Core Insights - Smith Douglas Homes Corp. (SDHC) is a significant player in the affordable housing sector, primarily operating in the southeastern United States and competing with major builders like D.R. Horton and Lennar Corporation [1] Earnings Performance - On November 5, 2025, SDHC reported an earnings per share (EPS) of $0.24, which was below the estimated $0.26, continuing a trend of missing consensus EPS estimates [2][6] - Despite the EPS miss, SDHC's revenue was approximately $262 million, exceeding the estimated $251 million and surpassing the Zacks Consensus Estimate of $249.63 million by nearly 5%, although this represented a 5.7% decline compared to the same period last year [3][6] Financial Metrics - The company has a price-to-earnings (P/E) ratio of approximately 2.87, indicating a relatively low valuation compared to its earnings [4] - The price-to-sales ratio is about 3.26, suggesting that investors are willing to pay $3.26 for every dollar of sales [4] - The enterprise value to operating cash flow ratio is negative at -27.49, indicating potential challenges in generating cash flow from operations [4] Balance Sheet and Liquidity - SDHC has a moderate level of debt, with a debt-to-equity ratio of 0.65, reflecting manageable debt levels [5] - The company has a strong current ratio of 15.61, indicating robust liquidity and the ability to cover short-term liabilities [5] - These financial metrics provide a comprehensive view of SDHC's current financial standing and potential challenges ahead [5][6]

Financial Data and Key Metrics Changes - Revenue in Q3 2025 totaled $396.6 million, down 39.2% year-over-year, driven by a 39.4% decline in closings [10] - Gross margin was 21.5%, compared to 25.1% in the same period last year, while adjusted gross margin was 24.5%, down from 27.2% [11] - Net income for the quarter was $19.7 million, or $0.85 per basic and diluted share [12] Business Line Data and Key Metrics Changes - The company closed 1,107 homes in Q3, with 1,065 contributing to reported revenue [4] - Wholesale operations generated $54.5 million in revenue from 163 home closings, representing 15.3% of total closings, up from 9.1% in the same period last year [10] - Net orders increased by 8.1% year-over-year and 43.9% sequentially, totaling 1,570 homes [12] Market Data and Key Metrics Changes - Top markets by closings per community included Charlotte (5.7), Las Vegas (4.7), Raleigh (4.2), Greenville (3.7), and Denver (3.5) [7] - Backlog at quarter-end was 1,305 homes, up 19.9% year-over-year and 61.5% sequentially, with a total backlog value of $498.7 million [13] Company Strategy and Development Direction - The company maintains a focus on affordability and entry-level buyers, with a long-term optimistic view of the housing market supported by demographic trends [8][9] - The strategy includes competitive pricing and selective price adjustments to manage inventory effectively [5][6] - The company plans to increase community count by 10%-15% by the end of 2026, primarily in Florida, Texas, and California [19] Management's Comments on Operating Environment and Future Outlook - Management noted that lower mortgage rates have positively impacted sales, with October closings expected to be between 390-400 homes, marking the best month since June [18] - The company expects to close between 1,300-1,500 homes in Q4, representing a 26% increase compared to Q3 [19] - Gross margin for Q4 is expected to range between 21-22%, with adjusted gross margin between 24-25% [19] Other Important Information - The company ended the quarter with $1.75 billion in debt, a debt-to-capital ratio of 45.7%, and total liquidity of $429.9 million [17] - The average finished lot cost was approximately $70,000, providing a competitive advantage in pricing [16] Q&A Session Summary Question: Acceleration in orders and its drivers - Management indicated that the acceleration in orders was driven by lower rates and company-specific initiatives, emphasizing a focus on affordability rather than a shift in strategy [23][25] Question: Land position and appetite from builders - Management stated they are evaluating their land supply and managing development spend, with a focus on maintaining stability in margins [26][28] Question: Community count growth and SG&A guidance - Management confirmed that community count growth will be steady throughout 2026, with established G&A expenses and incremental costs associated with new community counts [36][38] Question: Types of mortgages and adjustable rate mortgages - Over 60% of customers are taking FHA mortgages, with a notable increase in adjustable rate mortgages due to a new 3.99% 5/1 ARM product [45] Question: Average selling price outlook for 2026 - Management indicated that ASP will be influenced by geographic components and expects prices to continue to rise over the next few years [46][47] Question: Community count growth and demand outlook - Management is dedicated to community count growth regardless of demand fluctuations, with current investments aligned with absorption rates [50]

Financial Data and Key Metrics Changes - In Q3 2025, home closing revenue was $1.4 billion, a 12% decrease year-over-year due to a 7% lower home closing volume and a 5% decrease in average selling price (ASP) to $380,000 per home [18][24] - The gross margin for home closings was 19.1%, down 570 basis points from 24.8% in Q3 2024, reflecting increased use of incentives and inventory-related impairments [19][24] - Adjusted diluted EPS for Q3 2025 was $1.55, compared to $2.67 in Q3 2024, marking a 48% year-over-year decrease [24][25] Business Line Data and Key Metrics Changes - Orders increased by 4% year-over-year to 3,636 units, driven by a 14% increase in average community count, despite a 7% decrease in average absorption pace [4][13] - The cancellation rate was 11%, lower than the historical average, attributed to the 60-day closing-ready commitment [13] - The company achieved a backlog conversion rate of 211%, with more than 60% of orders closing in the same quarter [6][16] Market Data and Key Metrics Changes - Local demand varied across regions, with strong absorption in Dallas, Houston, Southern California, and Carolinas, while challenges persisted in Austin, San Antonio, and parts of Florida and Northern California [15] - The average selling price on orders was $389,000, down 4% from the prior year due to increased use of incentives [14] - The company moderated starts to approximately 3,000 homes, a 19% decrease year-over-year, to align with softer demand [16] Company Strategy and Development Direction - The company focuses on affordable move-in-ready homes and a 60-day closing-ready guarantee to provide certainty to home buyers [5][9] - A 100% spec strategy allows flexibility to adjust starts based on real-time local demand, with a goal of maintaining a four to six months' supply of specs [10][12] - The company reduced land acquisitions by 70% year-over-year, indicating a strategic shift to optimize asset management [11] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence remains low, impacting demand despite recent Fed rate cuts and lower mortgage rates [8][9] - The long-term outlook for the housing market is optimistic due to favorable demographic trends and an undersupply of affordable homes [9] - Management anticipates that the incentive burden will taper off as market conditions stabilize, allowing for improved margins in the future [9][22] Other Important Information - The company returned $85 million to shareholders in Q3 2025, an increase from $57 million in Q3 2024, and repurchased over 772,000 shares for $55 million [27][28] - The balance sheet remains healthy with cash of $729 million and a net debt-to-capital ratio of 17.2% [26] Q&A Session Summary Question: Impact of strategy pivot on overall return profile - Management acknowledged that while ROE compression is influenced by market conditions, there are opportunities to optimize inventory turnover and cash generation moving forward [34][36] Question: Community count growth outlook in 2026 - Management indicated that new communities would not significantly impact margins but would help leverage fixed costs better [38][41] Question: Expectations for orders in Q4 - Management does not expect Q4 absorptions to exceed Q3 levels but anticipates an increase in starts aligned with community count growth [47][46] Question: Buyer psychology and market share - Management believes the ability to close within 60 days enhances their competitive position, potentially gaining market share from peers [78]

Financial Data and Key Metrics Changes - In Q3 2025, home closing revenue was $1.4 billion, a 12% decrease year-over-year due to a 7% lower home closing volume and a 5% decrease in average selling price (ASP) to $380,000 per home [18][24] - The gross margin for home closings was 19.1%, down 570 basis points from 24.8% in Q3 2024, reflecting increased use of incentives and inventory-related impairments [19][24] - Adjusted diluted EPS for Q3 2025 was $1.55, while diluted EPS decreased 48% year-over-year to $1.39 from $2.67 in 2024 [24][25] Business Line Data and Key Metrics Changes - Orders increased by 4% year-over-year to 3,636 units, driven by a 14% increase in average community count, despite a 7% decrease in average absorption pace [4][13] - The cancellation rate remained at 11%, lower than the historical average, due to the 60-day closing-ready commitment [13] - The company achieved a backlog conversion rate of 211% in Q3, with 3,685 home deliveries [6][16] Market Data and Key Metrics Changes - Local demand varied across regions, with strong absorption in Dallas, Houston, Southern California, and Carolinas, while challenges persisted in Austin, San Antonio, and parts of Florida and Northern California [15] - The average selling price on orders was $389,000, down 4% from the prior year due to increased use of incentives and discounts [14] Company Strategy and Development Direction - The company focuses on affordable move-in-ready homes and a 60-day closing-ready guarantee to provide certainty to home buyers [5][8] - A 100% spec strategy allows flexibility to adjust starts based on local demand, with a 19% year-over-year reduction in starts to align with market conditions [10][16] - The company aims to optimize its community count and land spend while maintaining a strong balance sheet, returning $85 million to shareholders in Q3 [12][26] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence has declined, impacting demand, but remains optimistic about long-term housing market trends due to favorable demographics and undersupply of affordable homes [8][9] - The company anticipates a steady community count from Q3 to Q4, with expectations for double-digit growth in community count for 2026 [14][30] - Management highlighted the importance of buyer psychology and the potential for rapid changes in the sales environment with improved consumer confidence [70][71] Other Important Information - The company reduced land acquisition by 70% year-over-year, acquiring about 5,800 fewer lots, while still achieving community count growth [11][29] - The balance sheet remains healthy with $729 million in cash and a net debt-to-capital ratio of 17.2% [26] Q&A Session Summary Question: Impact of strategy pivot on overall return profile - Management acknowledged the need to optimize inventory turnover and spec strategy, indicating potential for improved cash generation and returns as the strategy matures [34][35] Question: Community count growth outlook in 2026 - Management indicated that new communities would not significantly impact margins but would help leverage fixed costs better [38][39] Question: Expectations for orders in Q4 - Management does not expect Q4 absorptions to exceed Q3 levels, focusing instead on optimizing profitability rather than chasing volume [47][49] Question: Buyer psychology and market share - Management believes the ability to close within 60 days enhances their competitive position, potentially gaining market share from peers [78]

Financial Data and Key Metrics Changes - In Q3 2025, home closing revenue was $1.4 billion, a 12% decrease year-over-year due to a 7% lower home closing volume and a 5% decrease in average selling price (ASP) to $380,000 per home [19][25] - The gross margin for home closings was 19.1%, down 570 basis points from 24.8% in Q3 2024, reflecting increased use of incentives and inventory-related impairments [19][20] - Adjusted diluted EPS for Q3 2025 was $1.55, while diluted EPS decreased 48% year-over-year to $1.39 from $2.67 in 2024 [25][26] Business Line Data and Key Metrics Changes - Orders increased by 4% year-over-year to 3,636 units, driven by a 14% increase in average community count, although average absorption pace decreased by 7% [4][13] - The cancellation rate remained at 11%, lower than the historical average, due to the 60-day closing-ready commitment [13] - The company achieved a backlog conversion rate of 211% in Q3, with over 60% of orders closing within the quarter [5][17] Market Data and Key Metrics Changes - Local demand varied across regions, with strong absorption in Dallas, Houston, Southern California, and the Carolinas, while challenges persisted in Austin, San Antonio, and parts of Florida and Northern California [16] - The average selling price on orders was $389,000, down 4% from the prior year due to increased use of incentives and discounts [14] - The company moderated starts to approximately 3,000 homes, a 19% decrease year-over-year, to align with the softer demand environment [17] Company Strategy and Development Direction - The company focuses on affordable move-in-ready homes and a 60-day closing-ready guarantee to provide certainty to home buyers [4][8] - A 100% spec strategy allows flexibility to adjust starts based on real-time local demand, with a goal to maintain a four to six months' supply of specs [10][12] - The company reduced land acquisition by 70% year-over-year, acquiring about 5,800 fewer lots, while still achieving community count growth [11][27] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence remains low, impacting demand despite favorable macroeconomic conditions like the Fed's rate cut [8][9] - The long-term outlook for the housing market is optimistic due to favorable demographic trends and an undersupply of affordable homes [9][10] - Management anticipates that the incentive burden will taper off as market conditions stabilize, allowing for improved margins in the future [9][23] Other Important Information - The company returned $85 million to shareholders in Q3 2025, an increase from $57 million in the same quarter of 2024 [28] - The balance sheet remains healthy with cash of $729 million and a net debt-to-capital ratio of 17.2% [27] - The company plans to maintain a steady community count from Q3 to Q4, projecting mid-double-digit year-over-year growth [14][31] Q&A Session Summary Question: Impact of strategy pivot on overall return profile - Management acknowledged that while ROE compression is influenced by market conditions, there are opportunities to optimize inventory turnover and improve cash generation [34][36] Question: Community count growth outlook in 2026 - New communities are expected to come on at margins similar to current levels, with no significant headwind or tailwind anticipated from community growth [39][40] Question: Expectations for orders in Q4 - Management does not expect Q4 absorptions per store to exceed Q3 levels, focusing instead on optimizing profitability rather than chasing volume [47][49] Question: Clarification on incentives and margin outlook - Management clarified that while margins are expected to decline slightly in Q4, they are focused on clearing older spec inventory to improve overall margin profiles [56][59] Question: Share repurchase strategy moving forward - Management indicated that the current share repurchase cadence is likely the floor, with potential for increased repurchases based on market conditions [62][63] Question: Consumer confidence and sales environment - Management believes that improvements in consumer confidence could lead to a quick change in the sales environment, allowing the company to capitalize on its move-in-ready inventory [66][68]

Group 1 - D.R. Horton reported fourth-quarter earnings per share (EPS) of $3.04, which was below the consensus estimate of $3.29 [1] - The company's revenue for the quarter was $9.68 billion, exceeding forecasts of $9.42 billion [1] - Homebuilding revenue amounted to $8.5 billion, with 23,368 homes closed during the quarter [1] - Net sales orders increased by 5% to 20,078 homes, while the total value of new orders rose by 3% to $7.3 billion [1] Group 2 - For fiscal 2026, D.R. Horton projected revenue between $33.5 billion and $35.0 billion, compared to Wall Street's estimate of $34.85 billion [2] - The company guided for 86,000 to 88,000 home closings in fiscal 2026 [2]

Financial Data and Key Metrics Changes - D.R. Horton reported consolidated pre-tax income of $1.2 billion on revenues of $9.7 billion for Q4 2025, with a pre-tax profit margin of 12.4% [7] - For the full year, consolidated pre-tax income was $4.7 billion, with a pre-tax profit margin of 13.8% [7] - Net income for Q4 was $905.3 million, or $3.04 per diluted share, on consolidated revenues of $9.7 billion [9] - The average closing sales price for Q4 was $365,600, down 1% sequentially and down 3% year over year [9] - The company generated $3.4 billion of cash from operations in fiscal 2025, representing 10% of total revenues [8][20] Business Line Data and Key Metrics Changes - Home sales revenues for Q4 were $8.5 billion on 23,368 homes closed [9] - Net sales orders in Q4 increased 5% year over year to 20,078 homes, with order value increasing 3% to $7.3 billion [10] - The average price of net sales orders in Q4 was $364,900, flat sequentially and down 3% from the prior year [10] - Rental operations generated $81 million of pre-tax income on $805 million of revenues in Q4 [16] Market Data and Key Metrics Changes - The average number of active selling communities was up 1% sequentially and up 13% from the prior year [10] - The company’s home building lot position at year-end consisted of approximately 592,000 lots, with 25% owned and 75% controlled through purchase contracts [15] - In the Southeast region, particularly Florida, some markets like Jacksonville and Southwest Florida faced excess inventory issues [75] Company Strategy and Development Direction - D.R. Horton remains focused on capital efficiency to generate strong operating cash flows and deliver compelling returns to shareholders [8] - The company plans to tailor product offerings and sales incentives based on demand in each market to maximize returns [8] - The company expects to generate consolidated revenues of approximately $33.5 to $35 billion for fiscal 2026, with homes closed in the range of 86,000 to 88,000 [21] Management's Comments on Operating Environment and Future Outlook - Management noted that new home demand remains impacted by affordability constraints and cautious consumer sentiment [6] - The company anticipates that incentive levels will remain elevated in fiscal 2026, depending on demand strength during the spring selling season [12] - Management expressed a positive outlook for the housing market over the medium to long term, despite current volatility and uncertainty in the economy [23] Other Important Information - The company repurchased 30.7 million shares for $4.3 billion in fiscal 2025, reducing the outstanding share count by 9% [20] - D.R. Horton’s book value per share increased by 5% year over year to $82.15 [20] - The company’s consolidated leverage at fiscal year-end was 19.8%, with plans to maintain leverage around 20% over the long term [20] Q&A Session Summary Question: How to think about the walk from the 20% gross margin in Q4 to the 20 to 20.5% in Q1? - Management indicated that the unusual impact from litigation in Q4 is not expected to persist into Q1, and the baseline would be a more normal impact from warranty and litigation going forward [27] Question: How quickly can the company ramp up starts to meet demand? - Management acknowledged that starts were intentionally lower to align inventory and expressed confidence in their ability to respond to market demand as it increases [28] Question: What is the outlook for rental operations and its impact on consolidated operating margin? - Management expects rental operations to be softer in Q1, impacting consolidated operating margin due to lower closings volume on the homebuilding side [32] Question: Can you provide insight into the Southeast market performance? - Management noted that while some areas in Florida are struggling with inventory balance, overall demand remains choppy across various markets [65] Question: What are the expectations for lot costs and stick and brick costs? - Management indicated that lot costs are expected to remain sticky, but they anticipate opportunities to renegotiate stick and brick costs down as the year progresses [56]

Financial Data and Key Metrics Changes - In Q4 2025, consolidated pretax income was $1.2 billion on revenues of $9.7 billion, resulting in a pretax profit margin of 12.4% [7] - For the full year, consolidated pretax income was $4.7 billion with a pretax profit margin of 13.8% [7] - The average closing sales price for Q4 was $365,600, down 1% sequentially and 3% year over year [10] - The company generated $3.4 billion of cash from operations after making homebuilding investments totaling $8.5 billion [9] Business Line Data and Key Metrics Changes - Home sales revenues for Q4 were $8.5 billion on 23,368 homes closed [10] - Net sales orders in Q4 increased 5% year over year to 20,078 homes, with order value rising 3% to $7.3 billion [11] - The average price of net sales orders in Q4 was $364,900, flat sequentially and down 3% from the prior year [11] - Rental operations generated $81 million of pretax income on $805 million of revenues from single-family and multifamily rental homes [15] Market Data and Key Metrics Changes - The average number of active selling communities was up 1% sequentially and 13% from the prior year [11] - The company’s homebuilding lot position at year-end consisted of approximately 592,000 lots, with 25% owned and 75% controlled through purchase contracts [14] - In Texas, net sales orders were up 11% year over year, despite some markets experiencing weakness [72] Company Strategy and Development Direction - The company remains focused on capital efficiency to generate strong operating cash flows and deliver compelling returns to shareholders [8] - The strategy includes tailoring product offerings and sales incentives based on demand in each market to maximize returns [9] - The company plans to purchase approximately $2.5 billion of its common stock and pay around $500 million in dividends for fiscal 2026 [22] Management's Comments on Operating Environment and Future Outlook - Management expects new home demand to reflect ongoing affordability constraints and cautious consumer sentiment [21] - For fiscal 2026, the company anticipates consolidated revenues of approximately $33.5 billion to $35 billion and homes closed to be in the range of 86,000 to 88,000 [22] - The company has a positive outlook for the housing market over the medium to long term, despite current volatility [24] Other Important Information - The company’s fiscal year-end stockholders' equity was $24.2 billion, down 4% from a year ago, but book value per share was up 5% to $82.15 [20] - The company repurchased 30.7 million shares for $4.3 billion during the year, reducing the outstanding share count by 9% [19] Q&A Session Summary Question: What factors will influence the gross margin from Q4 to Q1? - Management indicated that the unusual impact from litigation costs is not expected to persist into Q1, and the baseline expectation for gross margin is around 20.6% [27][28] Question: How quickly can the company ramp up starts to meet demand? - Management stated that while starts were intentionally lower, they are positioned to respond to market demand and increase starts as necessary [30] Question: What is the outlook for rental operations in the upcoming quarters? - Management expects rental operations to be softer in the first quarter, with a heavier delivery expected in the back half of the year [34] Question: Can you provide insights on the Southeast market performance? - Management noted that certain markets in Florida, such as Jacksonville and Southwest Florida, are struggling with excess inventory, impacting overall performance in the Southeast [86]

Financial Data and Key Metrics Changes - In Q3 2025, the company closed 1,217 homes at an average sales price of $672,000, generating $817 million in home sales revenue, exceeding delivery guidance [4][11] - Adjusted homebuilding gross margin was 21.6%, excluding $8 million of inventory-related charges, while adjusted net income was $62 million or $0.71 per diluted share [4][11] - The company ended the quarter with $1.6 billion in total liquidity, including $792 million in cash, and a debt-to-capital ratio of 25.1% [6][14] Business Line Data and Key Metrics Changes - Net new home orders in Q3 were 995, with an absorption pace of 2.2 homes per community per month [11][12] - The absorption pace varied regionally, with the West at 2.3, Central at 1.8, and East at 2.8, indicating stronger performance in the DC Metro and Raleigh divisions [12] Market Data and Key Metrics Changes - Market conditions remained soft, with homebuyer interest muted due to slow job growth and economic uncertainty [6][10] - The company anticipates that home shoppers will re-engage when conditions stabilize, leading to normalized absorption rates [6][10] Company Strategy and Development Direction - The company is focused on inventory management, disciplined cost control, and increasing the mix of to-be-built homes over time [7][9] - It aims to grow community count by 10% - 15% by the end of 2026, with significant expansion in central and eastern regions [8][9] - The strategy includes investing in well-located land positions near employment centers and amenities, with over 32,000 lots controlled [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term growth despite near-term uncertainties, emphasizing a disciplined approach to capital allocation and shareholder returns [10][16] - The company expects to deliver between 4,800 and 5,000 homes for the full year 2025, with an average sales price of approximately $680,000 [15] Other Important Information - The company repurchased 1.5 million shares for $51 million in Q3, totaling $226 million year-to-date, reducing share count by 7% [4][5] - The company was recognized as one of Fortune's 100 Best Companies to Work For in 2025, reflecting its strong corporate culture [16] Q&A Session Summary Question: Monthly cadence of orders and incentives - The monthly cadence was consistent, with September performing slightly better than August, and incentives on deliveries were 8.2% for the quarter [18][19] Question: Sales pace floor and incentives - The company is focused on maintaining a sales pace between two and two and a half homes per community, with strong community count growth anticipated for 2026 [20] Question: Financial incentives breakdown - About a third of the 8.2% incentives were financing-related, including closing costs [24] Question: Average order ASP and future closings - The average order ASP decreased to approximately $654,000, and it is reasonable to expect closings ASP to align with this level [27] Question: SG&A guidance for Q4 - The SG&A guidance reflects better leverage due to higher revenue from increased deliveries, with no significant one-time items [30] Question: Gross margin expectations - The gross margin guidance is better than expected due to a favorable mix from strong margin divisions [31] Question: Spec inventory strategy - The company reduced total spec inventory by 17% quarter-over-quarter, focusing on a balanced approach moving forward [41] Question: Community count growth and pricing strategy - The company intends to maintain its premium brand positioning without significant initial pricing adjustments, focusing on value [44] Question: Affordable housing push - The company supports the administration's goal of increasing housing supply and is prepared to contribute through its community count growth [47] Question: Q4 starts and inventory management - Q4 starts are expected to be similar to Q3, with a focus on moving through existing inventory before normalizing strategies [59]

Financial Data and Key Metrics Changes - In Q3 2025, the company closed 1,217 homes at an average sales price of $672,000, generating $817 million in home sales revenue, exceeding delivery guidance [4][11] - Adjusted homebuilding gross margin was 21.6%, excluding $8 million of inventory-related charges, while adjusted net income was $62 million or $0.71 per diluted share [4][11] - The company ended the quarter with $1.6 billion in total liquidity, including $792 million in cash, and a debt-to-capital ratio of 25.1% [6][14] Business Line Data and Key Metrics Changes - Net new home orders in Q3 were 995, with an absorption pace of 2.2 homes per community per month [11] - The absorption pace varied regionally, with the East at 2.8, the West at 2.3, and the Central region at 1.8 [12] - The company invested approximately $260 million in land and land development during the quarter, ending with over 32,000 total lots [13] Market Data and Key Metrics Changes - Market conditions remained soft, with homebuyer interest muted due to slow job growth and economic uncertainty [6] - The company anticipates that home shoppers will re-engage when conditions stabilize, leading to normalized absorptions [7] Company Strategy and Development Direction - The company is focused on inventory management, disciplined cost control, and increasing the mix of to-be-built homes over time [7] - Long-term goals include scaling operations, growing community count, and increasing book value per share [8] - The company plans to end 2025 with approximately 155 communities and expects to grow community count by 10 to 15% by the end of 2026 [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating housing cycles and emphasized a focus on long-term growth despite near-term uncertainties [7][16] - The company is encouraged by new market expansions in Utah, Florida, and Coastal Carolinas, expecting meaningful growth beginning in 2027 [8][10] Other Important Information - The company repurchased 1.5 million shares for $51 million in Q3, totaling $226 million year-to-date, reducing share count by 7% [4][5] - The company was recognized as one of Fortune's 100 Best Companies to Work For in 2025, reflecting its culture and values [16] Q&A Session Summary Question: Monthly cadence of orders and incentives through the quarter - The monthly cadence was consistent, with September performing slightly better than August, and incentives on deliveries were 8.2% for the quarter [18][19] Question: Absolute floor for sales pace and incentives - Management indicated that the industry is landing between two and two and a half homes per community per month, with strong community count growth expected in 2026 [20] Question: Breakdown of financial incentives - About a third of the 8.2% incentives were financing-related, including closing costs [24] Question: SG&A guidance for Q4 - The SG&A guidance reflects better leverage due to higher revenue from increased deliveries, with no specific one-time items impacting it [30] Question: Gross margin guidance - The gross margin guidance is better than expected due to a mix of strong-performing divisions and increased incentives [31] Question: Spec inventory strategy - Approximately three-quarters of orders are running as specs, with a focus on balancing inventory and demand [40][41] Question: Community count growth and pricing strategy - The company aims for community count growth of 10% to 15% next year, maintaining a premium brand proposition without significant pricing changes [44]