Smith Douglas Homes Q4 2024 Earnings Report

Smith Douglas Homes EPS Results

• Actual EPS: $0.46
• Consensus EPS: $0.46
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Smith Douglas Homes Revenue Results

• Actual Revenue: $287.49 million
• Expected Revenue: $265.85 million
• Beat/Miss: Beat by +$21.64 million
• YoY Revenue Growth: N/A

Smith Douglas Homes Announcement Details

• Quarter: Q4 2024
• Date: 3/12/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, March 12, 2025
• Conference Call Time: 8:30AM ET

Smith Douglas Homes (NYSE:SDHC), together with its subsidiaries, engages in the design, construction, and sale of single-family homes in the southeastern United States. It also provides closing, escrow, and title insurance services. The company sells its products to entry-level and empty-nest homebuyers. Smith Douglas Homes Corp. was founded in 2008 and is headquartered in Woodstock, Georgia.

Smith Douglas Homes Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Smith Douglas Homes Fourth Quarter twenty twenty five Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

I would now like to turn the conference over to Joe Thomas, Senior Vice President, Accounting and Finance. Please go ahead.

[Joe Thomas, SVP of Accounting & Finance at Smith Douglas Homes]

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 fourth quarter of twenty twenty four, 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, outlook, performance and ability to gain market share, including in uncertain environments, 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.

[Joe Thomas, SVP of Accounting & Finance at Smith Douglas Homes]

Except as required by law, the company undertakes no duty to update these forward looking statements. Additionally, reconciliations of non GAAP financial measures discussed in this call to the most comparable GAAP measures can be found in our press release located on our website and in our SEC filings. Hosting the call this morning are Greg Bennett, the company's CEO and Vice Chairman and Russ Devendorf, our Executive Vice President and CFO. I'd now like to turn the call over to Greg.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

Thanks, Joe. Good morning to everyone joining us on today's call as we go over results for the fourth quarter of twenty twenty four and provide some insight into the state of our homebuilding operations for the first few months of twenty twenty five. Ms. Douglas Homes reported pretax income of $30,000,000 in the fourth quarter of twenty twenty four, capping off a very profitable year for our company in which we generated nearly $117,000,000 in pretax income. The eight thirty six homes we delivered in the quarter were well above our stated guidance range and represented a quarterly record for our company.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

For the full year, mid August delivered 2,867 homes. Our gross margins for the quarter came in as expected at 25.5%, which was the midpoint of our guidance. For the full year, gross margins on home closings averaged 26.2%. The combination of strong delivery growth, healthy margins and quick inventory turns resulted in an adjusted return on equity of 29 for 2024, well above the industry average for publicly traded homebuilders. Overall, we're extremely pleased with our performance in 2024 and look forward to building on successes we've achieved during the year.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

During the fourth quarter, we generated five sixty nine net new orders. Similar to last quarter, price incentive and closing cost support were an important sales tool to all our communities. While this has been an effective way to address affordability issues, it has had a negative impact on our margins. We made further progress on improving the construction efficiency in the fourth quarter, cycle times coming in approximately fifty five working days, excluding our Houston division. Our trade partners and suppliers continue to buy in to the RTEAM philosophy, which streamlines the construction process and provides the level of accountability that leads to better cycle times.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

The adoption of the RTEAM system in Houston continues to progress. We expect to see real improvement to their operating efficiency in the coming quarters. Our ability to turn inventory quickly is a key component of our homebuilding strategy and we remain committed to making incremental improvements across our footprint. We ended the year with 19,522 controlled lots. Of our unstarted controlled lots, 96% were controlled via option agreement consistent with our asset loss strategy.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

This landline model allows us to control a significant number of lots in a capital efficient manner, while offloading much of our risk associated with owning the developing land. As we look ahead to 2025 and move into the heart of the spring selling season, there are microeconomic and political uncertainties, particularly around interest rates and tariffs that may cause potential headwinds for the business. Anticipate relief in mortgage rates after the Fed started cutting in the back half of 2024 never materialized. And in fact, rates increased throughout the fourth quarter of twenty twenty four and into January with the average thirty year mortgage reached a peak of over 7%. As several of our peers have also reported, January sales started off a bit slow compared to our expectations before picking up through February and early March.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

Despite seeing some stabilization and inflation, affordability remains a significant challenge for our buyers. Additionally, the lock in effect where homeowners are reluctant to sell due to their low mortgage rates is keeping housing inventory near historic lows and contributing to home prices remaining higher. While there might be some near term headwinds and additional pressure on margins, longer term, we continue to remain optimistic about the outlook for our industry and especially Smith Douglas. We believe our manufacturing approach to homebuilding, operational efficiency and landline strategy will serve us well in any environment. Our balance sheet remains in excellent shape.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

We have a real opportunity to gain market share as we expand our operations throughout the Southeast. Before I turn the call over to Russ, I want to thank all of our team members for their contributions to a remarkable year for our company. McDougalless has come a long way since we started operating out of Atlanta Seventeen Years ago. Our significant expansion throughout the Southeast and Texas over the years and our highly successful IPO last year is all due to the hard work and commitment of more than four fifty team members. We truly appreciate all of you.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

And now I'll turn it over to Russ.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Thanks, Greg. I'm going to highlight some of our results for the fourth quarter and full year and then conclude my remarks with our outlook for the first quarter. We finished the fourth quarter with $287,000,000 of revenue, a 32% increase over the year ago period on eight thirty six closings for an average sales price on closed homes of 344,000 Our gross margin was 25.5% and SG and A expense was 14.9% of revenue. Pretax income was $30,000,000 with net income of $28,800,000 for the quarter. Given the nature of our UPCE organizational structure, our reported net income reflects an effective tax rate of 4.2% on the face of our income statement.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

This income tax expense is primarily attributable to income related to the approximate 17.3% economic ownership of our public shareholders that is held by Smith Douglas Homes Corp. And Smith Douglas Holdings, LLC. Our adjusted net income, which is a non GAAP measure that we believe is useful in providing a comparison of more traditional C corporations, is $22,600,000 for the quarter. Adjusted net income assumes a 24.6 percent blended federal and state effective tax rate as if we had 100% public ownership operating as a subchapter C corporation. We believe adjusted net income is a useful metric because it allows management and investors to evaluate our results more effectively to industry peers that may have a more traditional tax and organizational structure.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

You can find more information about our structure and income taxes in the footnotes of our financial statements. For the full year 2024, we closed a record 2,867 homes with corresponding revenue of $975,000,000 a 2528% increase respectively over prior year. Our gross margin was 26.2% for the full year compared to 28.3% in 2023, primarily driven by an increase in our average lot cost, which was 24.4% of revenue versus 21.3% in 2023. Discounts and closing costs were 3.6% compared to 3.4% last year. Our SG and A expense was just under 14% of revenue, including internal and external sales commissions, which were 4% of revenue compared to 3.6% in 2023.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Pretax income was $116,900,000 with net income of $111,800,000 for the year, and our adjusted net income, as previously described, was $88,100,000 We were operating out of 78 active selling communities at the end of the year versus 69 at the end of twenty twenty three. We finished the year with six ninety four homes in backlog with an average selling price of $340,000 and an expected gross margin on those homes of just under 24%. Looking at our balance sheet, we ended the quarter with approximately $22,000,000 of cash and no borrowings under our $250,000,000 revolving credit facility and $4.00 $2,000,000 of total members and stockholders' equity. Our debt to book capitalization was 0.8% and our net debt to net book capitalization was negative 5%. We had approximately $220,000,000 available on our unsecured credit facility and are well positioned to execute on our growth strategy as Greg previously mentioned.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Before I speak to our guidance for the first quarter, I'll provide a little more color on what we are seeing through the first couple of months this year. As Greg mentioned, sales started a bit slow in January but picked up in February. Our sales pace per community trended higher at two point four and three point three sales in January and February, respectively, compared to 3.4 sales per community through the first two months of twenty twenty four. Additionally, we have seen an increase in the closing costs and incentives we offer versus this time last year to the tune of about 75 basis points on a relatively flat average sales price. That said, for the first quarter of twenty twenty five, we currently anticipate home closings to finish between six twenty five and six seventy five homes, an approximate 15% increase over 2024 at the midpoint, with an average sales price between $330,000 and $335,000 and gross margin in the range of twenty three point two five percent and twenty three point seven five percent.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

For the full year, we expect closings to be between 6,200 homes, which is in the range we previously stated on our last call. We believe the primary risk to our projections are around our ability to maintain sales pace and bring our new communities and lots online. Macroeconomic factors and uncertainty around jobs, tariffs, inflation and interest rates could also have unforeseen impacts to our numbers. With that, I'd like to turn the call over to the operator for instructions on Q and A.

[Operator]

Our first question will come from the line of Michael Rehaut with JPMorgan. Please go ahead.

[Andrew Azzi, Vice President at JP Morgan Chase & Co]

Hi, everyone. This is Andrew Ozzie on for Mike. Thank you for taking my questions. Just maybe I appreciate that guidance. I just wanted to maybe dial into the I believe I heard you say the backlog gross margins are to the tune of 24% and 1Q is a little bit below that.

[Andrew Azzi, Vice President at JP Morgan Chase & Co]

Could we what if you could bucket out some of the dynamics there that would be very helpful?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. So backlog margin you heard correctly it's about 24. A lot of that is obviously sales that were made in Q4. And so Q4 was definitely, we saw more incentives pick up where Greg had mentioned. It's an affordability thing.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Interest rates, really even with the Fed cutting kind of moved against us. And so we were taking more incentives to try and keep pace. So that's reflective in backlog. When I look out actually, a little bit further beyond what we're seeing for what's closing in the first couple of months in terms of our backlog, it looks like it's creeping up a little bit. So you're actually seeing it trend a little bit up when I look at kind of our backlog aging through kind of midyear.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

So we're hopeful again sales have picked up in February, but look incentives are still being used to drive volume. So it's tough. That's where we see the biggest risk, right? This year is going to be mostly in margin. People are showing up into the sales centers.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

There's definitely demand, but it's an affordability game.

[Andrew Azzi, Vice President at JP Morgan Chase & Co]

Thanks, Russ. And then maybe secondly, on the land side, is there some way to some framework for kind of lot cost inflation for you guys that you are thinking of currently or that would be very helpful?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes, that's really outside of incentives, right? And because we're seeing kind of flat ASP year over year, so you've got incentives that are impacting margins. It's lot cost, right? And we've talked about that in the past. I'd say it's it could be 200 to 300 basis points of margin is eroding because of our lot cost rolling through there.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

So land is still challenging. It's competitive and that's where we see the biggest challenge. Our vertical costs have actually been in check, but now with kind of what we're seeing with tariffs and the new administration and a lot of uncertainty, we are seeing some of our subcontractors reach out and look at surcharges or possible increases, but there's still a lot of uncertainty. We don't have a real clear picture yet on how that might impact us the rest of the year.

[Andrew Azzi, Vice President at JP Morgan Chase & Co]

Thank you, Russ. I'll pass it on.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Thanks.

[Operator]

Our next question comes from the line of Sam Reed with Wells Fargo. Please go ahead.

[Sam Reid, Analyst at Wells Fargo]

Awesome. Thanks. Actually, I wanted to piggyback off that last question just to comment on lot costs eroding 200 to 300 basis points of margin. I mean, is that mostly just weighted to twenty twenty five or is there a risk that that erosion kind of persists into 2026 and beyond? Just looking for some context there given the visibility you have in your out your lot pipeline?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. I don't see it I see it kind of leveling off based on where our lot costs are. But certainly as we've been buying and contracting land over the last couple of years, It's certainly increased, but I do think it's leveled off a bit when you if you kind of think about '26 and beyond. But, yes, we really haven't we haven't taken a deep dive into it, but just sitting here today, I'd say you're not going to see the kind of inflation that you're seeing in the lot costs now. I mean, it's been it's taken a pretty big bump and I think you kind of see that leveling off a bit as you look towards the outer years.

[Sam Reid, Analyst at Wells Fargo]

Awesome. Thanks, Russ. And then one follow-up, just wanted to touch on community count growth and cadence throughout the year. I know obviously there's a lot of moving pieces when it comes to community count, but can you just give us some guideposts in terms of how we should think about modeling that over the course of 2025? Obviously, it does have implications on start pay or pays, etcetera, etcetera.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. It should be pretty ratable increase throughout the year and we were just looking at that, last week. We can see community count growing low single digits towards kind of 90 by the end of the year, up from what were we 78. So, I'd say it's going to be kind of a ratable increase throughout the year.

[Sam Reid, Analyst at Wells Fargo]

That's helpful, Ross. I'll pass it on. Thanks.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Thanks.

[Operator]

Our next question comes from the line of Trevor Ellenson with Wolfe Research. Please go ahead.

[Trevor Allinson, Director - Equity Research at Wolfe Research LLC]

Hi, good morning. Thank you for taking my questions. I wanted to follow-up on gross margin. Previously, you had talked about 2025, perhaps being in the 25% range, give or take. Starting below that here in the first quarter, you've got some land inflation that will likely continue to work through in 2025.

[Trevor Allinson, Director - Equity Research at Wolfe Research LLC]

Can you talk about what the biggest difference is now versus maybe a quarter ago when you were talking about 2025 gross margin perhaps being in that 25% range?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. It's really it's the market I think when we had our call looking at where we saw rates had started coming down, the Fed was cutting and then Q4 you saw rates start to increase. And so we've definitely had a, we had a bigger use of incentives in Q4 and certainly at the beginning of this year. Rates peaked, the average thirty year peak in January is starting to come down a little bit. But when you look year over year, I think the rates are almost flat.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

And so that's really had an impact for sure on where we see margins going. And as you know, our business model, we're very focused on kind of manufacturing. It's a pace over price game. And so to steal a line from Lennar, that is that's kind of our buffer in terms of getting the pace is that gross margin. And so we've had to use more incentives to push pace.

[Trevor Allinson, Director - Equity Research at Wolfe Research LLC]

Yes, that makes sense.

[Trevor Allinson, Director - Equity Research at Wolfe Research LLC]

And then second question on SG and A, closings were really good in the quarter, but SG and A still kind of came in towards the top higher end of your range. How are you thinking about leverage on SG and A as we move into 2025? I appreciate that you guys have spent a lot on growth already. How do you think about levering that?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. SG and A was elevated in Q4. We actually so we over closed from our guidance and then we hit a lot of our operational metrics that bonuses are based on. And so we probably had over 100 basis points of SG and A, just an additional bonus accrual that if we knew we were going to hit the numbers like we did for the year, would have been accrued more evenly throughout the year. So we probably that 14.9% would have been probably just south of 14% if we had taken those accruals throughout the year.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

So that was a big part of it. But yes, we would expect ourselves to get some good SG and A leverage as we continue to grow the top line. We've got the team in place from a back office perspective. We've got we're pretty set from that standpoint as a public company. So we would expect that SG and A number to continue to trend down below 14%.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Our goal would be certainly to improve that year over year.

[Trevor Allinson, Director - Equity Research at Wolfe Research LLC]

Thank you for all the color and good luck moving

[Trevor Allinson, Director - Equity Research at Wolfe Research LLC]

forward.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Sure.

[Operator]

Our next question comes from the line of Mike Dahl with RBC Capital Markets. Please go ahead.

[Stephen Mea, Equity Research Senior Associate at RBC Capital Markets]

Hey, guys. Good morning. You've actually got Steven Mia on for Mike this morning. I wanted to ask about the market assumptions and kind of the outlook you have embedded within the full year guide and whether or not you have any improvement baked in there or if it's kind of flashing here, just kind of your thoughts on how you think about that in making the outlook? Thanks.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. We've got the communities in place to hit our 3,000 to 3,200 guide on closings. So a lot of it's going to depend. Again, February picked up from a sales pace perspective. We're seeing March has been pretty consistent with February.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

But look, there's definitely still a lot of uncertainty going into the balance of the year. But most of that we feel is around margins. We definitely think people are showing up to the sales centers. Traffic has been pretty good. So it really for us, I think it's just a matter of finding that right price, right?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

It's an affordability game as I've mentioned. So it's the biggest risk is certainly on the margin side. I think we can get volume, but the big question is at what margin, what price is it going to come. And that remains to be seen. So still there's a lot like I just mentioned before, there's a lot relative to vertical construction costs because of what's happening with tariffs and how that's going to impact us.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

And so that is just a lot of uncertainty there. But we feel sitting here today, we feel pretty good about getting volume. Again, barring some sort of major recession or a big shift in employment. I've always said, we can kind of cure a payment for folks and so that impacts margin. But if people start losing jobs, that's the part we can't fix.

[Stephen Mea, Equity Research Senior Associate at RBC Capital Markets]

No, it's super helpful. Thanks for all the color there. And then I guess one more kind of piggybacking off the previous tariff questions and margin questions. I think Trevor had said, the first quarter margin kind of coming in a little lower mainly as given the market weaknesses. As you think about margin through the balance of the year, is there just for a higher level kind of given there's so many moving pieces around tariffs, how are you kind of thinking about taking that into the guide?

[Stephen Mea, Equity Research Senior Associate at RBC Capital Markets]

And if I could sneak an extra one in here, are you guys hearing anything on the ground given kind of the recent headlines on immigration and labor as well too? Thanks a lot, guys.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. From a margin perspective, like I said earlier, we are seeing it's interesting our backlog when I look at the aging, it looks like backlog margin is picking up. So I think, again, some of our early backlog that's going to be closing this quarter is reflective of probably incentives and discounting we were given on inventory in Q4. But look, it's I'd be guessing if I told you which way margins are going to go from here. I think like I said that's the biggest risk, but we are seeing kind of that low to mid margins right now on what we're selling.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

But in order to keep pace, that's just going to shift based on where the market goes and a lot of that's interest rates and what happens just more macro level. Yes. And then from a tariff perspective, I don't know, Greg, if you got some color on what we're seeing from the subs.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

Yes. I'd say currently we're not seeing any impact, but you know we don't have our head in the sand either. We are following a list of items daily, weekly with all of our supply chain vendors and staying alert to those things. But really from immigration tariff, all those things there's as of today there's not been any impact.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. And you want to touch on the cycle times have actually come down and it hasn't been an issue.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

Yes. We were just visiting our other cycle times year over year. We've taken two weeks. So we ended 23 at sixty five days. We're into '24 at around fifty five days.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

That helps to shrink backlog, but it also helps with the efficiency and cycle and all the things that we're striving for here. So, in light of those things going on, we're still seeing some operational efficiencies.

[Stephen Mea, Equity Research Senior Associate at RBC Capital Markets]

No, got it. It makes a lot of sense. Thanks for all the color you guys. Okay.

[Operator]

And our next question will come from the line of Jay McCanless with Wedbush. Please go ahead.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Hey, good morning guys. I guess my first question Russ is, what have you all been seeing reduced the community count guide? I think you've given an initial fiscal twenty twenty five guide for plus 15% and now you're saying low single digits maybe bridge that delta for us?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

I think it's going to be low double digits. I think it's like a 12% because we were at 78 and we'll get close to 90. So it should be 12%

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

I think. Yeah.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Okay. So we'll get close. I mean some of that some of that could just be timing. I mean, this was just kind of the numbers that we looked at, but just last week. But some of that is just, we may get a couple of communities over.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

It's just how quickly can we get lots. And I didn't mention on our prepared remarks, but it's definitely still challenging in some of our municipalities and just getting through approvals. So there's always that risk, but I think we can get close to that 15% increase.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

And then that's actually my second question was going to be, what's the path for growth this year? Is it going to be mostly organic? Were you guys still evaluating some potential M and A?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes, it's all so all of our closing growth this year is I'd say organic. We are in Chattanooga. We did that's being run out of our Atlanta operations. But we've got I think it's close to about 1,000 lots under control in Chattanooga. So that's a big part where we push pretty far north in Atlanta.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

And then we did open Central Georgia. So that Middle Georgia, Central Georgia area might deliver about 100 closings. But again, that's kind of just an extension of Atlanta growing so big that we've divisionalized that. As we mentioned before, we opened a division in Greenville. We won't get any we don't think we're going to get any sales and closings this year, although our division president there is doing an excellent job of getting things going.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

We may have a small opportunity to do something. But so everything is organic. We are definitely looking at opportunities. The M and A, there's still M and A going on. We've seen some deals happen in the industry.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

We're seeing some packages. But as we've always said, we'll be opportunistic. We're looking at filling in some spots throughout the Southeast and expanding. But if we see something we like, we'll look at it. But we're certainly not going to overpay.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

We're comfortable doing greenfield startups if we like the market, but nothing immediate.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Got it. And then the last one I had, just thinking about average closing price for 25%. You initially or you'd said last quarter 3.35% to 3.45%. Is that still a good range? Or how should we modeling that through the year?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Yes. I think that's still a good range. I think our backlog is right now at $3.40. And so some of the ASP for this first quarter, it's just really the way our backlog is falling out and it's could be mix across different divisions. But yes, I still think kind of that three forty numbers is as we sit here today is still pretty good.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Okay. Sounds great. Thank you.

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

Sure. Thanks.

[Operator]

Our next question will come from the line of Alex Barron with Housing Research Center. Please go ahead.

[Alex Barron, President & Founder at Housing Research Center, LLC]

Yes. Thank you.

[Alex Barron, President & Founder at Housing Research Center, LLC]

I was wondering in

[Alex Barron, President & Founder at Housing Research Center, LLC]

terms of the incentives you guys are offering, are they mainly in the way of rate buy downs or in closing costs? Or are you guys starting to see the need to do price cuts?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

It is primarily in closing costs, which also which include rate buy downs. And most of our buyers, there is some level of rate buy down in there. We are discounting as well. So it's a mix, but I'd say it's it's more geared towards closing cost incentives.

[Alex Barron, President & Founder at Housing Research Center, LLC]

And what about broker commissions? Are you guys maintaining whatever your standard rate is? Or are you having to feel the need to add bonuses or something like that?

[Russ Devendorf, Executive VP & CFO at Smith Douglas Homes]

No, it's the same as what we've been doing in the past. We haven't changed. So we're still offering incentives, but nothing out of the ordinary.

[Operator]

And that will conclude our question and answer session. I'll turn the call back over to Greg Bennett for any closing remarks.

[Gregory S. Bennett, CEO , President & Director at Smith Douglas Homes]

Thank you everyone for joining us today. As always, we're accessible. Give us a call and look forward to chatting again next quarter.

[Operator]

This concludes today's meeting. Thank you all for joining. You may now disconnect.

Participants

Executives

• Joe Thomas, SVP of Accounting & Finance
• Gregory S. Bennett, CEO , President & Director
• Russ Devendorf, Executive VP & CFO

Analysts

• Andrew Azzi, Vice President at JP Morgan Chase & Co
• Sam Reid, Analyst at Wells Fargo
• Trevor Allinson, Director - Equity Research at Wolfe Research LLC
• Stephen Mea, Equity Research Senior Associate at RBC Capital Markets
• Jay McCanless, SVP - Equity Research at Wedbush Securities
• Alex Barron, President & Founder at Housing Research Center, LLC