Meritage Homes Q4 2025 Meritage Homes Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Meritage Homes Corp Earnings Call
Phillippe Lord: Please stand by. Your meeting is about to begin. Greetings, and welcome to the Q4 2025 Meritage Homes Analyst Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. If you should need operator assistance, please press star zero. I would now like to turn the call over to Emily Heidt, VP of Investor Relations and External Communications. Please go ahead.
Operator: Please stand by. Your meeting is about to begin. Greetings, and welcome to the Q4 2025 Meritage Homes Analyst Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. If you should need operator assistance, please press star zero. I would now like to turn the call over to Emily Heidt, VP of Investor Relations and External Communications. Please go ahead.
Speaker #2: Please stand by. Your meeting is about to begin. Greetings, and welcome to the fourth quarter 2025 Meritage Homes Analyst Call. At this time, all participants are in a listen-only mode.
Speaker #2: After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. If you should need operator assistance, please press star zero.
Speaker #2: call over to Emily Tadano, VP of Investor Relations and External I would now like to turn the Communications. Please go
Speaker #2: ahead.
Emily Heidt: Thank you, operator. Good morning, and welcome to our Analyst Call to discuss our Q4 2025 results. We issued the press release yesterday after the market closed. You can find it, along with the slides we'll refer to during this call, on our website at investors.meritagehomes.com, or by selecting the Investor Relations link at the bottom of our homepage. Please refer to slide 2, cautioning you that our statements during this call, as well as in the earnings release and accompanying slides, contain forward-looking statements. Those and any other projections represent the current opinions of management, which are subject to change at any time, and we assume no obligation to update them. Any forward-looking statements are inherently uncertain.
Emily Heidt: Thank you, operator. Good morning, and welcome to our Analyst Call to discuss our Q4 2025 results. We issued the press release yesterday after the market closed. You can find it, along with the slides we'll refer to during this call, on our website at investors.meritagehomes.com, or by selecting the Investor Relations link at the bottom of our homepage. Please refer to slide 2, cautioning you that our statements during this call, as well as in the earnings release and accompanying slides, contain forward-looking statements. Those and any other projections represent the current opinions of management, which are subject to change at any time, and we assume no obligation to update them. Any forward-looking statements are inherently uncertain.
Speaker #3: our analyst call to discuss our fourth Thank you, Operator. Good morning, and welcome to quarter 2025 results. We issued the press release yesterday after the market closed.
Speaker #3: find it along with the slides we'll refer You can to during this call on our website at investors.meritagehomes.com or by selecting the Investor Relations link at the bottom of our homepage.
Speaker #3: Please refer to slide 2, cautioning you that our statements during this call, as well as in the earnings release and accompanying slides, contain forward-looking statements.
Speaker #3: Those and any other projections represent the current opinions of management, which are subject to change at any time, and we assume no obligation to update them.
Speaker #3: are inherently uncertain. Our Any forward-looking statements actual results may be materially different than our expectations due to a wide variety of risk factors which we have identified and listed on this slide, as well as in our earnings release and most recent filings with the Securities and Exchange Commission, specifically our 2024 annual report on Form 10-K and Form 10-Q for subsequent quarters.
Emily Heidt: Our actual results may be materially different than our expectations, due to a wide variety of risk factors, which we have identified and listed on this slide, as well as in our earnings release and most recent filings with the Securities and Exchange Commission, specifically our 2024 annual report on Form 10-K and Form 10-Q for subsequent quarters. We've also provided a reconciliation of certain non-GAAP financial measures referred to in our earnings release as compared to their closest related GAAP measures. Share and per share amounts have been retroactively restated to reflect our 2 January 2025 stock split for all prior periods. With us today to discuss our results are Steve Hilton, Executive Chairman, Philippe Lord, CEO, and Hilla Sferruzza, Executive Vice President and CFO of Meritage Homes. We expect today's call to last about an hour. A replay will be available on our website later today.
Our actual results may be materially different than our expectations, due to a wide variety of risk factors, which we have identified and listed on this slide, as well as in our earnings release and most recent filings with the Securities and Exchange Commission, specifically our 2024 annual report on Form 10-K and Form 10-Q for subsequent quarters. We've also provided a reconciliation of certain non-GAAP financial measures referred to in our earnings release as compared to their closest related GAAP measures. Share and per share amounts have been retroactively restated to reflect our 2 January 2025 stock split for all prior periods. With us today to discuss our results are Steve Hilton, Executive Chairman, Philippe Lord, CEO, and Hilla Sferruzza, Executive Vice President and CFO of Meritage Homes. We expect today's call to last about an hour. A replay will be available on our website later today.
Speaker #3: We have also provided a reconciliation of certain non-GAAP financial measures referred to in our earnings release as compared to their closest related GAAP measures.
Speaker #3: Share and per-share amounts have been retroactively restated to reflect our January 2nd, 2025 stock split for all prior periods. With us today to discuss our results are Steve Hilton, Executive Chairman; Philippe Lord, CEO; and Hila Sferuza, Executive Vice President and CFO of Meritage Homes.
Speaker #3: an hour. A replay will be available on our website later We expect today's call to last about today. I'll now turn it over to Mr.
Emily Heidt: I'll now turn it over to Mr. Hilton. Steve?
Emily Heidt: I'll now turn it over to Mr. Hilton. Steve?
Speaker #3: Hilton.
Speaker #4: Steve.
Speaker #5: Thank you, Emily. Welcome to everyone listening in on brief overview of market trends our call. Today, I'll begin with a and highlight our fourth quarter results.
Steve Hilton: Thank you, Emily. Welcome to everyone listening in on our call. Today, I'll begin with a brief overview of market trends and highlight our fourth quarter results. Philippe will then discuss our strategy and provide an operational update. Finally, Hilla will review our financial performance and share our 2026 forward-looking guidance. The fourth quarter of 2025 ended a year marked by much softer-than-anticipated market conditions, as affordability challenges persisted and buyer confidence deteriorated. Our fourth quarter 2025 sales orders totaled 3,224, and our average absorption pace was 3.2 net sales per month, reflecting Q4 sales seasonality, a pullback in buyer urgency, and a strategic decision to hold the line on incentives.
Steven Hilton: Thank you, Emily. Welcome to everyone listening in on our call. Today, I'll begin with a brief overview of market trends and highlight our fourth quarter results. Philippe will then discuss our strategy and provide an operational update. Finally, Hilla will review our financial performance and share our 2026 forward-looking guidance. The fourth quarter of 2025 ended a year marked by much softer-than-anticipated market conditions, as affordability challenges persisted and buyer confidence deteriorated. Our fourth quarter 2025 sales orders totaled 3,224, and our average absorption pace was 3.2 net sales per month, reflecting Q4 sales seasonality, a pullback in buyer urgency, and a strategic decision to hold the line on incentives.
Speaker #5: strategy, and provide an operational Philippe will then discuss our update. Finally, Hila will review our financial performance and share our 2026 forward-looking guidance. The fourth quarter of 2025 ended a year marked by much softer than anticipated market conditions.
Speaker #5: As affordability challenges persisted, and buyer confidence deteriorated, our fourth quarter 2025 sales orders totaled 3,224, and our average absorption pace was 3.2 net sales per month.
Speaker #5: Reflecting Q4 sales seasonality, a pullback in buyer urgency and a strategic decision to hold the line on incentives. Despite the tougher conditions, our 60-day closing guarantee and healthy supply of nearly completed spec inventory contributed to another quarter with an exceptional backlog conversion rate of 221%.
Steve Hilton: Despite the tougher conditions, our 60-day closing guarantee and healthy supply of nearly completed spec inventory contributed to another quarter with an exceptional backlog conversion rate of 221%. We delivered 3,755 homes and home closing revenue of $1.4 billion this quarter, which led to an adjusted home closing gross margin of 19.3% and adjusted diluted EPS of $1.67, both in line with our guidance range. We also increased our book value per share 7% year-over-year and completed $150 million of share buybacks, returning nearly $180 million in total capital to shareholders this quarter via repurchases and dividends.
Despite the tougher conditions, our 60-day closing guarantee and healthy supply of nearly completed spec inventory contributed to another quarter with an exceptional backlog conversion rate of 221%. We delivered 3,755 homes and home closing revenue of $1.4 billion this quarter, which led to an adjusted home closing gross margin of 19.3% and adjusted diluted EPS of $1.67, both in line with our guidance range. We also increased our book value per share 7% year-over-year and completed $150 million of share buybacks, returning nearly $180 million in total capital to shareholders this quarter via repurchases and dividends.
Speaker #5: We delivered 3,755 homes and home closing revenue of $1.4 billion this quarter, which led to an adjusted home closing gross margin of 19.3% and adjusted diluted EPS of $1.67, both in line with our guidance range.
Speaker #5: We also increased our book value per share 7% year over year, and completed 150 million dollars of share buybacks returning nearly 180 million dollars in total capital to the shareholders this quarter, via repurchases and dividends.
Speaker #5: Our full year 2025 sales volume of 14,650 homes was essentially flat compared to prior year as we grew any community account of 15% year over year, to 336 communities.
Steve Hilton: Our full year 2025 sales volume of 14,650 homes was essentially flat compared to prior year, as we grew ending community count 15% year-over-year to 336 communities, offsetting slower demand. On a full year basis, we achieved an average absorption pace of 3.9, which we believe was better than the broader market trends, demonstrating the benefit of our strategic focus, including our strong realtor engagement. We anticipate that in the near term, market conditions will continue to be impacted by elevated mortgage interest rates, job security concerns, and greater macroeconomic geopolitical uncertainties. However, long-term housing demand remains supported by favorable demographics and under supply of affordable homes in the United States.
Our full year 2025 sales volume of 14,650 homes was essentially flat compared to prior year, as we grew ending community count 15% year-over-year to 336 communities, offsetting slower demand. On a full year basis, we achieved an average absorption pace of 3.9, which we believe was better than the broader market trends, demonstrating the benefit of our strategic focus, including our strong realtor engagement. We anticipate that in the near term, market conditions will continue to be impacted by elevated mortgage interest rates, job security concerns, and greater macroeconomic geopolitical uncertainties. However, long-term housing demand remains supported by favorable demographics and under supply of affordable homes in the United States.
Speaker #5: Offsetting slower demand. On a full year basis, we achieved an average absorption pace of 3.9, which we believe was better than the broader market trends, demonstrating the benefit of our strategic focus including our strong realtor engagement.
Speaker #5: We anticipate that in the near term, market conditions will continue to be impacted by elevated mortgage interest rates, job security concerns, and a greater macroeconomic geopolitical uncertainties.
Speaker #5: However, long-term housing demand remains supported by favorable demographics, and undersupply of affordable homes in the United States. We believe our strategy allows us to effectively compete with existing home sales, which will continue to create a market differentiator for us.
Steve Hilton: We believe our strategy allows us to effectively compete with existing home sales, which will continue to create a market differentiator for us. With that, I'll turn it over to Philippe.
We believe our strategy allows us to effectively compete with existing home sales, which will continue to create a market differentiator for us. With that, I'll turn it over to Philippe.
Speaker #5: With that, I'll turn it over to Phillippe.
Speaker #4: Thank you,
Phillippe Lord: Thank you, Steve. First, I want to thank our Meritage team for their hard work and dedication this year. Through challenging conditions, they never wavered from our vision to positively impact the lives of our customers, as evidenced by our industry-leading customer satisfaction scores for 2025, while still focused on generating value for our shareholders. I would like to emphasize our balanced approach to capital allocation. We strategically terminate certain land deals to redeploy our capital towards repurchasing additional shares and acquiring new land that will enhance our long-term portfolio. These decisions were influenced by several factors: our market outlook, the land market, growth targets, our current stock valuation, and the evolving macroeconomic landscape. The resulting changes stemmed from a thorough review of our controlled asset pool, allowing us to make informed decisions about which deals to exit to better position ourselves for the future...
Phillippe Lord: Thank you, Steve. First, I want to thank our Meritage team for their hard work and dedication this year. Through challenging conditions, they never wavered from our vision to positively impact the lives of our customers, as evidenced by our industry-leading customer satisfaction scores for 2025, while still focused on generating value for our shareholders. I would like to emphasize our balanced approach to capital allocation. We strategically terminate certain land deals to redeploy our capital towards repurchasing additional shares and acquiring new land that will enhance our long-term portfolio. These decisions were influenced by several factors: our market outlook, the land market, growth targets, our current stock valuation, and the evolving macroeconomic landscape. The resulting changes stemmed from a thorough review of our controlled asset pool, allowing us to make informed decisions about which deals to exit to better position ourselves for the future.
Speaker #4: Steve. First, I want to thank our Meritage team for their hard work and dedication this year. Through challenging conditions, they never wavered from our vision to positively impact the lives of our customers, as evidenced by our industry-leading customer satisfaction scores for 2025.
Speaker #4: While still focused on generating value for our shareholders. I would like to emphasize our balanced approach to capital allocation. We strategically terminate certain land deals to redeploy our capital towards repurchasing additional shares and acquiring new land that will enhance our long-term portfolio.
Speaker #4: These decisions were influenced by several factors. Our market outlook, the land market, growth targets, our current stock valuation, and the evolving macroeconomic landscape. The resulting changes stem from a thorough review of our controlled asset pool, allowing us to make informed decisions about which deals to exit to better position ourselves for the future.
Speaker #4: While we always encounter a few deals that don't meet our criteria after due diligence, we do not anticipate this level of deal terminations to reoccur.
Phillippe Lord: While we always encounter a few deals that don't meet our criteria after due diligence, we do not anticipate this level of deal terminations to reoccur, assuming the current economic environment remains stable. The recent slowing demand environment has presented opportunities to enhance our land portfolio in specific submarkets. We observed land deals returning to the market, sometimes in more strategic locations and with more favorable structures. Although land prices have not significantly declined, we believe these alternatives will positively impact our long-term profitability in the coming years. Consequently, we have unwound some existing land contracts to reallocate capital towards additional share repurchases and new and future land deals. Based on our current view of the market, we took action to rightsize our overhead this quarter.
While we always encounter a few deals that don't meet our criteria after due diligence, we do not anticipate this level of deal terminations to reoccur, assuming the current economic environment remains stable. The recent slowing demand environment has presented opportunities to enhance our land portfolio in specific submarkets. We observed land deals returning to the market, sometimes in more strategic locations and with more favorable structures. Although land prices have not significantly declined, we believe these alternatives will positively impact our long-term profitability in the coming years. Consequently, we have unwound some existing land contracts to reallocate capital towards additional share repurchases and new and future land deals. Based on our current view of the market, we took action to rightsize our overhead this quarter.
Speaker #4: Assuming the current economic environment remains stable, the recent slowing demand environment has presented opportunities to enhance our line portfolio in specific submarkets. We observed land deals returning to the market, sometimes in more strategic locations and with more favorable structures.
Speaker #4: Although land prices have not significantly declined, we believe these alternatives will positively impact our long-term profitability in the coming years. Consequently, we have unwound some existing land contracts to reallocate capital towards additional share repurchases and new and future land deals.
Speaker #4: Based on our current view of the market, we took action to right-size our overhead this quarter. Building on a multi-year technology initiative focused on automation and process efficiencies, we are now able to achieve improved back-office productivity aligned with our move-in ready, all-spec strategy.
Phillippe Lord: Building on a multi-year technology initiative focused on automation and process efficiencies, we are now able to achieve improved back-office productivity aligned with our move-in ready all spec strategy. Our goal is to remain highly efficient and drive increased operating leverage as we scale our business, regardless of near-term macroeconomic conditions. Finally, as announced in Q4, we are committed to redeploying $400 million towards share buybacks in 2026, highlighting our view that the stock remains significantly undervalued. We repurchased approximately 2.2 million shares this quarter at an average discount of 12% to 2025 year-end book value per share. For full year 2025, we repurchased 6% of our outstanding shares.
Building on a multi-year technology initiative focused on automation and process efficiencies, we are now able to achieve improved back-office productivity aligned with our move-in ready all spec strategy. Our goal is to remain highly efficient and drive increased operating leverage as we scale our business, regardless of near-term macroeconomic conditions. Finally, as announced in Q4, we are committed to redeploying $400 million towards share buybacks in 2026, highlighting our view that the stock remains significantly undervalued. We repurchased approximately 2.2 million shares this quarter at an average discount of 12% to 2025 year-end book value per share. For full year 2025, we repurchased 6% of our outstanding shares.
Speaker #4: Our goal is to remain highly efficient and drive increased operating leverage as we scale our business, regardless of near-term macroeconomic conditions. Finally, as announced in Q4, we are committed to redeploying $400 million towards share buybacks in 2026, highlighting our view that the stock remains significantly undervalued.
Speaker #4: We repurchased approximately 2.2 million shares this quarter at an average discount of 12% to 2025 year-end book value per share. For full year 2025, we repurchased 6% of our outstanding shares.
Speaker #4: Our decisions have been thoughtful and intentional, considering the current environment, and we believe the actions we are taking today position Meritage to continue to generate continued long-term value creation.
Phillippe Lord: Our decisions have been thoughtful and intentional, considering the current environment, and we believe the actions we are taking today position Meritage to continue to generate continued long-term value creation. Now turning to slide 4. Q4 2025 orders were 2% lower year-over-year, primarily due to an 18% decline in average absorption pace, which was mostly offset by an 18% increase in average community count. The cancellation rate ticked up to 14% this quarter, but remained slightly below the historical average of mid to high teens as we benefit from a quick sale to close process. Our Q4 2025 ending community count of 336 was an all-time high, up 15% year-over-year compared to 292 at 31 December 2024, and up 1% sequentially compared to 334 at 30 September 2025.
Our decisions have been thoughtful and intentional, considering the current environment, and we believe the actions we are taking today position Meritage to continue to generate continued long-term value creation. Now turning to slide 4. Q4 2025 orders were 2% lower year-over-year, primarily due to an 18% decline in average absorption pace, which was mostly offset by an 18% increase in average community count. The cancellation rate ticked up to 14% this quarter, but remained slightly below the historical average of mid to high teens as we benefit from a quick sale to close process. Our Q4 2025 ending community count of 336 was an all-time high, up 15% year-over-year compared to 292 at 31 December 2024, and up 1% sequentially compared to 334 at 30 September 2025.
Speaker #4: Now, turning to slide four, fourth quarter 2025 orders were 2% lower year over year primarily due to an 18% decline in average absorption pace, which was mostly offset by an 18% increase in average community account.
Speaker #4: The cancellation rate ticked up to 14% this quarter, but remained slightly below the historical average of mid to high teens as we benefit from a quick sale to close process.
Speaker #4: Our fourth quarter 2025 ending community count of 336 was an all-time high, up 15% year-over-year compared to 292 at December 31, 2024, and up 1% sequentially compared to 334 at September 30, 2025.
Speaker #4: During the quarter, we brought 35 new communities online throughout all of our regions. For the full year 2025, we opened over 160 communities. In addition, we are expecting another 5% to 10% community account growth in 2026.
Phillippe Lord: During the quarter, we brought 35 new communities online throughout all of our regions. For full year 2025, we opened over 160 communities. In addition, we are expecting another 5 to 10% community count growth in 2026. Given our robust growth in 2025 and further expansion in 2026, we believe Meritage is well positioned to gain market share, both near term and as macro conditions improve. Our Q4 2025 average absorption pace was 3.2 compared to 3.9 in the prior year, as we intentionally elected to not further lean into incentives where we experienced market inelasticity from weakened demand in order to balance margin and velocity. We remain committed to maximizing the value of every asset in our land book.
During the quarter, we brought 35 new communities online throughout all of our regions. For full year 2025, we opened over 160 communities. In addition, we are expecting another 5 to 10% community count growth in 2026. Given our robust growth in 2025 and further expansion in 2026, we believe Meritage is well positioned to gain market share, both near term and as macro conditions improve. Our Q4 2025 average absorption pace was 3.2 compared to 3.9 in the prior year, as we intentionally elected to not further lean into incentives where we experienced market inelasticity from weakened demand in order to balance margin and velocity. We remain committed to maximizing the value of every asset in our land book.
Speaker #4: Given our robust growth in 2025 and further expansion in 2026, we believe Meritage is well positioned to gain market share, both near-term and as macro conditions improve.
Speaker #4: Our fourth quarter 2025 average absorption pace was 3.2 compared to 3.9 in the prior year. As we intentionally elected to not further lean into incentives, where we experienced market inelasticity, from weakened demand in order to balance margin and velocity.
Speaker #4: We remain committed to maximizing the value of every asset in our land book. Long term, we continue to target four net sales per month on average.
Phillippe Lord: Long term, we continue to target 4 net sales per month on average, the pace at which we are able to operate most efficiently and leverage our fixed cost. However, we are willing to temporarily moderate slightly from this target to optimize our business in the current demand environment. ASP on orders this quarter of $374,000 was down 6% from prior year due to an increased use of incentives and discounts, as well as geographic mix. We don't yet know how the spring selling season will unfold, but we are encouraged by improved selling conditions in January when compared to the more difficult demand dynamics we experienced in December. We are also hopeful that lower mortgage rates will unwind some of the lock-in effect for existing homeowners who are looking to move up. Now moving to the regional level trends.
Long term, we continue to target 4 net sales per month on average, the pace at which we are able to operate most efficiently and leverage our fixed cost. However, we are willing to temporarily moderate slightly from this target to optimize our business in the current demand environment. ASP on orders this quarter of $374,000 was down 6% from prior year due to an increased use of incentives and discounts, as well as geographic mix. We don't yet know how the spring selling season will unfold, but we are encouraged by improved selling conditions in January when compared to the more difficult demand dynamics we experienced in December. We are also hopeful that lower mortgage rates will unwind some of the lock-in effect for existing homeowners who are looking to move up. Now moving to the regional level trends.
Speaker #4: The pace at which we are able to operate most efficiently and leverage our fixed cost. However, we are willing to temporarily moderate slightly from this target to optimize our business in the current demand environment.
Speaker #4: ASP on orders this quarter of $374,000 was down 6% from prior year due to an increased use of incentives and discounts, as well as geographic mix.
Speaker #4: We don't yet know how the spring selling season will unfold, but we are encouraged by improved selling conditions in January when compared to the more difficult demand dynamics we experienced in December.
Speaker #4: We are also hopeful that lower mortgage rates will unwind some of the lock-in effect for existing homeowners who are looking to move up. Now, moving to the regional level trends.
Speaker #4: In Q4, demand patterns were highly localized by market, with a generally tougher selling environment nationwide. Across all regions, incentive utilization increased to get buyers off the fence.
Phillippe Lord: In Q4, demand patterns were highly localized by market, with a generally tougher selling environment nationwide. Across all regions, incentive utilization increased to get buyers off the fence. In our most favorable markets, Dallas, Houston, North Carolina, and South Carolina, maintained a strong absorption pace supported by resilient local economic conditions. Conversely, our teams faced lower demand and aggressive local competition in Austin, San Antonio, parts of Florida, Northern California, and Colorado. We deliberately chose to hold our ground in these markets and accept lower sales volumes as we look to the spring selling season to work through our excess home inventory. Now turning to slide 6. In Q4, to align with our current sales pace, we moderated starts, which totaled approximately 2,700 homes, 24% less than last year's Q4 and 12% lower than Q3.
In Q4, demand patterns were highly localized by market, with a generally tougher selling environment nationwide. Across all regions, incentive utilization increased to get buyers off the fence. In our most favorable markets, Dallas, Houston, North Carolina, and South Carolina, maintained a strong absorption pace supported by resilient local economic conditions. Conversely, our teams faced lower demand and aggressive local competition in Austin, San Antonio, parts of Florida, Northern California, and Colorado. We deliberately chose to hold our ground in these markets and accept lower sales volumes as we look to the spring selling season to work through our excess home inventory. Now turning to slide 6. In Q4, to align with our current sales pace, we moderated starts, which totaled approximately 2,700 homes, 24% less than last year's Q4 and 12% lower than Q3.
Speaker #4: In our most favorable markets—Dallas, Houston, North and South Carolina—we maintained a strong absorption pace, supported by resilient local economic conditions. Conversely, our teams faced lower demand and aggressive local competition in Austin, San Antonio, parts of Florida, Northern California, and Colorado.
Speaker #4: We deliberately chose to hold our ground in these markets and accept lower sales volumes as we look to the spring selling season to work through our excess home inventory.
Speaker #4: Now, turning to slide six, in Q4, to align with our current sales pace, we moderated starts which totaled approximately $2,700 homes. Twenty-four percent less than last year's Q4 and twelve percent lower than Q3.
Phillippe Lord: As our spec targets are a function of expected demand, our reduced cycle times allow us to quickly flex and ramp up starts pace if demand picks up in the spring selling season, or slow it down if conditions were to erode further. With 63% of Q4 closings also sold during the quarter, our backlog conversion rate was yet another all-time high for the company of 221%, reflecting the benefit of our sixty-day closing ready guarantee. As a result, our ending backlog declined 24% year over year from approximately 1,500 as of 31 December 2024, to approximately 1,200 homes as of 31 December 2025. With our improved cycle times, we are able to maintain lower inventory levels without compromising our sixty-day closing commitment, as labor availability and supply chains are stable and predictable.
As our spec targets are a function of expected demand, our reduced cycle times allow us to quickly flex and ramp up starts pace if demand picks up in the spring selling season, or slow it down if conditions were to erode further. With 63% of Q4 closings also sold during the quarter, our backlog conversion rate was yet another all-time high for the company of 221%, reflecting the benefit of our sixty-day closing ready guarantee. As a result, our ending backlog declined 24% year over year from approximately 1,500 as of 31 December 2024, to approximately 1,200 homes as of 31 December 2025. With our improved cycle times, we are able to maintain lower inventory levels without compromising our sixty-day closing commitment, as labor availability and supply chains are stable and predictable.
Speaker #4: of expected demand, our As our spec targets are a function reduced cycle times allow us to quickly flex and ramp up starts pace if demand picks up in the spring selling season, or slow it down if conditions were to erode further.
Speaker #4: With 63% of Q4 closings also sold during the quarter, our backlog conversion rate was yet another all-time high for the company, up 221%, reflecting the benefit of our 60-day closing ready guarantee.
Speaker #4: As a result, our ending backlog declined 24% year over year, from approximately 1,500 homes as of December 31, 2024, to approximately 1,200 homes as of December 31, 2025.
Speaker #4: With our improved cycle times, we are able to maintain lower inventory levels without compromising our 60-day closing commitment, as labor availability and supply chains are stable and predictable.
Speaker #4: We reiterate our long-term backlog conversion target of 175 to 200%. We believe the most meaningful view of our inventory is the combined total of our specs and backlog, as more than 50% of our deliveries consistently come from interquarter sales for the last five quarters.
Phillippe Lord: We reiterate our long-term backlog conversion target of 175 to 200%.... We believe the most meaningful view of our inventory is the combined total of our specs and backlog, as more than 50% of our deliveries consistently come from interquarter sales for the last five quarters. We had approximately 7,000 specs and backlog units at 31 December 2025, compared to about 8,600 units at 31 December 2024. We ended the quarter with approximately 5,800 spec homes, down 17% from approximately 7,000 specs in the prior year, and down 8% sequentially from Q3. The spec count reduction was deliberate and intentional, as is not a constraint on our closing potential for 2026, given our faster construction cycle times and ample available spec inventory.
We reiterate our long-term backlog conversion target of 175 to 200%.... We believe the most meaningful view of our inventory is the combined total of our specs and backlog, as more than 50% of our deliveries consistently come from interquarter sales for the last five quarters. We had approximately 7,000 specs and backlog units at 31 December 2025, compared to about 8,600 units at 31 December 2024. We ended the quarter with approximately 5,800 spec homes, down 17% from approximately 7,000 specs in the prior year, and down 8% sequentially from Q3. The spec count reduction was deliberate and intentional, as is not a constraint on our closing potential for 2026, given our faster construction cycle times and ample available spec inventory.
Speaker #4: We had approximately 7,000 specs and backlog units at December 31, 2025, compared to about 8,600 units at December 31, 2024. We ended the quarter with approximately 5,800 spec homes down 17% from approximately 7,000 specs in the prior year, and down 8% sequentially from Q3.
Speaker #4: The spec count reduction was deliberate and intentional, as it is not a constraint on our closing potential for 2026, given our faster construction cycle times and ample available spec inventory.
Speaker #4: The 17 specs per store this quarter was our lowest level since mid-2023. This translated to five months' supply in line with our target of four to six months' supply of specs on the ground and intentionally skewed slightly higher as we prepare for the spring selling season.
Phillippe Lord: The 17 specs per store this quarter was our lowest level since mid-2023. This translated to 5 months supply, in line with our target of 4 to 6 months supply of specs on the ground, and intentionally skewed slightly higher as we prepare for the spring selling season. In the Q4 of 2024, we had 24 specs per store, or 6 months of supply. Our completed specs comprised 50% of our total spec count at 31 December 2024. This level is slightly above our target of approximately 1/3 completed specs, and we intend to bring this ratio down during the spring selling season. With that, I will now turn it over to Hilla to walk through our financial results.
The 17 specs per store this quarter was our lowest level since mid-2023. This translated to 5 months supply, in line with our target of 4 to 6 months supply of specs on the ground, and intentionally skewed slightly higher as we prepare for the spring selling season. In the Q4 of 2024, we had 24 specs per store, or 6 months of supply. Our completed specs comprised 50% of our total spec count at 31 December 2024. This level is slightly above our target of approximately 1/3 completed specs, and we intend to bring this ratio down during the spring selling season. With that, I will now turn it over to Hilla to walk through our financial results.
Speaker #4: In the fourth quarter of 2024, we had 24 specs per store, or six months of supply. Our completed specs comprised 50% of our total spec count at December 31, 2025.
Speaker #4: This level is slightly above our target of approximately one-third completed specs, and we intend to bring this ratio down during the spring selling season.
Speaker #4: With that, I will now turn it over to Hila to walk through our financial results.
Speaker #2: Thank you, Philippe. Let's turn to slide seven and cover our Q4 results in more detail. Fourth quarter 2025 home closing revenue of $1.4 billion was 12% lower than prior year, as a result of both 7% lower home closing volume and a 5% decrease in ASP on closings to $375,000 per home.
Hilla Sferruzza: Thank you, Philippe. Let's turn to Slide seven and cover our Q4 results in more detail. Fourth quarter 2025 home closing revenue of $1.4 billion was 12% lower than prior year, as a result of both 7% lower home closing volume and a 5% decrease in ASP on closings to $375,000 per home. Our affordability focus is evident, as our ASP was notably below the $411,000 median ASP on 2025 closings in the US. Our closing and revenue were slightly below our guidance range, as we intentionally slowed our pace by limiting the layering of multiple incentives and preserving margin in markets with inelastic demand.
Hilla Sferruzza: Thank you, Philippe. Let's turn to Slide seven and cover our Q4 results in more detail. Fourth quarter 2025 home closing revenue of $1.4 billion was 12% lower than prior year, as a result of both 7% lower home closing volume and a 5% decrease in ASP on closings to $375,000 per home. Our affordability focus is evident, as our ASP was notably below the $411,000 median ASP on 2025 closings in the US. Our closing and revenue were slightly below our guidance range, as we intentionally slowed our pace by limiting the layering of multiple incentives and preserving margin in markets with inelastic demand.
Speaker #2: Our affordability focus is evident, as our ASP was notably below the $411,000 median ASP on 2025 closings in the US. Our closing and revenue were slightly below our guidance range, as we intentionally slowed our pace by limiting the layering of multiple incentives and preserving margin in markets with inelastic demand.
Speaker #2: Despite an increased focus on price and margin overall, ASP and closings were impacted by the increased take rate of incentives as compared to prior year and geographic mix shift, as the West region, with our highest ASPs, comprised a smaller portion of closings this quarter.
Hilla Sferruzza: Despite an increased focus on price and margin, overall ASP on closings was impacted by the increased take rate of incentives as compared to prior year and geographic mix shift, as the West Region, with our highest ASPs, comprised a smaller portion of closings this quarter. We anticipate elevated incentive levels will continue near term, although the cost of financing incentives is starting to moderate. Home closing gross margin was 16.5% for the quarter, and adjusted gross margin was 19.3%, excluding $27.9 million in terminated land deal walkaway charges, $7.8 million of real estate inventory impairments, and $3.2 million in severance costs in Q4 2025.
Despite an increased focus on price and margin, overall ASP on closings was impacted by the increased take rate of incentives as compared to prior year and geographic mix shift, as the West Region, with our highest ASPs, comprised a smaller portion of closings this quarter. We anticipate elevated incentive levels will continue near term, although the cost of financing incentives is starting to moderate. Home closing gross margin was 16.5% for the quarter, and adjusted gross margin was 19.3%, excluding $27.9 million in terminated land deal walkaway charges, $7.8 million of real estate inventory impairments, and $3.2 million in severance costs in Q4 2025.
Speaker #2: We anticipate elevated incentive levels will continue near term, although the cost of financing incentives is starting to moderate. Home closing gross margin was 16.5% for the quarter, and adjusted gross margin was 19.3%, excluding $27.9 million in terminated land deal walk-away charges, $7.8 million of real estate inventory impairments, and $3.2 million in severance costs in the fourth quarter of 2025.
Speaker #2: This compared to fourth quarter 2024 home closing gross margin of 23.2% and adjusted gross margin of 23.3%, excluding 2.8 million in comparable terminated land deal walk-away charges.
Hilla Sferruzza: This compared to Q4 2024 home closing gross margin of 23.2% and adjusted gross margin of 23.3%, excluding $2.8 million in comparable terminated land deal walkaway charges. As Philippe mentioned, we elected to terminate certain optional land positions to release capital and top-grade our land portfolio as better opportunities become available. We exited land deals across all regions, with approximately two-thirds of the $27.9 million in walkaway charges coming from the East Region. Our impairment assessments are conducted minimally on an annual basis or quarterly during declining market conditions, as we're currently experiencing. We evaluate the recoverability of all of our real estate assets, both owned and controlled, as part of this review.
This compared to Q4 2024 home closing gross margin of 23.2% and adjusted gross margin of 23.3%, excluding $2.8 million in comparable terminated land deal walkaway charges. As Philippe mentioned, we elected to terminate certain optional land positions to release capital and top-grade our land portfolio as better opportunities become available. We exited land deals across all regions, with approximately two-thirds of the $27.9 million in walkaway charges coming from the East Region. Our impairment assessments are conducted minimally on an annual basis or quarterly during declining market conditions, as we're currently experiencing. We evaluate the recoverability of all of our real estate assets, both owned and controlled, as part of this review.
Speaker #2: As Philippe mentioned, we elected to terminate certain option land positions to release capital and top grade our land portfolio as better opportunities become available.
Speaker #2: We exited land deals across all regions with approximately two-thirds of the 27.9 million in walk-away charges coming from the East region. Our impairment assessments are conducted minimally on an annual basis or quarterly during declining market conditions, as we're currently experiencing.
Speaker #2: We evaluate the recoverability of all of our real estate assets, both owned and controlled, as part of this review. In addition to terminating over 3,400 lots resulting in the walk-away charges, we also recorded 7.8 million in impairments this quarter on owned inventory as we adjusted pricing to local market conditions.
Hilla Sferruzza: In addition to terminating over 3,400 lots, resulting in the walkaway charges, we also recorded $7.8 million in impairments this quarter on owned inventory as we adjusted pricing to local market conditions. Adjusted home closing gross margin was 400 BPS lower in Q4 as compared to prior year, due to greater utilization of incentives and discounts, higher lot costs, and lost leverage, all of which were partially offset by improved direct costs and shorter cycle times. Our land basis in 2025 included elevated land development costs from work completed over the past several years, which will continue to impact our margins in 2026.
In addition to terminating over 3,400 lots, resulting in the walkaway charges, we also recorded $7.8 million in impairments this quarter on owned inventory as we adjusted pricing to local market conditions. Adjusted home closing gross margin was 400 BPS lower in Q4 as compared to prior year, due to greater utilization of incentives and discounts, higher lot costs, and lost leverage, all of which were partially offset by improved direct costs and shorter cycle times. Our land basis in 2025 included elevated land development costs from work completed over the past several years, which will continue to impact our margins in 2026.
Speaker #2: Adjusted home closing gross margin was 400 bps lower in Q4 as compared to prior year, due to greater utilization of incentives and discounts, higher lock costs, and lost leverage, all of which were partially offset by improved direct costs and shorter cycle times.
Speaker #2: Our land basis in 2025 included elevated land development costs from work completed over the past several years, which will continue to impact our margins in 2026.
Speaker #2: However, we are hopeful that starting in late 2027, our lock costs as a percentage of ASP should start to return to historical averages, and we will select renegotiated land development costs and the lower land basis we expect to be able to acquire over the next several quarters.
Hilla Sferruzza: However, we are hopeful that starting in late 2027, our lot cost as a percentage of ASP should start to return to historical averages, and we will select renegotiated land development costs and the lower land basis we expect to be able to acquire over the next several quarters. During the quarter, we had direct cost savings of nearly 4% per sq ft on a year-over-year basis. More recent starts have lower direct costs, although the benefits will not be visible until later in 2026, as we continue to work through our existing spec inventory that was built earlier in the year. Our cycle times held to a sub-110-day calendar schedule, in line with Q3, but an improvement compared to prior year. Our long-term gross margin target remains at 22.5 to 23.5%.
However, we are hopeful that starting in late 2027, our lot cost as a percentage of ASP should start to return to historical averages, and we will select renegotiated land development costs and the lower land basis we expect to be able to acquire over the next several quarters. During the quarter, we had direct cost savings of nearly 4% per sq ft on a year-over-year basis. More recent starts have lower direct costs, although the benefits will not be visible until later in 2026, as we continue to work through our existing spec inventory that was built earlier in the year. Our cycle times held to a sub-110-day calendar schedule, in line with Q3, but an improvement compared to prior year. Our long-term gross margin target remains at 22.5 to 23.5%.
Speaker #2: During the quarter, we had direct cost savings of nearly 4% per square foot on a year-over-year basis. More recent starts have lower direct costs, although the benefits will not be visible until later in 2026, as we continue to work through our existing spec inventory that was built earlier in the year.
Speaker #2: Our cycle times held to a sub-110-day calendar schedule in line with Q3, but an improvement compared to prior year. Our long-term gross margin target remains at 22.5 to 23.5%.
Speaker #2: We expect to reach this target once incentive levels return to historical averages and market conditions normalize. SG&A, as a percentage of home closing revenue in the fourth quarter of 2025, was 10.6%, compared to 10.8% in the fourth quarter of 2024, primarily due to lower performance-based compensation, which was partially offset by lost leverage, as well as higher external commission and technology costs.
Hilla Sferruzza: We expect to reach this target once incentive levels return to historical averages and market conditions normalize. SG&A, as a percentage of home closing revenue in Q4 2025, was 10.6%, compared to 10.8% in Q4 2024, primarily due to lower performance-based compensation, which was partially offset by lost leverage, as well as higher external commission and technology costs. Q4 external commission costs were higher year over year to help secure volume in a tougher selling environment. Our co-broke percentage remains similar to the first nine months of this year in the low 90s% capture rate, which we believe is at or near the top of our peer group. We also continue to see an increase in repeat business from Realtors, underscoring the strength of our broker relationships.
We expect to reach this target once incentive levels return to historical averages and market conditions normalize. SG&A, as a percentage of home closing revenue in Q4 2025, was 10.6%, compared to 10.8% in Q4 2024, primarily due to lower performance-based compensation, which was partially offset by lost leverage, as well as higher external commission and technology costs. Q4 external commission costs were higher year over year to help secure volume in a tougher selling environment. Our co-broke percentage remains similar to the first nine months of this year in the low 90s% capture rate, which we believe is at or near the top of our peer group. We also continue to see an increase in repeat business from Realtors, underscoring the strength of our broker relationships.
Speaker #2: Q4 external commission costs were higher year-over-year to help secure volume in a tougher selling environment. Our co-broke percentage remained similar to the first nine months of this year in the low 90s percentage, capture rate which we believe is at or near the top of our peer group.
Speaker #2: We also continue to see an increase in repeat business from realtors, underscoring the strength of our broker relationships. Fourth quarter 2025 SG&A included 2.4 million of severance costs, with no similar charges in the prior year.
Hilla Sferruzza: Q4 2025 SG&A included $2.4 million of severance costs, with no similar charges in the prior year. We maintain our long-term SG&A target of 9.5%, which we expect to achieve at higher closing volumes. The fourth quarter's effective income tax rate was 18.5% this year, compared to 22.1% for Q4 2024. The 2025 tax rate reflected our purchase of below-market 45Z transferable clean fuel production tax credits that reduced income tax expense this quarter. This was partially offset by fewer homes qualifying for energy tax credits under the Inflation Reduction Act, giving the new higher construction thresholds required to earn tax credits this year.
Q4 2025 SG&A included $2.4 million of severance costs, with no similar charges in the prior year. We maintain our long-term SG&A target of 9.5%, which we expect to achieve at higher closing volumes. The fourth quarter's effective income tax rate was 18.5% this year, compared to 22.1% for Q4 2024. The 2025 tax rate reflected our purchase of below-market 45Z transferable clean fuel production tax credits that reduced income tax expense this quarter. This was partially offset by fewer homes qualifying for energy tax credits under the Inflation Reduction Act, giving the new higher construction thresholds required to earn tax credits this year.
Speaker #2: We maintain our long-term SG&A target of 9.5%, which we expect to achieve at higher closing volumes. The fourth quarter's effective income tax rate was 18.5% this year, compared to 22.1% for the fourth quarter of 2024.
Speaker #2: The 2025 tax rate reflected our purchase of below-market 45Z transferable clean fuel production tax credits that reduced income tax expense this quarter. This was partially offset by fewer homes qualifying for energy tax credits under the Inflation Reduction Act, giving the new higher construction thresholds required to earn tax credits this year.
Speaker #2: We expect a minimal impact in 2026 from the complete elimination of the energy tax credits by June 30, as we were not eligible for such credits in most of our markets throughout 2025.
Hilla Sferruzza: We expect a minimal impact in 2026 from the complete elimination of the energy tax credits by June 30, as we were not eligible for such credits in most of our markets throughout 2025. Overall, lower home closing revenue and gross profit led to a 30% year-over-year decrease in Q4 2025 Adjusted Diluted EPS to $1.67 from $2.39 in 2024. There were $42.9 million in non-recurring charges this quarter and $2.8 million in the prior year. As for full year 2025 results compared to prior year, orders were flat, closings were down 4%, and our home closing revenue decreased 9% to $5.8 billion.
We expect a minimal impact in 2026 from the complete elimination of the energy tax credits by June 30, as we were not eligible for such credits in most of our markets throughout 2025. Overall, lower home closing revenue and gross profit led to a 30% year-over-year decrease in Q4 2025 Adjusted Diluted EPS to $1.67 from $2.39 in 2024. There were $42.9 million in non-recurring charges this quarter and $2.8 million in the prior year. As for full year 2025 results compared to prior year, orders were flat, closings were down 4%, and our home closing revenue decreased 9% to $5.8 billion.
Speaker #2: Overall, lower home closing revenue and gross profit led to a 30% year-over-year decrease in fourth quarter 2025 adjusted diluted EPS to $1.67 from $2.39 in 2024.
Speaker #2: There were $42.9 million in non-recurring charges this quarter and $2.8 million in the prior year. As for full year 2025 results compared to the prior year, orders were flat, closings were down 4%, and our home closing revenue decreased 9% to $5.8 billion.
Speaker #2: Excluding 60.2 million in non-recurring charges, compared to 6.7 million in 2024, our full year adjusted gross margin of 20.8% was 420 bps lower than 25.0% last year, primarily due to greater use of incentives, higher lock costs, and lost leverage.
Hilla Sferruzza: Excluding $60.2 million in non-recurring charges, compared to $6.7 million in 2024, our full-year Adjusted Gross Margin of 20.8% was 420 basis points lower than 25.0% last year, primarily due to greater use of incentives, higher lot costs, and loss leverage. SG&A as a percentage of home closing revenue was 10.7% in 2025 versus 10.1% in 2024, as a result of loss leverage, as well as higher external commissions, spec maintenance costs, and spend on technology. Excluding $66.4 million in non-recurring charges, compared to $6.7 million in 2024, Adjusted Diluted EPS for 2025 was $7.05, compared to $10.79 in 2024.
Excluding $60.2 million in non-recurring charges, compared to $6.7 million in 2024, our full-year Adjusted Gross Margin of 20.8% was 420 basis points lower than 25.0% last year, primarily due to greater use of incentives, higher lot costs, and loss leverage. SG&A as a percentage of home closing revenue was 10.7% in 2025 versus 10.1% in 2024, as a result of loss leverage, as well as higher external commissions, spec maintenance costs, and spend on technology. Excluding $66.4 million in non-recurring charges, compared to $6.7 million in 2024, Adjusted Diluted EPS for 2025 was $7.05, compared to $10.79 in 2024.
Speaker #2: SG&A as a percentage of home closing revenue was 10.7% in 2025 versus 10.1% in 2024, as a result of lost leverage, as well as higher external commissions spec maintenance costs and spend on technology.
Speaker #2: Excluding 66.4 million in non-recurring charges, compared to 6.7 million in 2024, adjusted diluted EPS for 2025 was $7.05, compared to $10.79 in 2024. Before we move on to the balance sheet, I wanted to quickly cover our customers' fourth quarter credit metrics.
Hilla Sferruzza: Before we move on to the balance sheet, I wanted to quickly cover our customers' fourth quarter credit metrics. As expected, FICO scores, DTIs, and LTVs remain relatively consistent with our historical averages. While the financial strength of our customers has not materially changed, buyer psychology is driving the demand for higher incentives and discounts. On to Slide 8. Our balance sheet remained healthy at 31 December 2025, with cash of $775 million, nothing drawn on our credit facility, and net debt to cap of 16.9%. As a reminder, our net debt to cap ceiling remains in the mid-20% range. Based on market opportunities to topgrade our land book that we already covered, we walked away from certain land positions this quarter.
Before we move on to the balance sheet, I wanted to quickly cover our customers' fourth quarter credit metrics. As expected, FICO scores, DTIs, and LTVs remain relatively consistent with our historical averages. While the financial strength of our customers has not materially changed, buyer psychology is driving the demand for higher incentives and discounts. On to Slide 8. Our balance sheet remained healthy at 31 December 2025, with cash of $775 million, nothing drawn on our credit facility, and net debt to cap of 16.9%. As a reminder, our net debt to cap ceiling remains in the mid-20% range. Based on market opportunities to topgrade our land book that we already covered, we walked away from certain land positions this quarter.
Speaker #2: As expected, FICO scores, DTIs, and LTVs remain relatively consistent with our historical averages, while the financial strength of our customers is not materially changed by our psychology as driving the demand for higher incentives and discounts.
Speaker #2: On to slide 8. Our balance sheet remained healthy at December 31, 2025, with cash of $775 million, nothing drawn on our credit facility, and net debt to cap of $16.9%.
Speaker #2: As a reminder, our net debt to cap ceiling remains in the mid-20% range. Based on market opportunities to top-grade our landbook that we already covered, we walked away from certain land positions this quarter.
Speaker #2: Further, in response to slower demand, we experienced fewer community closeouts, allowing us to phase land development into smaller parcels and conserve cash. These combined efforts translated to $416 million in land spend this quarter, 40% less than last year.
Hilla Sferruzza: Further, in response to slower demand, we experienced fewer community closeouts, allowing us to phase land development into smaller parcels and conserve cash. These combined efforts translated to $416 million in land spend this quarter, 40% less than last year. Given current market conditions, we are forecasting land acquisition and development spend of up to $2 billion in 2026. We returned $179 million of capital to shareholders via buybacks and dividends this quarter, up from $67 million in the same period last year. In Q4, we accelerated share repurchases to over 2.2 million shares, spending almost 4 times more than prior year in the same quarter. For full year 2025, we bought back a company record of $295 million worth of shares, reducing our outstanding share count by 6%.
Further, in response to slower demand, we experienced fewer community closeouts, allowing us to phase land development into smaller parcels and conserve cash. These combined efforts translated to $416 million in land spend this quarter, 40% less than last year. Given current market conditions, we are forecasting land acquisition and development spend of up to $2 billion in 2026. We returned $179 million of capital to shareholders via buybacks and dividends this quarter, up from $67 million in the same period last year. In Q4, we accelerated share repurchases to over 2.2 million shares, spending almost 4 times more than prior year in the same quarter. For full year 2025, we bought back a company record of $295 million worth of shares, reducing our outstanding share count by 6%.
Speaker #2: Given current market conditions, we are forecasting land acquisition and development spend of up to $2 billion in 2026. We returned $179 million of capital to shareholders via buybacks and dividends this quarter, up from $67 million in the same period last year.
Speaker #2: In Q4, we accelerated share repurchases to over 2.2 million shares, spending almost four times more than the prior year in the same quarter. For full year 2025, we bought back a company record of $295 million worth of shares, reducing our outstanding share count by 6%.
Speaker #2: We ended the year with $514 million still available under the repurchase program. We have now repurchased nearly $836 million, or 22% of our outstanding common stock since implementing our share buyback program in mid-2018, and as we shared in our November press release, we plan to programmatically buy back $100 million of shares in each quarter in 2026, assuming no material additional market shifts.
Hilla Sferruzza: We ended the year with $514 million still available under the repurchase program. We have now repurchased nearly $836 million, or 22%, of our outstanding common stock since implementing our share buyback program in mid-2018. As we shared in our November press release, we plan to programmatically buy back $100 million of shares in each quarter in 2026, assuming no material additional market shifts. We increased our quarterly dividend 15% year-over-year to $0.43 per share in 2025, from $0.375 per share in 2024. Our cash dividend totaled $29 million in Q4 of 2025 and $121 million for the full year.
We ended the year with $514 million still available under the repurchase program. We have now repurchased nearly $836 million, or 22%, of our outstanding common stock since implementing our share buyback program in mid-2018. As we shared in our November press release, we plan to programmatically buy back $100 million of shares in each quarter in 2026, assuming no material additional market shifts. We increased our quarterly dividend 15% year-over-year to $0.43 per share in 2025, from $0.375 per share in 2024. Our cash dividend totaled $29 million in Q4 of 2025 and $121 million for the full year.
Speaker #2: We increased our quarterly dividend 15% year-over-year to $0.43 per share in 2025 from $0.37.5 per share in 2024. Our cash dividend totaled $29 million in the fourth quarter of 2025 and $121 million for the full year, where it returned nearly $270 million to shareholders in the form of dividends, since we initiated this program three years ago.
Hilla Sferruzza: We have returned nearly $270 million to shareholders in the form of dividends since we initiated this program three years ago. We will be evaluating the 2026 quarterly cash dividend amount next month, and we'll share the update publicly when available. In 2025, we returned a total of $416 million of capital to shareholders, or 92% of this year's total earnings. On a cumulative basis, since mid-2018, we have returned over $1.1 billion in total capital to shareholders through both buybacks and dividends. Turning to Slide 9. Our net lot activity was a decrease of about 500 lots this quarter, as our approximate 3,400 lot terminations exceeded new lots put under control. In the Q4 2024, we put nearly 14,400 net new lots under control.
We have returned nearly $270 million to shareholders in the form of dividends since we initiated this program three years ago. We will be evaluating the 2026 quarterly cash dividend amount next month, and we'll share the update publicly when available. In 2025, we returned a total of $416 million of capital to shareholders, or 92% of this year's total earnings. On a cumulative basis, since mid-2018, we have returned over $1.1 billion in total capital to shareholders through both buybacks and dividends. Turning to Slide 9. Our net lot activity was a decrease of about 500 lots this quarter, as our approximate 3,400 lot terminations exceeded new lots put under control. In the Q4 2024, we put nearly 14,400 net new lots under control.
Speaker #2: We will be evaluating the 2026 quarterly cash dividend amount next month and will show the update publicly when available. In 2025, we returned a total of $416 million of capital to shareholders, or 92% of this year's total earnings.
Speaker #2: On a cumulative basis, since mid-2018, we have returned over $1.1 billion in total capital to shareholders through both buybacks and dividends. Turning to slide 9.
Speaker #2: Our net lot activity was a decrease of about $500 lots this quarter, as our approximate 3,400 lot terminations exceeded new lots put under control.
Speaker #2: In the fourth quarter of 2024, we put nearly $14,400 net new lots under control. As of December 31, 2025, we owned or controlled a total of about 77,600 lots, equating to 5.2 years' supply of the last 12 months' closings.
Hilla Sferruzza: As of December 31, 2025, we owned or controlled a total of about 77,600 lots, equating to 5.2 year supply of the last twelve months closings. We also had nearly 14,600 lots that were still undergoing diligence at the end of the quarter. We remain focused on utilizing more off-balance sheet financing vehicles and target a mix of about 60% owned and 40% option lots, although we look to balance margin and IRR from such initiatives. About 72% of our total lot inventory at December 31, 2025, was owned and 28% was optioned, compared to prior year, where we had a 62% owned inventory and a 38% option lot position. Since our 3,400 lot terminations this quarter were all off-book controlled lots, our ratios are temporarily disproportionately skewed to owned at year-end.
As of December 31, 2025, we owned or controlled a total of about 77,600 lots, equating to 5.2 year supply of the last twelve months closings. We also had nearly 14,600 lots that were still undergoing diligence at the end of the quarter. We remain focused on utilizing more off-balance sheet financing vehicles and target a mix of about 60% owned and 40% option lots, although we look to balance margin and IRR from such initiatives. About 72% of our total lot inventory at December 31, 2025, was owned and 28% was optioned, compared to prior year, where we had a 62% owned inventory and a 38% option lot position. Since our 3,400 lot terminations this quarter were all off-book controlled lots, our ratios are temporarily disproportionately skewed to owned at year-end.
Speaker #2: We also had nearly 14,600 lots that were still undergoing diligence at the end of the quarter. We remain focused on utilizing more off-balance sheet financing vehicles and target a mix of about 60% owned and 40% option lots, although we look to balance margin and IRR from such initiatives.
Speaker #2: About 72% of our total lot inventory at December 31, 2025, was owned and 28% was options, compared to the prior year, where we had a 62% owned inventory and a 38% option lot position.
Speaker #2: Since our 3,400 lot terminations this quarter were all off-book control lots, our ratios are temporarily disproportionately skewed to owned at year-end. Finally, I'll go back to the slide 10.
Hilla Sferruzza: Finally, I'll go back to the slide 10. I want to emphasize that our guidance is based on current market conditions. We're guiding to full year 2026 closings in line with our 2025 performance in both units and home closing revenue, assuming no changes in market conditions. For Q1 2026, we are projecting total home closings between 3,000 and 3,300 units, home closing revenue of $1.13 to 1.24 billion, home closing gross margin of 18% to 19%, an effective tax rate of about 24%, and diluted EPS in the range of $0.87 to $1.13. With that, I'll turn it back over to Philippe.
Finally, I'll go back to the slide 10. I want to emphasize that our guidance is based on current market conditions. We're guiding to full year 2026 closings in line with our 2025 performance in both units and home closing revenue, assuming no changes in market conditions. For Q1 2026, we are projecting total home closings between 3,000 and 3,300 units, home closing revenue of $1.13 to 1.24 billion, home closing gross margin of 18% to 19%, an effective tax rate of about 24%, and diluted EPS in the range of $0.87 to $1.13. With that, I'll turn it back over to Philippe.
Speaker #2: I want to emphasize that our guidance is based on current market conditions. We're guiding to full year 2026 closings in line with our 2025 performance in both units and home closing revenue, assuming no changes in market conditions.
Speaker #2: For Q1 2026, we are projecting total home closings between 3,000 and 3,300 units, home closing revenue of $1.13 to $1.24 billion, home closing gross margin of 18 to 19%, and effective tax rate of about 24%, and diluted EPS in the range of $0.87 to $1.13, with that, I'll turn it back over to Felipe.
Speaker #2: Thank you, Hila. In closing, please turn to slide 11. As we look to 2026 and beyond, I want to remind everyone about who Meredith has chosen to be.
Phillippe Lord: Thank you, Hilla. In closing, please turn to slide 11. As we look to 2026 and beyond, I want to remind everyone about who Meritage has chosen to be. A top five builder focused on spec building with move-in-ready inventory, streamlined operations, a diverse geographic footprint, and a differentiated ability to compete against resale, given our 60-day closing ready guarantee and realtor engagement. All of these attributes give us a clear competitive advantage to operate efficiently under all market environments. When combined with our community count growth and improved cycle times, I believe Meritage is well positioned to continue to capture market share when demand dynamics improve. With that, I will now turn the call over to the operator for instructions on the Q&A. Operator?
Phillippe Lord: Thank you, Hilla. In closing, please turn to slide 11. As we look to 2026 and beyond, I want to remind everyone about who Meritage has chosen to be. A top five builder focused on spec building with move-in-ready inventory, streamlined operations, a diverse geographic footprint, and a differentiated ability to compete against resale, given our 60-day closing ready guarantee and realtor engagement. All of these attributes give us a clear competitive advantage to operate efficiently under all market environments. When combined with our community count growth and improved cycle times, I believe Meritage is well positioned to continue to capture market share when demand dynamics improve. With that, I will now turn the call over to the operator for instructions on the Q&A. Operator?
Speaker #2: The top five builder focused on spec building with move-in-ready inventory, streamlined operations, a diverse geographic footprint, and a differentiated ability to compete against resale, given our 60-day closing-ready guarantee, and realtor engagement.
Speaker #2: All of these attributes give us a clear competitive advantage to operate efficiently under all market environments. When combined with our community account growth and improved cycle times, I believe Meredith is well-positioned to continue to capture market share when demand dynamics improve.
Speaker #2: With that, I will now turn the call over to the operator for instructions on the Q&A.
Speaker #2: Operator. Thank
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Operator: Thank you. To ask a question, you will need to press star one on your telephone keypad. If you want to remove yourself from the queue, please press star two. In the interest of time, we ask that you limit yourself to one question and one follow-up. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. We'll take our first question from Trevor Allinson with Wolfe Research.
Operator: Thank you. To ask a question, you will need to press star one on your telephone keypad. If you want to remove yourself from the queue, please press star two. In the interest of time, we ask that you limit yourself to one question and one follow-up. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. We'll take our first question from Trevor Allinson with Wolfe Research.
Speaker #3: In the interest of time, we ask that you limit yourself to one question and one follow-up. So others can hear your questions clearly, we ask that you pick up your handset, for best sound quality.
Speaker #3: We'll take our first question from Trevor Allenson with Wolf Research.
Speaker #4: Hi, good morning. Thank you for taking my questions. First one's on your 2026 outlook. You mentioned historically you saw that for absorption pace per month, near term you're willing to dip a bit below that level.
Trevor Allinson: Hi, good morning. Thank you for taking my questions. First one's on your 2026 outlook. You mentioned historically, you solved for that 4 absorption pace per month. Near term, you're willing to dip a bit below that level. I think the incentive environment has been challenging for a while now, so what drove the change in, in your approach here? And then what is the temporary new level of absorb- of absorption we should expect you to operate in the current environment?
Trevor Allinson: Hi, good morning. Thank you for taking my questions. First one's on your 2026 outlook. You mentioned historically, you solved for that 4 absorption pace per month. Near term, you're willing to dip a bit below that level. I think the incentive environment has been challenging for a while now, so what drove the change in, in your approach here? And then what is the temporary new level of absorb- of absorption we should expect you to operate in the current environment?
Speaker #4: I think the incentive environment has been challenging for a while now. So what drove the change in your approach here? And then what is the temporary new level of absorption, which you expect you to operate in the current
Speaker #4: environment? Thanks,
Phillippe Lord: Thanks, Trevor. So let me just talk about what drove the temporary refocus on margin and not chasing incentives. As we rolled into Q4, we saw a lot of builders clearing the decks with aged inventory, and so we knew that incentives were going to be elevated in Q4, and intentionally chose, at least for that quarter, to not, not chase additional sales and operate at a slightly slower volume. As we look into Q1, I think there's still some noise in the system. There's still some builders out there, including ourselves, who are clearing inventory, so we'll see how it goes. But we do expect the spring selling season to be better, so we see an opportunity for improved returns, both in the form of absorptions and margins in Q1 and Q2.
Phillippe Lord: Thanks, Trevor. So let me just talk about what drove the temporary refocus on margin and not chasing incentives. As we rolled into Q4, we saw a lot of builders clearing the decks with aged inventory, and so we knew that incentives were going to be elevated in Q4, and intentionally chose, at least for that quarter, to not, not chase additional sales and operate at a slightly slower volume. As we look into Q1, I think there's still some noise in the system. There's still some builders out there, including ourselves, who are clearing inventory, so we'll see how it goes. But we do expect the spring selling season to be better, so we see an opportunity for improved returns, both in the form of absorptions and margins in Q1 and Q2.
Speaker #2: Trevor. So let me just talk about what drove the temporary refocus on margin and not chasing incentives. As we rolled into Q4, we saw a lot of builders clearing the decks.
Speaker #2: With aged inventory, and so we knew that incentives were going to be elevated in Q4 and intentionally chose at least for that quarter to not chase additional sales and operate at a slightly slower volume.
Speaker #2: As we look into Q1, I think there's still some noise in the system. There are still some builders out there, including ourselves, who are clearing inventory.
Speaker #2: So we'll see how it goes. But we do expect the spring selling season to be better so we see an opportunity for improved returns both in the form of absorptions and margins in Q1 and Q2.
Speaker #2: So our goal is to try to do four a month throughout the year. But right now, we're hedging a little bit based on what the builder competition is doing and waiting to see exactly how the spring selling season will
Phillippe Lord: So our goal is to try to do four a month throughout the year. But right now, we're hedging a little bit based on what the builder competition is doing and waiting to see exactly how the spring selling season will materialize.
So our goal is to try to do four a month throughout the year. But right now, we're hedging a little bit based on what the builder competition is doing and waiting to see exactly how the spring selling season will materialize.
Speaker #2: materialize. Yeah, we've not reset a different
Hilla Sferruzza: Yeah, we've not reset a different target. It's community by community, week by week. The goal is still an average of four net sales per store, which we achieved in 2025. We were just a hair shy of it at 3.9.
Hilla Sferruzza: Yeah, we've not reset a different target. It's community by community, week by week. The goal is still an average of four net sales per store, which we achieved in 2025. We were just a hair shy of it at 3.9.
Speaker #3: Target. It's a community-by-community, week-by-week process. The goal is still an average of four net sales per store, which we achieved in 2025. We were just a hair shy of it at 3.9.
Speaker #2: For the full year,
Phillippe Lord: For the full year, yeah.
Phillippe Lord: For the full year, yeah.
Speaker #2: yeah. Okay.
Trevor Allinson: Okay. Okay, that's a really helpful clarification, and I think also a very smart approach in the current environment. The second question is related to specs. You've done a really good job of working down your specs per community. I think you mentioned they were down to 17 versus 24 a year ago. With that in mind, do you have those where you want them now? Do you expect, you know, a further reduction here moving forward? And then I think you may have mentioned it, but can you remind us what portion of those specs are finished, and where do you target finished specs per community in the coming quarters? Thanks.
Trevor Allinson: Okay. Okay, that's a really helpful clarification, and I think also a very smart approach in the current environment. The second question is related to specs. You've done a really good job of working down your specs per community. I think you mentioned they were down to 17 versus 24 a year ago. With that in mind, do you have those where you want them now? Do you expect, you know, a further reduction here moving forward? And then I think you may have mentioned it, but can you remind us what portion of those specs are finished, and where do you target finished specs per community in the coming quarters? Thanks.
Speaker #4: Okay. That's really helpful clarification. And I think also a very smart approach in the current environment. The second question is related to the specs you've done a really good job of working down your specs per community.
Speaker #4: I think you mentioned they were down to 17 versus 24 a year ago. With that in mind, do you have those where you want them now?
Speaker #4: Do you expect a further reduction here moving forward? And then I think you may have mentioned it, but can you remind us what portion of those specs are finished and where do you target finished specs per community in the coming quarter?
Speaker #2: Yeah.
Phillippe Lord: Yeah, thanks for the question. I think we're not quite where we want to be. We still have about 50% of our specs are nearing finished or finished. We'd like that to be more around 1/3. We like to have about 1/3 that can move in 30 days and about 1/3 that can move in 60 days, and then the other 1/3, we're just starting. So we're getting close to that, but we still have some areas where we're whittling down our finished inventory. As far as the 17 specs per community, that's pretty close to our target. It might go down a little bit if the market doesn't cooperate in certain places, but that's pretty reasonable.
Phillippe Lord: Yeah, thanks for the question. I think we're not quite where we want to be. We still have about 50% of our specs are nearing finished or finished. We'd like that to be more around 1/3. We like to have about 1/3 that can move in 30 days and about 1/3 that can move in 60 days, and then the other 1/3, we're just starting. So we're getting close to that, but we still have some areas where we're whittling down our finished inventory. As far as the 17 specs per community, that's pretty close to our target. It might go down a little bit if the market doesn't cooperate in certain places, but that's pretty reasonable.
Speaker #2: Thanks for the Thanks. question. I think we're not quite where we want to be. We still have about 50% of our specs are nearing finished or finished.
Speaker #2: We like that to be more around the third. We like to have about a third that can move in in 30 days and about a other third we're just starting.
Speaker #2: Third, that can move in 60 days, and then the—so we're getting close to that, but we still have some areas where we're whittling down our finished inventory.
Speaker #2: As far as the 17 specs per community, that's pretty close to our target. It might go down a little bit if the market doesn't cooperate.
Speaker #2: In certain places, but that's pretty reasonable. And we always like to carry a little bit more specs right now because we expect the spring selling season to be the strongest part of the year.
Phillippe Lord: We always like to carry a little bit more specs right now because we expect the spring selling season to be the strongest part of the year, and then we carry a little bit less specs in the back half of the year when seasonality were to occur.
We always like to carry a little bit more specs right now because we expect the spring selling season to be the strongest part of the year, and then we carry a little bit less specs in the back half of the year when seasonality were to occur.
Speaker #2: And then we carry a little bit less specs in the back half of the year when seasonality were to.
Speaker #2: occur. Okay.
Trevor Allinson: Okay. Thank you for all the, all the coloring. Good luck moving forward.
Trevor Allinson: Okay. Thank you for all the, all the coloring. Good luck moving forward.
Speaker #4: Thank you for all the coloring. Good luck moving forward.
Speaker #2: Thank you.
Phillippe Lord: Thank you.
Phillippe Lord: Thank you.
Speaker #3: Thank you. We'll take our next question from Alan Rottner, with Zelman.
Operator: Thank you. We'll take our next question from Alan Ratner with Zelman.
Operator: Thank you. We'll take our next question from Alan Ratner with Zelman.
Speaker #4: Hey, guys. Good morning. Thanks for all the details so far. Appreciate it. First question, I just want to clarify. The community account guidance of 5 to 10 percent, your community account ramped pretty meaningfully throughout '25.
Alan Ratner: Hey, guys. Good morning. Thanks for all the details so far. Appreciate it. First question, I just want to clarify the community count guidance of 5% to 10%. You know, your community count ramped pretty meaningfully throughout 2025. So is that growth off of your year-end count, or is that on an average for the year? Which I think if it's the latter, I guess would imply more, more of like a flat lining from here. Can you just clarify that?
Alan Ratner: Hey, guys. Good morning. Thanks for all the details so far. Appreciate it. First question, I just want to clarify the community count guidance of 5% to 10%. You know, your community count ramped pretty meaningfully throughout 2025. So is that growth off of your year-end count, or is that on an average for the year? Which I think if it's the latter, I guess would imply more, more of like a flat lining from here. Can you just clarify that?
Speaker #4: So is that growth off of your year-end count, or is that on an average for the year, which I think if it's the latter, I guess would imply more of a flat lining from here?
Speaker #4: Can you just clarify
Speaker #4: that? It's the growth
Phillippe Lord: It's the growth off our current year-end, so it's not-
Phillippe Lord: It's the growth off our current year-end, so it's not-
Speaker #2: off our current year-end. So it's not a flat line. We'll have 5 to 10 percent incremental community account growth this year.
Alan Ratner: Okay.
Phillippe Lord: A flat line. We'll have 5 to 10% incremental community count growth this year.
Alan Ratner: Okay.
Phillippe Lord: A flat line. We'll have 5 to 10% incremental community count growth this year.
Speaker #4: Gotcha. Okay. Great. Thanks. And then on the margin guidance, I think if I'm looking at this correctly, adjusting for the kind of charges this quarter, it implies about maybe 70 basis points of sequential pressure on an apples-to-apples basis in one Q&A.
Alan Ratner: ... Gotcha. Okay, great. Thanks. And then on the margin guidance, I think if I'm looking at this correctly, adjusting for the kind of charges this quarter, it implies about maybe 70 basis points of sequential pressure, on an apples-to-apples basis in Q1. And I think that's pretty in line with, like, your typical seasonal pullback in Q1. Maybe, Hilla, you could just refresh my memory. I believe there is some seasonality in your margins. So should I interpret that guide as kind of a flattish guide, adjusting for seasonality?
Alan Ratner: Gotcha. Okay, great. Thanks. And then on the margin guidance, I think if I'm looking at this correctly, adjusting for the kind of charges this quarter, it implies about maybe 70 basis points of sequential pressure, on an apples-to-apples basis in Q1. And I think that's pretty in line with, like, your typical seasonal pullback in Q1. Maybe, Hilla, you could just refresh my memory. I believe there is some seasonality in your margins. So should I interpret that guide as kind of a flattish guide, adjusting for seasonality?
Speaker #4: And I think that's pretty in line with your typical seasonal pullback in one Q. Maybe Hila, you could just refresh my memory. I believe there is some seasonality near margins.
Speaker #4: So should I interpret that guide as kind of a flattish guide, adjusting for
Speaker #4: seasonality? Yeah.
Hilla Sferruzza: Yeah, you're exactly right. So when you look at the midpoint of our closing units versus where we were in Q4 for closings, we've typically said there's up to 100 bps of lost leverage in, in margins. So you're seeing that in the guidance for Q1. You know, maybe a little bit of an incentive environment in Q4, still closing in Q1, maybe some of the December noise. But for the most part, what we're seeing right now is holding steady with, you know, some hopeful green shoots from the spring selling season.
Hilla Sferruzza: Yeah, you're exactly right. So when you look at the midpoint of our closing units versus where we were in Q4 for closings, we've typically said there's up to 100 bps of lost leverage in, in margins. So you're seeing that in the guidance for Q1. You know, maybe a little bit of an incentive environment in Q4, still closing in Q1, maybe some of the December noise. But for the most part, what we're seeing right now is holding steady with, you know, some hopeful green shoots from the spring selling season.
Speaker #3: You're exactly right. So when you look at the midpoint of our closing units versus where we were in Q4 for closings, we've typically said there's up to 100 bps of loss leverage in margins.
Speaker #3: So you're seeing that in the guidance for Q1. Maybe a little bit of an incentive environment in Q4 still closing in Q1. Maybe some of the December noise.
Speaker #3: But for the most part, what we're seeing right now is holding steady with some hopeful green shoots from the spring selling season.
Speaker #4: Gotcha. So that seems pretty encouraging, I guess, just given the trends that we saw through '25. It feels like maybe things are firming up a little bit.
Alan Ratner: Gotcha. So that seems pretty encouraging, I guess, just given the trends that we saw through 2025. It feels like maybe things are firming up a little bit, and I'm sure a lot of that has to do with, you know, the gentle pivot you guys are making, maybe a bit more balance between pace and price. But as we think about the remainder of 2026, recognizing you don't give guidance, can you just kind of talk through what the potential headwinds and tailwinds could be, assuming, you know, you do solve for that flattish volume outlook, which, you know, feels, you know, more conservative than certainly the expectations you had coming into this year?
Alan Ratner: Gotcha. So that seems pretty encouraging, I guess, just given the trends that we saw through 2025. It feels like maybe things are firming up a little bit, and I'm sure a lot of that has to do with, you know, the gentle pivot you guys are making, maybe a bit more balance between pace and price. But as we think about the remainder of 2026, recognizing you don't give guidance, can you just kind of talk through what the potential headwinds and tailwinds could be, assuming, you know, you do solve for that flattish volume outlook, which, you know, feels, you know, more conservative than certainly the expectations you had coming into this year?
Speaker #4: And I'm sure a lot of that has to do with the gentle pivot you guys are making—maybe a little bit more balance between pace and price.
Speaker #4: But as we think about the remainder of '26, recognizing you don't give guidance, can you just kind of talk through what the potential headwinds and tailwinds could be, assuming you do solve for that flattish volume outlook, which feels more conservative than certainly the expectations you had coming into this
Speaker #4: year? Yeah.
Phillippe Lord: Yeah, and absolutely. I think the, the biggest tailwind is our starting backlog. You know, as we said, we intentionally chose not to chase the incentives in Q4 during a time of seasonality. Consumer confidence felt weak. We saw a lot of builders trying to clear out old inventory, and we felt like we'd have a better return on our inventory in Q1 than we did in Q4. So that, that starting backlog is really what we're trying to overcome, even though we have higher community count growth, and we still expect to, on average, sell around 4 a month. Trying to overcome that starting backlog is gonna be the big goal. So if the spring selling season is better than we think, and the incentive environment moderates, and some of the competition stabilizes, I think that's the, that's the tailwind.
Phillippe Lord: Yeah, and absolutely. I think the, the biggest tailwind is our starting backlog. You know, as we said, we intentionally chose not to chase the incentives in Q4 during a time of seasonality. Consumer confidence felt weak. We saw a lot of builders trying to clear out old inventory, and we felt like we'd have a better return on our inventory in Q1 than we did in Q4. So that, that starting backlog is really what we're trying to overcome, even though we have higher community count growth, and we still expect to, on average, sell around 4 a month. Trying to overcome that starting backlog is gonna be the big goal. So if the spring selling season is better than we think, and the incentive environment moderates, and some of the competition stabilizes, I think that's the, that's the tailwind.
Speaker #2: And absolutely. I think that the biggest tailwind is our starting backlog. As we said, we intentionally chose not to chase the incentives in Q4 during a time of seasonality, when consumer confidence fell weak.
Speaker #2: We saw a lot of builders trying to clear out old inventory, and we felt like we'd have a better return on our inventory in Q1 than we did in Q4.
Speaker #2: So that starting backlog is really what we're trying to overcome, even though we have higher community account growth. And we still expect to, on average, sell around four a month, trying to overcome that starting backlog is going to be the big goal.
Speaker #2: So if the spring selling season is better, then we think. And the incentive environment is moderate. And some of the competition stabilizes, I think that's the tailwind.
Speaker #2: The headwind is the higher rates that are still out there. Obviously, that's pressuring the entry-level buyer more than the move-up buyer. And then certain regional nuances, as we look for a better performance in Florida, better performance out west, so it's just a lot of still unknowns right now.
Phillippe Lord: The headwind is the higher rates that are still out there. Obviously, that's pressuring the entry-level buyer more than the move-up buyer. And then certain regional nuances as we look for a better performance in Florida, better performance out west. So it's just a lot of still unknowns right now. And then the number one headwind that everyone knows about is consumer confidence, which is ultimately, I think, a bigger deal than affordability right now. And hopefully, the consumer starts to feel better about things as we move throughout the year.
The headwind is the higher rates that are still out there. Obviously, that's pressuring the entry-level buyer more than the move-up buyer. And then certain regional nuances as we look for a better performance in Florida, better performance out west. So it's just a lot of still unknowns right now. And then the number one headwind that everyone knows about is consumer confidence, which is ultimately, I think, a bigger deal than affordability right now. And hopefully, the consumer starts to feel better about things as we move throughout the year.
Speaker #2: And then the number one headwind that everyone knows about is consumer confidence, which is ultimately I think a bigger deal than affordability right now.
Speaker #2: And hopefully the consumer starts to feel better about things as
Speaker #2: we move throughout the year. So
Hilla Sferruzza: So I'll add two, two other points. And Alan, as you know, we don't guide full year margin at this point, so we, we can't give any specifics. But two things to consider. We've mentioned that we're already seeing some moderating in the cost, how expensive it is for us to buy rate locks. So assuming that trend continues, there's a potential, a potential improvement during the year. You know, we can't sit here on 29 January and predict what rates are gonna do, but if the trend holds, or improves, I think that's, that's an opportunity for margin. And then the other item we mentioned in our prepared remarks, we've seen some pretty fantastic savings on direct costs, 4% year-over-year as we close out the year.
Hilla Sferruzza: So I'll add two, two other points. And Alan, as you know, we don't guide full year margin at this point, so we, we can't give any specifics. But two things to consider. We've mentioned that we're already seeing some moderating in the cost, how expensive it is for us to buy rate locks. So assuming that trend continues, there's a potential, a potential improvement during the year. You know, we can't sit here on 29 January and predict what rates are gonna do, but if the trend holds, or improves, I think that's, that's an opportunity for margin. And then the other item we mentioned in our prepared remarks, we've seen some pretty fantastic savings on direct costs, 4% year-over-year as we close out the year.
Speaker #3: I'll add two other points. And Alan, as you know, we don't guide full year margin at this point. So we can't give any specifics.
Speaker #3: But two things to consider: we've mentioned that we're already seeing some moderating in the cost, how expensive it is for us to buy at rate lock.
Speaker #3: So assuming that trend continues, there's a potential improvement during the year. We can't sit here in the 29th of January and predict what rates are going to do.
Speaker #3: But if the trend holds or improves, I think that's an opportunity for margin. And then the other item we mentioned in our prepared remarks—we've seen some pretty fantastic savings on direct costs, 4% year over year as we close out the year.
Speaker #3: So as you guys know, we have quite a nice volume of existing inventory that we're going to go ahead and sell through Q1 and part of Q2.
Hilla Sferruzza: So as you guys know, we have quite a nice volume of existing inventory that we're gonna go ahead and sell through Q1 and part of Q2. But as you see, some of those newer homes coming through, their direct costs should be at the lower basis. So even holding everything else even, there should be some savings coming through on the lower direct. So again, there's no specific numbers that we're providing at this time, but directionally, those are two things that we can look to as we look to the rest of 2026.
So as you guys know, we have quite a nice volume of existing inventory that we're gonna go ahead and sell through Q1 and part of Q2. But as you see, some of those newer homes coming through, their direct costs should be at the lower basis. So even holding everything else even, there should be some savings coming through on the lower direct. So again, there's no specific numbers that we're providing at this time, but directionally, those are two things that we can look to as we look to the rest of 2026.
Speaker #3: But as you see some of those newer homes coming through, their direct costs should be at the lower basis. So even holding everything else even, there should be some savings coming through on the lower direct.
Speaker #3: So again, there's no specific numbers that we're providing at this time, but directionally those are two things that we can look to as we look to the rest of
Speaker #3: 2026. Thanks a lot.
Alan Ratner: Thanks a lot. Appreciate it.
Alan Ratner: Thanks a lot. Appreciate it.
Speaker #4: Appreciate it.
Operator: Thank you. We'll take our next question from Michael Rehaut with J.P. Morgan.
Operator: Thank you. We'll take our next question from Michael Rehaut with JPMorgan.
Speaker #1: Thank you. And we'll take our next question from Michael Rahot with JP
Speaker #1: Morgan. Thanks.
Michael Rehaut: Thanks. Good morning, everyone. Thanks for taking my questions. I wanted to first delve in a little bit to your statement earlier, Philippe, where you said you were encouraged in January, maybe around demand trends. And you also kind of said that you hope or expect the spring selling season to be better. When you say better, I guess I was just wondering if that's better than the fourth quarter, so in line with normal seasonality, or better versus the spring selling season from a year ago? And also, what signs or, you know, data points are out there that give you that encouragement in terms of what's happened so far in January?
Michael Rehaut: Thanks. Good morning, everyone. Thanks for taking my questions. I wanted to first delve in a little bit to your statement earlier, Philippe, where you said you were encouraged in January, maybe around demand trends. And you also kind of said that you hope or expect the spring selling season to be better. When you say better, I guess I was just wondering if that's better than the fourth quarter, so in line with normal seasonality, or better versus the spring selling season from a year ago? And also, what signs or, you know, data points are out there that give you that encouragement in terms of what's happened so far in January?
Speaker #5: Good morning, everyone. Thanks for taking my questions. I wanted to first delve in a little bit to your statement earlier, Philippe, where you said you were encouraged in January maybe around demand trends.
Speaker #5: And you also kind of said that you hope or expect the spring selling season to be better. When you say better, I guess I was just wondering if that's better than the fourth quarter.
Speaker #5: So in line with normal seasonality or better versus the spring selling season from a year ago, and also what signs or data points are out there that give you that encouragement in terms of what's happened so far in January?
Speaker #2: Sure. I think it will be better than Q4. I'm not sure if it's going to be better than last spring selling season. Last spring selling season wasn't too bad.
Phillippe Lord: Sure. I think better than Q4. I'm not sure if it's gonna be better than last spring selling season. Last spring selling season wasn't too bad. We were selling well over four a month in Q1 and Q2 of last year. So I'm optimistic that we can get back to four a month here in Q1 and Q2. Why am I optimistic? I think Q4 was really bad. I would say that to start out with. But generally, as the year flipped, we started to see better prospects throughout our funnel. The realtor community indicated to us that more buyers were out. They had more people that they were working with. The first couple of weeks of January were much better than the first couple of weeks of November and December. And so for all those reasons, we felt pretty good.
Phillippe Lord: Sure. I think better than Q4. I'm not sure if it's gonna be better than last spring selling season. Last spring selling season wasn't too bad. We were selling well over four a month in Q1 and Q2 of last year. So I'm optimistic that we can get back to four a month here in Q1 and Q2. Why am I optimistic? I think Q4 was really bad. I would say that to start out with. But generally, as the year flipped, we started to see better prospects throughout our funnel. The realtor community indicated to us that more buyers were out. They had more people that they were working with. The first couple of weeks of January were much better than the first couple of weeks of November and December. And so for all those reasons, we felt pretty good.
Speaker #2: We were selling well over four a month in Q1 and Q2 of last year. So I'm optimistic that we can get back to four a month here in Q1 and Q2.
Speaker #2: Why am I optimistic? I think Q4 was really bad. I would say that to start out with. But generally, as the year flipped, we started to see better prospects throughout our funnel.
Speaker #2: The realtor community indicated to us that more buyers were out. They had more people that they were working with. The first couple of weeks of January were much better than the first couple of weeks of November and December.
Speaker #2: And so for all those reasons, we felt pretty good. The incentive utilization out there seemed to start moderating. We saw less discounting by builders.
Phillippe Lord: The incentive utilization out there seemed to start moderating. We saw less discounting by builders. So there was a lot of good things that we saw out there that give us hope and optimism about the spring selling season. But it's just a little too early to tell if that's structural or temporary because people pulled out of the market so hard in Q4, and they're reentering in Q1. And obviously, the storm has really shut down a big part of the country as well. So we're, you know, it's hard to exactly see what's happening with that as well.
The incentive utilization out there seemed to start moderating. We saw less discounting by builders. So there was a lot of good things that we saw out there that give us hope and optimism about the spring selling season. But it's just a little too early to tell if that's structural or temporary because people pulled out of the market so hard in Q4, and they're reentering in Q1. And obviously, the storm has really shut down a big part of the country as well. So we're, you know, it's hard to exactly see what's happening with that as well.
Speaker #2: So, there was a lot of good things that we saw out there that give us hope and optimism about the spring selling season. But it's just a little too early to tell if that's structural or temporary, because people pulled out of the market so hard in Q4 and they're reentering in Q1.
Speaker #2: And obviously, the storm has really shut down a big part of the country as well. So we're it's hard to exactly see what's happening with that as well.
Speaker #5: Okay. No, I appreciate that. I guess secondly, I'd love your thoughts around some of the administration's comments with regards to share repurchase. I'm sure you've obviously seen the comments by Bill Pulte around share repurchase versus core investment.
Michael Rehaut: Okay. No, I appreciate that. I guess secondly, I'd love your thoughts around some of the administration's comments with regards to share repurchase. I'm sure you've obviously seen the comments by Bill Pulte around share repurchase versus, you know, core investment. And, you know, if you have any additional color, if you've had any contact with administration officials or any thoughts around those comments, specifically as it relates to, you know, your intention for a higher level of share repurchase in 2026.
Michael Rehaut: Okay. No, I appreciate that. I guess secondly, I'd love your thoughts around some of the administration's comments with regards to share repurchase. I'm sure you've obviously seen the comments by Bill Pulte around share repurchase versus, you know, core investment. And, you know, if you have any additional color, if you've had any contact with administration officials or any thoughts around those comments, specifically as it relates to, you know, your intention for a higher level of share repurchase in 2026.
Speaker #5: And if you have any additional color, if you've had any contact with administration officials or any thoughts around those comments, specifically as it relates to your intention for a higher level of share repurchase in '26?
Speaker #2: Yeah. We obviously take the federal government very seriously. We want to partner and collaborate with them. Our whole strategy as a company is around affordability.
Phillippe Lord: Yeah. We obviously take the federal government very seriously. We want to partner and collaborate with them. Our whole strategy as a company is around affordability. We have one of the lowest ASPs in the industry. 90% of our product is below FHA. We carry a bunch of specs to solve the void of the lack of affordable housing. So we are all in on whatever we can do with the federal government to continue to unlock the buyers that are basically priced out of the market. But we also believe that buybacks are a big part of our balanced approach to investing in operational growth and returning capital to our shareholders. So we balance those things out. We're still growing our business.
Phillippe Lord: Yeah. We obviously take the federal government very seriously. We want to partner and collaborate with them. Our whole strategy as a company is around affordability. We have one of the lowest ASPs in the industry. 90% of our product is below FHA. We carry a bunch of specs to solve the void of the lack of affordable housing. So we are all in on whatever we can do with the federal government to continue to unlock the buyers that are basically priced out of the market. But we also believe that buybacks are a big part of our balanced approach to investing in operational growth and returning capital to our shareholders. So we balance those things out. We're still growing our business.
Speaker #2: We have one of the lowest ASPs in the industry; 90% of our product is below FHA. We carry a bunch of specs to solve the void of the lack of affordable housing.
Speaker #2: So we are all in on whatever we can do with the federal government to continue to unlock the buyers that are basically priced out of the market.
Speaker #2: But we also believe that buybacks are a big part of our balanced approach to investing in operational growth and returning capital to our shareholders.
Speaker #2: So we balance those things out. We're still growing our business. We're still carrying specs, but we also have the ability to return more capital to our shareholders, which is the responsible thing to do.
Phillippe Lord: We're still carrying specs, but we also have the ability to return more capital to our shareholders, which is the responsible thing to do. When our stock is trading at a significant discount to intrinsic value, the best investment I can make for our shareholders is to buy our existing enterprise at a discount, and we're gonna do that as long as the support is there and there's no unintended consequences, which currently I don't see. So that's what I know today. We're learning more each and every day. We're working with the federal government when they ask for our input and our perspective, and we'll continue to navigate it as best we can.
We're still carrying specs, but we also have the ability to return more capital to our shareholders, which is the responsible thing to do. When our stock is trading at a significant discount to intrinsic value, the best investment I can make for our shareholders is to buy our existing enterprise at a discount, and we're gonna do that as long as the support is there and there's no unintended consequences, which currently I don't see. So that's what I know today. We're learning more each and every day. We're working with the federal government when they ask for our input and our perspective, and we'll continue to navigate it as best we can.
Speaker #2: When our stock is trading at a significant discount to intrinsic value, the best investment I can make for our shareholders is to buy our existing enterprise at a discount.
Speaker #2: And we're going to do that. As long as the support is there and there's no unintended consequences, which currently I don't see, so that's what I know today.
Speaker #2: We're learning more each and every day. We're working with the federal government when they ask for our input and our perspective, and we'll continue to navigate it as best we can.
Speaker #2: can. Great.
Michael Rehaut: Great. Thanks so much.
Michael Rehaut: Great. Thanks so much.
Speaker #5: Thanks so
Speaker #5: much. Thank you.
Operator: Thank you. We'll take our next question from John Lovallo with UBS.
Operator: Thank you. We'll take our next question from John Lovallo with UBS.
Speaker #1: And we'll take our next question from John Lavallo with
Speaker #1: UBS. Good morning, guys.
John Lovallo: Good morning, guys. Thanks for taking my question. So the delivery outlook for the full year is essentially flat year-over-year. The first quarter is down about 80%, which seems to imply that, you know, we return to year-over-year growth in the second quarter through the fourth quarter. So I guess the question is: Is it fair to assume that sort of the newer strategy of driving the highest volume and margins in Q1 and Q2 may be pushed out a bit, maybe into 2027 rather than this year?
John Lovallo: Good morning, guys. Thanks for taking my question. So the delivery outlook for the full year is essentially flat year-over-year. The first quarter is down about 80%, which seems to imply that, you know, we return to year-over-year growth in the second quarter through the fourth quarter. So I guess the question is: Is it fair to assume that sort of the newer strategy of driving the highest volume and margins in Q1 and Q2 may be pushed out a bit, maybe into 2027 rather than this year?
Speaker #6: Thanks for taking my question. So, the delivery outlook for the full year is essentially flat year over year. The first quarter is down about 8%, which seems to imply that we return to year-over-year growth in the second quarter through the fourth quarter.
Speaker #6: So I guess the question is, is it fair to assume that sort of the newer strategy of driving the highest volume and margins in the first quarter and the second quarter may be pushed out a bit, maybe into 2027 rather than this
Speaker #6: year? We'll see, right?
Phillippe Lord: We'll see, right? I think we're gonna see how the incentive environment evolves here over the next five quarters. If it stabilizes, and we're able to go out and get four a month in a profitable way and not compromise our land book, we're gonna go do that as quickly as we can. So we'll just see how things, how things go. The real challenge with our 2026 outlook versus 2025 is just how we're starting out the year. The backlog's down. We just came off a pretty slow Q4, and we're intentionally thinking about Q1 a little bit more conservatively until we understand that incentive environment.
Phillippe Lord: We'll see, right? I think we're gonna see how the incentive environment evolves here over the next five quarters. If it stabilizes, and we're able to go out and get four a month in a profitable way and not compromise our land book, we're gonna go do that as quickly as we can. So we'll just see how things, how things go. The real challenge with our 2026 outlook versus 2025 is just how we're starting out the year. The backlog's down. We just came off a pretty slow Q4, and we're intentionally thinking about Q1 a little bit more conservatively until we understand that incentive environment.
Speaker #2: I think we're going to see how the incentive environment evolves here over the next five quarters. If it stabilizes and we're able to go out and get four a month in a profitable way and not compromise our land book, we're going to go do that as quickly as we can.
Speaker #2: So, we'll just see how things go. The real challenge with our 2026 outlook versus 2025 is just how we're starting out the year. The backlog's down.
Speaker #2: We just came off a pretty slow Q4. And we're intentionally thinking about Q1 a little bit more conservatively until we understand that incentive environment.
Speaker #2: But at the end of the day, we're looking to optimize our business at four a month. In almost every scenario, except where it becomes so inelastic that the cost of that incremental demand on a community-by-community basis is too
Phillippe Lord: But at the end of the day, we're looking to optimize our business at 4 a month in almost every scenario, except where it becomes so inelastic that the cost of that incremental demand on a community kind- community-by-community basis is too material.
But at the end of the day, we're looking to optimize our business at 4 a month in almost every scenario, except where it becomes so inelastic that the cost of that incremental demand on a community kind- community-by-community basis is too material.
Speaker #2: Material. I just want to clarify.
Hilla Sferruzza: I just wanna clarify, there's a difference between sales and closings, obviously. So, the spring selling season, that doesn't change. That, that's gonna be the healthiest volume of sales per community. Again, community count is distorting the discussion a little bit, but per community, we should see, you know, the kickoff of the spring selling season in February, kind of winding down in May. So you're gonna see a healthy volume of sales in Q1 and Q2. Now, when those sales convert into closings, that's typically Q2, Q3, right? So, our sales in April and May are gonna close partially in Q2, but also in Q3.
Hilla Sferruzza: I just wanna clarify, there's a difference between sales and closings, obviously. So, the spring selling season, that doesn't change. That, that's gonna be the healthiest volume of sales per community. Again, community count is distorting the discussion a little bit, but per community, we should see, you know, the kickoff of the spring selling season in February, kind of winding down in May. So you're gonna see a healthy volume of sales in Q1 and Q2. Now, when those sales convert into closings, that's typically Q2, Q3, right? So, our sales in April and May are gonna close partially in Q2, but also in Q3.
Speaker #7: There's a difference between sales and closings, obviously. So the spring selling season, that doesn't change. That's going to be the healthiest volume of sales.
Speaker #7: Per community, again, community count is distorting the discussion a little bit, but per community, we should see the kickoff of the spring selling season in February, kind of winding down in May.
Speaker #7: So you're going to see a healthy volume of sales in Q1 and Q2. Now, when those sales convert into closings, that's typically Q2, Q3, right?
Speaker #7: So our sales in April and May are going to close partially in Q2, but also in Q3. So I think that you're going to see some of the volume from the spring selling season closing out in Q1, but more material so in Q2 and Q3, although the sales volume should be coming through in those two first quarters.
Hilla Sferruzza: So I think that you're gonna see some of the volume from the spring selling season closing out in Q1, but more materially so, more materially so in Q2 and Q3, although the sales volume should be coming during those two first quarters. So hopefully that, that helps.
So I think that you're gonna see some of the volume from the spring selling season closing out in Q1, but more materially so, more materially so in Q2 and Q3, although the sales volume should be coming during those two first quarters. So hopefully that, that helps.
Speaker #7: So hopefully that helps.
Speaker #6: Okay, great. And then, I guess the next question is, I just wanted to talk about the community account growth, which has been very strong here for some time.
John Lovallo: Okay, great. And then I guess the next question is, I just wanted to talk about the community count growth, which has been very strong here, for some time. And I'm curious if you're seeing, you know, what we would typically expect to be stronger, you know, kind of conversions within those newer communities than you are in kind of the existing communities. Is the absorption pace, you know, better as we would expect?
John Lovallo: Okay, great. And then I guess the next question is, I just wanted to talk about the community count growth, which has been very strong here, for some time. And I'm curious if you're seeing, you know, what we would typically expect to be stronger, you know, kind of conversions within those newer communities than you are in kind of the existing communities. Is the absorption pace, you know, better as we would expect?
Speaker #6: And I'm curious if you're seeing what we would typically expect to be stronger kind of conversions within those newer communities than you are in kind of the existing communities.
Speaker #6: Is the absorption pace better as we would expect?
Stephen Kim: ... Modestly, I mean, probably not what we would see in a traditional housing environment with stable consumer confidence, reasonable affordability. I think we always expect to sell more houses when we first open a community. There's a certain, fresh and new opportunity for people to own a home. People like to be the first in a community. But I would say, over the last, like, couple of quarters, it has been much more modest than we would traditionally see out of our new stores. So as we look at the new community openings, in 2026, we're not modeling them with elevated absorptions to start out, at the inception of the community.
Speaker #2: Modestly. I mean, probably not what we would see in a traditional housing environment with stable consumer confidence, reasonable affordability, I think we always expect to sell more houses when we first open a community.
Phillippe Lord: Modestly, I mean, probably not what we would see in a traditional housing environment with stable consumer confidence, reasonable affordability. I think we always expect to sell more houses when we first open a community. There's a certain, fresh and new opportunity for people to own a home. People like to be the first in a community. But I would say, over the last, like, couple of quarters, it has been much more modest than we would traditionally see out of our new stores. So as we look at the new community openings, in 2026, we're not modeling them with elevated absorptions to start out, at the inception of the community.
Speaker #2: There's a certain fresh and new opportunity for people to own a home. People like to be the first in the community. But I would say over the last couple of quarters, it has been much more modest than we would traditionally see out of our new stores.
Speaker #2: So as we look at the new community openings, in 2026, we're not modeling them with elevated absorptions to start out at the inception of the
Speaker #2: community. Okay.
Rafe Jadrosich: Okay, fantastic. Thanks, guys.
John Lovallo: Okay, fantastic. Thanks, guys.
Speaker #6: Fantastic. Thanks, guys.
Speaker #2: Yep.
Stephen Kim: Yes.
Phillippe Lord: Yes.
Speaker #1: Thank
Speaker #1: you. And we'll take our next question from Rafi Jadrusek with Bank of
Operator: Thank you. We'll take our next question from Rafe Jadrosich with Bank of America.
Operator: Thank you. We'll take our next question from Rafe Jadrosich with Bank of America.
Speaker #1: America. Hi, good morning.
Rafe Jadrosich: Hi, good morning. Thanks for taking my questions.
Rafe Jadrosich: Hi, good morning. Thanks for taking my questions.
Speaker #6: Thanks for taking my
Speaker #6: question. Good
Stephen Kim: Morning.
Phillippe Lord: Morning.
Speaker #6: I just want to I wanted morning. to ask on the SG&A. Can you talk a little bit about the potential cost savings from the cuts you made in the fourth quarter?
Rafe Jadrosich: Yeah, I just wanted to ask on the SG&A. Can you talk a little bit about the potential cost savings from the cuts you made in the fourth quarter? What's the annualized? How do we think about, like, the annualized benefit from those cost reductions?
Rafe Jadrosich: Yeah, I just wanted to ask on the SG&A. Can you talk a little bit about the potential cost savings from the cuts you made in the fourth quarter? What's the annualized? How do we think about, like, the annualized benefit from those cost reductions?
Speaker #6: What's the annualized? How do we think about the annualized benefit from those costs?
Speaker #7: Yeah.
Hilla Sferruzza: Yeah, so we're not providing a full annualized benefit yet, as part of it is a function of, the performance in 2026. You can see that we mentioned that we had, severance as a component of both SG&A and, in margin, depending on, what type of, employee was impacted. So we have a fairly material, impact on a go-forward basis, from those savings, although a lot of those savings are also just gonna be coming from, other opportunities. You've heard us talk about increased technology spend, for the last several quarters, and we're starting to see the benefits of, that technology spend on a go-forward basis as well, not just in lower spend, but in improved efficiencies in our back office operations.
Hilla Sferruzza: Yeah, so we're not providing a full annualized benefit yet, as part of it is a function of, the performance in 2026. You can see that we mentioned that we had, severance as a component of both SG&A and, in margin, depending on, what type of, employee was impacted. So we have a fairly material, impact on a go-forward basis, from those savings, although a lot of those savings are also just gonna be coming from, other opportunities. You've heard us talk about increased technology spend, for the last several quarters, and we're starting to see the benefits of, that technology spend on a go-forward basis as well, not just in lower spend, but in improved efficiencies in our back office operations.
Speaker #7: So, we're not providing a full annualized benefit yet, as part of it is a function of the performance in 2026. You can see that we mentioned that we had severance as a component of both SG&A and in margin, depending on what type of employee was impacted.
Speaker #7: So we have a fairly material impact and a go-forward basis from those savings, although a lot of those savings are also just going to be coming from other opportunities.
Speaker #7: You've heard us talk about increased technology spend for the last several quarters, and we're starting to see the benefits of that technology spend on a go-forward basis as well—not just in lower spend, but in improved efficiencies in our back-office operations.
Speaker #7: So on top of all the regular things that most folks are also doing, we've cut any excess events or any SG&A that was more discretionary.
Hilla Sferruzza: So on top of all the regular things that most folks are also doing, you know, we've cut any, any excess events or, or any SG&A that was more discretionary. The overhead count saves should definitely translate into some year-over-year SG&A leverage lift. Even though we're guiding to the same, the same-ish revenue, we are looking to see a saving on our SG&A leverage for full year 2026, but we're not providing specific guidance.
So on top of all the regular things that most folks are also doing, you know, we've cut any, any excess events or, or any SG&A that was more discretionary. The overhead count saves should definitely translate into some year-over-year SG&A leverage lift. Even though we're guiding to the same, the same-ish revenue, we are looking to see a saving on our SG&A leverage for full year 2026, but we're not providing specific guidance.
Speaker #7: The overhead count saves should definitely translate into some year-over-year SG&A leverage lift, even though we're guiding to the same-ish revenue. We are looking to see a saving in our SG&A leverage for full year 2026, but we're not providing specific guidance.
Speaker #6: Okay. That's very helpful. And then just how do you think about the obviously good to see that the step-up in shared purchase that you announced during the quarter.
Rafe Jadrosich: Okay, that's very helpful. And then, just how do you think about the... It's obviously good to see the step up in share repurchase that you announced during the quarter. How do you think longer term about the right level of debt to cap? And is there an opportunity to increase off-balance sheet from where we are today?
Rafe Jadrosich: Okay, that's very helpful. And then, just how do you think about the... It's obviously good to see the step up in share repurchase that you announced during the quarter. How do you think longer term about the right level of debt to cap? And is there an opportunity to increase off-balance sheet from where we are today?
Speaker #6: How do you think longer-term about the right level of debt-to-cap? And is there an opportunity to increase off-balance sheet from where we are
Speaker #6: today? Yeah.
Hilla Sferruzza: Yeah. So we're pretty comfortable with a low 20% net debt to cap as a long-term target. You know, we've said if there's any, you know, anything unique or unusual that temporarily takes us above that, and we can see a very clear path to coming back below it in a quick timeline, we would consider it, although, you know, we're not, we're not all that close to it right now, so we're not contemplating going above that threshold. We definitely are looking at more off-balance sheet vehicles. We appreciate that there's an ability to continue to both reinvest back in Meritage and in shareholder returns with an increased utilization of off-balance sheet vehicles. So it's something that we're very, very focused on, and are looking to dig into deeper.
Hilla Sferruzza: Yeah. So we're pretty comfortable with a low 20% net debt to cap as a long-term target. You know, we've said if there's any, you know, anything unique or unusual that temporarily takes us above that, and we can see a very clear path to coming back below it in a quick timeline, we would consider it, although, you know, we're not, we're not all that close to it right now, so we're not contemplating going above that threshold. We definitely are looking at more off-balance sheet vehicles. We appreciate that there's an ability to continue to both reinvest back in Meritage and in shareholder returns with an increased utilization of off-balance sheet vehicles. So it's something that we're very, very focused on, and are looking to dig into deeper.
Speaker #7: So we're pretty comfortable with a low 20% net debt-to-cap as a long-term target. We've said if there's anything unique or unusual that temporarily takes us above that, and we can see a very clear path of coming back below it in a quick timeline, we would consider it, although we're not all that close to it right now.
Speaker #7: So we're not contemplating going above that threshold. We definitely are looking at more off-balance sheet vehicles. We appreciate that there's an ability to continue to both reinvest back in marriage and ensure holder returns with an increased utilization of off-balance sheet vehicles.
Speaker #7: So it's something that we're very, very focused on and are looking to dig into deeper unfortunately, the ratio got a little bit off-balance this quarter because of our intentional 3,400-unit lot terminations.
Hilla Sferruzza: You know, unfortunately, the ratio got a little bit off balance this quarter because of our intentional 3,400 unit lot termination. So our relative ratio at the end of the year looks a little bit skewed, but it's definitely our intent to double down on off-balance sheet partnerships and relationships. And you should see that percentage increase throughout 2026.
You know, unfortunately, the ratio got a little bit off balance this quarter because of our intentional 3,400 unit lot termination. So our relative ratio at the end of the year looks a little bit skewed, but it's definitely our intent to double down on off-balance sheet partnerships and relationships. And you should see that percentage increase throughout 2026.
Speaker #7: So our relative ratio at the end of the year looks a little bit skewed, but it's definitely our intent to double down on off-balance sheet partnerships and relationships, and you should see that percentage increase throughout 2026.
Speaker #6: Thank you. That's helpful.
Rafe Jadrosich: Thank you. That's helpful.
Rafe Jadrosich: Thank you. That's helpful.
Speaker #1: Thank you. We will take our next question from Steven Kim with other core ISI. Please go ahead, Steven. Your line is open.
Operator: Thank you. We will take our next question from Stephen Kim with Evercore ISI. Please go ahead, Stephen, your line is open.
Operator: Thank you. We will take our next question from Stephen Kim with Evercore ISI. Please go ahead, Stephen, your line is open.
Speaker #8: Hi, guys. Sorry about that. Yeah, first question. I'm curious about the margin impact we might be able to expect purely from volume de-leverage. If your closings per community move below four—four per community per month this year—which I think you said earlier in the call that you would do that on a temporary basis.
Stephen Kim: Hi, guys, sorry about that. Yeah, first question, I'm curious about the margin impact we might be able to expect, purely from volume deleverage. If your closings per community move below 4, 4x, you know, 4 per community per month this year, which I think you said earlier in the call that, you know, that you would do that on a temporary basis. So, like, if we assume that there's no change in incentives, you know, is there a decremental margin on a per community basis or some other kind of rule of thumb that would help us quantify what the margin impact from sales per community moving below 4? Let's say they moved at, like, 3.5 from 4 or something.
Stephen Kim: Hi, guys, sorry about that. Yeah, first question, I'm curious about the margin impact we might be able to expect, purely from volume deleverage. If your closings per community move below 4, 4x, you know, 4 per community per month this year, which I think you said earlier in the call that, you know, that you would do that on a temporary basis. So, like, if we assume that there's no change in incentives, you know, is there a decremental margin on a per community basis or some other kind of rule of thumb that would help us quantify what the margin impact from sales per community moving below 4? Let's say they moved at, like, 3.5 from 4 or something. Is there some rule of thumb that we can think about that would, you know, quantify some, a margin impact from that deleverage?
Speaker #8: So, if we assume that there's no change in incentives, is there a decremental margin on a per-community basis, or some other kind of rule of thumb that would help us quantify what the margin impact from sales per community moving below four would be?
Speaker #8: Let's say they moved at like three and a half from four or something. Is there some rule of thumb that we can think about that would quantify a margin impact from that de-leverage?
Stephen Kim: Is there some rule of thumb that we can think about that would, you know, quantify some, a margin impact from that deleverage?
Speaker #7: Unfortunately, it's not that easy. Many of our communities share superintendents, and there's some leveraging that can be picked up, especially with our cross-selling initiatives, where we have multiple folks working across several communities.
Hilla Sferruzza: Unfortunately, it's not that easy. Many of our communities share superintendents, and there's some leveraging that can be picked up, especially with our cross-selling initiatives, that we have some multiple folks working across several communities. I wouldn't expect a small pullback to have an impact, but if it was a larger pullback, you know, in your example, from 4 to 3.5, there would be some impact. I don't think it would be more than, you know, 20, 30, 40 bps, if that was consistent for the entire year. But I don't know that there's a rule of thumb, kind of like what we do for the leveraging between the, you know, Q1 and Q4.
Hilla Sferruzza: Unfortunately, it's not that easy. Many of our communities share superintendents, and there's some leveraging that can be picked up, especially with our cross-selling initiatives, that we have some multiple folks working across several communities. I wouldn't expect a small pullback to have an impact, but if it was a larger pullback, you know, in your example, from 4 to 3.5, there would be some impact. I don't think it would be more than, you know, 20, 30, 40 bps, if that was consistent for the entire year. But I don't know that there's a rule of thumb, kind of like what we do for the leveraging between the, you know, Q1 and Q4.
Speaker #7: I wouldn't expect a small pullback to have an impact. But if it was a larger pullback in your example from four to three and a half, there would be some impact.
Speaker #7: I don't think it would be more than 20, 30, 40 bips if that was consistent for the entire year. But I don't know that there's a rule of thumb, kind of like what we do for the leveraging between the first and the fourth quarters.
Speaker #8: Gotcha. Okay. That's a helpful framework. I guess a second question is sort of a broader one. It relates to the move-in-ready strategy, the 60-day guaranteed close, and the reliance on realtors.
Stephen Kim: Gotcha. Okay, that's, that's a helpful framework. I guess a second question is sort of a broader one. It relates to the, the move-in-ready strategy, you know, the 60-day guaranteed close and the reliance on realtors. I, I sort of think about that as a strategy which was born out of an environment when there was an extreme scarcity of existing homes for sale. But, you know, if we were to see existing home inventory rise and, let's say, return to sort of historically normal levels, in your view, would that diminish the attractiveness of the move-in-ready strategy? And would you be open to changing it?
Stephen Kim: Gotcha. Okay, that's, that's a helpful framework. I guess a second question is sort of a broader one. It relates to the, the move-in-ready strategy, you know, the 60-day guaranteed close and the reliance on realtors. I, I sort of think about that as a strategy which was born out of an environment when there was an extreme scarcity of existing homes for sale. But, you know, if we were to see existing home inventory rise and, let's say, return to sort of historically normal levels, in your view, would that diminish the attractiveness of the move-in-ready strategy? And would you be open to changing it?
Speaker #8: I sort of think about that as a strategy which was born out of an environment when there was an extreme scarcity of existing homes for sale.
Speaker #8: We see existing home inventory rise, and—but if we were to, let's say, return to sort of historically normal levels, in your view, would that diminish the attractiveness of the move-in-ready strategy?
Speaker #8: And would you be open to changing
Speaker #8: It? Well, we're open to changing anything if—
Phillippe Lord: Well, we're open to changing anything if it makes sense, but I think it was less about what was happening over the last five years with the existing home market being locked in, and more about the fact that other than location, why do people ever buy a used home versus a new home? And ultimately, when new homes are at such a great value to existing homes, even more so today than they've ever been before, you can get homeowners insurance, your warranty cost is lower, they live better, they're more energy efficient. The idea that anyone could convince someone to buy a used home versus a new home just doesn't make any sense to the folks over at Meritage Homes.
Phillippe Lord: Well, we're open to changing anything if it makes sense, but I think it was less about what was happening over the last five years with the existing home market being locked in, and more about the fact that other than location, why do people ever buy a used home versus a new home? And ultimately, when new homes are at such a great value to existing homes, even more so today than they've ever been before, you can get homeowners insurance, your warranty cost is lower, they live better, they're more energy efficient. The idea that anyone could convince someone to buy a used home versus a new home just doesn't make any sense to the folks over at Meritage Homes.
Speaker #2: it makes sense. But I think it was less about what was happening over the last five years with the existing home market being locked in and more about the fact that other than location, why do people ever buy a used home versus a new home?
Speaker #2: And ultimately, when new homes are at such a great value to existing homes, even more so today than they've ever been before, you can get homeowners insurance, your warranty cost is lower, they live better, they're more energy efficiency.
Speaker #2: The idea that anyone could convince someone to buy a used home versus a new home just doesn't make any sense to the folks over at Meredith Jones.
Speaker #2: So our strategy is built around when that existing home market comes back, you have a compelling option to buy a new home. With no compromise, other than whether it's not in the school district you want to live, and so that is what the strategy is based on.
Phillippe Lord: So our strategy is built around when that existing home market comes back, you have a compelling option to buy a new home with no compromise, other than whether it's not in the school district you want to live. And so that is what the strategy is based on. It's not based on the lock-in effect.
So our strategy is built around when that existing home market comes back, you have a compelling option to buy a new home with no compromise, other than whether it's not in the school district you want to live. And so that is what the strategy is based on. It's not based on the lock-in effect.
Speaker #2: It's not based on the lock-in effect.
Speaker #7: Yeah, I mean, Phillippe said it better, but it was designed for when the resale market returns, not for when it was not in place.
Hilla Sferruzza: Yeah, I mean, Philippe said it better, but it was designed for when the resale market returns, not for when it was not in place.
Hilla Sferruzza: Yeah, I mean, Philippe said it better, but it was designed for when the resale market returns, not for when it was not in place.
Speaker #8: Gotcha. Yeah. It's more like saying that you can compete better against resales so why not accentuate that? That's really the emphasis, right,
Stephen Kim: Gotcha. Yeah, it's more like saying that you can compete better against resales, so why not accentuate that? That's really the emphasis, right, basically?
Stephen Kim: Gotcha. Yeah, it's more like saying that you can compete better against resales, so why not accentuate that? That's really the emphasis, right, basically?
Speaker #8: basically? That's correct.
Phillippe Lord: That's correct. And that's the whole realtor piece, because the realtor really influences that buying decision, and they're a big influencer of why people buy used homes instead of new homes. And we're trying to partner with them in a way where they would consider buying a new home over buying a used home, and it's in the best interest of everybody.
Phillippe Lord: That's correct. And that's the whole realtor piece, because the realtor really influences that buying decision, and they're a big influencer of why people buy used homes instead of new homes. And we're trying to partner with them in a way where they would consider buying a new home over buying a used home, and it's in the best interest of everybody.
Speaker #2: And that's the whole realtor piece because the realtor really influences that buying decision. And they're a big influencer of why people buy used homes instead of new homes.
Speaker #2: And we're trying to partner with them in a way where they would consider buying a new home over buying a used home. And it's in the best interest of
Speaker #2: everybody. Gotcha.
Stephen Kim: Gotcha. Okay, great. That's very helpful. Thanks.
Stephen Kim: Gotcha. Okay, great. That's very helpful. Thanks.
Speaker #8: Okay.
Speaker #8: Great. That's very helpful. You're
Speaker #2: welcome. Thank you.
Phillippe Lord: You're welcome.
Phillippe Lord: You're welcome.
Operator: Thank you. We'll take our next question from Jade Rahmani with KBW.
Operator: Thank you. We'll take our next question from Jade Rahmani with KBW.
Speaker #1: And we'll take our next question from Jade Rahmani with
Speaker #1: KBW. Hi.
Jason Sabshon: Hi, this is Jason Sabshon on for Jade. Thanks for taking my question. When mortgage rates have dipped in the last few months, have you seen builders maintain mortgage buydown levels or reduce them in concert with rate? And do you think builders will pass along savings to customers or try to get better margins?
Jason Sabshon: Hi, this is Jason Sabshon on for Jade. Thanks for taking my question. When mortgage rates have dipped in the last few months, have you seen builders maintain mortgage buydown levels or reduce them in concert with rate? And do you think builders will pass along savings to customers or try to get better margins?
Speaker #4: This is Jason Savch. I'm on for Jade. Thanks for taking my question. When mortgage rates have dipped in the last few months, have you seen builders maintain mortgage buy-down levels or reduce them in concert with rate?
Speaker #4: And do you think builders will pass along savings to customers or try to get better margins?
Phillippe Lord: So as rates have ticked down a little bit, the cost of rate buydowns has definitely shrunk moderately. Some builders have chosen to buy rates down further when that happened, while other builders have maintained the rate buydown where it was, and therefore, that cost has shrunk. I think some builders have reallocated those incentive dollars to other incentives to continue to try to overcome consumer confidence. I believe if consumer confidence were to come back, I believe that builders would pull that back into either margin or additional savings for their customers, depending on their particular community and their particular market. So I'm not sure I answered your question because the answer is probably all of the above, depending on who you are, what your strategy is, and where your community is.
Speaker #2: So as rates have ticked down a little bit, the cost of rate buy-downs has definitely shrunk moderately. Some builders have chosen to buy rates down further when that happened.
Phillippe Lord: So as rates have ticked down a little bit, the cost of rate buydowns has definitely shrunk moderately. Some builders have chosen to buy rates down further when that happened, while other builders have maintained the rate buydown where it was, and therefore, that cost has shrunk. I think some builders have reallocated those incentive dollars to other incentives to continue to try to overcome consumer confidence. I believe if consumer confidence were to come back, I believe that builders would pull that back into either margin or additional savings for their customers, depending on their particular community and their particular market. So I'm not sure I answered your question because the answer is probably all of the above, depending on who you are, what your strategy is, and where your community is.
Speaker #2: While other builders have maintained the rate buy-down where it was, and therefore that cost has shrunk, I think some builders have reallocated those incentive dollars to other incentives to continue to try to overcome consumer confidence.
Speaker #2: I believe if consumer confidence were to come back, I believe that builders would pull that back into either margin or additional savings for their customers.
Speaker #2: Depending on their particular community and their particular market. So I'm not sure I answered your question because the answer is probably all of the above.
Speaker #2: Depending on who you are and what your strategy is, and
Speaker #2: where your community is. I would say if
Hilla Sferruzza: I would say, if you look at margin guidance from the peer group for everyone that's already released, I don't think most folks are taking it back to margin, right? Most folks have guided to lower margins in Q1 with a moderating interest rate environment. So I think the expectation is to continue the status quo until we see a stabilization in demand, and then you can make decisions.
Hilla Sferruzza: I would say, if you look at margin guidance from the peer group for everyone that's already released, I don't think most folks are taking it back to margin, right? Most folks have guided to lower margins in Q1 with a moderating interest rate environment. So I think the expectation is to continue the status quo until we see a stabilization in demand, and then you can make decisions.
Speaker #7: you look at margin guidance from the peer group for everyone that's already released, I don't think most folks are taking it back to margin, right?
Speaker #7: Most folks have guided to lower margins. In Q1, with a moderating interest rate environment, so I think the expectation is to continue the status quo until we see a stabilization in demand.
Speaker #7: And then you can make decisions.
Speaker #4: Got it. That's helpful, thank you. Then, separately, what drove higher other income during the quarter? Because we were expecting a dip due to lower rates.
Jason Sabshon: Got it. That's helpful. Thank you. Then separately, what drove higher other income during the quarter? Because we were expecting a dip due to lower rates. Thanks.
Jason Sabshon: Got it. That's helpful. Thank you. Then separately, what drove higher other income during the quarter? Because we were expecting a dip due to lower rates. Thanks.
Speaker #4: Thanks.
Speaker #7: Yeah, yeah. It was actually a little bit of a combination of a higher-than-expected cash balance—that we were actually earning interest a little bit longer—and then we had some pickups in legal settlements.
Hilla Sferruzza: Yeah. Yeah, it was actually a little bit of a combination of a higher than expected cash balance, and we were actually earning interest a little bit longer. Then, we had some pickups in legal settlements. There's always ups and downs. That's a tough to model line item, which is why we kind of usually stay silent on it.
Hilla Sferruzza: Yeah. Yeah, it was actually a little bit of a combination of a higher than expected cash balance, and we were actually earning interest a little bit longer. Then, we had some pickups in legal settlements. There's always ups and downs. That's a tough to model line item, which is why we kind of usually stay silent on it.
Speaker #7: There's always ups and downs. That's a tough to model, line item, which is why we kind of usually stay silent on it.
Speaker #8: All right. Thank
Jason Sabshon: All right. Thank you.
Jason Sabshon: All right. Thank you.
Speaker #8: you. Thank
Hilla Sferruzza: Thank you.
Hilla Sferruzza: Thank you.
Speaker #1: Thank you. you. And we'll take our last question from Alex Barron with Housing Research Center.
Operator: Thank you. And we'll take our last question from Alex Barron with Housing Research Center.
Operator: Thank you. And we'll take our last question from Alex Barron with Housing Research Center.
Speaker #9: Thank you for fitting me in. Good morning. I think I heard you say that the percentage of homes that are bringing in or using a broker is like 90%.
Alex Barron: Thank you for fitting me in. Good morning. I think I heard you say that the percentage of homes that are bringing in or using a broker is, like, 90%. If that's accurate, are you guys, like, paying just the standard, like, commission, or do you guys use some type of incentive structure, bonuses, or anything like that?
Alex Barron: Thank you for fitting me in. Good morning. I think I heard you say that the percentage of homes that are bringing in or using a broker is, like, 90%. If that's accurate, are you guys, like, paying just the standard, like, commission, or do you guys use some type of incentive structure, bonuses, or anything like that?
Speaker #9: If that's accurate, are you guys paying just the standard commission, or do you guys use some type of incentive structure, bonuses, or anything like
Speaker #9: that? Yeah.
Phillippe Lord: Yeah, we pay market rate commissions. So depending on, you know, which market we're in, whatever everyone else is paying, we pay, we pay the same. We do have some incremental loyalty programs if you've sold more than one home or two home or three homes with us, but those are pretty small, small dollars. So generally, the increase in our cost is just the fact that we're at 90% versus whatever other builders are at. Otherwise, it's pretty much market.
Phillippe Lord: Yeah, we pay market rate commissions. So depending on, you know, which market we're in, whatever everyone else is paying, we pay, we pay the same. We do have some incremental loyalty programs if you've sold more than one home or two home or three homes with us, but those are pretty small, small dollars. So generally, the increase in our cost is just the fact that we're at 90% versus whatever other builders are at. Otherwise, it's pretty much market.
Speaker #2: We pay market rate. Commissions. So depending on which market we're in, whatever everyone else is paying, we pay the same. We do have some incremental loyalty programs if you've sold more than one home or two home or three homes with us.
Speaker #2: But those are pretty small. Small dollars. So generally, the increase in our cost is just the fact that we're at 90% versus whatever other builders are at.
Speaker #2: Otherwise, it's pretty much
Speaker #2: market. Interesting data point we can
Hilla Sferruzza: Interesting data point we can share, 40% of our volume is repeat volume, so it's not a one and done. So I think that the benefit of our loyalty program and our intentional pivot towards a stronger relationship with the realtor community is definitely paying off, since we're seeing a very high volume of those realtors come back with customers more than one time.
Hilla Sferruzza: Interesting data point we can share, 40% of our volume is repeat volume, so it's not a one and done. So I think that the benefit of our loyalty program and our intentional pivot towards a stronger relationship with the realtor community is definitely paying off, since we're seeing a very high volume of those realtors come back with customers more than one time.
Speaker #7: share. 40% of our volume is repeat volume. So it's not a one-and-done. So I think that the benefit of our loyalty program and our intentional pivot towards a stronger relationship with the realtor community is definitely paying off since we're seeing a very high volume of those realtors come back with customers more than one
Speaker #7: time. So what's the feedback
Alex Barron: ... So what's the feedback they're providing to you as to why it's that high? Is it mainly the 60-day guarantee and the fact they get paid faster than build to order or something like that?
Alex Barron: So what's the feedback they're providing to you as to why it's that high? Is it mainly the 60-day guarantee and the fact they get paid faster than build to order or something like that?
Speaker #9: there providing to you as to why it's that high? Is it mainly the 60-day guarantee and the fact they get paid faster than bill-to-order or something like that?
Speaker #2: Yeah. I want to give out all of our secrets over here, but I think, obviously, the number one factor is that we're able to meet their customer on their timeline.
Phillippe Lord: Yeah, I don't want to give out all of our secrets over here, but I think obviously, the number one factor is that we're able to meet their customer on their timeline, right? So when they commit to their customer being able to move, they're able to move at that point, and there's no negotiation there. The home's going to be done, done, done, you're going to move in. I think that realtors generally feel that that's the same with realtor, with existing homes. But the second is also just the transparency. The price is the price and, you know, you're getting a good deal, and, you know, you can work with us in a way that feels like working with the, working with the existing home market. But yeah, I mean, you nailed it.
Phillippe Lord: Yeah, I don't want to give out all of our secrets over here, but I think obviously, the number one factor is that we're able to meet their customer on their timeline, right? So when they commit to their customer being able to move, they're able to move at that point, and there's no negotiation there. The home's going to be done, done, done, you're going to move in. I think that realtors generally feel that that's the same with realtor, with existing homes. But the second is also just the transparency. The price is the price and, you know, you're getting a good deal, and, you know, you can work with us in a way that feels like working with the, working with the existing home market. But yeah, I mean, you nailed it.
Speaker #2: Right? So when they commit to their customer being able to move, they're able to move at that point, and there's no negotiation there. The home's going to be done, done, done.
Speaker #2: You're going to move in. I think that realtors generally feel that that's the same with realtors with existing homes. But the second is also just the transparency.
Speaker #2: The price is the price, and you're getting a good deal. And you can work with us in a way that feels like working with the existing home market.
Speaker #2: But yeah, I mean, you nailed it. A big part of it is just delivering the home on time and guaranteeing
Phillippe Lord: You know, a big part of it is just delivering the home on time and guaranteeing that.
Phillippe Lord: You know, a big part of it is just delivering the home on time and guaranteeing that.
Speaker #2: that. That's great.
Alex Barron: That's great. If I could also ask, on incentives that you guys did this quarter versus the previous quarter, like, what percentage of ASP do they comprise?
Alex Barron: That's great. If I could also ask, on incentives that you guys did this quarter versus the previous quarter, like, what percentage of ASP do they comprise?
Speaker #9: Also, on incentives, if I could ask, what did you guys do this quarter versus the previous quarter, and what percentage of ASP do they comprise?
Speaker #7: Yeah. Since we're 100% spec builders, we don't provide incentive detail. There is no base price. And then you have some incentive off of that price.
Hilla Sferruzza: Yeah, since we're 100% spec builders, we don't provide incentive detail. There is no base price, and then, you know, you have some incentive off of that price. We just have an all-in price because our homes are sold complete. So we don't provide that, although, you know, we'll share the same commentary that we've shared the last couple of quarters. We're running more than a couple of hundred basis points above historical averages, which is why we have a good level of confidence that once things return to normal, our target gross margin of 22.5% to 23.5% is very realistic, because that reflects - the current numbers reflect that elevated incentive market.
Hilla Sferruzza: Yeah, since we're 100% spec builders, we don't provide incentive detail. There is no base price, and then, you know, you have some incentive off of that price. We just have an all-in price because our homes are sold complete. So we don't provide that, although, you know, we'll share the same commentary that we've shared the last couple of quarters. We're running more than a couple of hundred basis points above historical averages, which is why we have a good level of confidence that once things return to normal, our target gross margin of 22.5% to 23.5% is very realistic, because that reflects - the current numbers reflect that elevated incentive market.
Speaker #7: We just have an all-in price because our homes are sold complete, so we don't provide that. Although, we'll show the same commentary that we've shared the last couple of quarters.
Speaker #7: We're running more than a couple hundred bips above historical averages, which is why we have good level of confidence that once things return to normal, our target gross margin of 22 and a half to 23 and a half percent is very realistic.
Speaker #7: Because that reflects the current numbers, which reflect that elevated incentive.
Speaker #9: Okay. Thank you. And best of luck for this
Alex Barron: Okay, thank you, and best of luck for this year.
Alex Barron: Okay, thank you, and best of luck for this year.
Speaker #9: year. Thank you.
Phillippe Lord: Thank you. Thank you, operator. I'd like to thank everyone who joined the call today for your continued interest in Meritage Homes. We hope you have a wonderful day and a wonderful weekend. Thank you.
Phillippe Lord: Thank you. Thank you, operator. I'd like to thank everyone who joined the call today for your continued interest in Meritage Homes. We hope you have a wonderful day and a wonderful weekend. Thank you.
Speaker #2: Thank you, operator. I'd like to thank everyone who joined the call today. For your continued interest in Meritage Homes, we hope you have a wonderful day and a wonderful weekend.
Speaker #2: Thank
Speaker #2: you. Thank
Operator: Thank you. This concludes today's Meritage Homes Q4 2025 analyst call. Please disconnect your line at this time, and have a wonderful day.
Operator: Thank you. This concludes today's Meritage Homes Q4 2025 analyst call. Please disconnect your line at this time, and have a wonderful day.
