Financial Data and Key Metrics Changes - The company reported pretax income of $17.2 million and earnings of $0.26 per diluted share for Q2 2025 [4] - Home sales revenue was $224 million for the quarter, with home closings of 669, which is a 2% increase from 653 closings in the same quarter last year [11] - Gross margin was 23.2%, at the high end of guidance, compared to 26.7% in the prior year, reflecting higher average lot costs and increased promotional activity [12] - Net income for the quarter was $16.4 million, down from $24.7 million in the prior year [12] Business Line Data and Key Metrics Changes - The average sales price (ASP) for homes closed this quarter was approximately $335,000, one of the lowest among peers [5] - The company ended the quarter with 92 active communities, a 23% increase year-over-year, and improved controlled lot count by 57% to almost 25,000 lots [6] Market Data and Key Metrics Changes - The company experienced inconsistent demand trends, with solid order activity followed by periods of softness due to affordability constraints and declining consumer confidence [5] - Monthly sales per community fluctuated, with averages of 2.8 in April, 2.4 in May, and returning to 2.8 in June [14] Company Strategy and Development Direction - The company is focused on an asset-light operational model, aiming to turn inventory quickly and maintain affordability for buyers [5] - Strategic expansion into Dallas Fort Worth and Gulf Coast of Alabama markets is planned, with expectations to start selling by year-end [6][7] - Construction efficiency is a major focus, with average cycle time reduced to 54 days, down from 60 days in 2024 [8] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the company's outlook despite macroeconomic challenges, citing a strong balance sheet and operational flexibility [9] - The company plans to continue utilizing targeted incentives to support sales, particularly through rate buy-downs [15] - Risks include maintaining adequate sales pace and managing cost pressures, particularly in labor and materials [16][17] Other Important Information - The company has a net debt to net book capitalization ratio of 12.1%, indicating a strong balance sheet [9] - Backlog at the end of the quarter was 858 homes with an average sales price of $341,000 and expected gross margin of approximately 21.5% [14] Q&A Session Summary Question: What are the expectations regarding labor costs and gross margin for Q3? - Management indicated that labor costs were flat during Q2 and that gross margin pressure is expected due to continued incentives [20][21] Question: Can you break down the controlled lot position growth? - The controlled lot position increased significantly, with approximately 600 lots in Dallas and growth in Chattanooga and Central Georgia [25][28] Question: What is the outlook for the full year regarding home closings? - The company aims for a target of 3,000 to 3,100 homes, depending on market demand and macroeconomic conditions [35][36] Question: How is the land landscape currently viewed? - There is some softness in the land market, with more favorable negotiating terms but little pullback on prices [39] Question: What is the strategy for community count growth? - Moderate growth in community count is expected, with a focus on maintaining presale levels despite higher spec levels due to market conditions [46][61] Question: How does the company view M&A opportunities? - The company is open to M&A but prefers greenfield expansions due to a conservative approach and long-term strategy [101][106]