A：The renewed focus on the build-to-order (BTO) strategy is a central component in strengthening the company going forward. The lag between sales and delivery for BTO homes is expected to continue growing the backlog, which will provide greater predictability in deliveries and higher gross margins than inventory sales, typically ranging from 300 to 500 basis points as margins.

A：The financial results for the first quarter of fiscal year L were total revenues of about $2.5 billion dollars and diluted earnings per share of 50 cents.

A：The company continued to demonstrate significant financial flexibility and maintained a balanced capital allocation, investing for growth and returning capital to shareholders. They repurchased 200 million shares of our common stock at an average price below book value per share, which is believed to be an excellent use of cash and accretive to earnings and book value per share. Additionally, they returned almost $70 million in capital to shareholders in the first quarter.

A：The shift in the order mix to built to order homes implies a significant increase in financial margins. BTO homes typically generate between 300 and 500 basis points of incremental gross margins compared to inventory homes. As the company increases its mix of built-to-order homes, it is building a solid backlog and positioning itself to drive higher margins.

A：The company expects to regain operating leverage and sequential increases in deliveries as they move through the back half of the year. This is a result of a reset back to their core operating model, which will provide greater precision, less volatility, and stronger alignment among sales, starts, and deliveries. It will also reduce the need for speculative inventory and lower exposure to pricing swings.

A：The expected regional delivery mix shift in the second half of the year is anticipated to have a more favorable contribution from the Northern California business, which has historically had higher average sales prices (ASPs) and higher margins.

A：The company has been successful in reducing build times. They had already achieved a company-wide target of 100 days from home start to completion on built-to-order homes in the fourth quarter of fiscal 2025 and further improved to 108 days in the first quarter of fiscal year L. This reduction in build times expands the selling window and allows more sales to turn into deliveries and revenues by year-end, which improves volume and cash flow.

A：The community count is expected to step down somewhat in the second half of the year depending on the pace of sellouts.

A：The company is managing its lumber costs strategically, drawing on deep supplier relationships to limit cost increases. They are also actively rebidding local and national contracts and simplifying their studio offerings to help manage overall direct costs.

A：The typical cash down payment was $72,000 on average, and the household income of buyers using the company's joint venture was about $133,000, with a FICO score of 743.

A：The company has taken steps to reduce costs, including a 10% year-over-year headcount reduction. These measures are expected to result in a lower sgna ratio in the second half of the year.

A：The company's approach toward land investments remains consistent and balanced, aimed at positioning the business for future growth, managing leverage within a targeted range, and rewarding shareholders through share repurchases and a quarterly cash dividend.

A：The company's focus in the second quarter is on delivering between 10,500 and 11,500 homes with housing revenues between $1.05 and $1.15 billion. The expected housing gross profit margin is between 15% and 17%.

A：The company expects housing revenues of between $4.8 and $5.5 billion for the full year 2026 based on between 10,000 and 11,500 deliveries. This full year guidance is based on current market conditions.

A：Shifting the delivery mix towards higher margin build to order homes benefits the business by providing predictability and a backlog of homes that can be leveraged for even flow production. This strategy allows for better management of fixed costs and consistent levels of construction in communities. Additionally, it offers trade partners visibility, which is especially valuable given that starts are down significantly year over year. The build to order model also allows customers to personalize their homes, creating a unique value rather than treating the home as a commodity.

A：The change in guidance for the year was influenced by a combination of factors: the transition to more build to order (BTO) sales that were below internal expectations, a positive year-over-year comparison, and the conflict in the Middle East that started at the end of February. March's sales results were initially strong in the first week but became softer in the following weeks, creating uncertainty due to the lack of visibility on how long the conflict will last and its impact on consumer psyche and confidence.

A：The company expects the following factors to drive an increase in gross profit margin in the second half of the year: the sequential shift of BTO sales, which should accumulate to an increase in gross profit margin; seasonal uplift in margins; and further cost reductions. They also have confidence in these factors because they are selling the houses and pricing the BTO homes before construction, allowing them to predict margins more accurately compared to spec homes, whose costs are not fully known until completion.

A：Structural changes that are anticipated to impact margins positively in the second half of the year include the leverage on fixed costs due to greater scale and the transition back to a bigger and better business in Northern California. Specifically, deliveries from communities in Northern California with higher average selling prices (ASPs) and healthy margins are expected to significantly impact the company's overall margins. These deliveries are from stores that are open and have higher ASPs ranging from 1.2 to over $2 million.

A：Direct costs were down 8% year over year, which is a strong performance attributed to the company's efforts in value engineering their products, renegotiating and rebuilding national contracts, and controlling what they can. Lumber prices have started to tick up, and the company has a strategy in place regarding lumber locks. While it's difficult to predict the impact of the situation in the Middle East on oil prices and potential disruptions, the company believes that their current strategy is sound and that it may offset further cost reductions that could be achieved. Overall, the company made good progress in managing direct costs despite the challenging environment.

A：Potential cost increases may arise from land development and vertical construction due to the involvement of petroleum in many products used in homes.

A：When projecting future backlog turnover ratios, one should consider the expected range between 60% and 80%, acknowledging that the actual ratio has been a 'false read' due to specific circumstances such as off-plan sales and inventory turns not being initially included in the backlog numbers.

A：The built-to-order approach improves cash management as it involves real-time deliveries where homes are completed, loans are approved, and buyers close immediately, as opposed to carrying unsold spec homes that require significant cash outlay.

A：The company evaluates customer deposits and may adjust them depending on market conditions. Currently, lower deposits are used to avoid making the deposit an obstacle for purchasing a personalized home, especially in a market with strong competition for housing sales.

A：Sales cadence progressed generally as expected, improving each week as the quarter unfolded. December had a slower start, putting the company behind on year-over-year comparisons, but momentum built through January and February, resulting in a 3% year-over-year sales pace increase in March. However, the last couple of weeks of March saw a softer performance due to the conflict in the Middle East, which is likely to affect consumer sentiment in the short term.

A：The expected second half margin uplift is driven by several factors including the shift to built-to-order (BTO) sales, regional mix which can result in up to a 1000 basis point differential in gross profit in higher-margin communities, reducing costs, and potentially re-evaluating units based on historical data.

A：Pricing stability varies by community, with approximately 70% of communities experiencing no change or small price increases, while 30% saw price reductions. Communities adjust prices based on market conditions and aim to optimize asset value, with price changes ranging from small adjustments to significant ones depending on the specific community.

A：There is a risk associated with customers who entered contracts expecting to close at certain mortgage rates and may face difficulties when rates increase. The company is trying to move away from incentives and rate buy-downs. It is unclear how the company is handling buyers who entered contracts at lower rates when rates have since increased, but it suggests a review of these contracts to manage the risk more effectively.

A：To address rate volatility, the company has reduced build times to 108 days, which decreases exposure to rate changes. They are also trying to lock buyers in with loans before court dates and, if necessary, may offer incentives to keep buyers in the same position as rates continue to fluctuate.

A：The company has adjusted headcount and fixed costs to align with current delivery, revenue, and production levels. If the market improves and volumes increase, the company expects to benefit structurally from these changes.

A：Challenges in the land market include driving deal flow due to sticky prices and patient land sellers who have not adjusted to the new reality of sales prices and demand. The company is dealing with these challenges by renegotiating terms with landowners, structuring deals to take down parcels instead of buying in bulk, and delaying closings to align with development timelines. They are focusing on building up their portfolio with new deals that meet their return hurdles based on current conditions and pricing.

A：The margin difference between BTO and inventory sales has remained consistent at around a 300 to 500 basis point delta. As inventory sales have decreased, particularly in communities with fewer inventory homes, the reduction in margin on those sales has lessened compared to the past. This indicates higher margins on built-to-order sales and an improved outlook for inventory sales.

A：The West Coast, including California, Seattle, and Boise, as well as Las Vegas and Texas, are performing well. Houston has improved, but San Antonio faces challenges due to high inventory and competition. In Florida, demand is mixed with Orlando and Jacksonville seeing better demand than Tallahassee. Overall, the markets have their own stories, with some submarkets outperforming others.

A：The start pace in the first quarter can be confirmed as around 5,000 homes started, based on homes in production. The company expects to generate more BTO sales in the second quarter, which will drive the start of those homes from the backlog of sold homes that have not yet started.