difficult to to to figure out you know where where that margin is going to be to get that pace but that's our that's our focus um i think it's worth calling out and jay just start going back it was 2.8 in april 2.4 in may and and thanks june looks like yeah yeah 2.8 in june so tick back up in june and then you have the the numbers we gave for july and august or july sorry um yeah i'd love to have but August number already, if you've got that, that'd be a good one.

So it's actually encouraging, I think, that you guys are saying that if you give a little more on incentives that the consumer is responding because some of your larger competitors have talked about how even if they did lean in and put more incentives in, it's not making the consumer react.

So maybe talk a little bit, if you could, about what type of uptake you're seeing when you do lean into the incentives because that's different from what we've been hearing from some of your larger competitors yeah look at least for us um it's it's definitely so we weren't a big user you know we really did our first forward commitments um in at the end of q1 and uh we we pushed it into uh to q2 because we did see an uptick in in traffic and um you know we we do feel like we're getting a little bit better conversion rate and so it's you know i can't quantify exactly but um we continue to monitor you know we talk we talk to the field on a regular basis and just you know try to figure out what's working uh really try to continue to educate you know our sales folks on hey these are the positives of using these incentives um you know we we implemented kind of that arm product this this um you know last several weeks because you know at a 399 rate um getting folks to to be able to qualify at that 399 rate is is a big deal especially for our buyer uh you know for us it's our buyers it's really uh figuring out that payment um we're still giving closing costs so we're we're also given you know um you know zero closing costs plus that 399 it's a really attractive opportunity um and and so it's you know it's like we said last quarter you know it's some some of what's happening in the market i feel is is a confidence issue by consumers but uh hopefully is is there's not as much noise um you know people start feeling good into the back half of the year and like i said these incentives feel like they're working for us and and so we'll continue to monitor and and continue to push it uh to the extent that uh we feel like it's helping out okay that's great thank you and then the last one for me um yeah i know y'all y'all talked about your stick and brick sounds like that's a little better but um i think there is the the looming threat potentially of higher lumber prices depending on what happens with this canadian

softwood lumber agreement i guess are y'all seeing any pricing letters from from your suppliers are y'all starting to see anecdotally any signs of lumber prices starting to move up and if so what When do you think it might fit? Y'all think some statement?

J, this is Greg. Good morning. We've not seen any letters presently. So there's a lot of discussion around tariffs. There's a lot of discussion about potential. But at the present moment, we've not had any notifications of impact.

That's great. Appreciate it.

Thanks, Jay.

If you ask a question, please press star followed by one on your telephone keypad. Let's star followed by one on your telephone keypad. Your next question comes from the line of Alex Barron of Housing Research Center. Your line is now open.

Good morning, guys, and congratulations on the reduction in the bill times. I was curious on that subject, if there's anything you can share on how you've been able to achieve those reductions, and do you feel like there's any further potential, or do you feel like that's as good as it gets?

Good morning. Yeah, we've got a stated goal company-wide that we want to be at 46 days on our build. So, yeah, we still believe there's opportunity. you know the the pace over price is is is our lever that we use with our our trays to help drive our waste and uh and and our cost uh so so they know they're getting a commitment of starts and and uh and that allows us to be more reliable in our assembly process john thank you so much Thanks, Alex.

Your next question comes from the line of Paul Friesbeck of Wolf Research. Your line is now open.

Thanks. Good morning, everyone. I guess, you know, you've got the two new green fields you just announced, but could you give us an update on what you're seeing, you know, with respect to the M&A environment and your appetite for M&A given current volatility and how you would even go about underwriting a deal, you know, given the unknowns out there?

Yeah, no, good question. There's definitely M&A opportunities out there. You know, we absolutely, we're always looking. We evaluate opportunities. But again, for us, it's, you know, all but Houston, we've done through a green field. We feel really confident and comfortable in our ability to open new divisions through greenfields. It's, you know, obviously it takes a little bit longer to get ramped up, but we're okay with that. You know, we're patient. Our majority shareholders are patient. You know, we're not looking at this as a sprint. You know, this is a long-term play, long-term view that we're taking, and really the objective, the main objective is to build a durable company and stick to the culture and the things that have made us really good, and it's easier to do that through greenfields.

And, you know, the one thing we didn't mention, but the two folks that are going to be heading up these operations are internal folks that have been at the corporate level for a long time and really get, you know, how we do things.

So we're really fortunate, and that's how we look. Like, we always look to promote internally, and we feel like that's the best way to do it. No. That said, if there was a really good opportunity that we can, you know, we felt like we were getting a really good deal, sure.

I mean, we'd look at it. Like I said, there's opportunities out there. But, you know, it's tough to want to pay a big premium in today's environment.

It's still, you know, I'd say M&A is still not cheap. i think things are getting a little more realistic but um you know there there may be a time and a place for it for us but um uh for now we feel we feel pretty good about you know the direction we're taking on on the growth uh side of things okay and then i i guess kind of related to that have you made any changes to your your you know current land underwriting standards have you You pushed up your hurdle rates.

And along with that, have you seen any change in financing costs given the volatility from, you know, the keeps up off balance sheet?

Yeah. On the latter part, really not a lot of term changes. But we are focused on, you know, our mature divisions. you know we want to maintain pace and we're underwriting based on our ability to maintain pace and market share and then on our newer divisions you know maybe our underwriting a touch softer but we're still very conservative as we look at those new markets knowing that we've got to ramp up so uh yeah not not any not any real change overall to underwriting but you know we're totally aware of the market conditions great appreciate it thank you thanks Paul call back to Greg Bennett for final remarks thank you everyone for joining us today on behalf of Smith Douglas and the whole management group we appreciate your interest in you in your involvement today have a great day thank you for attending today's call you may now disconnect goodbye