Financial Data and Key Metrics Changes - In 2025, the company delivered 8,921 homes and recorded revenue of $4.4 billion, with pre-tax income of nearly $590 million, down 20% from last year's record of $734 million [5][6] - The net income was $403 million, or $14.74 per share, with a return on equity of 13.1% [6] - Full-year gross margins, excluding inventory and warranty charges, were 24.4%, down 220 basis points from 2024 [6][14] - The company ended the year with cash of $689 million and zero borrowings under its $900 million unsecured revolving credit facility, resulting in a strong debt-to-capital ratio of 18% [11][19] Business Line Data and Key Metrics Changes - The financial services segment achieved a record capture rate of 93% and pre-tax income of $56 million for the year [5] - The Smart Series, the company's most affordably priced product, comprised 49% of total sales in Q4, down from 52% a year ago [7] - The average closing price for Q4 was $484,000, a 1% decrease from the previous year's average of $490,000 [13] Market Data and Key Metrics Changes - New contracts in the Southern Region increased by 13% year-over-year, while the Northern Region saw a 4% increase [9] - Deliveries in the Southern Region represented 57% of the company-wide total, with a slight increase in homes delivered compared to the previous year [9] - The company owns approximately 26,000 lots, with 30% in the Northern Region and 70% in the Southern Region, and controls an additional 24,000 lots via option contracts [10] Company Strategy and Development Direction - The company is focused on maintaining quality and customer service while navigating economic challenges, positioning itself well in 17 markets [3][4] - The strategy includes using mortgage rate buydowns as incentives to promote sales, particularly in response to affordability challenges [6][35] - The company plans to open more communities in 2026, estimating a 5% increase in average community count compared to 2025 [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the industry despite current challenges, noting a slight improvement in demand and traffic as they enter 2026 [11][46] - The company anticipates that margin pressures may not be as severe in 2026 as they were in 2025, with expectations for improved demand in the early months of the year [47][48] - Management acknowledged the impact of impairments primarily in entry-level communities and indicated a focus on addressing these issues to stabilize margins [48][52] Other Important Information - The company spent $524 million on land purchases and $646 million on land development in 2025, up from $1.1 billion in 2024 [19] - The average mortgage amount increased to $414,000 in Q4 2025, with a loan-to-value ratio of 83% [18] Q&A Session Summary Question: Can you address the 13% growth in the South and bifurcate it into Texas and Florida? - Management noted solid sales across various markets, with Florida's Orlando and Tampa markets performing well, while Texas markets showed mixed results [25][26] Question: Can you comment on margin pressures and the differential between intra-quarter closings and backlog? - Management indicated that a significant portion of sales now comes from spec sales, which generally have lower margins compared to to-be-built homes [34][36] Question: What is the outlook for margins and incentives in the upcoming quarter? - Management refrained from providing specific guidance on margins but acknowledged that incentives had increased slightly in Q4 [80] Question: How is the company structuring mortgage rate buydowns? - The company has been successful with a 4.875% 30-year fixed mortgage rate and temporary buydowns to attract buyers [71][72] Question: What are the trends in Florida markets and overall inventory? - Management expressed optimism about Florida markets, particularly Orlando and Tampa, and indicated that inventory levels are being managed carefully [66][100]