Smith Douglas Homes (SDHC) Q2 2026 earnings call transcript

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 2nd quarter of 2026, which we will discuss on today's call and which can be found on our website at investors dot Smith Douglas dot com or by selecting the investor relations link at the bottom of our homepage. Please note this call will be simultaneously webcast on the 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-GAP 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, Greg Bennett, the company's CEO and vice chairman, and Russ Devendorf, our executive vice president and CFF. I'd now like to turn the call over to Greg.

Good morning. Thank you for joining us today for a review of our business results for the 2nd quarter of 2026 in an update on industry conditions and our company's outlook.

Smith Douglas Holmes continued to make progress towards our goal of becoming the large-scale builder in the southeastern and southern United States, hosting strong year-over-year growth in both net new home orders and home closings in the 2nd quarter. We generated 273 million in home closing revenue for the quarter, representing a 22% increase over the 2nd quarter of 2025 on 839 home closings and an average sales price on close homes of 325,000. Home closing gross margin for the quarter averaged 17.6% on a gap basis, or 18.7% when you exclude the impact of 3.1 million inventory impairments included in the cost of home closings. Our pre-tax profit came in at 1.9 million for the quarter, or 9.5 million for adjusting for impairments and a lot of option contract abandonment charges.

Overall, our company executed well in the quarter against the home billing backdrop that continues to be marked by uncertainty and affordability challenges for new home order growth of 32% on a year-over-year basis for the quarter for a total of 970 net new home orders. As our team did an excellent job working with buyers to find the right combination of price, personalization, and value to keep our production-oriented building model running smoothly.

We saw consistent traffic and a relatively stable sales phase throughout the quarter, averaging roughly three sales per community per month, which we maintained through a targeted use of sales and sense. Our construction cycle time for homes closed average 55 days as we continue to emphasize construction efficiency across our home building platform. This remains the key component of our return focus business model, and one we feel differentiates our company from the competition. Not only does this discipline allow us to work through our communities efficiently, but it also shortens the time between sale and close, which helps reduce the possibility of cancellations. We continue to expand our presence across our markets. We grew order in community count by 20% on a year-over-year basis to 110 active communities.

Home building is the business of scale, and we know higher volume will lead to better expense leverage over time. At the same time, we remain disciplined on our land acquisition front by hearing our underwriting standards and walking from deals that do not meet those standards. We maintain this balance through our landline strategy, which allows us to control the pipeline of lots through options and land banking agreements, while also providing downside risk protection. At the end of the second quarter, we had a total of 22,319 unstarted controlled lots, with only 3% of those lots owned on our balance sheet.

As we turn our focus to the back half of the year, we feel cautiously optimistic about the state of the home building industry and our company's positioning. The U. S. consumer has proven to be resilient in the face of rising rates in macroeconomic uncertainty, while building conditions continue to be favorable. With a better discipline from builders in terms of spec inventory, and through selective and targeted financial incentives to buyers, we continue to be able to compete well against existing home market. As a result, I remain confident in our long-term outlook for Smith-Ugg with homes.

Finally, I want to once again recognize and thank our team members for their continued dedication and hard work. Their commitment to serving our customers, executing our strategy, and adapting to a dynamic operating environment has been instrumental to our success. On behalf of the entire leadership team, I want to express our sincere appreciation for everything they did.

Now, I'll turn the call over to Russ, who provide more detail in our financial results this quarter, and give an update on our outlook.

Thanks, Greg, and good morning. I'll highlight our results for the second quarter, and then conclude my remarks with an update on our balance sheet, capital allocation priorities, and outlook for the third quarter. We finished the second quarter with 273 million in revenue on 839 closings, with closings up 25 percent from the year ago period, and an average sales price of 325,000. Our home closing gross margin was 17.6 percent on a gap basis, and adjusted home closing gross margin was 19 percent, which excludes capitalized interest and inventory impairments. Our margins continue to reflect the use of incentives and targeted pricing adjustments to support affordability and maintain sales pace. During the quarter, closing costs, price discounts, and the cost of forward commitments totaled 780 basis points, which compared to 480 basis points in the year ago period, and 730 basis points sequentially were 41.9 million, or approximately 15.4 percent of revenue, up 7.2 million, compared to the same period last year, and down slightly as a percent of revenue.

The increase primarily reflected higher sales commissions and advertising costs associated with higher closings, and the investments related to our Dallas, Fort Worth, and Alabama Gulf Coast expansions. Free tax income for the quarter was 1.9 million, resulting in net income of 1.8 million, or 3 cents per diluted share. Our second quarter results included 3.1 million of inventory impairment charges in cost of home closings, and 4.5 million of lot option contract abandonment charges in other expense. Adjusted EBITDA, which we believe provides a clean apples-to-apples view of our operating performance as it excludes share-based payment expense, inventory impairments, and lot option contract abandonment charges, among other items, was 13.4 million, or 4.9 percent of revenue, compared to 19.8 million, or 8.8 percent of revenue in the same period last year.

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 interests 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 seed corporations. For that reason, we also present adjusted net income, which assumes a blended federal and state effective tax rate of 26.9 percent as if we operate it as a fully public seed corporation, which we believe provides a more meaningful comparison to peers. For the quarter, adjusted net income was 1.4 million, compared to 12.9 million in the same period last year.

Turning to orders, we generated 970 net new home orders during the quarter, an increase of 32 percent versus the year ago period. Year-to-date, we have generated 1,951 net new home orders, up 30 percent from the prior year period. We ended the quarter with 1,000 homes in backlog, up 17 percent from the year ago period, with a contract value of 322.1 million and an average sales price of 322,000. In addition to backlog, we also had 74 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 third quarter.

Turning to the balance sheet, we remain focused on preserving financial flexibility while continuing to invest in our growth. The end of the quarter with 14.2 million of cash and 66 million of total debt. Our 325 million unsecured revolving credit facility had 63 million of outstanding borrowings and 0.8 million of letters of credit at quarter end. Our debt-to-book capitalization was 13.2 percent and net debt-to-net book capitalization was 10.7 percent compared with 9 percent and 6.6 percent respectively at year end 2025. Net debt was 51.8 million at quarter end.

Importantly, our balance sheet has continued to improve as we scale operations even in this difficult housing environment. Despite increasing active communities by 20 percent from 92 at the end of this quarter and growing our closings 25 percent, our total debt was down 11 percent and on a per community basis total debt declined 25 percent while real estate inventory per community declined 14 percent from a year ago. These metrics highlight the efficiency of our business model and ability to effectively manage our balance sheet while at the same time growing our business.

Our land light strategy remains a core component of this performance. At quarter end, we control 23,527 locks including 1,208 homes under construction, 664 own locks, and 21,655 option locks. By relying primarily on third-party lot developers and option agreements, we can align a lot delivery with demand, maintain flexibility, and deploy capital efficiently. As Greg previously mentioned, 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, continue investing in our community pipeline which ultimately drives scale and stronger returns over the full housing cycle.

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 remain opportunistic with shared repurchases. During the second quarter, we repurchase 312,351 shares of Class A common stock for 4.4 million. Including repurchases completed in the first quarter, we have repurchased approximately 10.1 million of stock through June 30th.

We believe these repurchases represent an attractive and disciplined use of capital while preserving the financial flexibility to support our long-term growth strategy. Looking ahead, we remain encouraged by the strength of our order growth, the expansion of our community base, and the approving efficiency of our land light model while recognizing that demand remains sensitive to mortgage rates, affordability, and consumer confidence. For the third quarter, we currently expect closings between 825 and 900 homes, average sales price between 315,000 and 320,000, and gross margin between 16% and 16.5%. Given the continued variability in demand conditions, we are not providing full year guidance at this time. While the primary risk to our outlook remains tied to macroeconomic conditions, including mortgage rates, consumer confidence, employment trends, and the potential need for continued pricing adjustments and incentives, we believe our affordable product offering, land light strategy, discipline operating model, and growing community base positions 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.

Yeah, Mike, thanks. Well, pretty much June, July has stayed pretty much the same. That one caveat is we have leaned back in a little more on forwards and in some right versus the right that's gone back up. So we just continue to underwrite everything to our current environment. So if we look forward, if we have to continue this, if rates are continuing to stay elevated, the macros not giving us any indication of a lot of consumer change here in terms of, you know, we just continue, like I said, cautiously optimistic. The man's there. It's just solving affordability. And we continue to push for our pace. And as you see, the numbers, we've been able to hold our pace pretty steady.

Yeah, it should, you know, when we look at backlog and, you know, as Greg said, we were leaning more into to pace as we have really the first half of the year, I would tell you it's just more of, you know, our continued use of incentives and discounting to match pace with, you know, as a land-like builder, you know, kind of takedown. You know, we really focused in the first half of the year on trying to get, you know, one sale per community per week, really, and that kind of just matches the, you know, the takedowns in the majority of our, you know, option contracts. And so it's really, it's really just a function of kind of, you know, adjusting price and payment through those, you know, use of incentives, closing costs, forward commitments to get that pace.

So that's what I would tell you without, you know, I don't have the exact numbers in front of me, but that's really going to be the driver of the margin compression. And then hopefully, you know, like Greg said, we're cautiously optimistic that we're finding, you know, an opportunity to maybe kind of keep margin steady from here. And, you know, maybe pull back a little bit on incentives going forward and start to work on, you know, pricing and see if we can, we can call back some margin. You know, we're hearing some of our competitors, I think if you've heard on the other conference calls, you know, I think a lot of builders are reducing inventories or, you know, specs and, you know, leaning, you know, against, you know, increasing incentives.

So hopefully, as a, as an industry, we're, we're kind of finding bond.

So we'll look at the second half. Yeah, we've always been built to order focus. I mean, pre sales is, is our number one priority, or if you want to. Yeah, I think, I mean, to give you numbers, we're about 70, 30. We look at it more so around, you know, because of the way we work, buyers, you know, maybe have credit challenge or, or times and strengths that we may. So we focus on getting the home sold by drywall. That allows that house to steal clothes on its intended close date when we started it. So, so there's a few buyers that we do through reservations. But if you look at all that, into the day, everything sold by drywall at about 70%.

Yeah. And those are what we look at as the pre sales goes. There's a certain amount, well, that buyer, you know, there's a certain amount of attention to the approvals that we need to work through and qualify on the front end.

Yeah, no, the one, the one thing I would add, we still give our buyers the ability to personalize their homes, even after we, we start the home. So up until that drywall stage, like Greg, Greg mentioned, they still have the opportunity to select certain options in that home. So it allows for additional personalization, which I think is pretty unique, especially at our price point, giving buyers up until that point of drywall to create the home that they want. And those, as you know, the margin on those options come at a pretty good number for us. So anything we can do to give our buyers that opportunity to select their own options creates more margin opportunity for us, and it also creates a stickier buyer, because it's the home that they've had the ability to make choices.

Sure.

Yeah, I'll take that. So yeah, we've seen we're two and a half, three percent, year over year, cost is, you know, our hard cost savings are there. So yeah, for sure that helps, you know, with fuel prices, there's fuel surcharges and other things that are starting to creep back into the equation, but yeah, we have seen, seen savings in cost.

No, we haven't, we haven't gone back into the arms this quarter. What we, what we've been using is still kind of the fixed rate where we've, where we've bought forward just a fixed rate incentive. And, and towards the end of the quarter into third quarter, we've started to pull back on, on the rate incentive and are really trying to focus on just using the, the six percent that's allowable for closing costs and spot buy downs.

We think that, you know, from a base pricing standpoint, we're, you know, in, in most of our communities and markets, we're already priced, you know, on the low end of the market and offer a really good, a good value at our pricing. So, and it's, and it's seemed to, it hasn't seemed to have slowed our pace, which is, which is good. So as I mentioned on the last question, you know, we're, we're, you know, slowly pulling back on incentives to see if we can recapture some of that marking.

Sure. Yeah, we, we, you know, obviously, like every builder should be, we, we go through, you know, our impairment testing quarterly, and we first look at, you know, where our backlog margin is sitting. And that's kind of your first indicator. And, and so we do a thorough scrub of backlog. And then we'll, we're on cash flows, where we have some, you know, where those margins are, say, you know, mid to high single digits, and then we'll, we'll do the cash flow. And so again, we're, you know, it is what it is, right? We, it's, it is subjective. I will say this for anybody that's been in home building and doing this for a while. I mean, the, the testing is subjective.

I think that's why you probably across the builder landscape might see some that are, you know, taking more than others, but it's a pretty subjective process. But, you know, I think we, we're, we're pretty, you know, consistent on how we look at things. And, but is it widespread? No, I, I think, you know, we took it in maybe three communities.

Yes, three communities, three communities, this, this quarter. And then we took a couple of abandonment charges where it made sense. You know, again, I think the nice thing is, is having a strong balance sheet like we do, you know, the accounting does not drive any decision we, we make everything we do is based on, you know, economics. Is it a good deal for the business?

And, and so we're, we're fortunate, you know, just the way we manage the, the business that, you know, everything we look at is from an economic standpoint, not from an accounting standpoint. So, hopefully that answers your question.

No, we, we're still seeing kind of, it depends on the market. Two and a half to three percent is the commission that we're paying to, to outside brokers. We haven't, we haven't run any, any special, you know, deals or opportunities. So we've been, we've been pretty consistent. And then I think the, the co-broker, you know, the, the, uh, is about what 80, 80 percent? Mid-hath 70s. Mid-hath 70s. So, it's, it's remained for us. It's, that's, that's pretty consistent to where we've been running for a while.

Thanks, Sam.

Yeah, our, um, our long-term target would obviously be 100 percent. Right. That's, that's the, the ultimate goal is to get everything sold, uh, by drywall. And certainly, without a doubt, everything sold before we, we hit CO, right? That's, that's, but if you look historically, so if you go back pre-COVID, that, um, pre-sale, which I would say pre-sale before we hit drywall stage, uh, was about 90 percent. So as Greg said, we're about 70 percent. So we're, we're, um, we're inching closer to where we, we want to be, but we're, we're not there yet. And again, that's, that's, that really is, um, uh, the kind of environment we're in. And I think the fact that, you know, we're competing with a lot of builders that have specs out there and, you know, the use of incentives and forward commitments really applies to more, more QMI's quick movements.

And so that's what we're battling against. But we've always been, you know, we've never pushed a spec strategy. We're always a bill to order pre-sale. Um, it's just the environment we're in has kind of, you know, pushed those, those percentages, uh, down from, from where we would, we would like to be. Um, and then from a, from a pre-sale versus spec, uh, you know, true, true spec, I'd say, what about 100 basis points difference in margin, 150, 150 basis. Yeah, 200. Yeah. It, it, it, it'll, it'll, it'll vary by division. Um, and then, you know, we've, we've seen it compress a little bit. Um, but it's, um, you know, normally when you go historically, it was probably more of a 300 basis point.

Uh, and difference pre-sale versus spec. And now it's about 150, 200. So, yeah. Anything else? Yeah, a quick follow-up also on the three Q growth margin guidance. Um, what do you have embedded for different costs for costs and what costs the coming clear? Could you repeat that, Victoria? You cut out a little. We couldn't hear you. Oh, sorry. I just had it also in the three Q growth margin guidance. Uh, can you give any color and what you have embedded in terms of sticking brick costs, labor, and lot costs? Yeah, I don't have the numbers, uh, in, in front of us. We can, we can follow up, but I would tell you my, my, my guess is, um, lot costs and sticking, sticks and bricks are probably, uh, fairly consistent from where we are.

That, that probably has the least amount of variability from, from quarter to quarter. So what's probably sitting in, in backlog as I mentioned before, it's, it's going to mostly come from, um, incentives, uh, discount incentives and, and, um, closing costs are probably, uh, the drivers there. And again, it's, it's, if you think about it, um, because the first half of the year, we really were leaning into pace. And so, the, the way that we're getting pace is really by using, utilizing, um, those, those discounts. And sequentially the incentives were up 50, 50 basis points. And so I guess is third quarter, the incentives, uh, the total of all those incentives are probably going to also be up.

And that's, that's the driver of the, uh, the margin compression. Um, the last thing I would add is we're, we're usually as, is hopefully you all have gotten to, to know us over the last two and a half years of, of being public. We, we're pretty conservative. Um, we, we, I think we've had a pattern of, of beating our guidance and we hope to keep it that way. So we're usually pretty conservative. Um, but, you know, again, I, I felt comfortable with the 16 to 16 and a half percent. Hopefully we come in, you know, there, there might be an opportunity to do a little bit better. But because we're in such an environment where you've got specs and you're continuing to discount and we are pushing pace, you know, who knows what we're going to have to or want to do, um, towards the, in these last couple of months to, uh, to continue to move some of those specs through the, through the system.

Yeah, we, we talk about that a lot internally. Um, you know, I, I tell you first, our overriding goal is always going to be pace versus price. Uh, but yeah, we definitely have conversations about what level, um, does it start to make sense? And a lot of times it's going to be on a, on a division by division or really a community by community basis. Um, you know, currently our SGNA sits around 15% let's just say. So when, when gross margins, so if you, if you wanted a number, I tell you 15%, that's when we start saying, okay, what other levers could we or should we pull because look, you know, 15% gross, 15% SGNA you're, you'd be at a zero net.

So that's, that's probably the floor look, nobody wants to build for practice. Um, but we also recognize, right, we also recognize the need for us to continue to scale our, our business, right? That's in, in a declining rate environment, uh, or declining, you know, the housing environment we're in with, you've got top line margin compression. Scale is probably the best lever to pull to continue to, um, you know, generate positive, uh, returns. And so, you know, we, we, we feel like it was great when we went public and we raised capital and that capital was used to scale the business. The unfortunate thing is like six months later, we've entered into one of the toughest housing environments.

At least I've seen certainly, you know, GFC and, you know, even prior to that, but, um, yeah, we, we continue to, to focus on what we can control.

Yeah. Yeah. No, absolutely. I mean, we're looking at that every, every single day. Um, you know, Greg and I, you know, talk to the, to the DPs last week and, you know, for the back half of the year, it's like, you know, uh, no dollar is too small to save. Uh, and we're looking at SGNA every day. We, you know, we're, we're quite frankly, we, we said, Hey, it's, you know, no more, no more new hires unless it's really a variable head that's going to support field operations like sales and construction. You know, this is not a time to start layering on any additional overhead. We're anything on the like. So yeah, that's a, that's always a huge focus.

And so we're, we're always trying to pull those levers.

Uh, no more than, than what we've seen historically. Uh, we, we do take a number of contingencies and, and you know, a number of our, uh, specs are a result of those contingencies that we took and then buyers just didn't get, you know, either, either they're, they're deal fell out or didn't. Something happened in that process. So yeah, we are seeing seeing that.

Yep.

No, no. We, we, we never forecast, um, impairments. If, if we did, then we probably would have take, we would have, not probably, we would have already taken the impairment. So, no, we, we don't assume, uh, future impairments.

Yeah. Um, absolutely are, are taking base, base price cuts where it's, it's warranted. Um, and, and again, it is a community by community analysis. Um, because some, some communities, we're actually, you know, seeing opportunities to raise, uh, prices. And so we are, I mean, we're not pushing it to, to a point where, you know, it shuts down sales or, or slows pace, but we, we are definitely looking on a community by community basis where we can take price increases. And then obviously, um, you know, we are, we are continuing to discount where, where we've got inventory or the pace isn't, isn't where we, we'd like it. Um, we're traditionally, when you look at our communities, I, I tell you on average, uh, we're probably the, the biggest value when you look across the competitive market and the competitive communities.

We, we always, when we underwrite, we're always trying to underwrite to about 10 grand below, uh, any of our, at least 10 grand below the lowest competitor so that, um, you know, there's, there's obviously more people that can afford our homes than anybody else because of that price, right? Price, we always say price is the ultimate amenity. And, and so, you know, having that low price is, is key. So look at our incentives and seeing, you know, what's the optimal use of incentives and where can we pull back to, to then kind of recapture or at least maintain, you know, margin as it's, um, you know, clearly we've seen some compression, but I, I think, you know, we're going on about two years of what's been a really tough environment from a, from a sales and pace and margin compression perspective.

And you know, hopefully as we've heard from other builders that we're starting to find, um, you know, we're hopefully, we're, we're starting to find a little bit of a, of a bottom here. And we can, we can all start to recapture a little bit of profits.

Um, it, it should. And just to be clear, we never really, we never moved away from, from BTO, it was just a function of the market and, uh, the demand environment. And so it's, I tell you, and I give a lot of credit to our sales folks, but it is, it's really hard to know that you're setting the right price in a declining market, right? You really don't know until it's in the rearview mirror. So I tell you, uh, you know, last year and kind of into the beginning of this year, you know, you always, I tell you probably most bolders would say you're always kind of playing catch up because you're kind of looking in the rearview and saying, well, shoot, we didn't, we didn't move pace fast enough.

So I guess we didn't cut prices quick enough. And I think we did a really good job in the first half of the year, uh, matching pace or exceeding pace, on our sales versus start. So, um, yeah, I, I would tell you, um, given the way we've executed and the environment, I think yes, I think our, uh, we'll get back to a more, um, hopeful that we're going to start getting back to a more normal, um, kind of conversion and backlog going forward.

Yeah, there's, there's activity. We're, we're seeing, you know, there's usually a consistent flow of packages. Um, you know, the, the environment is such that, you know, it's unfortunate. I think some of the smaller, uh, you know, not as well capitalized builders, it's, it's been a struggle. And so that's where you usually see the, the bigger builders, the ones that have a balance sheet, you know, take this opportunity to, uh, grow market share. And so as you know, from, from the way we operate, I mean, we're, we're looking to scale up the business, but we're very thoughtful about how we, we go about it because we, we're absolutely, uh, it's important to protect kind of the way we operate, you know, with our team strategy and, uh, so the deal has to make sense.

Uh, so we're, we're always looking. Uh, we're, we're certainly, uh, exploring, you know, new possible markets for maybe a greenfield, uh, opportunity, but yeah, there's some deals out there that, you know, we'll, we'll take a look at packages and if, um, if it makes sense, uh, to expand. And again, we're, we're really focused on kind of just building out the southeast and central, you know, maybe creeping up a little bit, uh, you know, into the Midwest, but, but that's kind of our, our sweet spot if we were to do, uh, to do anything.

Jay, I think we're seeing it, uh, across all of our geographies that, uh, you know, there's, there's less inventory. I would say there appears to be an increase though in, in resale activity and, and resale homes on the market, but I think our new home specs has, has, uh, has slowed a bit.

Uh, yeah, we, we've seen pretty consistent demand across all the markets. I, I would say one bright spot for me that has been very interesting to see is the Houston and, uh, Dallas markets for us, the amount of pre-sale as, uh, as the percentage is probably higher than any markets we're in. Uh, our, you know, our message of personalization and, and ability to, you know, for buyers to, to do that is resonated and, uh, been embraced and, and I expect little levels there at all time lows and, and obviously Dallas and New Market, but Houston for sure.

Yeah, we were second quarter. We, what we closed was 780. Um, again, without seeing the numbers, I'm going to tell you it's probably a little bit higher than that. Uh, just again, given, given our guide, um, of, of, you know, the 16 to 16 and a half, which we hope is, is going to be a little bit better, but that's, that's where we see the, um, uh, the margin compression coming from. It's in those, it's in the incentives. And that's a combination of price discounts, uh, closing costs and forward commitments. And then, you know, again, we have been also reducing base price. So it's, it's going to be a combination of price reductions and, and those things.

So it's not, it's not really on the cost side or, and I can't imagine it's, um, it's really the land cost that's, that's shifting that much between quarters, right? So it's, it's really going to be driven by that, that incentives in the top line revenue.

You know, we've seen some, uh, but, but it's not, uh, not as widespread as you would think. Um, you know, it's still, um, you know, a lot of, a lot of the land sellers are still thinking their lands at, at top of market and, um, you know, which is, have done by a couple of them, those abandonment that we showed that, you know, we try hard to work through every deal and going to work through every deal, but it is a certain point you can't and, uh, uh, you know, so, but we are seeing, you know, a lot of, uh, ease in on terms, you know, probably more so than price, which at the end of the day is the savings.

So, uh, yeah, and I'd say it's probably 50-50 in the market right now.

Thanks. Thank you.

Thank you everyone for joining us, uh, for our Q2, um, results, and, uh, and again, just want to add a thank you to all our team members and Smith Douglas on family for, for all you do for us and, and, and thanks again.