Hello everyone. Thank you for joining us and welcome to Smith Douglas Holmes' first quarter 2026 earnings call and webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 on your keypad to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Joe Thomas, SVP of Accounting and Finance. Joe, please go ahead.

Good morning and welcome to the Earnings Conference call for Smith-Douglas Homes. We issued a press release this morning outlining our results for the first quarter of 2026, 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, are 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 GAAP 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.

Good morning and thank you for joining us today to review our results for first quarter of 2026 and provide an update on our operations. Smith-Douglas Homes generated $4.3 million in pre-tax income for the quarter, net income of $0.06 per share. We delivered 624 homes, which came in at the high end of our guidance range, while home closing gross margin exceeded expectations at 19.6% on a gap basis. For the quarter, we generated 981 net new orders, about 28% from a year ago, and a new quarterly record for the company. While order activity remained choppy throughout the quarter, we experienced a sequential improvement in our sales space each month for the quarter, culminating in a sales space of four homes per community in the month of March. Finance and incentives continue to be a key selling tool as buyers remain motivated to own a home, provided they can secure a monthly mortgage payment that fits their budget. We are encouraged by the price elasticity we experienced during the quarter, as incremental adjustments in pricing led to an uptick in demand. We view this as an indicator that underlying demand remains intact across our markets, despite broader macroeconomic uncertainty. From an operational standpoint, we remain focused on pace over price velocity, which means maintaining a consistent cadence of starts, driving efficient inventory turns, and driving towards a more pre-sale oriented backlog. Our average build time was 57 days during the quarter, consistent with prior periods, and we continue to view our ability to deliver homes quickly and reliably with an offering of home choice and personalization as a key competitive advantage. Our landline strategy also remains central to how we operate. By relying on third-party lot developers, we're able to allocate capital efficiently and maintain flexibility through varying market conditions. We believe this approach positions us well to manage risk while continuing to scale the business. We also make progress on our growth initiatives during the quarter. Community count expanded to 108 active communities across our markets, up 24% from a year ago, and we continue to ramp operations in our new markets such as Dallas, Chattanooga, Greenville, and Alabama Gulf Coast. Our experience in Houston continues to demonstrate that our operating model translates well beyond our legacy footprint and we remain focused on executing a discipline and opportunistic expansion strategy over time. As we move through the spring selling season, we're encouraged by sales orders generated during the quarter, which helps rebuild backlog and provide momentum heading into the second quarter. We have continued to see encouraging traffic and order activity early in the second quarter, although demand remains variable week to week. We will continue to evaluate pricing and incentives at a community level and adjust as needed to maintain the pace required to support our operating model. While macro conditions remain dynamic, employment trends have been relatively resilient, and we continue to see motivated and engaged buyers in our markets. We believe our focus on attainable pricing, personalization, and value put us in a good position to compete for these buyers and drive market share gains over time. Finally, I'd like to thank all of our team members for the hard work during this quarter. We challenged everyone to focus on getting off to a strong start this year and our results this quarter showed they were up to the challenge. With that, I'd like to turn the call over to Russ who will provide more color on financial results this quarter and give an update on our outlook.

Thanks Greg, and good morning. I'll highlight our results for the first quarter and then conclude my remarks with an update on what we are seeing so far this year and our outlook for the second quarter. We finished the first quarter with $206.4 million in revenue on 624 closings at the high end of our guidance range with an average sales price of $331,000. Our home closings gross margin was 19.6% on a gap basis and adjusted home closing gross margin was 20.3 percent which adds back impairments, interest in cost of sales, and purchase accounting adjustments. During the quarter, gross margin benefited by 170 basis points from the reduction of land development accruals on the closeout of several communities. Our margins continue to reflect the use of incentives and targeted pricing adjustments to support affordability and maintain sales space. During the quarter, closing costs, price discounts, and the cost of forward commitments totaled 730 basis points, which compared to 430 basis points in the year-ago period and 680 basis points sequentially from the fourth quarter of 2025. Selling general and administrative expenses for the quarter were $35.9 million, or approximately 17.4% of revenue, up $2.9 million compared to the same period last year, reflecting continued investment on our growth markets as well as the impact of lower average sales price. Pre-tax income for the quarter was $4.3 million, resulting in net income of $0.06 per share. Given the nature of our up-sea organizational structure, our reported net income reflects the allocation of earnings between Smith-Douglas Homes Corp. and the non-controlling interest of Smith-Douglas Holdings, LLC. Because a significant portion of our earnings is attributable to LLC members and not taxed at the corporate level, the income tax impact reflected in our financial statements can differ from more traditional C-Corporations. For that reason, we also present adjusted net income, which assumes a blended federal and state effective tax rate of 26.6% as if we operated as a fully public C-Corporation, which we believe provides a more meaningful comparison to peers. For the quarter, adjusted net income was $3.2 million compared to $14.7 million in the same period last year. Turning to orders, we generated 981 net new home orders during the quarter, an increase of 28% versus the year-ago period. We ended the quarter with 869 homes in backlog, with an average sales price of $332,000. In addition to backlog, we also had 42 home reservations at the end of the quarter. These reservations allow our buyers to take advantage of buying a built-to-order home while also benefiting from a guaranteed mortgage rate when they close. We expect most of these reservations to convert to new home orders in the second quarter. Turning to the balance sheet, we remain in a strong financial position. We ended the quarter with $28 million of cash and $68.5 million of total debt, with approximately $195 million available under our revolving credit facility. Our debt-to-book capitalization was 13.6%, and net debt-to-net-book capitalization was 8.5%, reflecting our continued conservative approach to leverage. Our land light strategy remains a core component of our operating model, with the majority of our lots controlled through option agreements, allowing us to maintain flexibility and deploy capital efficiently. As Greg previously mentioned, and I explained on our fourth quarter call, I want to reiterate that our pace over price philosophy continues to guide how we manage the business. In the current environment, our focus remains on maintaining absorption and inventory turns, even if that requires some pressure on margins in the short term. We believe maintaining sales pace allows us to preserve market share, generate cash flow, and continue investing in our community pipeline, which ultimately drives scale and stronger returns over the full housing cycle. From a broader macro perspective, the housing market continues to operate in a challenging environment, driven primarily by affordability pressures and elevated mortgage rates. Recent economic data has been mixed, and geopolitical developments continue to contribute to uncertainty. We are also monitoring labor market trends closely, as employment remains a key driver of housing demand. Our capital allocation priorities remain unchanged. We will continue to prioritize investing in our land pipeline and community growth while maintaining a conservative balance sheet, and we will also remain opportunistic with share repurchases. During the first quarter, we began executing on our share repurchase authorization and continued to repurchase shares into the second quarter. Including repurchases completed in April, we have repurchased approximately $10 million of stock at an average price of $13.28 per share. We believe these repurchases represent an attractive and disciplined use of capital without limiting the financial flexibility to support our long-term growth strategy. For the second quarter, we currently expect closings between $725,000 and $800,000 homes, average sales price between $325,000 and $330,000, and gross margin between 17% and 17.5%. Given the continued variability in demand conditions, we are not providing full-year guidance at this time. We believe the primary risk to our outlook remains tied to macroeconomic conditions, including mortgage rates, consumer confidence, and employment trends. That said, we believe our affordable product offering, landline strategy, and discipline operating model position us well to continue gaining market share over time. With that, I'll turn the call over to the operator for instructions on Q&A.

We will now begin the Q&A session. A reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Michael Rahat with J.P. Morgan. Michael, your line is open. Please go ahead.

Hey guys, it's Nick, Tara, on for Michael. Good morning. Thanks for taking the question. um i wanted to start by asking um on the gross margin piece um you called out some moving pieces but would really appreciate any uh extra color that you have either on the incentive environment and pricing um you know considering like asps um for the first quarter um for the lower end of your guide um as well as on on the cost side would be really helpful any color you can provide on on construction costs, labor, etc.

Guidance on a gap basis came in at the high end of guidance on a gap basis and we had 170 basis points as I mentioned that in the way land development works so when we close out communities we we typically have a reserve in land development for anything that um you know over the next three to six months uh may come in you know from a cost perspective uh we had closed out some communities in the fourth quarter you know towards the end of last year and so um those accruals that we we had got reversed uh in the quarter so that that contributed to 170 basis point positive uh impact to margin so if you back that out we would have been right around I think 18 point 18.1% was which I think still was right in line with guidance or in the high end of our guidance range and then from just some additional costs as we mentioned there's 730 basis points that were impacted by like I said impairment not impairments excuse me closing costs the incentives for forward commitments so the cost there and price discounts and just to remind everybody the price discounts and the forward incentives that's a reduction to revenue so ASP that kind of drives ASP down a little bit and then closing costs run through our cost of goods so that that was that was up sequentially as I mentioned and up year over year and then you know from a just from a cost perspective you know we're actually getting some benefit on the direct cost side so that's coming in a little bit better year over year But the big driver still for us in kind of margin degradation is the lot costs. So lot costs were, as a percentage of revenue, it's up about 300 basis points versus last year. So that's just the impact of, you know, the higher basis for land deals that we entered into the last couple of years.

Got it. And then on anything you could provide, you know, I think you mentioned any preparator marks that demand is still looking a little choppy week to week. Any color you can provide on that, either on a sequential basis, you know, just a couple weeks in, but relative to March or anything you could provide on April to date, that'd be helpful from a demand perspective.

Yeah, thanks for the question. and we you know we're seeing seasonal traffic and we we had good strong traffic through March April has been a slight decline but still seasonally good you know so we've gone through all the spring break and all the disruptions there it's held pretty pretty steady maybe down um oh six eight percent over what we were saying earlier got it super helpful um appreciate it guys i'll pass it on thanks your next question comes from the line of mike doll with rbc capital

mike your line is open please go ahead hi everyone you've actually got steve and mia on for mike today thanks for taking my question sure um i was hoping we could talk a little bit on the sgna side of things i totally understand y'all are in a big kind of growth phase and there's you know life cycle chargers and there's you're opening up your new divisions and kind of getting all heads in place in there um i was just kind of wondering if you could give us a little more of an overview on where you are in that life are in those life cycles are that good keep ramping or is that something that might start to moderate a little bit in the coming quarters just kind of qualitative overview there. Thanks.

Sure. Yeah, I think as a percentage of revenue, it should definitely start to moderate. Because when you look at the gross dollars, we were only up to $3 million in that range. So it's more a reflection of our ASP is coming down. And again, part of that is increase incentives. Like I mentioned, forwards and price discounts are pushing that ASP down. And so it's pushing that top line revenue. So some of that percentage increases is because of the top line revenue. But, you know, it is, you know, the gross dollars, you know, the increases is actually not that bad in my, you know, from from our perspective, because we did open, as you recall, so Dallas was a new division last year. We divisionalized Chattanooga. We're opening up the Gulf Coast, which we hope to have some sales here in the next few months. And so we've got we've got a lot of, you know, new, fresh G&A that's hitting the books without any any volume. And so that that, again, just reflects our our continued growth and scale. So when when you start to see, you know, some of that revenue come through, I think it'll it'll moderate. Right. You know, and again, even if you go back a couple of years, Greenville is a fairly new division. We centralized or we divisionalized central Georgia. And so we have expanded the footprint, you know, again, in in in the drive for additional scale.

So it's just, you know, it's kind of a timing thing. no totally makes sense appreciate the response and secondly understanding that you're not providing full year guidance but if there's anything y'all could share with us on areas where you may have a little more visibility like your thoughts on your perhaps pacer cadence of community counts and how you're looking at kind of hopping on the previous question incentives within kind of within the guide and just kind of more broadly going forward would be helpful thank Sure.

Yeah, we don't like to give full year now. I mean, maybe as we wrap up the second quarter and we're kind of halfway through the year, we will give some more clarity. I mean, it's not like we don't have, you know, our internal targets. It's just given the environment, we just don't think it's prudent to provide any, you know, full year guidance. I mean, again, especially when it comes to margin or income, I mean, it's such a wild card. You know, we're going to continue to push pace. We feel pretty good, especially coming off of March and the quarter. I mean, we had a really good beat, you know, exceeded our internal expectations on sales. You know, that's a reflection of us doing, you know, some additional price discovery in our communities, really driving our sales folks uh you know credit to them in the in the field for really pushing um pushing on pace and so uh turned out to be a good quarter in sales which obviously the the increase in backlog it's going to you know set us up for um you know uh hopefully it starts to set us up for a good back half of the year in terms of closings um i think i mentioned on the last call uh you know we were we were expecting anywhere from you know 10 to 10 to 20 percent in community count growth for the year um and so you can kind of translate that into you know what you might expect or as you you run your model uh what you might expect for for closings but um clearly we're we're we're focused on growing closings uh year over year so we've got some some pretty good internal targets but you can kind of back into the numbers um based on what i just told you that's logical thanks thanks thanks for all your time sure your next question comes from the line of trevor allenson with wolf research trevor your line is open please go ahead hi good morning thank you for taking my questions uh first one's on your expectation for vertical costs going forward as I said, oil prices up, quite a bit of fuel prices up, some building products, materials,

have seen price increase announcements. So what are you expecting for vertical costs going forward? And then in terms of some of these price increase announcements from the manufacturers, are you currently taking on any of those price increases or have you been able to successfully push back against those?

Yeah, thanks for the question. We've been pretty successful in, you know, pushing a lot those increases off. Our costs are down year over year. We know that if this fuel situation stays higher for longer we're going to get hit with fuel surcharges and some of those things but we show up diligent every day to work on our cost and our efficiency. So we'll continue to do that and And, you know, the market's not allowing us price, and, you know, that message is going through to our trade and our suppliers to say, look, you know, we don't have ability to take price, and so we can't pass that through. So, we're holding a pretty tough line on that.

Okay. Makes sense. Appreciate that color. And then on your lot portfolio, I mean, clearly the majority of your lots are held off balance sheet. Can you talk about what portion of those lots are held by land banks and then shed any light on the structure of your land bank agreements, perhaps in terms of deposit rates, option maintenance fees, as well as your ability to potentially walk away from deals that no longer Thanks.

Sure. So of the total portfolio, we have about 30% of our lots under option are with land bankers. Then there's about 40% of our lots under option are with developers. And so there's 70%. And then the balance, the other 30% are still deals that are with the underlying land seller. So where we have a contract that we may be in various stages of due diligence, but we control it with, you know, varying deposits. And usually those are pretty small. But just from a land bank perspective and a structure perspective, so we are pretty much, on average, it's about a 10% deposit that we have with the land bankers. And then there's typically like a walkaway fee that if you bust out of the option, then you pay another 10 percent walkaway fee. And that's that we disclose that in in our financials. But we we don't on all of our new land bank deals. We do not cross collateralize. we have some finished lot bank where we'll stick some lots when we have some bulky takedowns on active communities that we'll put into a finished lot bank. And we may, you know, within a division cross-collateralize. But honestly, we don't view that as any real issue. So it's pretty simple the way we think about it.

Yep. Thanks, Zach, Ross. I appreciate all the color.

Good luck moving important thank you your next question comes from the line of ryan gilbert with btig ryan your line is open please go ahead hi thanks good morning guys um on the uh 2q26 margin guidance can you talk about how much of the step down is um from higher incentives in the quarter versus higher law costs or if there's anything else that we should call out uh it's we're assuming the The incentives are probably about flat sequentially, you know, maybe up or down 10, 10, 20 basis points.

We're still seeing the same, and it's been pretty consistent. We're seeing the same percentage of forwards, the use of forwards. So that's probably, you know, pretty consistent. But then it's really, you know, I think there's a little step down in ASP. You know, that, again, is probably coming from the forwards. But it's lot costs. You know, again, I think lot costs, you're going to continue to see that trend year over year where that's, you know, about 300 basis points up. So it's lot costs is driving it. And then, you know, part of the variable in there is, you know, how much to the earlier question, what Greg said, you know, how much are we able to hold on, you know, vertical costs? Right now, we've done a pretty good job year over year. The average sticks and bricks costs are down a bit, but, you know, there's some variability there.

Okay, got it. And can you update us on what you're seeing in terms of, I guess, spot land prices for the deals that you're signing up today? And then if you're getting any relief on pricing, how long that would take to flow through into your income statement?

Yeah, it's starting to turn. I think we've been mentioning this for the last couple of quarters. We're definitely seeing land prices start to moderate. We're starting to feel like we have more negotiating power, right? It's starting to flip from a seller's market to a buyer's market. And that, you know, obviously any new deals that we put under contract, you know, in the typical fashion, you know, excluding, you know, where we can pick up some finished lots from others that have walked. But, you know, it takes 18 months to flow through typically, right? Because you've got development for a year and then you've got, you know, several months of vertical construction. So it takes some time. So we don't expect the increase in lot cost to moderate for at least a couple of years, right, at any material level. And when we went public, we knew. We were guiding everybody. I mean, lot costs were going up just because we knew what we were doing deals at. But now you're starting to see that reverse a little bit. But that's also, as we talked about on our call and our pace over price philosophy, that's why it's real important for us to continue to move inventory through the pipeline so that we don't get, you know, gummed up with these lots. We can continue to move it through the pipeline so we can start taking advantage of a reset in land basis, land prices. And so that's kind of how we're thinking about it. Got it. Makes sense.

Just one more for me.

One last thing there, and Joe just pointed it out, and he's right. This is part of the reason why we think it's a reasonable opportunity to enter some of these new markets, because we're able to start fresh and take advantage of some of these reset bases.

Got it. Yeah, that makes sense. Yeah, just one more for me. It seems like you and the other publics and, I guess, the industry overall, based on the starts number earlier this morning, it seems like there's a reacceleration in starts. I'm just wondering how inventory looks in your markets and if you're seeing any impact from, I guess, the recent increase in starts volume.

There hasn't been anything that we've seen materially different or that we're hearing from our divisions. I know some of the builders, I mean, I think when you look year over year, a lot of the public's spec counts are down. You know, they may be starting, you know, and that could just be relative to maybe some better, you know, slightly better sales. I mean, we had better sales than expected this first quarter. We were up pretty good. So, obviously, our starts are going to be up. But no, from an overall pure inventory standpoint, not seeing any real impact there.

Okay, great. Thanks so much.

Your next question comes from the line of Natalie Kulisakere from Zellman & Associates. Natalie, your line is open. Please go ahead. Hey, good morning. Thank you for taking my question.

So could you talk a little bit about how your incentives trended as the quarter progressed? I know you said it was 730 basis points for the whole quarter on average, but I'm just wondering if March was higher than January and February and, you know, if you had to kind of push incentives to achieve that pace of, you know, for sales per community.

Yeah, and I don't have the exact numbers in front of me. And keep in mind, the 730 basis points, that's incentives and discounts that would have mostly come through in Q3, Q4 of last year that are hitting the books. And then, you know, from incentives on sales through the quarter, yeah, I would just generally say that as we ramped up our pace and, you know, pushed for a little bit more price discovery, you know, we probably saw it up a little bit. But honestly, we were, I think we were pleasantly surprised that it didn't, it wasn't, it wasn't a huge, a huge hit. But it does show that there is some, you know, price elasticity. It does, you can see it ties into, you know, increase in volume.

All right.

And what share of your closings this quarter were driven by spec sales and, you know, where in terms of getting to a more pre-sale heavy business? yeah i mean that's that um pre-sale is a huge um a huge uh driver or a huge focus of ours uh because you know traditionally uh you you're going to make more money on on pre-sales and you know because of our business model uh we we really focus on personalization and choice for our buyer and we have a quick quick turn uh you know from a cycle time perspective so really for us, we're trying to drive that message to the divisions, you know, and because we do think that ultimately that's going to help drive higher margins, but it also gives our buyers a different buying experience than when you go to some other entry-level builders that are more, you know, hey, you get, you know, a vanilla chocolate strawberry type of type of choice um but we've been averaging um you know it's probably still you know 40 60 pre-sale versus spec every every week um but but more importantly um we're we're getting the contract uh we saw an uptick in in getting a sale uh on um on a spec home before it hits what we call line in the sand so kind of um before it hits drywall stage so uh that's really today very important because you know we're still using um forward commitments incentives and you know the the interest to put an interest rate lock out there for more than 60 days is almost cost prohibitive so the incentives are still a big driver um for for some of these buyers and figuring out payment so even if we have those starts you know as long as we're within kind of 60 days and they can get some choice uh before we hit drywall stage you know getting that that sale before drywall stage is important so we're doing a pretty good job there i'd say we're probably 70 80 percent before drywall stage has got a sale uh and our spec inventory has been been coming down so um you know it's it's still a battle but that's you know that's our focus is is uh driving more pre-sale going forward.

All right, thank you.

Sure.

Your next question comes from the line of Rafe Judrosich from Bank of America. Rafe, your line is open. Please go ahead.

Hi, good morning. Thanks for taking my question. Sure. Can you, I know you walked through it a little bit, just the gross margin, it's good to see the backlog sort of stabilize and step up here. The gross margin sequentially flat quarter over quarter and one queue like just can you help me just understand um the the accrual call out that you had there and bridge like maybe on a like for like basis one queue to two queue um yeah so uh if you so we we had 170 basis points roughly of of a of a benefit because we reversed some land development accruals on closeout communities.

So these were several communities that closed out in kind of Q3, Q4. And so our internal policy is, you know, we keep, we start to ratchet down accruals over, you know, three to six months, just in case there's any stragglers or any costs out there once we close the community. And so that was 170 basis points to margin so basically if you just look operationally take our take our margin for the quarter back out 170 basis points and that's kind of where you would you would start with your you know um your gross margin uh to take out the noise um you know we had a little bit of impairment in there so you know strip that out uh i think that was 30 i don't know how many basis points that that accounted for 70 basis points so there were 70 basis points of impairment that was a negative uh impact to margin you know again you want to strip that out so uh when when you see our when you see our filing you'll you'll be able and i think it's in it's in the notes it's in the uh the back half of the press release but um when you when you look at the the adjusted margins you'll be able to to see some of that stuff um so that's why when you when you strip out all the noise i I think sequentially, we're basically calling for about a 50 basis point decline in margin from Q1 to Q2. And again, there was a lot there, but we can walk through any detail if once you see the numbers, do you have any confusion?

Okay, that actually, that's very helpful. It makes sense. And that's the sequential from 1K2, you still have land inflation, but incentives sort of flash. that's getting to this.

That's right.

Yeah. Okay. And then on the SG&A side, you said something that was really interesting. And obviously the dollars have stepped up here and continue to grow, but you're expanding communities. You're also moving into new markets. Of the markets that you operate in today, what would you consider to be at scale versus what you're still trying to get the scale up and are sort of below where you'd expect it to be longer term.

Yeah, thanks, Ray. I'll take that. We're in still infancy, I would say, in Greenville. We're the same in Dallas, Fort Worth, Gulf Coast. You know and we're kind of over that hump in Chattanooga made a lot of growth strides there in the last year and then Central Georgia would be another that we're still building scale in. It's just kind of spin off of Atlanta but without any real community count as we spun that off. So those Those are, again, not the scale would be Central Georgia, Greenville, Dallas, Fort Worth, and Gulf Coast.

Yeah, and the only, what I'd add to that as well is while we have, you know, we always are targeting a minimum of two what we call our teams, you know, and that's roughly 208 starts per our team. We want to have a minimum two R teams in every division. And so we're not quite there in a couple of our legacy divisions like Charlotte, you know, it's Nashville. We're not there yet. So at a minimum, we want to get there. And then that's just the minimum. But we really feel like in some of those legacy divisions, we should be closer to three R teams, 600 closing. specifically Raleigh. I do think Charlotte can get there, 600 plus. We're not there yet. Nashville should be, you know, 400 plus. And then obviously Atlanta and Houston right now are, you know, too big, you know, from a permit count, right, to the largest markets that we're in. Atlanta, because we peeled out Chattanooga, which was really kind of north, you know, Georgia, pulled back a little bit. But again, Atlanta proper should be, you know, close to 1,000, you know, units on a run rate. And then Houston for us, you know, we entered that. We're making a lot of good strides in getting them what I would say is like Smith-Douglas-ized, you know, from a turns. And they've been great. But, you know, we're only doing 400, you know, plus or minus closings there. I mean, that should be double, right? Within five years, you know, we need to i mean that's such a big market um we've had some headwinds but that should be double um and then you know what's really shining for us is is our alabama division you know they're they're at pretty good scale uh between birmingham and huntsville you know kind of plus or minus 600 so uh we've got some work to do in scaling up some of the legacy divisions but like greg said you know a lot of these um these new ones are just getting going but that's that's why you see the gna right when you look at the gna relative to the community count increase right our community count was up 24 and our gna was only up 2.9 million on gross dollar basis so um to me that's

pretty efficient great that's really helpful thank you yep your next question comes from the line of jay mccandless from citizens bank jay your line is open please go ahead hey good morning guys Guys, first question I had, you know, we've seen some articles in the mainstream press about affordability being even worse than some of the larger cities now, which is forcing some migration out. So I guess my question is, are you guys seeing better demand in your smaller markets, whether it's, you know, absorption, traffic, however you want to measure it, versus maybe some of the larger markets like a Raleigh and Atlanta?

Yeah, look, Alabama has done really well. You know, and I would consider that relative, obviously, you know, Birmingham, Huntsville relative to to a Houston, for instance. Yeah, we've seen, you know, some better demand trends. And again, you know, Texas is its own own animal. So, yeah, I think it's also just we're so used to in the Alabama markets. You know, they didn't have the kind of, you know, spike up, you know, post-COVID. I mean, it was good, but it wasn't like you had some of these other markets. So I almost feel like we're just used to hand-to-hand combat there, and, you know, it's just the way we operate. So, yeah, we saw some better demand there. But outside of that, like, there's nothing that I would say really sticks out with our footprint. I think we're in some pretty good markets, you know, kind of in the southeast and central U.S., which is, you know, that's by design. but nothing really that I can say sticks out. I don't know, Greg, if you...

You know, the only thing, Jay, I'll add to that is the in-migration and some of the bigger metro locations we're in is down. I mean, that's been ordered a lot. And so, you know, you feel that a little more and some of those smaller markets are not as sensitive to that.

Got it. Okay, thanks, guys.

And then the second question I had, um arms are you guys still trying to push on those is that still having good success with customers and um maybe what what your arm percentage was this quarter yeah we we shifted um really towards the end of the quarter and into april we moved from a 499 uh incentive that we kind of marketing across the footprint uh you know 30-year fixed uh we moved to a just to change it up a little bit and the costs were kind of almost in line. We moved to a 399-51 arm towards the end of the quarter and, you know, really into April. And if you go to our website, I think that's what you'll see at the top of the page. So we're offering, we're really, we're still offering both. We're marketing the 399. And a lot of that is, a lot of it really is, it's more a traffic driver, but it's also designed to give our salespeople as much flexibility right when because with a 399 5-1 arm the um the buyers can qualify off of that payment that that calculates off the 399 so you know for our buyer that's definitely helpful so we kind of give them some some optionality there but you know it's we're just trying you know seeing what the market's doing um you know trying to at least you know compete at that level uh and give give buyers as much um affordable options as as possible and we're seeing more usage of the 499s yeah 499 the

30-year fixed 499 is probably taking the most of uh of the incentive okay got it great thanks guys appreciate it yep thanks jay we have reached the end of the q a session i will now turn the call back to greg bennett for closing remarks thank you for joining us on our q1 results call i hope everyone has a great day this concludes today's call thank you for attending you may now