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]