Q2 2024 PulteGroup Inc Earnings Call

Thank you for standing by and welcome to the PulteGroup second quarter 2020 for earnings conference call. All lines have been placed on mute to prevent any background noise.

Operator: Thank you. I'd now like to turn the call over to Jim Zeumer, Vice President of Investor Relations. You may begin.

Operator: and 24 earnings conference call, all lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question and answer session. If you liked last question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you.

Speaker Change: After the speaker's remarks, there will be a question and answer session.

Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

James Zeumer: I'd now like to turn the call over to Jim Zumer, Vice President of Investor Relations. You may begin.

Speaker Change: If you would like to withdraw your question, again, press the star 1. Thank you. I'd now like to turn the call over to Jim Zeumer, Vice President of Investor Relations. You may begin.

James Zeumer: Great. Thanks, Rob.

James P. Zeumer: Great, thanks, Rob. I want to welcome everyone to PulteGroup's Earnings Call to discuss our strong financial performance for our second quarter ended June 30, 2024. Here to review PulteGroup's Q2 results are Ryan Marshall, President and CEO; excuse me, Bob O'Shaughnessy, Executive Vice President and CFO; and Jim Olszewski, Senior Vice President. A copy of our earnings release and this morning's presentation slides have been posted to our corporate website at PulteGroup.com. We'll post an audio replay of this call later today.

Ryan Marshall: I want to welcome everyone to PulteGroup's earnings call to discuss our strong financial performance for our second border ended, June 30th, 2024. Here to review PulteGroup's Q2 results are Ryan Marshall, President C.E.O. To me, Bob O'Shaughnessy, Executive Vice President, CFO, Jim O'Shaughnessy, Senior Vice President, Finance.

James P. Zeumer: Great. Thanks, Rob.

James P. Zeumer: I want to welcome everyone to PulteGroup's earnings call to discuss our strong financial performance for our second quarter ended June 30, 2024.

Speaker Change: Here to review PulteGroup's Q2 results are Ryan Marshall, President and CEO , excuse me, Bob O'Shaughnessy, Executive Vice President and CFO , Jim Olszewski, Senior Vice President, Finance.

James Zeumer: Copy of our earnings release in this morning's presentation, slides have been imposed for our corporate website, and PulteGroup.com.

Speaker Change: A copy of our earnings release and this morning's presentation slides have been posted to our corporate website at PulteGroup.com. We'll post an audio replay of this call later today. I want to alert everyone that today's presentation includes forward-looking statements about the company's expected future performance.

James Zeumer: We'll post an audio replay of this call later today.

James P. Zeumer: I want to alert everyone that today's presentation includes forward-looking statements about the company's expected future performance. However, actual results could differ materially from those suggested by our comments made today. The most significant risk factors that can affect future results are summarized as part of today's earnings release and within the accompanying presentation slides. These risk factors and other key information are detailed in our SEC filings, including our Annual and Quarterly Reports. Now, I turn the call over to Ryan Marshall. Ryan?

James Zeumer: I want to learn everyone that today's presentation includes forward looking statements about the company's expected future performance. Actually, results could differently from those suggested by our comments me today.

Speaker Change: Actual results could differ materially from those suggested by our comments made today.

James Zeumer: The most significant risk factors that can affect future results are summarized as part of today's earnings release and within the accompanying presentation slides. These risk factors and other key information on detailed and RSEC's highlights, including our annual employment reports.

Speaker Change: The most significant risk factors that can affect future results are summarized as part of today's earnings release and within the accompanying presentation slides. These risk factors and other key information are detailed in our SEC filings, including our annual and quarterly reports.

Ryan Marshall: Now, let me turn the call over to Ryan Marshall. Ryan. Thanks, Jim, and thank you to everyone joining today's call. PulteGroup delivered another quarter of strong financial results, which reflects an approach to the business and which we seek the balance price, pace, and investment over the long term to generate superior returns. Consistent with this strategy, our financial results continue to show the power of capitalizing on the value of each lot and home we sell. Our divisions work extremely hard to secure and title and develop our land assets, and work equally hard to generate exceptional profitability, while still turning our portfolio to an appropriate rate.

Ryan R. Marshall: Thanks, Jim, and thank you to everyone joining today's call. PulteGroup delivered another quarter of strong financial results, which reflect an approach to the business in which we seek to balance price, pace, and investment over the long term to generate superior return. Consistent with this strategy, our financial results continue to show the power of capitalizing on the value of each lot and home we sell. Our divisions work extremely hard to secure, entitle, and develop our land assets and work equally hard to generate exceptional profitability while still turning our portfolio at an appropriate rate.

Speaker Change: Now let me turn the call over to Ryan Marshall. Ryan?

Ryan R. Marshall: Specific to our second quarter performance, we realized a 2% increase in average sales price, an 8% increase in closings, and a 30 basis point gain in gross margin, which, in aggregate, helped drive a 19% increase in earnings to a second quarter record of $3.83 per share. Another quarter of overall strong financial performance, highlighted by double-digit earnings growth, resulted in PulteGroup generating a return on equity of 27.1% for the trailing 12-month period.

Ryan R. Marshall: Thanks, Jim. And thank you to everyone joining today's call. PulteGroup delivered another quarter of strong financial results, which reflect an approach to the business in which we seek to balance price, pace, and investment over the long term to generate superior returns.

Ryan R. Marshall: Consistent with this strategy, our financial results continue to show the power of capitalizing on the value of each lot and home we sell.

Ryan R. Marshall: Our divisions work extremely hard to secure, entitle, and develop our land assets, and work equally hard to generate exceptional profitability while still turning our portfolio at an appropriate rate.

Ryan Marshall: Specific door second quarter performance, we realized the two percent increase in average sales price and eight percent increase in closings, and a 30 basis point gain in gross margin, which an aggregate helped drive a 19 percent increase in earnings to a second quarter record of $3.83 per share. Another quarter overall strong financial performance highlighted by our double digit earnings growth resulted in PulteGroup generating a return on equity of 27.1 percent for the trailing 12-month period. Obviously, a key driver of our strong financial results and high returns on investor capital continues to be the company's outstanding gross margins.

Ryan R. Marshall: Specific to our second quarter performance, we realized a 2% increase in average sales price, an 8% increase in closings.

Ryan R. Marshall: and a 30 basis point gain in gross margin, which in aggregate helped drive a 19% increase in earnings to a second quarter record of $3.83 per share.

Ryan R. Marshall: Another quarter of overall strong financial performance, highlighted by our double-digit earnings growth, resulted in PulteGroup generating a return on equity of 27.1% for the trailing 12-month period.

Ryan R. Marshall: Obviously, a key driver of our strong financial results and high returns on invested capital continues to be the company's outstanding gross margin. As Bob will discuss, gross margins in the period benefited from a favorable mix of closings, but I would also highlight the pricing strength evident in our numbers. In Q2, product options and lot premiums averaged $104,000 per home and represented approximately 19% of our average sales price of $549,000. As I'm sure you can all appreciate, options and lot premiums are high margin dollars and an important contributor to PulteGroup's outsized margins relative to peers. I know how hard our employees work to deliver such outstanding results, and I want to thank our entire organization for their efforts.

Ryan R. Marshall: Obviously a key driver of our strong financial results and high returns on invested capital continues to be the company's outstanding gross margins.

Ryan Marshall: As Bible discussed, gross margins in the period benefited from a favorable mix of closings, but I would also highlight the pricing strength evident in our numbers. In Q2, product options and lot premiums average to $104,000 per home and represented approximately 19 percent of our average sales price of $549,000. As I'm sure you can all appreciate, options and lot premiums, or high margin dollars, are an important contributor to PulteGroup's outsize margins relative to peers. I know how hard our employees work to deliver such outstanding results, and I want to thank our entire organization for their efforts.

Ryan R. Marshall: As Bob will discuss, gross margins in the period benefited from a favorable mix of closings, but I would also highlight the pricing strength evident in our numbers.

Bob: In Q2, product options and lot premiums averaged $104,000 per home and represented approximately 19% of our average sales price of $549,000.

Bob: As I'm sure you can all appreciate, options and lot premiums are high margin dollars and an important contributor to PulteGroup's outsized margins relative to peers.

Speaker Change: I know how hard our employees work to deliver such outstanding results, and I want to thank our entire organization for their efforts. As good as our second quarter numbers are, it's fair to say that, as we navigated through the period, demand was a little less consistent than we experienced in the first quarter of 2024.

Ryan R. Marshall: As good as our second-quarter numbers are, it's fair to say that as we navigated through the period, demand was a little less consistent than we experienced in the first quarter of 2024. On our Q1 earnings call, we noted buyer traffic had slowed in the first few weeks of April. While subsequent Wall Street channel checks confirmed a change in short-term demand, the fact remains that we are operating in a housing market that has been underbuilt relative to population, immigration, and household formation for more than a decade.

Ryan Marshall: As good as our second quarter numbers are, it's fair to say that as we navigate it through the period, the man was a little less consistent than we experienced in the first quarter of 2024. On our Q1 earnings call, we noted by our traffic and slowed the first few weeks of April. While subsequent Wall Street channel checks confirm the change in short-term demand, the fact remains that we are operating in a housing market that has been underbuilt relative to population, immigration, and household formation for more than a decade. The resulting housing deficit of several million homes is likely a structural reality for years to come, given the zoning challenges we face in most municipalities.

Speaker Change: On our Q1 earnings call, we noted buyer traffic had slowed the first few weeks of April .

Speaker Change: While subsequent Wall Street channel checks confirmed a change in short-term demand, the fact remains that we are operating in a housing market that has been underbilled relative to population, immigration, and household formation for more than a decade.

Ryan R. Marshall: The resulting housing deficit of several million homes is likely a structural reality for years to come given the zoning challenges we face in most municipalities. The country's underlying new home supply issue has been exacerbated by the lock-in effect caused by the dramatic rise in interest rates over the last two years. What the market continues to experience is existing homeowners who are unwilling, or more likely, unable to give up the low-rate mortgages originated several years ago. As a consequence, the inventory of quality existing homes remains below long-term averages in many markets.

Speaker Change: The resulting housing deficit of several million homes is likely a structural reality for years to come, given the zoning challenges we face in most municipalities.

Ryan Marshall: Our country's underlying new home supply issue has been exacerbated by the lock and effect caused by the dramatic rise in interest rates over the last two years. What the market continues to experience is existing homeowners who are unwilling or more likely unable to give up the low-rate mortgages originated several years ago. As a consequence, the inventory of quality existing homes remains below long-term averages in any markets. The supply and balance is one of the reasons that I have confident in the long-term demand trends for housing in this country, but I appreciate that buyer demand will fluctuate from quarter to quarter.

Speaker Change: Our country's underlying new home supply issue has been exacerbated by the lock-in effect caused by the dramatic rise...

Speaker Change: and interest rates over the last two years. What the market continues to experience is existing homeowners who are unwilling or more likely unable to give up the low rate mortgages originated several years ago.

Speaker Change: As a consequence, the inventory of quality existing homes remains below long-term averages in many markets. The supply imbalance is one of the reasons that I am confident in the long-term demand trends for housing in this country.

Ryan R. Marshall: The supply imbalance is one of the reasons that I am confident in the long-term demand trends for housing in this country. But I do appreciate that buyer demand will fluctuate from quarter to quarter. For example, the bump in interest rates in the second quarter caused some buyers to become more cautious, while others saw affordability stretch beyond their financial capacity. While many cities are facing a limited supply of homes for sale, we have seen an increase in existing and new home supply in select markets in Florida and Texas.

Speaker Change: But I do appreciate that buyer demand will fluctuate from quarter to quarter. For example, the bump in interest rates in the second quarter caused some buyers to become more cautious, while others saw affordability stretch beyond their financial capacity.

Ryan Marshall: For example, the bump in interest rates in the second quarter caused some buyers to become more cautious, while other soft-wortability stretched beyond their financial capacity. While many cities are facing a limited supply of homes for sale, we have seen an increase in existing and new home supply in select markets in Florida and Texas. These markets are now in the process of finding the new clearing price needed to work down any excess inventory. Maybe more impactful than rates in inventory, the feedback we are getting points to a lack of confidence among some consumers that now is a good time to buy.

Speaker Change: While many cities are facing a limited supply of homes for sale, we have seen an increase in existing and new home supply in select markets in Florida and Texas.

Ryan R. Marshall: These markets are now in the process of finding the new clearing price needed to work down any excess inventory. Perhaps more impactful than rates and inventory, the feedback we are getting points to a lack of confidence among some consumers that now is a good time to buy. High prices, higher interest rates, and the resulting high monthly payments are making potential buyers more cautious in purchasing a new home.

Speaker Change: These markets are now in the process of finding the new clearing price needed to work down any excess inventory.

Speaker Change: Maybe more impactful than rates and inventory, the feedback we are getting points to a lack of confidence among some consumers that now is a good time to buy. High prices, higher interest rates, and the resulting high monthly payments are making potential buyers more cautious in purchasing a new home.

Ryan Marshall: High prices, higher interest rates, and the resulting high monthly payments are making potential buyers more cautious in purchasing a new home. To the degree that this lack of confidence among consumers reflects affordability concerns, this isn't new, and in fact, it's something we address on a market-by-market, even community-by-community basis every day.

Ryan R. Marshall: To the degree that this lack of confidence among consumers reflects affordability concerns, this isn't new, and in fact, it's something we address on a market-by-market, even community-by-community basis every day. It was more than a year ago that you first heard me say that delivering high returns requires that we turn our assets, and that we won't be margin proud, in an environment where market conditions are more competitive. We have worked to ensure that our products, prices, and incentives are clearly meeting buyer needs.

Speaker Change: To the degree that this lack of confidence among consumers reflects affordability concerns, this isn't new, and in fact, it's something we address on a market-by-market, even community-by-community basis every day.

Ryan Marshall: It was more than a year ago that you first heard me say that delivering high returns requires that we turn our assets and that we won't be margin-proud. In an environment where market conditions are more competitive, we have worked to ensure that our products, prices, and incentives are clearly meeting buyer needs. Consistent with this focus on turning our assets, we continue to build a more efficient and fast-returning land pipeline. In the quarter, lots control via option increased to 53 percent of total lots. We are successfully building on our historic base of lots option directly with the land sellers by increasing our use of third-party land bankers.

Speaker Change: It was more than a year ago that you first heard me say that delivering high returns requires that we turn our assets and that we won't be margin proud. In an environment where market conditions are more competitive,

Speaker Change: We have worked to ensure that our products, prices, and incentives are clearly meeting buyer needs.

Ryan R. Marshall: Consistent with this focus on turning our assets, we continue to build a more efficient and faster turning land pipeline. In the quarter, lots controlled via option increased to 53% of total lots. We are successfully building on our historic base of lots controlled via option directly with the land sellers by increasing our use of third-party land banks.

Speaker Change: Consistent with this focus on turning our assets, we continue to build a more efficient and faster turning land pipeline.

Speaker Change: In the quarter, lots controlled via option increased to 53% of total lots. We are successfully building on our historic base of lots optioned directly with the land sellers by increasing our use of third-party land bankers.

Ryan Marshall: Today, we have entered into a transaction representing almost 13,000 lots and $1.5 billion of capital. As with all land-related activities, we are being disciplined in how we expand this part of our portfolio; that we are making steady progress in assembling a more efficient land pipeline.

Ryan R. Marshall: To date, we have entered into transactions representing almost 13,000 lots and $1.5 billion of capital. As with all land-related activities, we are being disciplined in how we expand this part of our portfolio, but we are making steady progress in assembling a more efficient land pipeline. As we sit here at the midpoint of 2024, I would say that it is shaping up to be a very good year for Pulte.

Speaker Change: To date, we have entered into transactions representing almost 13,000 lots and $1.5 billion of capital.

Speaker Change: As with all land-related activities, we are being disciplined in how we expand this part of our portfolio, but we are making steady progress in assembling a more efficient land pipeline.

Ryan Marshall: As we sit here at the midpoint of 2024, I would say that it is shaping up to be a very good year for full-time. Relative to our expectations coming into 2024, not only did we raise our initial closing guide by a thousand homes, but we are clearly on a gross margin path well above our initial guide. For various reasons, market conditions got a little tougher in the second quarter, but we continue to actively manage price, pace, and starts to drive the best business outcome. Based on the current demand conditions and construction cycle times, we continue to start homes at a pace consistent with closing 31,000 homes this year, as well as positioning the company to grow five to 10% in 2025, consistent with the multi-year outlook we discussed previously.

Speaker Change: As we sit here at the midpoint of 2024, I would say that it is shaping up to be a very good year for Pulte.

Ryan R. Marshall: Relative to our expectations coming into 2024, not only did we raise our initial closing guide by 1,000 homes, but we are clearly on a gross margin path well above our initial guide. For various reasons, market conditions got a little tougher in the second quarter, but we continue to actively manage price, pace, and starts to drive the best business outcome. Based on the current demand conditions and construction cycle times, we continue to start homes at a pace consistent with closing 31,000 homes this year, as well as positioning the company to grow 5-10% in 2025, consistent with the multi-year outlook we discussed previously.

Speaker Change: Relative to our expectations coming into 2024, not only did we raise our initial closing guide by a thousand homes, but we are clearly on a gross margin path well above our initial guide.

Speaker Change: For various reasons, market conditions got a little tougher in the second quarter, but we continue to actively manage price, pace, and starts to drive the best business outcome.

Speaker Change: Based on the current demand conditions and construction cycle times, we continue to start homes at a pace consistent with closing 31,000 homes this year.

Speaker Change: as well as positioning the company to grow 5-10% in 2025, consistent with the multi-year outlook we have discussed previously.

Ryan Marshall: Through the first few weeks of July, traffic to our communities has been solid, but depending on how demand conditions and absorption paces evolve up or down in each market over the balance of the year, we will adjust our starts paces needed.

Ryan R. Marshall: Through the first few weeks of July, traffic to our communities has been solid, but depending on how demand conditions and absorption paces evolve, up or down, in each market over the balance of the year, we will adjust our start pace as needed. Now, Ryan, and good morning.

Speaker Change: Through the first few weeks of July , traffic to our communities has been solid, but depending on how demand conditions and absorption paces evolve, up or down, in each market over the balance of the year, we will adjust our start paces needed.

Bob O'Shaughnessy: Now let me turn the call over to Bob for a review of our second quarter results. Thanks, Ryan, and good morning. PulteGroup generated second quarter wholesale revenues of $4.4 billion, which represents an increase of 10% over the second quarter of 2023. The increase in revenues through the period was driven by an 8% increase in closing to 8,097 homes. In combination was a 2% increase in our average sales price to $549,000. On a year-over-year basis, the increase in our ASP reflects modest price increases in our first-time and active adult communities, while prices in our move-up communities were consistent with last year.

Speaker Change: Now let me turn the call over to Bob for a review of our second quarter results.

Robert T. OShaughnessy: PulteGroup generated second quarter home sale revenues of $4.4 billion, which represents an increase of 10% over the second quarter of 2020. The increase in revenues through the period was driven by an 8% increase in closings to 8,097 homes, combined with a 2% increase in our average sales price to $549,000. On a year-over-year basis, the increase in our ASP reflects modest price increases in our first-time and active adults. However, all prices in our move-up communities were consistent with last year.

Bob: Thanks, Ryan, and good morning. PulteGroup generated second quarter home sale revenues of $4.4 billion, which represents an increase of 10% over the second quarter of 2023.

Bob: The increase in revenues through the period was driven by an 8% increase in closings to 8,097 homes.

Bob: in combination with a 2% increase in our average sales price to $549,000.

Bob: On a year-over-year basis, the increase in our ASP reflects modest price increases in our first-time and active adult communities.

Bob O'Shaughnessy: The increase in our average sales prices for the quarter also reflects the impact of things, as we recorded higher closings within our move-up business, which at $250,000 carried much higher prices than our first time and active adult. Roping down by buyer group, closings in the second quarter consisted of 40% first time, 37% move-up, and 23% active adult. This compares to the mix of closings in the second quarter of last year, which was 41% first time, 34% move-up, and 25% active adult. Reflecting the headwinds caused by higher rates than other market dynamics are 7,649 that new orders were down 4% from last year's exceptionally strong results.

Robert T. OShaughnessy: The increase in our average sales prices for the quarter also reflects the impact of the pandemic; we recorded higher closings within our move-up business, which, at $650,000, carried much higher prices than our first time in action. Broken down by buyer group, closings in the second quarter consisted of 40% first time, 37% move-up, and 23% active development. This compares with the mix of closings in the second quarter of last year, which was 41% the first time, 34% moving up, and 25% moving down, reflecting the headwinds caused by higher rates and other market dynamics. Our 7,649 new orders were down 4% from last year's exceptionally strong.

Bob: All prices in our move-up communities were consistent with last year.

Bob: The increase in our average sales prices for the quarter also reflects the impact of FIGS.

Bob: has recorded higher closings within our move-up business, which, at $650,000, carried much higher prices than our first-time and active-adult business.

Bob: Broken down by buyer group, closings in the second quarter consisted of 40% first-time, 37% move-up, and 23% active adult.

Bob: This compares with the mix of closings in the second quarter of last year, which was 41% first time, 34% move-up, and 25% active result.

Bob: Reflecting the headwinds caused by higher rates and other market dynamics, our 7,649 net new orders were down 4% from last year's exceptionally strong results.

Bob O'Shaughnessy: In particular, I would highlight that last year's Q2 orders benefited from Delweb grand opening and bill for rent sales that are lumpy in nature. As has been well reported, operating conditions for select Florida and Texas markets got more competitive in the second quarter, as interest rates rose during the month of April. On our first quarter earnings call this year, we indicated that buyer traffic had slowed during the first few weeks of April, and this slowed down did ultimately impact orders as we moved through the period. For the second quarter, our average community count was 934, which is an increase of 3% over the same period last year.

Robert T. OShaughnessy: In particular, I would highlight that last year's Q2 orders benefited from DelWeb's Grand Open and Bill Ferenczel, who are along. As has been well reported, operating conditions in select Florida and Texas markets got more competitive in the second quarter, as interest rates rose during the month of April. On our first quarter earnings call this year, we indicated that fire traffic had slowed during the first few weeks of April.

Bob: In particular, I would highlight that last year's Q2 orders benefited from Dell Web brand openings.

Bob: and Bill Ferenczel that are lumpy in nature.

Bob: As has been well reported, operating conditions in select Florida and Texas markets got more competitive in the second quarter, as interest rates rose during the month of April .

Bob: On our first quarter earnings call this year, we indicated that buyer traffic had slowed during the first few weeks of April , and this slowdown did ultimately impact orders as we moved through the period.

Robert T. OShaughnessy: And this slowdown did ultimately impact orders as we moved through the pandemic. For the second quarter, our average community count was 934, which is an increase of 3% over the same period last year. The resulting absorption pace of 2.7 orders per community per month in the quarter is above the pre-COVID average, down from the 2.9 you generated last year. More granularly, our net new orders in the second quarter decreased 3 percent among first-time buyers, increased 4 percent among move-up buyers, and decreased 17 percent among active adult buyers.

Bob: For the second quarter our average community count was 934 which is an increase of 3% over the same period last year.

Bob O'Shaughnessy: Resulting absorption pace of 2.7 orders per community per month in the quarter is above the pre-COVID average, but down from the 2.9 you generated last year. More granularly, per net new orders in the second quarter decreased 3% among first-time buyers, increased 4% among move-up buyers, and decreased 17% among active adult buyers. While we continue to see strong demand among active adult fires, we did report a large review over your decrease in their second quarter quarters. That decrease primarily reflects lower community count in the current year and some impacts on the timing of openings and closings of several of our Thelon community.

Bob: The resulting absorption pace of 2.7 orders per community per month in the quarter is above the pre-COVID average, but down from the 2.9 we generated last year.

Bob: More granularly, our net new orders in the second quarter decreased 3% among first-time buyers, increased 4% among move-up buyers, and decreased 17% among active adult buyers.

Robert T. OShaughnessy: While we continue to see strong demand among active adult buyers, we did report a larger year-over-year decrease in their second quarter. That decrease primarily reflects lower community counts in the current and some impacts on the timing of openings and closings of several of our Delaware stores Adjusting for the impact of these, our net new orders at stores that were operating consistently in both periods shows an order decrease of only 3%. Consistent with our overall order results, on a unit basis, our quarter-end backlog was down 4% to 12,982 volumes.

Bob: While we continue to see strong demand among active adult buyers, we did report a larger year-over-year decrease in their second quarter orders.

Bob: That decrease primarily reflects lower community count in the current year.

Bob: and some impacts on the timing of openings and closings of several of our Deloitte communities.

Bob: Adjusting for the impact of these dynamics, our net new orders at stores that were operating consistently in both periods shows an order decrease of only 3%.

Bob O'Shaughnessy: The lower results on a unit basis, our quarter end backlog was down 4% to 12,982 homes; although backlog value is down only 1% to 8.1 billion dollars. Turning to production, we started approximately 8,100 homes in the second quarter and ended the quarter with a total of 17,250 homes under construction. Of the 17,250 homes under construction, approximately 6,900 or 40% for spec, including an average of 1.3 finished specs per community. These levels are in line with our targets of 40% and 1 finished spec per community and put us in a position to meet our delivery targets over the balance of the year.

Bob: Consistent with our overall order results, on a unit basis, our quarter-end backlog was down 4% to 12,982 homes, although backlog value was down only 1% to $8.1 billion.

Robert T. OShaughnessy: Although the backlog value is down only 1%, turning to production, we started approximately 8,100 homes in the second quarter and ended the quarter with a total of 17,250 homes under construction. Of the 17,250 homes under construction, approximately 6,900.

Bob: Turning to production, we started approximately 8,100 homes in the second quarter and ended the quarter with a total of 17,250 homes under construction.

Bob: Of the 17,250 homes under construction, approximately 6,900, or 40%, were SPEC, including an average of 1.3 finished SPECs per community.

Robert T. OShaughnessy: 40% for spec, including an average of 1.3 finished specs per community. These levels are in line with our targets of 40% and one finished spec per community. They put us in a position to meet our delivery targets over the balance. As always, we are prepared to adjust our cadence of spec starts up or down in response to sustained changes in overall fire, based on the units we have under construction and their stages.

Bob: These levels are in line with our targets of 40% and one finished spec per community and put us in a position to meet our delivery targets over the balance of the year.

Bob O'Shaughnessy: As always, we are prepared to adjust our cadence of spec starts or bore down in response to sustained changes in overall fire. Based on the units we have under construction and their stage of production, we currently expect to close between 7,400 and 7,800 homes in the third quarter and continue to expect to close approximately 31,000 homes for the full year. As noted, we realize an average sales price of 549,000 dollars in the second quarter, which is consistent with our prior guide for pricing of 540-550,000 dollars. Looking ahead, we expect closings in the third and fourth quarters to be in that same range of 540,000-550,000 dollars.

Bob: As always, we are prepared to adjust our cadence of spec starts up or down in response to sustained changes in overall fire demand.

Robert T. OShaughnessy: We currently expect to close between 7,400 and 7,800 homes in the third quarter and continue to expect to have closed approximately 31,000 homes for the full year. As noted, we realized an average sales price of $549,000 in the second quarter, consistent with our prior guide for pricing of $540 to $550. Looking ahead, we expect closings in the 3rd and 4th quarters to be in that same range of $540,000 to $550,000. While our average price and backlog is higher than our guide, we have a lot of homes left to sell and close, most of which will be spec production with our first-time buyer, Communities for Pricing. reported second quarter gross margins of 29.9 percent, an increase of 30 basis points over both the second quarter of last year and the first quarter of this year.

Bob: Based on the units we have under construction and their stage of production.

Bob: We currently expect to close between 7,400 and 7,800 homes in the third quarter, and continue to expect to close approximately 31,000 homes for the full year.

Bob: As noted, we realize an average sales price of $549,000 in the second quarter.

Bob: which is consistent with our prior guide for pricing of $540,000 to $550,000.

Bob: Looking ahead, we expect closings in the 3rd and 4th quarters to be in that same range of $540,000 to $550,000.

Bob O'Shaughnessy: While our average price and backlog is higher than our guide, we have a lot of homes left selling close this year, most of which will be spec production with our first time buyer communities for pricing as lowered. We reported second quarter gross margin at 29.9%, which represents an increase of 30 basis points over both the second quarter of last year and the first quarter of this year. As in Q1 of this year, our reported gross margins reflect the plate favorable mix of closing and a generally supported pricing environment for many of the specs get up sales we close in the quarter.

Bob: While our average price and backlog is higher than our guide, we have a lot of homes left to sell and close this year.

Bob: Most of which will be spec production, which was our first time by our communities where pricing is lower.

Bob: We reported second quarter gross margins of 29.9%, which represents an increase of 30 basis points over both the second quarter of last year and the first quarter of this year.

Robert T. OShaughnessy: As in Q1 of this year, our reported gross margins reflect a favorable mix of closings and a generally supportive pricing environment for many of the SpecsGap sales. Second quarter gross margins also benefited from opportunities we've taken in prior quarters to improve net pricing in a number of communities across our portfolio. Consistent with such actions, incentives on closings in the second quarter were 6.3% selling price, down from 6.5% in the first

Bob: As in Q1 of this year, our reported gross margins reflect a favorable mix of closings and a generally supportive pricing environment for many of the specs sales we closed in the quarter.

Bob O'Shaughnessy: Second quarter gross margin is also benefited from opportunities we've taken prior quarters to improve net pricing in a number of communities across our portfolio. Consistent with such actions, incentives on closing in the second quarter of a 6.3% selling price, which is down from 6.5% in the first quarter of this year. While recent macro data has sparked optimism about the potential for Fed rate cuts, we don't factor such expectations into our guides. What we do know is that rates remain elevated before ability is stretched, and our delivery mix will be less favorable in the back half of the year.

Bob: Second quarter gross margins also benefited from opportunities we've taken in prior quarters to improve net pricing in a number of communities across our portfolio.

Bob: Consistent with such actions, incentives on closings in the second quarter were 6.3% of selling price.

Robert T. OShaughnessy: While recent macro data has sparked optimism about the potential for Fed rate cuts, we don't factor such expectations into our guide. What we do know is that rates remain elevated, affordability is stretched, and our delivery mix will be less favorable in the back half of the year, as we discussed in our Q1 earnings.

Bob: which is down from 6.5% the first quarter of this year.

Bob: While recent macro data has sparked optimism about the potential for Fed rate cuts, we don't factor such expectations into our guides.

Bob: What we do know is that rates remain elevated, affordability is stretched, and our delivery mix will be less favorable in the back half of the year.

Bob O'Shaughnessy: As we discussed on our Q1 Ernie's call, in the third and fourth quarters we will be closing more homes in our West region, where most carry a lower relative margin profile than we did in the first half of the year. These factors combined with our need to be price competitive to turn assets point to an expected gross margin of approximately 29% in the third. and 28.5% to 29% in the fourth quarter. As stated previously, we still have almost a selling close to being our full-year delivery guide of 31,000 units, so demand conditions over the next few months can have an impact on the results of the fourth quarter.

Robert T. OShaughnessy: In the 3rd and 4th Quarters, we'll be closing more homes in our West, proposing to carry a lower relative margin profile than we did in the first half of the year. These factors, combined with our need to be price competitive to turn assets, point to an expected gross margin of approximately 29% in the third quarter. As stated previously, we still have homes to sell and close to meet our full year delivery guide of 31,000 units.

Bob: As we discussed on our Q1 earnings call, in the 3rd and 4th quarters we will be closing more homes in our West Region.

Bob: where most carry a lower relative margin profile than we did in the first half of the year.

Bob: These factors, combined with our need to be price competitive to turn assets, point to an expected gross margin of approximately 29% in the third quarter.

Bob: and 28.5% to 29% in the fourth quarter.

Bob: As stated previously, we still have homes to sell and close to meet our full year delivery guide of 31,000 units, so demand conditions over the next few months can have an impact on the results we'll report.

Robert T. OShaughnessy: So demand conditions over the next few months can have an impact on the results bill. In the second quarter, our reported SG&A expense was $361 million, or 8.1% of wholesale revenue. Recorded SG&A includes a $52 million pre-tax insurance benefit.

Bob O'Shaughnessy: In the second quarter, our reported SG&A expense was $361 million, or 8.1% of home sale revenues. The reported SG&A includes a $52 million pre-tax insurance benefit recorded in the period. In Q2 of last year, our reported SG&A expense was $315 million or 7.8% of home sale revenues, which includes a $65 million pre-tax insurance benefit. Excluding the impact of the insurance benefits recorded in the first two quarters of this year, we continue to expect SG&A expense for the full year to be in the range of 9.2% to 9.5% of home sale revenues. According to our financial services operations, we reported pre-tax income of $63 million in the sixth quarter, which is up from $46 million in the same period last year.

Bob: In the second quarter, our reported SG&A expense was $361 million, or 8.1% of home sale revenues.

Bob: Reported SG&A includes a $52 million pre-tax insurance benefit recorded in the period.

Robert T. OShaughnessy: In Q2 of last year, our reported SG&A expense was $315 million. 7.8% also includes $65 million pre-tax, excluding the impact of the insurance benefits recorded in the first two quarters of this year. We continue to expect SG&A expense for the full year to be in the range of 9.2% to 9.5% of wholesale revenue. Prior to our financial services operations, we reported a pre-tax income of $63 million in six years, which is up from $46 million in the same period last year.

Bob: In Q2 of last year, our reported SG&A expense was $315 million, or 7.8% of wholesale revenue.

Bob: which includes a $65 billion pre-tax insurance benefit.

Bob: Excluding the impact of the insurance benefits recorded in the first two quarters of this year, we continue to expect SG&A expense for the full year to be in the range of 9.2% to 9.5% of wholesale revenues.

Bob: According to our financial services operations, we reported pre-tax income of $63 million in the second quarter, which is up from $46 million in the same period last year.

Bob O'Shaughnessy: The 36% increase in pre-tax income reflects strong financial performance across all business lines, including mortgage, title, and insurance. Our performance also benefited from increasing capture rates across all business lines, including the mortgage capture rate of 86% in the quarter, up from 80% last year. In total, reported pre-tax income for the second quarter was $1 billion, which represents an increase of 10% over last year. Our tax expense of the second quarter was $239 million for an effective tax rate of 22.8%. Our effective tax rate for the quarter includes the benefit of energy tax credits and a $13 million benefit related to the favorable resolution of certain state tax benefits.

Robert T. OShaughnessy: 36% increase in pre-tax income reflects strong financial performance across all, including mortgage, title, and. The performance also benefited from an increase in capture rates, including a mortgage capture rate of 86% in the quarter, up from 80% last year. In total, reported pre-tax income for the second quarter was $1 billion.

Bob: The 36% increase in pre-tax income reflects strong financial performance across all business lines.

Bob: including mortgage, title, and insurance.

Bob: Our performance also benefited from an increase in capture rates across all business lines, including a mortgage capture rate of 86% in the quarter, up from 80% last year.

Speaker Change: In total, reported pre-tax income for the second quarter was $1 billion, which represents an increase of 10% over last year.

Robert T. OShaughnessy: This represents an increase of 10% over last year. $39 million, effective tax rate of 22.8% Our effective tax rate for the quarter includes the benefit of energy tax credits and a $13 million benefit related to the favorable resolution of certain state taxes. For the remaining quarters this year, we continue to expect our tax rates to be in the range of 24, 24 and a half percent. Taken all together, we reported net income of $809 million, $3.83 million.

Speaker Change: Our tax expense in the second quarter was $239 million, for an effective tax rate of 22.8%.

Speaker Change: Our effective tax rate for the quarter includes the benefit of energy tax credits and a $13 million benefit related to the favorable resolution of certain state tax benefits.

Bob O'Shaughnessy: The remaining quarters this year, we continue to expect our tax rates to be in the range of 24.5%. Taking all together, we reported net income of $809 million, $3.83 per share. This compares to prior year reported net income of $720 million for $3.21 per share. On a first share basis, we continue to benefit from our income and share repurchase program, which, on a year-over-a-year basis, produces shares outstanding by 5% for last year. Capitalizing on our strong cash flows, we continue to support the future growth of our business because we invested approximately $1.2 billion in land acquisition and development in the second quarter.

Speaker Change: For the remaining quarters this year, we continue to expect our tax rates to be in the range of 24 to 24.5 percent.

Speaker Change: Taken all together, we reported net income of $809 million, $3.83 per share.

Robert T. OShaughnessy: This compares to prior year reported net income of $720 million, or $3.21 per share. On a per share basis, we continue to benefit from our ongoing share repurchase program, which on a year-over-year basis reduces shares outstanding by 5% for last year, capitalizing on our strong cash flow. We continue to support the future growth of our business as we invest an approximate $1.2 billion in land acquisition and development in the second half of the year. This brings our year-to-date land spend to just over $2.3 billion.

Speaker Change: This compares to prior year reported net income of $720 million for $3.21 per share.

Speaker Change: On a per share basis, we continue to benefit from our ongoing share repurchase program, which, on a year-over-year basis, reduced shares outstanding by 5% from last year.

Speaker Change: capitalizing on our strong cash flows.

Speaker Change: We continue to support the future growth of our business as we invest approximately $1.2 billion in land acquisition and development in the second quarter.

Bob O'Shaughnessy: This brings our year-to-date land spent to just over $2.3 billion, keeping us on track to invest approximately $5 billion in land acquisition and development for the full year. For both the quarter and the first six months of 2024, the allocation of land spend was 60% development and 40% acquisition. At the end of the second quarter, we had approximately 225,000 lots under control, of which 53% were held via option. Given the strength of our land pipeline, we continue to forecast community account growth of 3% to 5% in the third and fourth quarters of this year over the comparable prior periods last year.

Speaker Change: This brings our year-to-date land spend to just over $2.3 billion, keeping us on track to invest approximately $5 billion in land acquisition and development for the full year.

Robert T. OShaughnessy: Thank you for keeping us on track to invest approximately $5 billion in land acquisition and development. For both the quarter and the first six months of 2024, the allocation of land spend was 60% development and 40%... At the end of the second quarter, we had approximately 225,000 lots. 53% were held via 3rd and 4th quarters of this year over the comparable prior period. Consistent with our capital allocation priorities, we are also continuing to return capital to shareholders. In the second quarter, we repurchased 2.8 million common shares at a cost of $314 million, for an average price of $113.

Speaker Change: For both the quarter and the first six months of 2024, the allocation of land spent was 60% development and 40% acquisition.

Speaker Change: At the end of the second quarter, we had approximately 225,000 lots under control, of which 53% were held via option.

Speaker Change: Given the strength of our land pipeline, we continue to forecast community-count growth of 3% to 5%.

Speaker Change: in the third and fourth quarters of this year over the comparable prior periods last year.

Bob O'Shaughnessy: Consistent with our capital allocation priorities, we are also continuing to return capital to shareholders. In the second quarter, we purchased 2.8 million common shares that cost $314 million for an average price of $113. and 79 cents per share. This brings our year-and-a-chair referred to activities with total of 5.1 million shares, referred to 10 across the $560 million, $110.58 cents per share. In addition to referred to six stock, we also completed a tender offer for $300 billion for senior notes in the second quarter. As a result, our debt to capital ratio is now just 12.8%, and our notes payable have decreased to $1.7 billion, which represents the lowest level since before we acquired the Web in 2001.

Speaker Change: Consistent with our capital allocation priorities, we are also continuing to return capital to shareholders.

Speaker Change: In the second quarter, we repurchased 2.8 million common shares at a cost of $314 million for an average price of $113.79 per share.

Robert T. OShaughnessy: This brings our year-to-date share repurchase activity to a total of 5.1 million shares, pre-purchased at a cost of $560 million, or $110.58. In addition to repurchasing stock, we also completed a tender offer for $300 billion of our senior notes in the second quarter. As a result, our debt-to-capital ratio is now just 12.8%. And our notes payable have decreased to $1.7 billion, which represents the lowest level since before we acquired Dell Web in 2000.

Speaker Change: This brings our year-to-date share repurchase activity to a total of 5.1 million shares, repurchased at a cost of $560 million dollars, $110.58 per share.

Speaker Change: In addition to repurchasing stock, we also completed a tender offer for $300 million of our senior notes in the second quarter.

Speaker Change: As a result, our debt-to-capital ratio is now just 12.8%, and our notes to pay will have decreased to $1.7 billion, which represents the lowest level since before we acquired Del Webb in 2001.

Robert T. OShaughnessy: After spending more than $1.8 billion during the quarter on land investments and the purchase of our equity and debt, we ended the quarter with more than $1.4 billion in cash. We are adjourned. Our net debt-to-capital ratio at the quarter end was 1.0.

Bob O'Shaughnessy: After spending more than $1.8 billion during the quarter-on-land investment to the purchase of our equity and debt, we ended the quarter with more than $1.4 billion of cash. Adjusting for our cash position, our net debt to capital ratio at the quarter end was 1.8%.

Speaker Change: After spending more than $1.8 billion during the quarter on land investment and the purchase of our equity and debt, we ended the quarter with more than $1.4 billion of cash.

Robert T. OShaughnessy: I'm also pleased to report that, in acknowledgment of our approved operations, strong cash flow generation, and outstanding balance, Pitch recently upgraded our deck to BBB+, while Moody's upgraded its outlook to Cosmic. Now, let me turn the call back to Ryan for some final comments. Thanks, Bob. During the first half of 2024, traffic to our communities was good, and the absorption pace ran slightly above historic norms. So I feel good about our opportunities in the second half of the year.

Speaker Change: Adjusting for our cash position, our net debt-to-capital ratio at the quarter end was 1.8%.

Bob O'Shaughnessy: I'm also pleased to report that in acknowledgment of our approved operations, strong cash flow generation, now standing balance sheet, which recently upgraded our debt to triple B plus, while Moody's upgraded into our positive.

Speaker Change: I'm also pleased to report that, in acknowledgment of our improved operations, strong cash flow generation, and outstanding balance sheet,

Mitch: Mitch recently upgraded our debt to BBB+, while Moody's upgraded its outlook to Positive.

Ryan Marshall: Now, let me turn the call back to Ryan for some final comments. Thanks, Bob. For the first half of 2024, traffic to our communities was good, and absorption pace ran slightly above historic norms. So, I feel good about our opportunities in the back after the year. To the degree that the Fed actually cuts interest rates in the coming months, I think that will provide a powerful tailwind both financially and psychologically as we enter 2025.

Mitch: Now let me turn the call back to Ryan for some final comments.

Ryan R. Marshall: Thanks Bob. During the first half of 2024, traffic to our communities was good and absorption pace ran slightly above historic norms, so I feel good about our opportunities in the back half of the year.

Robert T. OShaughnessy: To the degree that the Fed actually cuts interest rates in the coming months, I think that will provide a powerful tailwind both financially and psychologically as we enter 2025. Before turning the call back to Jim, I would draw your attention to a release we issued a couple of weeks ago about one of our newest community openings and our first in Utah in more than 20 years. Along with representing PulteGroup's re-entry into my home state, Utah is the seventh Greenfield new market entry we have initiated over the past few years.

Speaker Change: To the degree that the Fed actually cuts interest rates in the coming months, I think that will provide a powerful tailwind both financially and psychologically as we enter 2025.

Ryan Marshall: Before turning the call back to Jim, I would draw your attention to a release we issued a couple of weeks ago about one of our newest community openings in our first in Utah in more than 20 years. Along with representing poultry groups' re-entry into my home state, Utah is the seventh green field new market entry we have initiated over the past few years. Through the first half of 2024, we increased home sale revenues by 10% and grew reported earnings per share by 25% over the last year. Over the same period, we increased our land investment by 31% to $2.3 billion while increasing year-to-date share purchases and dividend payments by 37% to $645 million.

James P. Zeumer: Before turning the call back to Jim, I would draw your attention to a release we issued a couple of weeks ago about one of our newest community openings and our first in Utah in more than 20 years.

Speaker Change: Along with representing PulteGroup's re-entry into my home state, Utah is the seventh Greenfield new market entry we have initiated over the past few years.

Robert T. OShaughnessy: Through the first half of 2024, we increased home sale revenues by 10% and grew reported earnings per share by 25% over the last year. Over this same period, we increased our land investment by 31% to $2.3 billion, while increasing year-to-date share repurchases and dividend payments by 37% to $645 million. We also retired $300 million of debt.

James P. Zeumer: Through the first half of 2024, we increased home sale revenues by 10% and grew reported earnings per share by 25% over the last year.

James P. Zeumer: Over the same period, we increased our land investment by 31% to $2.3 billion, while increasing year-to-date share repurchases and dividend payments by 37% to $645 million.

Ryan Marshall: We also retired $300 million of debt. We'll be grouped as executed extremely well, and with expectations of closing 31,000 homes for the full year, we are in excellent position and drive strong results going forward.

Ryan R. Marshall: PulteGroup has executed extremely well, and with expectations of closing 31,000 homes for the full year, we are in an excellent position to drive strong results going forward. And finally, before opening the call to questions, I want to briefly address the press release we issued yesterday announcing our CFO succession plan. After a truly impactful 13-year career with PulteGroup, Bob O'Shaughnessy is initiating a transition toward retirement at the end of

James P. Zeumer: We also retired $300 million of debt. PulteGroup has executed extremely well and with expectations of closing 31,000 homes for the full year, we are in excellent position to drive strong results going forward.

Ryan Marshall: And finally, before opening the call to questions, I want to briefly address the press release we issued yesterday announcing our CFO succession plans. After a truly impactful 13-year career with poultry group, Bob O'Shaughnessy is initiated in a transition toward retirement at the end of 2025. Step one in this process is that Bob will relinquish title as chief financial officer effective early February of next year. I'm pleased to say that Bob will then remain with us for another 10 months as Executive Vice President. During that time, he will support a smooth transition of CFO responsibilities, as well as continue to oversee our financial services business, our strategic partnerships, and our asset management committee.

Speaker Change: And finally, before opening the call to questions, I want to briefly address the press release we issued yesterday announcing our CFO succession plans.

Speaker Change: After a truly impactful 13-year career with PulteGroup, Bob O'Shaughnessy is initiating a transition toward retirement at the end of 2025. Step one in this process is that Bob will relinquish his title as Chief Financial Officer effective early February of next year.

Ryan R. Marshall: Step one in this process is that Bob will relinquish his title as Chief Financial Officer effective early February of next year. I'm pleased to say that Bob will then remain with us for another 10 months as Executive Vice President. During that time, he will support a smooth transition of CFO responsibilities, as well as continue to oversee our financial services business, our strategic partnerships, and our asset management committee. Since its founding, PulteGroup's greatest strength has always been the talented people who work for it. Reflecting this depth of exceptional people, I am proud to announce that Jim Ossowski, currently Senior Vice President of Finance, has been named as the company's next C

Speaker Change: I'm pleased to say that Bob will then remain with us for another 10 months as Executive Vice President.

Speaker Change: During that time, he will support a smooth transition of CFO responsibilities, as well as continue to oversee our financial services business, our strategic partnerships, and our asset management committee. Since its founding, PulteGroup's greatest strength has always been the talented people who work here.

Ryan Marshall: Since its founding, poultry group's greatest strength has always been the talents of people who work. Reflecting this depth of exceptional people, and proud to announce that Jim Ossowski, currently Senior Vice President of Finance, has been named as the company's next CFO. Jim has had an outstanding 22-year career at PulteGroup, during which time he has served as VP of Finance and Corporate Controller, VP of Finance, Home Building Operations, Area VP of Finance, and Director of Corporate Audit. In his current role as the SPP of Finance, he manages our critical Asset Management Committee and FPNA function. Jim has been promoted to Executive Vice President and CFO effective February of 2025.

Speaker Change: Reflecting this depth of exceptional people, I am proud to announce that Jim Osowski, currently Senior Vice President of Finance, has been named as the company's next CFO .

Ryan R. Marshall: Jim has had an outstanding 22-year career at PulteGroup, during which time he has served as VP of Finance and Corporate Controller, VP of Finance, Home Building Operations, Area VP of Finance, and Director of Corporate Audit. In his current role as SVP of Finance, he manages our Critical Asset Management Committee and FP&A functions. Jim has been promoted to Executive Vice President and CFO, effective February of 2025. At that time, Jim will report directly to me and will have responsibility for our accounting, tax, audit, risk management, and treasury funds.

Speaker Change: Jim has had an outstanding 22-year career at PulteGroup, during which time he has served as VP of Finance and Corporate Controller, VP of Finance, Home Building Operations, Area VP of Finance, and Director of Corporate Audit.

Speaker Change: In his current role as SVP of Finance, he manages our Critical Asset Management Committee and FP&A function.

Speaker Change: Jim has been promoted to Executive Vice President and CFO effective February of 2025. At that time, Jim will report directly to me and will have responsibility for our accounting, tax, audit, risk management, and treasury functions.

Ryan Marshall: At that time, Jim will report directly to me and will have responsibility for our accounting, tax, audit, risk management, and treasury functions. In announcing these changes now, we ensure having plenty of time to implement the seamless transition of responsibilities.

Ryan R. Marshall: In announcing these changes now, we ensure we have plenty of time to implement a seamless transition of responsibility. Now, let me turn the call back. Thanks, Ryan. We're now prepared to open the call for questions, so we can get to as many questions as possible during the remaining time of this call. We ask that you limit yourself to one question and one follow-up. Thank you, and I'll ask Rob to again explain the process, and we'll open the call to questions.

Speaker Change: In announcing these changes now, we ensure having plenty of time to implement a seamless transition of responsibilities. Now, let me turn the call back to Jim.

James Zeumer: Now, let me turn the call back to Jim. Thanks, Ryan. You're now prepared to open the call for questions, so we can get to as many questions as possible during the remaining time of this call. We ask if you limit yourself to one question and one follow-up.

James P. Zeumer: Thanks Ryan. We're now prepared to open the call for questions so we can get to as many questions as possible during the remaining time of this call. We ask that you limit yourself to one question and one follow-up. Thank you and I'll ask Rob to again explain the process and we'll open the call for questions.

Operator: Thank you, and I'll ask Rob to again explain the process and hold open the call for questions.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Ryan R. Marshall: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line Stephen King. Kim from Evercore ISI.

Rob: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Stephen Kim: Your first question comes from a line of Stephen King, Kim from Evercore ISI. Your line is open. Yeah, thanks very much, guys. Congrats on the results, and congrats to Jim and Bob. I'm glad to hear that we got a great transition going, so congrats to everybody. I wanted to ask a couple of questions.

Speaker Change: Your first question comes from the line of Stephen King. Kim from Evercore ISI, your line is open.

Stephen Kim: Your line is open. Yeah, thanks very much, guys. Congratulations on the results, and congratulations to Jim and Bob. I'm glad to hear that we have a great transition going, so congratulations to everybody. I wanted to ask a couple of questions. If I could start off just by talking about your gross margin outlook, You indicated that you're going to be doing more in the West, which is a little bit lower margin, and you also talked about, on a longer-term basis, increasing your land banking initiative.

Stephen King: Thanks very much guys. Congrats on the results and congrats to Jim and Bob. I'm glad to hear that we got a great transition going.

Speaker Change: Congrats to everybody. I wanted to ask a couple of questions. If I could start off just by talking about your gross margin outlook.

Stephen Kim: If I could start off just by talking about your gross margin outlook, you indicated that you're going to be doing more in the last, which is a little bit lower margin, and you also talked about, on a longer-term basis, increasing your land banking initiative. I was wondering if you could give us a sense if you were to isolate the land banking, the increased use of land bankers. I know that this is going to take a little time to kind of flow through all your results, but once that has happened and you reach the target of the level that you think land banking is going to represent in your mix, how much of a margin impact overall do you think that that alone would represent relative to where you are today?

Speaker Change: You indicated that you're going to be doing more in the West, I think, which is a little bit lower margin. And you also talked about, on a longer term basis, increasing your land banking initiative.

Stephen Kim: I was wondering if you could give us a sense of what it would mean if you were to isolate land banking and the increased use of land bankers. I know that this is going to take a little time to kind of flow through all your results, but once that has happened and you reach the targeted level that you think land banking is going to represent in your mix, how much of a margin impact overall do you think that that alone would represent relative to where you are today? Yes, Stephen. It's Ryan.

Speaker Change: I was wondering if you could give us a sense, if you were to isolate the land banking, the increased use of land bankers.

Speaker Change: I know that this is going to take a little time to kind of flow through all your results.

Speaker Change: But once that has happened and you reach the targeted level that you think land banking is going to represent in your mix, how much of a margin impact overall do you think that that alone would represent relative to where you are today?

Ryan Marshall: Yeah, Stephen, it's Ryan. Thanks for the question. Maybe the first part of the question about the margin and the balance of the year related to the West. We've mentioned last quarter, and it's continued into this quarter; the West has performed better than it had in kind of prior periods. So we've got a heavier mix of West Coast closings coming through. Those margins on a relative basis are a little bit lower, and so we've factored that into the margin guide that we've given for Q3 and Q4. The margins are, you know, I think you'll agree, incredibly, incredibly strong at the levels that we've guided to.

Ryan R. Marshall: Thanks for the question. You know, and is it maybe the first part of the question about the margin in the balance of the year related to the West? We mentioned last quarter, and it's continued into this quarter, the West has performed better than it had in kind of prior periods. So we've got a heavier mix of West Coast closings coming through those margins on a relative basis or a little bit lower. And so we've factored that into the margin guide that we've given for Q3 and Q4. The margins are, you know, I think you'll agree, incredibly, incredibly strong at the levels that we've guided to.

Speaker Change: Yes, Stephen, it's Ryan. Thanks for the question.

Speaker Change: You know, and is it maybe the first part of the question about the margin in the balance of the year related to the West?

Speaker Change: We've mentioned last quarter, and it's continued into this quarter, the West has performed better.

Speaker Change: that it had in kind of prior periods. So we've got a heavier mix of West Coast closings coming through.

Speaker Change: Those margins on a relative basis are a little bit lower.

Speaker Change: And so we've factored that into the margin guide that we've given for Q3 and Q4. The margins are, you know, I think you'll agree, incredibly, incredibly strong.

Ryan Marshall: As it relates to land banking, we're making great progress. You know, the goal that we've kind of laid out is to get from the historical 50% options that we've been running at, the 70% that incremental kind of 20% move was going to be done with land bankers. We're, you know, I highlighted in my prepared remarks, we're making great progress. It's steady, it's deliberate, and we're absolutely on the path to get to 70%. In terms of the trade between margin and return, that's what we typically look at as we're looking. What we're ultimately looking for is we're looking for transfer of risk, and with that we typically see somewhere between a two and a 300, a two to 300 basis point trade between margin and return.

Ryan R. Marshall: As it relates to land banking, we're making great progress. You know, the goal that we've kind of laid out is to get from the historical 50 percent options that we've been running at to 70 percent. An incremental kind of 20 percent move is going to be done with land bankers. We're, you know, I highlighted in my prepared remarks, we're making great progress. It's steady, it's deliberate, and we're absolutely on the path to get to 70 percent.

Speaker Change: at the levels that we've guided to. As it relates to land banking, we're making great progress.

Speaker Change: You know, the goal that we've...

Speaker Change: What we've kind of laid out is to get from the historical 50% options that we've been running at.

Speaker Change: The 70%, that incremental kind of 20% move was going to be done with land bankers. We're, you know, I highlighted in my prepared remarks, we're making great progress. It's steady, it's deliberate, and we're absolutely on the path to get to 70%.

Ryan R. Marshall: In terms of the trade between margin and return, that's what we typically look at. What we're ultimately looking for is a transfer of risk. And with that, we typically see somewhere between a two and a 300, a two to 300 basis point trade between margin and return. Every deal is unique, so to paint it with any more of a broad brush than that wouldn't be fair.

Speaker Change: In terms of the trade between margin and return, that's what we typically look at as we're looking

Speaker Change: What we're ultimately looking for is we're looking for transfer of risk, and with that, we typically see somewhere between a two and a three hundred, a two to three hundred basis point trade between margin and return. Every deal is unique.

Stephen Kim: Every deal is unique, so to paint it with any more of a broad brush than that, I think wouldn't be fair. And then the closing comment I'd make is, and I know you know this, Steven, but we underwrite return, not the margin. Return is what we believe ultimately drives shareholder value. Absolutely. That's very helpful; about 20% increase in the 200-300 base point, which is also pretty standard across the industry, so that's helpful.

Speaker Change: So, to paint it with any more of a broad brush than that, I think wouldn't be fair. And then the closing comment I'd make is, and I know you know this, Stephen, but we underwrite the return, not the margin.

Ryan R. Marshall: And then the closing comment I'd make is, and I know you know this, Stephen, but we underwrite return, not the margin. Return is what we believe ultimately drives shareholder value. Absolutely.

Stephen King: Return is what we believe ultimately drives shareholder value.

Ryan R. Marshall: You know, that's very helpful, that 20% increase in the 200 to 300 base point, which is also pretty standard across the industry. So, that's helpful. I wanted to talk about cycle times, because when you talk about returns, you know, being able to build more quickly and, therefore, more efficiently also helps you with your return goals. Can you talk, can you update us on where your cycle times sit today relative to, let's say, a pre-pandemic kind of situation?

Stephen King: Absolutely. That's very helpful, that 20% increase in the 200 to 300 base point, which is also pretty standard across the industry, so that's helpful.

Stephen Kim: Wanted to talk about cycle times because also when you talk about returns, being able to build more quickly, and therefore more efficiently, also helps you in your return goals. Can you talk – can you update us on where your cycle time is? Sometimes today, and relative to, let's say, a pre-pandemic kind of a situation. And if you think there's additional opportunities there, and wrapped up in that, can you give us an update on ICG? It's been a while since we've kind of heard you talk about it. You've had it now for about four years, I think.

Speaker Change: Wanted to talk about cycle times because also when you talk about returns, you know, being able to build more quickly and therefore more efficiently also helps you in your return goals.

Speaker Change: Can you update us on where your cycle times sit today relative to, let's say, a pre-pandemic kind of a situation?

Ryan R. Marshall: And if you think there's additional opportunities there. And wrapped up in that, can you give us an update on ICG? It's been a while since we've kind of heard you talk about it. You've had it now for about four years, I think.

Speaker Change: And if you think there's additional opportunities there, and wrapped up in that, can you give us an update on ICG? It's been a while since we've kind of heard you talk about it. You've had it now for about four years, I think. Just give us a sense for sort of where that fits into the overall cycle time progression.

Ryan Marshall: Just give us a sense for sort of where that fits into the overall cycle time progression. It's a great question, Stephen. So cycle time days in the quarter on closings were 123 days, so that's a pickup of about a week from where we were in Q1. I would tell you today, we've got a number of divisions where the cycle times are at or below kind of that 100-day target that we set for ourselves, but we do still have some divisions where it's elevated. I'd say trade availability is probably what's holding some of those divisions back.

Ryan R. Marshall: Just give us a sense for sort of where that fits into the overall cycle time progression. Great question, Stephen. So cycle time days in the quarter for closings were 123 days.

Ryan R. Marshall: So that's a pickup of about a 2% from where we were in Q1. I would tell you today that we've got a number of divisions where the cycle times are at or below kind of that 100-day target that we've set for ourselves. But we do still have some divisions where it's elevated.

Speaker Change: It's a great question, Stephen. So, cycle time days in the quarter on closings were 123 days, so that's a pickup of about a week.

Speaker Change: from where we were in Q1. I would tell you today we've got a number of divisions, whether cycle times are at or below.

Speaker Change: We are still in the 100-day target that we set for ourselves, but we do still have some divisions where it's elevated. I'd say trade availability is probably what's holding us back.

Ryan Marshall: Looking forward as we look to the end of the year, we'll probably be slightly elevated over that 100-day target that we set, but we're working hard, and we think we can get there in the first half of 25.

Ryan R. Marshall: I'd say trade availability is probably what's holding some of those divisions back. You know, looking forward as we look to the end of the year, we'll probably be slightly elevated over that 100-day target that we set, but we're working hard, and we think we can get there in the first half of 25. Stephen, it's Ryan again. I'll take the ICG question. We're pleased with how ICG is performing. We've got two active plants, both located in the southeast part of the U.S.

Speaker Change: Looking forward as we look to the end of the year, we'll probably be slightly elevated over that 100-day target that we set, but we're working hard and we think we can get there in the first half of 2025.

Ryan Marshall: Stephen, it's Ryan again. I'll take the ICG question. We're pleased with how ICG is performing. We've got two active plants, both located in the southeast part of the US. They do a mix of our business along with other single family home builder business, and we have a decent amount of commercial business that runs through those plants as well, predominantly. In the frame package for apartments.

Ryan R. Marshall: They do a mix of our business along with other single-family home builder business, and we have a decent amount of commercial business that runs through those plants as well, predominantly in the frame package for apartments. You know, that's, if there was a part of the ICG business that's lagging, it would be that commercial business with, you know, the slowdown in new apartment development or new apartment project starting. We do have a physical location secured and owned, actually, more than secured; we own a location for our third ICG plant. However, we have not started construction on that yet.

Speaker Change: Stephen, it's Ryan again. I'll take the ICG question. We're pleased with how ICG is performing. We've got two active plants.

Speaker Change: both located in the southeast part of the U.S. They do a mix of our business,

Speaker Change: along with other single-family home builder business and we have a decent amount of commercial business that runs through those plants as well predominantly.

Ryan Marshall: If there was a part of the ICG business that's lagging, it would be that commercial business with the slowdown in a new apartment development or new apartment project starting. We do have a physical location secured and owned; actually, more than secured. We own a location for our third ICG plant. We have not started construction on that yet. We're just finalizing some of the design parameters for that new location.

Speaker Change: in the frame package for apartments. You know, that's if there was a part of the ICG business that's lagging, it would be that commercial.

Speaker Change: business with, you know, the slowdown in apartment, new apartment development or new apartment project starting.

Speaker Change: We do have a physical location secured and owned, actually more than secured, we own a location for our third ICG plant. We have not started construction on that yet.

Ryan R. Marshall: We're just finalizing some of the design parameters for that new location. As soon as we have more details on that, we'll be sure to share them. We're pleased with not only the cycle time benefits we get out of ICG, the quality pickups, and better safety, but we also think we get, you know, better costs just in the way that we're able to buy, particularly lumber, as it flows into the ICG plant. So, I'm happy with how that... Okay, great. Appreciate the, uh, all the color guys.

Speaker Change: We're just finalizing some of the design parameters for that new location, so as we have more details on that, we'll be sure to share it. We're pleased with not only the cycle time benefits we get out of ICG, the quality pickups, better safety.

Stephen Kim: So, as we have more details on that, we'll be sure to share it. We're pleased with not only the cycle time benefits we get out of ICG, the quality pickups, better safety. We also think we get better costs just in the way that we're able to buy, particularly lumber as it flows into the ICG plant. So happy with how that business is performing. Okay, great. Appreciate all the color guys.

Speaker Change: We also think we get, you know, better cost just in the way that we're able to buy particularly lumber as it flows into the ICG plants. So, I'm happy with how that business is performing.

Speaker Change: Okay, great. Appreciate all the color guys.

John Lovallo: Your next question comes from a line of John Lovolo from UBS. Your line is open. Good morning, guys. Thank you for taking my questions as well. You spoke about the uptick in inventory on the existing home side in certain markets, like self-host Florida and I think Texas you mentioned. Are these levels concerning to you? Are there any markets where that inventory is concerning? And are you seeing more of an impact on your move-up business versus your entry-level, or how would you characterize that?

Stephen Kim: Your next question comes from a line John Lovallo from UBS. Your line is open. Good morning, guys.

Speaker Change: Your next question comes from a line of John Lovallo from UBS. Your line is open.

John Lovallo: Thank you for taking my questions as well. You spoke about the uptick in inventory on the existing home side in certain markets like Southwest Florida and, I think, Texas. Are these levels concerning to you? Are there any markets where that inventory is concerning? And are you seeing more of an impact on your move up business versus your entry level? Or how would you kind of characterize that?

John Lovallo: Good morning, guys. Thank you for taking my questions as well. You know, you spoke about the uptick in inventory on the existing home side in certain markets like Southwest Florida and I think Texas you mentioned. Are these levels concerning to you? Are there any markets where that inventory is concerning? And are you seeing more of an impact on your move-up business versus your entry level? Or how would you kind of characterize that?

John Lovallo: Yeah, John, it's a good question. You know, probably the one market that's higher than what we'd ideally like to see would be Southwest Florida there. We've seen inventory, resale inventory levels approach about nine months. You know, with the benchmark or the kind of equilibrium rate being six months. So, you know, we're a tad elevated. I wouldn't consider it concerning. There's been a very strong market for a long time. I think it continues to be a really desirable place for retirees and second homeowners. So I think that, you know, the market had unprecedented price appreciation. Part of the reason that I think we're seeing some of the elevated inventory levels, the market will go through a bit of an adjustment.

Ryan R. Marshall: Yeah, John, it's a good question. You know, probably the one market that's higher than what we'd ideally like to see would be Southwest Florida. We've seen inventory resale inventory levels approach about nine months, you know, with the benchmark or the kind of equilibrium rate being six months. So, you know, we're a tad elevated; I wouldn't consider it concerning. That's been a very strong market for a long time, and I think it continues to be a really desirable place for retirees and second homeowners.

John Lovallo: Yeah, John , it's a good question. You know, probably the one market that's higher than what we'd ideally like to see would be Southwest Florida. There, we've seen inventory, resale inventory levels approach about nine months. You know, with the benchmark or the...

Speaker Change: Kind of equilibrium rate being six months. So, you know, we're a tad elevated. I wouldn't consider it concerning.

Ryan R. Marshall: So I think that, you know, the market had unprecedented price appreciation. Part of the reason that I think we're seeing some of the, you know, elevated inventory levels. The market will go through a bit of an adjustment, it'll find a clearing price, and I'd expect inventory levels to come back to kind of a more normal range. There are, you know, a few markets in Texas that I think are in a similar situation. Austin and Dallas would be the two that I would probably highlight, you know, that have also seen unprecedented growth in population, jobs, and, you know, resulting home price increases.

Speaker Change: That's been a very strong market for a long time. I think it continues to be a really desirable place for retirees and second homeowners. So I think that, you know, market had unprecedented price appreciation.

Speaker Change: Part of the reason that I think we're seeing some of the elevated inventory levels, the market will go through a bit of an adjustment. It'll find a clearing price, and I'd expect inventory levels to come back to kind of a more normal range.

Ryan Marshall: It'll find a clearing price, and I'd expect inventory levels to come back to kind of a more normal range. There are, you know, a few markets in Texas that I think are in a similar situation. Austin and Dallas would be the two that I would probably highlight, you know, that have also seen unprecedented growth in population, jobs, and, you know, resulting home price increases. But, you know, other than the nine months of inventory in Southwest Florida, there's probably nothing that I would characterize as concerning.

Speaker Change: There are a few markets in Texas that I think are in a similar situation, Austin, Dallas would be the two that I would probably highlight.

Speaker Change: You know, I've also seen unprecedented growth in population jobs.

Ryan R. Marshall: But, you know, other than the nine months of inventory in southwest Florida, there's probably nothing that I would characterize as concerning. Yeah, just something I might add to that. It's worth it to remember that if they're selling a home, more often than not, that's also a buyer.

Speaker Change: and, you know, resulting home price increases, but, you know, other than the nine months of inventory in Southwest Florida, there's probably nothing that I would like to characterize as concerning.

Ryan R. Marshall: So it's not really net supply added to the market. It can influence pricing as much as anything else. And, you know, resale has always been our biggest competitor.

Ryan Marshall: Something I might add to that. It's worth it to remember, you know, if they're selling home or often the not, that's also a buyer. So it's not really net supply add to the market. It can influence pricing as much as anything else. And, you know, resell has always been our biggest competitor. We always have the, we have the advantage today of being able to offer rate incentives to the buyers. So for the demand that's there, we are a compelling choice.

Speaker Change: Yeah, just a minute.

Speaker Change: Something I might add to that. It's worth it to remember.

Speaker Change: You know, if they're selling a home, more often than not, that's also a buyer, so it's not really net supply add to the market. It can influence pricing as much as anything else.

Speaker Change: And, you know, resale has always been our biggest competitor. We always have the – we have the advantage today of being able to offer rate incentives to the buyers. So for the demand that's there, we are a compelling choice versus that resale inventory.

John Lovallo: The first is that retail inventory. Okay, that's helpful.

John Lovallo: We always have the advantage today of being able to offer rate incentives to the buyer. So for the demand that's there, we are a compelling choice versus that. Okay, that's helpful. And then just on cash flow, is $1.8 billion still the cash flow guide for the full year? You guys did, I think, $246 million of buybacks in the first quarter, and another $314 million in the second quarter. How are you kind of thinking about that cash flow in the back half and the ability to repurchase more shares?

John Lovallo: And then just on the cash flow, is a billionaire still the cash flow guide for the full year. You guys did, I think 246 million of buybacks in the first quarter or another 314 in the second quarter. How are you kind of thinking about that cash flow in the back half and the ability to repurchase more shares? Well, certainly our cash flow guide is still current.

Speaker Change: Okay, that's helpful. And then just on the cash flow, is a billion eight still the cash flow guide for the full year? You guys did I think 246 million of buybacks in the first quarter, another 314 in the second quarter. How are you kind of thinking about that cash flow in the back half and the ability to repurchase more shares?

John Lovallo: Well, certainly, our cash flow guide is still current, you know, and I think, you know, we've historically not given a view as to how much we're going to be repurchasing. In the forward periods, you know, we've let our kind of actions speak for themselves.

Speaker Change: Well, certainly our cash flow guide is still current, you know, and I think, you know, we've historically not given a view as to how much we're going to be repurchasing

John Lovallo: You know, and I think, you know, we've historically not given a view as to how much we're going to be repurchasing in the forward periods. You know, we've let our kind of actions speak for themselves. You can and should expect to see us continue to be in market. Okay.

Speaker Change: In the forward periods, you know, we've let our kind of actions speak for themselves. You can and should expect to see us continue to be in March.

John Lovallo: You can and should expect to see us continue to do so. Okay, thank you guys. Your next question comes from the line of Anthony Pettinari from Citigroup. Your line is open. Good morning, and congratulations to Bob and Jim.

Anthony Pettinari: Thank you, guys. Your next question comes from line of Anthony Pettinari from City Group. Your line is open.

Speaker Change: Okay, thank you guys.

Speaker Change: Your next question comes from the line of Anthony Pettinari from Citigroup. Your line is open.

Anthony Pettinari: Good morning, and congratulations to Bob and Jim. You indicated your guidance doesn't anticipate lower rates. And I'm just wondering, you know, if benchmark mortgage rates were to fall, you know, 50 bps or 100 bps. Is it possible to quantify what that would do to gross margin, holding all else equal? And then maybe kind of harder question to answer.

Anthony James Pettinari: You indicated your guidance doesn't anticipate lower rates, and I'm just wondering if benchmark mortgage rates were to fall 50 bps or 100 bps, is it possible to quantify what that would do to gross margin, holding all else equal? And then, maybe a harder question to answer, do you get a sense that there is a meaningful group of prospective buyers that are kind of on the sidelines until we get a move in rates?

Speaker Change: Good morning, and congratulations to Bob and Jim.

Anthony James Pettinari: You indicated your guidance doesn't anticipate lower rates, and I'm just wondering if benchmark mortgage rates were to fall.

Anthony James Pettinari: you know, 50 bips or 100 bips. Is it possible to quantify what that would do to gross margin, holding all else equal? And then maybe kind of harder question to answer, do you get a sense that there's meaningful group of prospective buyers that are kind of on the sidelines until we get a move in rates?

Anthony Pettinari: Do you get a sense that there's a meaningful group of prospective buyers that are kind of on the sidelines until we get a move and rates.

Ryan Marshall: Yeah, it's an interesting question, and I wish I had a perfect answer for you, but, you know, a lot of it will depend on, you know, what is prompting that decline in rates, right? We've talked about this before. If the economy is healthy, lower rates are good because it means that the consumer's wallet is still healthy and they still have a job, and the lower interest rate environment allows them to save some money. I think in that environment, we would expect to see margins, tailwind because our incentive load likely goes down. If it is in concert with that, you know, we're worried about recessionary impacts, GDP, not healthy jobs, not as solid as they are today, that has another influence.

Anthony James Pettinari: Yeah, it's an interesting question, and I wish I had a perfect answer for you, but you know, a lot of it will depend on... Yeah, what is prompting that decline in rates, right? We've talked about this before if the economy is healthy. Lower rates are good because it means that the consumer's wallet is still healthy, and they still have a job, and the lower interest rate environment allows them to save some money.

Speaker Change: Yeah it's a it's an interesting question and and I wish I had a perfect answer for you but you know a lot of it will depend on

Speaker Change: Yeah, what is prompting that decline in rates, right? We've talked about this before, if the economy is healthy,

Speaker Change: Lower rates are good because it means that the consumer's wallet is still healthy and they still have a job.

Ryan R. Marshall: I think in that environment, we would expect to see margins, a tailwind because our incentive load likely goes down. If it is in concert with that, you know, we're worried about recessionary impacts, GDP, not healthy jobs, not as solid as they are today. That has another influence.

Speaker Change: And the lower interest rate environment allows them to save some money. I think in that environment, we would expect to see margins, a tailwind, because our incentive load

Speaker Change: likely goes down.

Speaker Change: If it is in concert with that, you know, we're worried about recessionary impacts.

Speaker Change: GDP, not healthy, jobs, not.

Ryan Marshall: But the other thing that factors into this is supply, right? You know, we talked about it in some markets; it's a little bit more competitive, and so there could be a scenario where, you know, we've made it clear, we want to sell homes, and we're going to find the price is going to get there. While we may be able to save a little bit of money on the incentive for the financing, we may be in a position where we're giving some of that in some other form of incentive.

Speaker Change: as solid as they are today. That has another influence. The other thing that factors into this is supply, right? You know, we talked about in some markets it's a little bit more competitive, and so there could be a scenario where, you know, we've made it clear we want to sell homes.

Ryan R. Marshall: The other thing that factors into this is supply, right? You know, we talked about in some markets that it's a little bit more competitive. And so there could be a scenario where, you know, we've made it clear we want to sell homes, and we're going to find the price that's going to get there. While we may be able to save a little bit of money on the incentive for the financing, we may be in a position where we're giving some of that in some other form of incentive. So, like I said, I don't know, Ryan, if you want to comment, but the...

Speaker Change: And we're going to find the price that's going to get there. While we may be able to save a little bit of money on the incentive for the financing, we may be in a position where we're giving some of that in some other form of incentive.

Ryan Marshall: So, like I said, I don't know right if you want to comment, but the broader environment is important to that. That is just a what happened to rates. We've always said rates are interesting, but they're only one element of the consumer equation.

Ryan R. Marshall: The broader environment that's important to that is just what happened to rates. We've always said rates are interesting, but they're only one element of the consumer equation. Okay, that's helpful. And then, sorry if I missed this, but in terms of stick and brick costs in the quarter and then what your maybe second half gross margin guidance assumes or contemplates, can you just give us kind of color on those trends? So, the stick and brick costs in the second quarter were $80 per square foot.

Ryan R. Marshall: So, like I said, I don't know, Ryan, if you want to comment, but the broader environment that's important to that is just a what happened to rates. We've always said rates are interesting, but they're only one element of the consumer equation.

Anthony Pettinari: Okay, that's helpful.

Bob O'Shaughnessy: And then, sorry if I missed this, but in terms of stick and brick costs in the quarter, and then what your maybe second half gross margin guidance assumes or contemplates, can you just give us kind of color on those trends? So, the stick and brick costs in the second quarter were $80 per square foot. That's flat with the first quarter of this year. You know, as we look ahead, you know, we expect inflation to be manageable, you know, maybe low single digits over the balance. And that's incorporated into the guy that we provided.

Speaker Change: Okay, that's helpful. And then, sorry if I missed this, but in terms of stick and brick costs in the quarter, and then what your maybe second half gross margin guidance assume or contemplates, can you just give us kind of color on those trends?

Speaker Change: So, the stick and brick costs in the second quarter were $80 per square foot. That's flat with the first quarter of this year. You know, as we look ahead, you know, we expect inflation to be manageable, you know, maybe low single digits over the balance of the year.

Ryan R. Marshall: That's flat with the first quarter of this year. As we look ahead, we expect inflation to be manageable, maybe low single digits over the balance. And that's incorporated into the guide that we've provided. It may be worth highlighting. I think Jim's referencing primarily verticals, you know, the land costs we've talked about and the high single-digit increases through 24 also embedded. Okay, that's very helpful. I'll turn it over to you.

Bob O'Shaughnessy: Yeah, maybe we weren't highlighting; I think Jim's referencing primarily the land cost. We've talked about kind of high single-digit increases through 24, also embedded in that guy. Okay, that's very helpful.

Speaker Change: And that's that's incorporated into the guide that we provided. Yeah, maybe worth highlighting.

Speaker Change: I think Jim's referencing primarily vertical, you know, the land cost we've talked about and a high single-digit increases through 24 also embedded in that guide.

Michael Rehaut: I'll turn it over. Your next question comes from a line of Michael Reho from JP Morgan.

Speaker Change: Okay, that's very helpful. I'll turn it over.

Anthony James Pettinari: Your next question comes from the line of Michael Rehaut from J.P. Morgan. Your line is open. Thanks. Good morning, everyone, and I also want to offer my congratulations to Bob and Jim.

Speaker Change: Your next question comes from the line of Michael Rehaut from J.P. Morgan. Your line is open.

Michael Rehaut: Your line is open. Thanks.

Michael Rehaut: Good morning, everyone, and I also want to offer my congrats to Bob and Jim. First, I wanted to circle back to the comments around, you know, the shift of the business over time to more lot of optioning and just wanted to kind of clarify. You know, the comments earlier, you said that, you know, when you kind of move from a regular, perhaps owned land position to a lot of bank land position. I just want to make sure we understood that right, that it kind of shifts. Two to three hundred basis points of gross margin takes that out of gross margin, but shifts it into return on equity if we heard that right.

Michael Jason Rehaut: First, I wanted to circle back to the comments around, you know, the shift of the business over time to more lot optioning, and just wanted to kind of clarify what you said earlier. You said that, you know, when you kind of move from a, you know, regular, perhaps owned land position to a lot banked land position. I just want to make sure we understood that right, that it kind of shifts two to three hundred basis points of gross margin takes that out of gross margin but shifts it into return on equity. If we heard that right.

Michael Jason Rehaut: First, I wanted to circle back to the comments around, you know, the shift of

Michael Jason Rehaut: the business over time to more lot optioning.

Michael Jason Rehaut: And just wanted to kind of clarify.

Michael Jason Rehaut: land position. I just want to make sure we understood that right, that it kind of shifts.

Michael Jason Rehaut: And if we're talking about a 20% shift in the business, effectively, you know, 200 to 300 BIPs times 20%, we're talking about, you know, 40 to 60 BIPs impact of moving from gross margin to ROE. Just want to make sure that we're understanding that correctly and if there are any other factors that we should consider in that longer-term move to more lot optioning and land bank. Yeah, hey, Mike. Yeah, it's Ryan.

Speaker Change: takes that out of gross margin but shifts it into return on equity, if we heard that right. And if we're talking about a 20% shift of the business...

Michael Rehaut: And if we're talking about a 20% shift of the business, effectively, you know, two to 300 bips times 20%. We're talking about, you know, 40 to 60 bips impact of moving from gross margin to ROE.

Speaker Change: Effectively, you know, two to three hundred BIPs times twenty percent, we're talking about, you know, forty to sixty BIPs impact of moving from gross margin to ROE. Just want to make sure that we're understanding that correctly and if there's any other factors.

Michael Rehaut: We just want to make sure that we're understanding that correctly and if there's any other factors that we can should consider in that longer term move to more lot optioning and land banking.

Speaker Change: that we can should consider in that longer-term move to more lot optioning and land banking.

Ryan Marshall: Yeah, I hate my cats, Ryan. I think the way you've articulated is accurate, so I think you're understanding it right. I would reiterate that the 50% that we have in our business today of land options; those are land options with the underlying seller, and that's been the case for the last seven or eight years. So that's not a change, and going forward, we'd expect that to remain in that kind of 50% range. So, you know, the incremental optionality taken is from 50 to 70. That's the piece that will have more land banking in it.

Ryan R. Marshall: I think the way you've articulated it is accurate. So I think you're understanding it right. I would reiterate that the 50% that we have in our business today of land options, those are land options with the underlying seller. And that's been the case for the last seven or eight years. So that's not a change.

Speaker Change: Hey Mike, yeah it's Ryan. I think the way you've articulated is accurate so I think you're understanding it right. I would reiterate that the 50% that we have

Speaker Change: in our business today of land options.

Speaker Change: Those are land options with the underlying seller, and that's been the case for the last seven or eight years. So that's not a change, and going forward we'd expect that to remain in that kind of 50-ish percent range.

Ryan R. Marshall: And going forward, we'd expect that to remain in that kind of 50-ish percent range. So, you know, the incremental optionality, taking this from 50 to 70, that's the piece that will have more land banking in it. Yeah, maybe just one point of clarification. I'd rather we were speaking to the IRR on the transaction as opposed to our return on equity. Mike, you know, our equity gets influenced by lots of other things, ultimately, when you kind of get to the parent level, but on a deal by deal basis, banked versus non-banked, it is roughly a two to 300 basis point difference in cost and margin, and then roughly a 200 to 300 basis point benefit to the return on that transaction. Great

Speaker Change: You know, the incremental optionality, taking us from 50 to 70, that's the piece that will have more land banking in it.

Ryan Marshall: Yeah, maybe just one point of clarification. I'd rather we're speaking to the IRR on the transaction as opposed to our return on equity, like, you know, our equity gets influenced by lots of other things. Ultimately, when you kind of get to the parent level, but on a deal by deal basis, you know, banks versus non-bank, it is roughly a two to 300 basis point cost in margin. And then a roughly two to 300 basis point benefit to the return on that transaction.

Speaker Change: Yeah, maybe just one point of clarification. I'd rather we're speaking to the IRR on the transaction as opposed to our return on equity.

Speaker Change: Mike, you know, our equity gets influenced by lots of other things, ultimately when you kind of get to the parent level, but on a deal-by-deal basis, you know, banked versus non-banked, it is roughly a two to three hundred basis point.

Speaker Change: Cost and Margin

Speaker Change: and then at roughly 200 to 300 basis point benefit to the return on that transaction.

Michael Rehaut: Great. No, that's that's very helpful, and I think it's important to clarify that. You know, secondly, you know, maybe looking at the balance sheet, I believe you still are kind of running below your target levels, which correct if I'm wrong. I believe are in the 20 to 30% debt to cap ratio, you know, net debt, you know, more or less around zero, the last several quarters. How should we think about, you know, the potential to maybe even getting that leverage back to your targeted range? What's the potential for that, you know, you know, I think as you're kind of entering perhaps even a more, more of a tailwind type of macro backdrop to the extent that rates are coming down, how should we think about the balance sheet and the ability, particularly as you're shifting more and more towards lot optioning.

Michael Jason Rehaut: That's very helpful, and I think it's important to clarify that. Um, you know, secondly, you know, maybe looking at the balance sheet, I believe you still are kind of running below your target levels, which, correct me if I'm wrong, I believe are in the 20 to 30% debt to cap ratio, net debt, you know, more or less around zero for the last several quarters. How should we think about... You know, the potential to maybe even get that leverage back to your targeted range? What's the potential for that?

Speaker Change: Great. That's very helpful, and I think it's important to clarify that.

Speaker Change: Secondly, you know, maybe looking at

Speaker Change: The balance sheet, I believe you still are kind of running below your target levels.

Speaker Change: How should we think about...

Speaker Change: You know, the potential to maybe even getting that leverage back to your targeted range. What's the potential for that? You know, you know, I think as you're kind of entering perhaps even a more

Michael Jason Rehaut: You know, you know, I think as you're kind of entering perhaps even more of a tailwind type of macro backdrop to the extent that rates are coming down, how should we think about the balance sheet and the ability, particularly as you're shifting more and more towards lot optioning? You know, what is the right amount of leverage and, you know, to the extent that there's the potential to increase share repurchase. As we've been thinking about this with other companies, how should we think about that for Pulte in the next several years?

Ryan Marshall: You know, what is the right amount of leverage and, you know, to the extent that there's a potential to increase sharey purchase as we've been thinking about this with other companies. How should we think about that for polpies in the next several years?

Speaker Change: You know, what is the right amount of leverage and, you know, to the extent that there's a potential to increase share repurchase, as we've been thinking about this with other companies, how should we think about that for Pulte in the next several years?

Ryan Marshall: Yeah, Mike, the way that I ask you to think about capital allocation is we look at the needs of the business first and foremost. And that starts with how much investment do we want to put into land? How much investment do we want to put into dividends? How much investment do we want to put into share repo? And you know, it's evidenced in over the last couple of years; we've even been retiring debt. So we look at the collective needs of the business. And then we think about how are we going to finance that? The business has performed incredibly well, and we've been generating great cash flow, and that cash flow has put us in a very favorable position where we haven't needed the levels of debt that we've historically used in the business.

Ryan R. Marshall: Yeah, Mike, the way that I'd ask you to think about capital allocation is that we look at the needs of the business first and foremost. And that starts with how much investment do we want to put into land? How much investment do we want to put into dividends? How much investment do we want to put into share repo?

Speaker Change: Yeah, Mike, the way I'd ask you to think about capital allocation is we look at the needs of the business first and foremost. And that starts with how much investment do we want to put into land?

Speaker Change: How much investment do we want to put into dividends? How much investment do we want to put into share repo?

Speaker Change: And, you know, as evidenced over the last couple of years, we've even been retiring debt. So, we look at the collective needs of the business, and then we think about how are we going to finance that.

Ryan R. Marshall: And, you know, as evidenced in the last couple of years, we've even been retiring debt. So we look at the collective needs of the business. And then we think about how are we going to finance that? The business is performing incredibly well, and we've been generating great cash flow. And that cash flow put us in a very favorable position where we haven't needed the levels of debt that we've historically used in the business.

Speaker Change: The business is performing incredibly well, and we've been generating great cash flow, and that cash flow has put us in a very favorable position where we haven't needed

Bob O'Shaughnessy: So, you know, I think we can all agree that having an appropriate amount of leverage in a business is advantageous and efficient from a return standpoint. As part of the reason that we set kind of our target rate at 20 to 30%. But we're not going to let the tail wag the dog here. We look at how we want to run the business, think about the capital that we need for that, and then we look at how we're going to finance it. And in the position that we're in, we're in a great position to have lower leverage, lower debt, and still do all of the things that we want to do strategically from an investment standpoint.

Speaker Change: the levels of debt that we've historically used in the business.

Ryan R. Marshall: So, you know, I think we can all agree that having an appropriate amount of leverage in a business is advantageous and efficient from a return standpoint. That's part of the reason that we set our target rate at 20 to 30%. But we're not going to let the tail wag the dog here.

Speaker Change: You know, I think we can all agree that having an appropriate amount of leverage in a business is advantageous and efficient from a return standpoint.

Speaker Change: That's part of the reason that we set kind of our target rate at 20 to 30 percent, but

Ryan R. Marshall: We look at how we want to run the business, think about the capital that we need for that, and then we look at how we're going to finance it. And in the position that we're in, we're in a great position to have lower leverage, lower debt, and still do all of the things that we want to do strategically from an investment standpoint. So I'd take the position that we're in from an overall debt level any day of the week and twice on Sunday. Could the business absorb or handle more debt?

Speaker Change: We're not going to let the tail wag the dog here. We look at how we want to run the business, think about the capital that we need for that, and then we look at how we're going to finance it. And in the position that we're in,

Speaker Change: We're in a great position to have lower leverage, lower debt, and still do all of the things that we want to do strategically from an investment standpoint, so I'd take the position that we're in from an overall debt level any day of the week and twice on Sunday.

Bob O'Shaughnessy: So I take the position that we're in from an overall debt level any day of the week and twice on Sunday; could the business absorb or handle more debt certainly. But again, the number one priority is how do we want to run the business, and then we go figure out how to finance it.

Ryan R. Marshall: Certainly. But again, the number one priority is how we want to run the business, and then we'll figure out how to finance it. Bob, anything else you want to add to that? Not really.

Speaker Change: Could the business absorb or handle more debt? Certainly. But, again, the number one priority is how do we want to run the business, and then we go figure out how to finance it.

Bob O'Shaughnessy: Bob, anything else do you want to add to that? No other than that, you know, furthering Brian's point, you know, we, as we get a more efficient land pipeline, i.e., more optionality. I think we get to a point where our cash flows better match our earnings. So the less of the cyclicality on the balance sheet and the impact on cash flows from inventory changes. Which is that the environment we operate today is going to generate a lot of cash. So, you know, it's not likely that we would be leveraging from here.

Speaker Change: Bob, anything else you want to add to that?

Ryan R. Marshall: Furthering Ryan's point, you know, we As we get a more efficient land pipeline, i.e., more optionality, I think we will get to a point where our cash flows better match our earnings. So less of the cyclicality on the balance, and The Impact on Cash Flows from Inventory Changes. The environment we operate in today is going to generate a lot of cash.

Bob: No other than the two.

Bob: furthering Brian's point you know we as we get

Bob: A more efficient land pipeline, i.e. more optionality, I think we get to a point where our cash flows better match our earnings.

Bob: So less of the cyclicality on the Alan sheet.

Speaker Change: and the Impact on Cash Flows from Inventory Changes, which in a

Ryan R. Marshall: So, you know, it's not likely that we would be leveraged. Great, thank you. Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is open. Hi, good morning.

Speaker Change: The environment we operate today is going to generate a lot of cash, so it's not likely that we would be levering from here.

Raffi Dijousic: Great. Thank you.

Raffi Dijousic: So our next question comes from a line of Raffi Dijousic from Think of America. Your line is open. Hi, good morning. Thanks for taking my questions. The first one to follow up on some of the comments on Florida and Texas. Can you talk about what you would sort of attribute the slowdown and the higher inventory in those markets to? What's driving that?

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is open.

Rafe Jason Jadrosich: Thanks for taking my questions. The first one is to follow up on some of the comments on Florida and Texas. Can you talk about what you would sort of attribute the slowdown and the higher inventory in those those markets to, what's driving that? And then the comments on the price discovery process? Like, where are we in that process?

Rafe Jason Jadrosich: Hi, good morning. Thanks for taking my questions.

Rafe Jason Jadrosich: I just wanted to follow up on some of the comments on Florida and Texas.

Rafe Jason Jadrosich: Can you talk about what you would sort of attribute the slowdown and the higher inventory in those markets to? Like what's driving that? And then the comments on the price discovery process, like where are we in that process? Have you seen prices correct already or is that something?

Raffi Dijousic: And then the comments on the price discovery process, where are we in that process? Have you seen prices correct already, or is that something you would expect going forward?

Ryan Marshall: Yeah, Ray. Thanks for the question. I think what's created some of the increase in inventory is the unprecedented rise in price, which has caused some owners to become sellers for whatever reason.

Ryan R. Marshall: Have you seen prices correct already? Or is that something you would expect going forward? Yeah, Rafe, thanks for the question. I think what's created some of the increase in inventory is the unprecedented rise in price, which has caused some owners to become sellers for whatever reason. Those high prices have created a bit of an affordability challenge that prospective buyers are struggling to kind of, you know, digest at this point.

Speaker Change: you would expect going forward.

Speaker Change: Yeah, Rafe, thanks for the question. I think what's...

Speaker Change: You know, created some of the increase in inventory is the unprecedented rise in price, which has caused some owners to become sellers for whatever reason.

Ryan Marshall: Jason. Those high prices have created a bit of an affordability challenge. The perspective buyers are struggling to digest at this point. So, as I mentioned on one of the prior questions, I think what happens here, there'll be a little bit of a kind of price, you know, market clearing price adjustment process that will happen over time. I don't think it takes a terribly long time, but, you know, over the next probably three, six, nine months, I'd expect that market to kind of work through some of the build-up of inventory. I'd point you to, as an example, Austin.

Speaker Change: Those high prices.

Speaker Change: have created a bit of an affordability challenge that prospective buyers are struggling to kind of, you know, digest at this point. So, as I mentioned on one of the prior questions, I think what happens here, there'll be a little bit of a

Ryan R. Marshall: So, as I mentioned in one of the prior questions, I think what happens here will be a little bit of a kind of price, you know, market clearing price adjustment process that will happen over time. But I don't think it takes a terribly long time.

Speaker Change: kind of price, you know, market clearing, price adjustment process that will...

Rafe Jason Jadrosich: But you know, over the next probably three, six, nine months, I'd expect that market to kind of work through some of the buildup of inventory. I'd point you to Austin as an example. If you looked at the Austin market going back probably two years ago, you know, a couple of years post-COVID, unprecedented job growth combined with unprecedented rise in sales prices, all of a sudden, the market kind of came to a bit of a slowdown.

Speaker Change: happen over time. I don't think it takes a terribly long time, but you know over the next probably three, six, nine months, I'd expect that market to kind of work through some of the buildup of inventory. I'd point you to, as an example, Austin.

Ryan Marshall: If you looked at the Austin market going back probably two years ago, you know, a couple of years post-COVID, unprecedented job growth combined with unprecedented rise in sales prices, all of a sudden the market kind of came to a bit of a slowdown. We saw a build in inventory. It took about six months for the market to kind of work through some of that inventory, and it settled back into kind of a more normal run rate growth rate. So my expectation would be probably for something similar to happen as it relates to Southwest borough.

Speaker Change: If you looked at the Austin market going back probably two years ago...

Speaker Change: You know, a couple of years post-COVID, unprecedented job growth.

Speaker Change: Combined with unprecedented rise in sales prices,

Speaker Change: All of a sudden the market kind of came to a bit of a slowdown.

Rafe Jason Jadrosich: We saw a build-up in inventory. It took about six months for the market to kind of work through some of that inventory, and it settled back into kind of a more normal run rate, growth rate. So my expectation would be for something similar to happen as it relates to Southwest Florida. Thank you, that's really helpful.

Speaker Change: We saw a bill in inventory.

Speaker Change: It took about six months for the market to kind of work through some of that inventory and it settled back into kind of a more normal run rate, growth rate. So my expectation would be probably for something similar to happen as it relates to Southwest Florida.

Raffi Dijousic: So thank you, that's really helpful.

Rafe Jason Jadrosich: And then, just on the gross margin guidance for the second half of the year, I think you were previously expecting sort of a consistent 29%, and through the back half, the expectation for the change in the outlook for the fourth quarter, for sort of the exit rate, is that driven entirely by mix? Or are there other factors that are changing that expectation for the fourth quarter? Yeah, it's really a combination of two primary things. One is it's the mix that we've highlighted. And to a degree, we saw that coming.

Raffi Dijousic: And then just on the gross margin guidance for the second half of the year, I think you were previously expecting sort of consistent 29%.

Speaker Change: Thank you. That's really helpful. And then just on the gross margin guidance for the second half of the year, I think you were previously expecting sort of consistent 29 percent.

Bob O'Shaughnessy: And through the back half, the expectation for the change in the outlook for the fourth quarter for sort of the exit rate, is that driven entirely by mix or are there other factors that are changing that expectation for the fourth quarter? Yeah, it's really a combination of two primary things. One is it's the mix that we've highlighted. And to a degree, we saw that coming. So it was in the 29 area that we had given back at the end of the first quarter, but that has continued. So we've got a bigger mix kind of number than we saw 90 days ago.

Speaker Change: And through the back half, the expectation for the change in the outlook for the fourth quarter, for the exit rate, is that driven entirely by mix, or are there other factors that are changing that expectation for the fourth quarter?

Speaker Change: It's really a combination of two primary things. One is it's the mix that we've highlighted.

Rafe Jason Jadrosich: So it was in the 29 area that we had given back at the end of the first quarter, but that has continued. So we've got a bigger mix kind of number than we saw 90 days ago. Really, you know, we've highlighted that the market has gotten a little bit choppier, and so we see that there's likely to be a little bit more incentive. We told you we've got homes to sell and close on, and so we're projecting that into our guide as well.

Speaker Change: And to a degree, we saw that coming, so it was in the 29 area that we had given back at the end of the first quarter, but that has continued. So we've got a bigger mix, kind of, number than we saw 90 days ago. And...

Bob O'Shaughnessy: And really, you know, we've highlighted the markets, gotten a little bit chopier. And so we see that there's likely to be a little bit more incentive. We told you we've got holes to sell and close. And so we're projecting that into our guide as well. You know, I think it's worth highlighting, you know, the range that we've given now is a little bit lower, but it includes that same point that we had given at the beginning, you know, at the end of the first quarter. So I don't want anybody to misconstrue. We don't see a big change in the market.

Speaker Change: Really, you know, we've highlighted the market's gotten a little bit choppier and so we see that there's likely to be a little bit more incentive. We told you we've got homes to sell and close and so we're projecting that into our guide as well. You know, I think it's

Rafe Jason Jadrosich: I think it's worth highlighting that the range that we've given now is a little bit lower, but it includes that same point that we had given at the beginning, you know, at the end of the first quarter. So I don't want anybody to misconstrue that we don't see a big change in the market. This is really just kind of sort of, Thanks for all the color.

Speaker Change: It's worth highlighting, you know, that the range that we've given now is a little bit lower, but it includes that same point that we had given at the beginning, you know, at the end of the first quarter. So I don't want anybody to misconstrue. We don't see a big change in market. This is really just kind of circumstantial.

Raffi Dijousic: This is really just kind of circumstance.

Raffi Dijousic: Thanks for all the color.

Alan Ratner: Your next question comes from a line up, Alan Ratner from Zellman Associates.

Alan S. Ratner: Your next question comes from Alan Ratner from Zellman & Associates. Your line is open. Hey, guys, good morning. And congratulations to Bob and Jim as well.

Speaker Change: Thanks for all the color.

Speaker Change: Thank you. Bye-bye.

Speaker Change: Your next question comes from a line of Alan Ratner from Zellman & Associates. Your line is open.

Alan Ratner: Your line is open.

Alan Ratner: Hey guys, good morning. And from my congrats to Bob and Jim as well. So, you know, I'm actually going to take kind of the opposite side of the margin question because, you know, I actually think the guidance, it's pretty similar to your prior guide when you, you know, kind of considered moving pieces with the upside this quarter, what seems like a bit of a mixed shift in the back half of the year. And I guess I was hoping you might be reconciled out a little bit with the comments on Lexus and Florida, because, you know, those two states are a pretty sizeable part of your business over 40% of closing.

Alan S. Ratner: Hey, guys. Good morning. And let me offer my congrats to Bob and Jim as well.

Ryan R. Marshall: So, you know, I'm actually going to take kind of the opposite side of the margin question because, you know, I actually think the guidance is pretty similar to your prior guidance when you, you know, kind of consider the moving pieces with the upside this quarter and what seems like a bit of a mixed shift in the back half of the year. And I guess I was hoping you might reconcile that a little bit with the comments on Texas and Florida because, you know, those two states are a pretty sizable part of your business, your 40% of closings, and it sounds like you're kind of bracing maybe for a little bit of an incentive, you know, war, that's probably too strong of a word, but in the back half of the year, in order to generate some

Alan S. Ratner: So, you know, I'm actually going to take kind of the opposite side of the margin question because, you know, I actually think the guidance, it's pretty similar to your prior guide when you, you know, kind of considered the moving pieces with the upside this quarter, what seems like a bit of a mix shift in the back half of the year.

Speaker Change: And I guess I was hoping you might be...

Speaker Change: reconcile that a little bit with the comments on Texas and Florida because

Speaker Change: You know, those two states are a pretty sizable part of your business, over 40% of closings, and it sounds like you're kind of bracing maybe for a little bit of a...

Ryan Marshall: And it sounds like you're kind of bracing maybe for a little bit of an incentive, you know, war; that's probably too strong of a word, but in the back half of the year in order to generate some volume. So I guess my question or interpretation of the guidance is it feels like you're not necessarily factoring in that much of an incentive headwind in the back half of the year. So can you just kind of talk through that a little bit?

Speaker Change: and Incentive, you know.

Speaker Change: but in the back half of the year in order to generate some volume.

Ryan R. Marshall: So I guess my question or interpretation of the guidance is, it feels like you're not necessarily factoring in that much of an incentive headwind in the back half of the year. So can you just kind of talk through that a little bit?

Speaker Change: My question or interpretation of the guidance is, it feels like you're not necessarily factoring in that much of an incentive headwind in the back half of the year. So, can you just kind of talk through that a little bit?

Ryan Marshall: Yeah, Alan, I think Bob's prior answer to a race question helped to address that. Now, I'd combine that with a comment that I made that we're not going to be margin proud. It's important for us to turn our assets, you know, the demand environment and specifically consumer confidence and affordability has been a little bit chopier. So, you know, the combination of a little bit more West Coast mix with a few markets where we think we're going to have to add in, you know, a few incremental incentives. You know, we've given kind of some incremental or some, you know, more kind of finite range and where we think margins fall into four.

Alan S. Ratner: Yeah, Alan, I think Bob's prior answer, you know, to Rafe's question helped to address that. Now, I'd combine that with a comment that I made that we're not going to be margin proud, it's important for us to turn our assets, you know, the demand environment, and, and specifically, consumer confidence and affordability have been a little bit choppier. So, you know, the combination of a little bit more West Coast mix with a few markets where we think we're going to have to add in, you know, a few incremental incentives.

Speaker Change: Yeah, Alan, I think Bob's prior answer to Rafe's question helped to address that. Now, I'd combine that with a comment that I made that we're not going to be margin proud. It's important for us to turn our assets.

Speaker Change: You know, the demand environment and specifically consumer confidence and affordability has been a little bit choppier.

Speaker Change: So, you know, the combination of a little bit more West Coast mix

Alan S. Ratner: You know, we've given kind of some incremental or some, you know, more kind of finite range and where we think margins will fall in Q4. The guide for Q3, we left unchanged at 29, you know, approximately 29%. And we just put a range around the fourth quarter to accommodate for some of the things that I just described. Okay, that's helpful.

Speaker Change: with a few markets where we think we're going to have to add in a few incremental incentives.

Speaker Change: You know, we've given kind of some incremental or some, you know, more kind of finite range and where we think margins fall.

Ryan Marshall: The guide for two, three, we left unchanged at 29, you know, approximately 29%, and we just put a range around the fourth quarter to accommodate for some of the things that I just described.

Speaker Change: in Q4.

Speaker Change: The guide for Q3, we left unchanged at approximately 29%, and we just put a range around the fourth quarter to accommodate for some of the things that I just described.

Alan Ratner: Okay, that's helpful. It just seems like it's pretty, you know, not too dissimilar from the outlook three months ago, even though maybe there's a little bit more conservatism in your outlook from what it sounds like, at least in those two states.

Alan S. Ratner: It just seems like it's pretty, you know, not too dissimilar from the outlook three months ago, even though maybe there's a little bit more conservatism in your outlook from what it sounds like, at least in those two states. Well, and Alan, maybe just one other point: I mean, we've got 13,000 units of backlog, the vast majority of which are going to be delivered over the next six months. So, we could see a lot of that, to your point about forward incentive load. We already know what the incentives are on those homes, so it's really just under the grid. I got it.

Speaker Change: Okay, that's helpful. It just seems like it's pretty, you know, not too dissimilar from the outlook three months ago, even though maybe there's a little bit more conservatism in your outlook from what it sounds like, at least in those two states.

Ryan Marshall: Well, and I don't have my second. They've just blown a point. I mean, we've got 13,000 units of backlog. The vast majority of what you're going to deliver over the next six months. So, we can see a lot of that. And to your point about forward incentive load. We already know what the incentives are on those homes. So it's really just.

Speaker Change: Well, and Alan, maybe just one other point, I mean, we've got 13,000 units of backlog, the vast majority of which are going to deliver over the next six months.

Speaker Change: So, Joe, we could see a lot of that, and to your point about forward incentive load,

Alan S. Ratner: We already know what the incentives are on those homes, so it's really just a deferred lease.

Alan S. Ratner: That's helpful. Um, you know, the second question is just a bit of a bigger picture, higher level question. You know, some of your peers have kind of put out reset, long-term absorption targets for the business and, you know, kind of raise that maybe from where the businesses have run historically. And, you know, those are for various reasons, maybe more of a spec mix, more entry level, or just, kind of just better efficiencies.

Alan Ratner: That's helpful.

Alan Ratner: You know, second question is just a bit of a bigger picture higher level question. You know, some of your peers have kind of put out reset long-term absorption targets for the business. You know, and you know, kind of raise that maybe from where the businesses are on historically. And you know, those are for various reasons, maybe more of a spec mix more and through level or just, you know, kind of just better efficiencies.

Joe: Got it. That's helpful. You know, second question is just a bit of a bigger picture, higher level question.

Speaker Change: Some of your peers have kind of put out reset, long-term absorption targets for the business, you know, and, you know, kind of raise that maybe from where the businesses have gone historically, and, you know, those are for various reasons, maybe more of a step mix, more entry level, or just, you know,

Ryan Marshall: I'm curious. You know, as you look at your return focus and obviously the very strong margins. But the commentary about not being margin proud. Is there an opportunity longer term to take the absorption run rate of your business higher compared to where it's run historically? And how much margin, if any, do you have to give up to achieve that?

Speaker Change: I'm curious, as you look at your return focus and obviously the very strong margins,

Ryan R. Marshall: I'm curious, you know, as you look at your return focus and obviously the very strong margin, but the commentary about not being margin proud. Is there an opportunity, longer term, to take the absorption run rate of your business higher compared to where it's run historically? And how much margin, if any, do you have to give up to achieve that?

Speaker Change: But the commentary about not being margin proud, is there an opportunity longer term to take the absorption run rate of your business higher compared to where it's run historically, and how much margin, if any, do you have to give up to achieve that?

Ryan Marshall: Yeah, I think the thing that I would probably reorient the focus would be around how difficult it is to have entitled land in this country. We're in an environment that is largely a not-in-my-backyard anti-growth environment post municipalities. So the land that we have entitled and we're able to develop, become somewhat of a precious commodity, and we're treating it as such. And we're treating it as such and balancing pace and price to drive the best returns that we can because we fundamentally believe that's what creates shareholder value. And I think the last decade of performance from this company demonstrates just that growth is a very important part of our story.

Ryan R. Marshall: Yeah, I think the thing that I would probably reorient the focus would be around how difficult it is to have entitled land in this country. We're in an environment that is largely a not-in-my-backyard, anti-growth environment in most municipalities, so the land that we have entitled and we're able to develop becomes somewhat of a precious commodity, and we're treating it as such, and we're treating it as such and balancing pace and price to drive the best returns that we can because we fundamentally believe that's what creates shareholder value, and I think the last decade of performance from this company demonstrates just that.

Speaker Change: Yeah, I think the thing that I would probably reorient the focus would be around how difficult it is to have entitled land in this country.

Speaker Change: We're in an environment that is largely a not-in-my-backyard, anti-growth environment in most municipalities.

Speaker Change: So the land that we have entitled and we're able to develop becomes somewhat of a precious commodity and we're treating it as such.

Speaker Change: And we're treating it as such, and balancing pace and price to drive the best returns that we can, because we fundamentally believe that's what creates shareholder value, and I think the last decade of performance from this company demonstrates just that.

Ryan R. Marshall: Growth is a very important part of our story, and it's part of the reason that in our last quarter, we laid out a multi-year growth target of 5 to 10 percent over a multi-year period, so for 2024, we're going to be at the higher end of that range for the business that we'll deliver in 2024, and then in my prepared remarks, I highlighted that for 2025, we'd expect to be kind of within that range, so the way we've been investing capital, the way we've been thinking about kind of community-level absorption and total volume deliveries out of the business are very much aligned with that 5 to 10 percent multi-year growth target, and I'd probably leave it there as opposed to going into by community absorption. Makes a lot of sense.

Ryan Marshall: And it's part of the reason that in our last quarter, we laid out a multi-year growth target of five to 10% over a multi-year period. So for 2024, we're going to be at the higher end of that range. For the business that will deliver in 2024, and then in my prepared remarks, I highlighted that for 2025, we'd expect to be within that range. So the way we've been investing capital, the way we've been thinking about community level absorption and total volume deliveries out of the business are very much aligned with that five to ten percent multi-year growth target.

Speaker Change: Growth is a very important part of our story, and it's part of the reason that in our last quarter we laid out a multi-year growth target of 5 to 10 percent.

Speaker Change: You know, over a multi-year period. So, for 2024, we're going to be at the higher end of that range.

Speaker Change: You know, for the business that we'll deliver in 2024, and then in, you know, my prepared remarks, I highlighted that for 2025, we'd expect to be kind of within that range. So, the way we've been investing capital, the way we've been thinking about kind of community level absorption and total volume deliveries out of the business,

Speaker Change: are very much aligned with that 5-10% multi-year growth target. And I'd probably leave it there as opposed to, you know, going into by community absorption rates.

Ryan Marshall: And I'd probably leave it there as opposed to going into by community absorption. Rage. Makes a lot of sense. I appreciate the comments.

Speaker Change: Makes a lot of sense. I appreciate the comments.

Sam Reid: Your next question. Your next question comes from a line of Sam Reid from Wells Fargo. Your line is open. Awesome, thanks so much, guys. One more question on the floor to hear. Just wanted to maybe hear your perspective or your latest perspective, I guess I should say, on the insurance market. You generally build houses that are further inland, obviously to the latest building codes, but are you finding that higher insurance rates across the state are also potentially a driver behind some of the buyer trepidation there? Just wanted your perspective on that. Yeah, Sam, I think it's something that the entire country is grappling with, not just Florida.

Sam Reid: I appreciate the comments. Your next question comes from a line of Sam Reid from Wells Fargo. Your line is open.

Speaker Change: Your next question comes from a line of Sam Reid from Wells Fargo. Your line is open.

Sam Reid: One more question on Florida here. I just wanted to maybe hear your perspective or your latest perspective, I guess I should say, on the insurance market. You generally build houses that are further inland, obviously, to the latest building codes.

Sam Reid: Awesome. Thanks so much, guys. One more question on Florida here. Just wanted to maybe hear your perspective or your latest perspective, I guess I should say, on the insurance market. You generally build houses that are further inland, obviously to the latest building codes.

Sam Reid: But are you finding that higher insurance rates across the state are also potentially a driver behind some of the buyer trepidation there? Just wanted your perspective on that.

Sam Reid: But are you finding that higher insurance rates across the state are also potentially a driver behind some of the fire trepidation there? Just what is your perspective on that?

Ryan R. Marshall: I think it's something that the entire country is grappling with, not just Florida. I think we've seen insurance rates go up in a number of states. Certainly, the issues are maybe more acute in the Florida markets. We are fortunate that we've got our own insurance agency. They do an amazing job.

Speaker Change #100: Yes, Sam, I think it's something that the entire country is grappling with, not just Florida. I think we've seen insurance rates go up in a number of states. Certainly, the issues are maybe more acute in the Florida markets.

Ryan Marshall: I think we've seen insurance rates go up in a number of states; certainly, the issues are maybe more acute in Florida markets. We are fortunate that we've got our own insurance agency. They do an amazing job.

Ryan R. Marshall: We have a high capture rate. They're able to not only provide insurance coverage but to do it at a very attractive rate for the buyers that are buying in our communities. To your point, our homes are built to the most up-to-date code. They're more resilient, both in terms of building materials but also in terms of how they handle rain events and rising water type events because of the way that we manage land development, on-site retention, drainage, etc.

Speaker Change #101: We are fortunate that we've got our own insurance agency. They do an amazing job. We have high capture rate.

Ryan Marshall: We have a high capture rate, and they're able to provide not only provide insurance coverage, but to do it at a very attractive rate for the buyers that are buying in our communities. To your point, our homes are built to the most up-to-date code; they're more resilient, both in terms of building materials, but also in terms of how they handle rain events and kind of rising water type events because of the way that we manage land development, on-site retention, drainage, etc. So I think it's not to be dismissed, but it's not something that has an impact on our ability to sell homes.

Speaker Change #101: And they're able to not only provide insurance coverage, but to do it at a very attractive rate for the buyers that are buying in our communities. To your point,

Speaker Change #102: Our homes are built to the most up-to-date code. They're more resilient.

Speaker Change #102: both in terms of building materials but also in terms of how they handle, you know, rain events and kind of rising water type events.

Ryan R. Marshall: I think it's not to be dismissed, but it's not something that's having an impact on our ability to sell homes. The other thing that I would highlight is that, at least with a lot of Florida buyers, typically, you've got somebody that already lives in Florida. They're selling a home in Florida, and they might be moving to another location. They've had insurance. They've been paying, on a relative basis, higher insurance rates, so there's not necessarily a shock there.

Speaker Change #102: because of the way that we manage land development, on-site retention, drainage, etc.

Speaker Change #102: You know, I think it's not to be dismissed, but it's not something that's having an impact on our ability to sell homes.

Ryan Marshall: The other thing that I would highlight, at least with a lot of Florida buyers, typically you've got somebody that already lives in Florida; they're selling the home in Florida and they might be moving to another location. So they've had insurance; they've been paying on a relative basis higher insurance rates, and so there's not necessarily a shock there. There's also, as it relates to buyers that are coming in from outside of the state of Florida, they may be on a relative basis to where they're leaving. They might be paying higher rates, but there are other benefits they might be picking up in terms of lower property tax rates, no state income tax.

Speaker Change #103: The other thing that I would kind of highlight, at least with a lot of Florida buyers, typically you've got somebody that already lives in Florida, they're selling a home in Florida, and they might be moving to another location. So they've had insurance, they've been paying.

Speaker Change #103: on a relative basis, higher insurance rates. And so, there's not necessarily a shock there. There's also, as it relates to buyers that are coming in from outside of the state of Florida,

Ryan R. Marshall: There are also, as it relates to buyers that are coming in from outside of the state of Florida, they may be on a relative basis to where they're leaving. They might be paying higher rates, but there are other benefits they might be picking up in terms of lower property tax rates and no state income tax.

Speaker Change #103: You know, they may be on a...

Speaker Change #103: Relative basis to where they're leaving, they might be paying higher rates, but there are other benefits they might be picking up in terms of

Sam Reid: You don't have to shovel snow and things like that, so there are some puts and takes on insurance rates. No, that helps. And then maybe switching gears and touching on land really quickly here.

Sam Reid: So there are some, you know, you don't have to shovel snow and things like that, so there are some puts and takes to insurance rates. No, that helps.

Speaker Change #103: Lower property tax rates, no state income tax, you know, so there's some, you know, you don't have to shovel snow and things like that. So there's some puts and takes to insurance rates.

Sam Reid: And then just baby switching gears and catching on land really quickly.

Speaker Change #104: No, that helps. And then just maybe switching gears and touching on land really quickly here, and this is more of a clarification question. It sounds like you're talking to more of a high single-digit increase in land costs this year, at least that's what's hitting your P&L and flowing through the gross margin. First of all, I just want to make sure I'm hearing that correctly. And then does that represent any change from your earlier year commentary? Because I believe the original expectation was for that to be closer to, let's call it, mid to high single digits. Just want to make sure we're thinking of that correctly. Thanks.

Sam Reid: And this is more of a clarification question. It sounds like you're talking to more of a high single-digit increase in land costs this year. At least that's what's hitting your P&L on flowing to the gross margin. First of all, I just want to make sure I'm hearing that correctly. And then does that represent any change from your earlier, your commentary? Because I believe the original expectation was for that to be closer to, let's call it, mid to high single digits. Just want to make sure we're thinking of that correctly.

Sam Reid: And this is more of a clarification question. It sounds like you're talking about more of a high single-digit increase in land costs this year. At least that's what's hitting your P&L and flowing through the gross margin. First of all, I just want to make sure I'm hearing that correctly. And then does that represent any change from your earlier year commentary? Because I believe the original expectation was for that to be closer to, let's call it, mid to high single digits.

Sam Reid: Just want to make sure we're thinking of that correctly. Thanks. Yeah, apologies if we weren't clear; we haven't changed our... Cost Estimates for Land. I may be guilty of saying high single digits versus mid to high single digits. It means the same thing, and I apologize.

Bob O'Shaughnessy: Thanks. Yeah, apologies if we weren't clear. We haven't changed our cost estimates for land. I may be guilty of saying high single digits versus mid to high single digits. It means the same thing, and I apologize. It's somewhere between five and 10%. Got to, that helps.

Speaker Change #105: Yeah, apologies if we weren't clear, we haven't changed our cost estimates for land. I may be guilty of saying high single digits versus mid to high single digits.

Sam Reid: It's, you know, somewhere between five and ten. Gotcha. That helps. Thanks so much.

Speaker Change #105: It means the same thing, and I apologize. It's, you know, somewhere between five and ten percent.

Sam Reid: Thanks so much.

Sam Reid: I'll pass it on.

Speaker Change #106: Gotcha. That helps. Thanks so much. I'll pass it on.

Alina Mydlo: Your next question comes from Alina. Alina of my doll from RBC Capital Markets. Your line is open.

Michael Glaser Dahl: I'll pass it on. Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open. Morning. Thanks. And congrats, Bob and Jim. Although, Bob, I guess you're not free of us all quite yet. That's quite good sometimes.

Speaker Change #107: Your next question comes from the line of Mike Dahl from RBC Capital Markets. Your line is open.

Alina Mydlo: Morning, thanks, and congrats Bob and Jim. I'm the Bob. I guess you're not three of us to all plate yet. I'm going to. Sometimes a couple, a couple of quick ones for my end. You characterized the July traffic as always. Obviously, some moving pieces around race over the past month and then normal seasonality. You know, you would slow your absorption would typically be down kind of 15s quarter on quarter in the third quarter. Just given all the kind of attention from investors, analyst. Like can you give a little more clarity on kind of how the beginning of three Q has looked and are you trying to characterize this as kind of.

Michael Glaser Dahl: Morning. Thanks. And congrats, Bob and Jim. Although, Bob, I guess you're not free of us all quite yet.

Michael Glaser Dahl: A couple quick ones from my end. You characterize July traffic as solid, obviously some moving pieces around rates over the past month, and then normal seasonality, you know, you would flow, I think your absorption would typically be down kind of mid-T and quarter-on-quarter in the third quarter. Just given all the kind of attention from investors and analysts alike, can you give a little more clarity on kind of how the beginning of 3Q has looked and are you trying to characterize this as kind of, you know, against what was choppy, solid, or is consistent with what you'd expect, better, you know, worse?

Michael Glaser Dahl: Fantastic.

Michael Glaser Dahl: A couple quick ones from my end. You characterized the July traffic as solid, obviously some moving pieces around rates over the past month, and then normal seasonality, you know, you would slow, I think your absorption would typically be down, kind of mid-teens.

Speaker Change #109: Thank you all for joining us for this quarter-on-quarter in the third quarter, just given all the kind of attention from investors, analysts alike, can you give a little more clarity on kind of how the beginning of 3Q has looked and are you trying to characterize this as kind of

Ryan Marshall: Yeah, against what was choppy, solid is consistent with what you'd expect better, you know, worse, how would you, you know, further clarify that. Yeah, Mike, it's always tricky when we're giving qualitative descriptions about three weeks of traffic in July. So we try to choose our words carefully. The second quarter, you know, I think you've heard from us and you've heard from others that have reported: you know, it was choppy throughout the quarter. But, you know, things in early July, three weeks in, have been that have been solid and we're pleased with kind of how the business is performing and probably the biggest thing that I want you to focus on is kind of our reaffirmation of how we view.

Speaker Change #110: Yeah, against what was choppy, solid, is consistent with what you'd expect, better, you know, worse, how would you, you know, further clarify that?

Michael Glaser Dahl: How would you, you know, further clarify that? Yeah, Mike, it's always tricky when we're giving qualitative descriptions about three weeks of traffic in July. So we try to choose our words carefully. The second quarter, you know, I think you've heard from us and you've heard from others that have reported, you know, it was choppy throughout the quarter.

Speaker Change #110: Yeah, Mike, it's always tricky when we're giving qualitative descriptions about

Speaker Change #110: 3 weeks of traffic in July , so we try to choose our words carefully. The second quarter, you know, I think you've heard from us and you've heard from others that have reported, you know, it was choppy throughout the quarter.

Ryan R. Marshall: But, you know, things in early July, three weeks in, have been solid, and we're pleased with how the business is performing. And probably the biggest thing that I'd want you to focus on is kind of our reaffirmation of how we view the business for the entire year, our start rate, what we believe we can deliver, and kind of how that sets us up for kind of 2025. So, certainly, you know, three weeks of data in July. I know they're important. I know there's a lot of focus on it.

Speaker Change #110: But, you know, things in early July , three weeks in, have been solid, and we're pleased with kind of how the business is performing. And probably the biggest thing that I'd want you to focus on is kind of our reaffirmation of how we view

Ryan Marshall: The business for the entire year, our start rate, what we believe we can deliver and kind of how that sets us up for kind of 2020, 2025. So certainly, you know, three weeks of kind of data in July. I know they're important. I know there's a lot of focus on it, but you know, I think the bigger picture of what's the full year of 24 going to look like. How are we thinking about 2025? Those are the things that I think are probably more important.

Speaker Change #110: The business for the entire year, our start rate, what we believe we can deliver, and kind of how that sets us up for kind of 2020.

Speaker Change #110: 2025. So certainly, you know, three weeks of kind of data in July . I know they're important. I know there's a lot of focus on it. But, you know, I think the bigger picture of what's the full year of 24 going to look like?

Ryan R. Marshall: But, you know, I think the bigger picture of what the full year of 2024 is going to look like, and how we are thinking about 2025, those are the things that I think are probably more important. Yeah, okay. And then just sorry to keep going on kind of the Florida and Texas stuff, but just again, as kind of a level setting exercise, if we look at the orders, you know, your Florida orders were down 9%, and your Texas orders were down 8% in the quarter. Is there any way you could give us some additional perspective on those challenge markets in Southwest Florida and Austin, and Dallas? you know, how was the order performance in those markets? specifically in the quarter?

Speaker Change #110: How are we thinking about 2025? Those are the things that I think are probably more important.

Ryan Marshall: Yeah, okay, understand here. And then just sorry to keep going on, kind of a Florida and Texas stuff, but just again, as kind of a level-setting exercise, we love to do orders. You know, your Florida orders were down 9%; your Texas down 8% in the quarter. Is there any way you could give us some additional perspective on in those challenge markets in Southwest Florida and Austin Dallas. How was the order for four mentioned in those markets specifically in the quarter? Yeah, you know, my only thing that I'd probably kind of point to there, you know, Bob talked about his prepared remarks, some of the Delweb impact in the quarter. Both of those markets are big markets for Delweb.

Speaker Change #111: Yeah, okay, understood.

Speaker Change #111: And then, just, sorry to keep going on kind of the Florida and Texas stuff, but just, you know, as kind of a level setting.

Speaker Change #112: exercise, if we look at the orders, you know, your Florida orders were down 9%, your Texas down 8% in the quarter. Is there any way you could give us some additional perspective on in those challenge markets in Southwest Florida and Austin, Dallas?

Speaker Change #114: You know, how was the order performance in those markets, you know, specifically in the quarter?

Michael Glaser Dahl: Yeah, you know, Mike, the only thing that I probably kind of point to there, you know, Bob talked about in his prepared remarks some of the Del Webb impact in the quarter. Both of those markets are big markets for Del Webb. So, you know, beyond some of the community count transition, you know, the community count transition that we're having with some closings and new Del Webb's opening, I wouldn't really go any more granular.

Michael Glaser Dahl: Yeah, you know, Mike, the only thing that I'd probably kind of point to there, you know, Bob talked about in his prepared remarks some of the Del Webb impact in the quarter. Both of those markets are big markets for Del Webb, so, you know, beyond

Ryan Marshall: So, you know, beyond some of the community count transition, you know, the community count transition that we're having with some closing and new Delweb's opening, I wouldn't really go any more granular than that.

Michael Glaser Dahl: Some of the community count transition You know the community count transition that we're having with some closing and new Dell webs opening I wouldn't I wouldn't really go any more granular than that

Bob O'Shaughnessy: Okay, Bob, thank you.

Susan Maklari: Your final question comes from the line of Susan Maklari from Goldman Sachs; your line is open.

Michael Glaser Dahl: Okay. Thank you.

Michael Glaser Dahl: Okay, thank you. Your final question comes from the line of Susan Maklari from Goldman Sachs. Your line is open. Good morning, everyone. Thanks for squeezing me in. My first question is: you mentioned in your comments that the consumer is a bit more unsure, a bit more cautious. How would you generally characterize their health as you come into the third quarter, think about the back half, and what do you think is causing that increased caution?

Michael Glaser Dahl: Your final question comes from the line of Susan Maklari from Goldman Sachs. Your line is open.

Susan Maklari: Good morning everyone, thanks for squeezing me in. My first question is, you mentioned in your comments that the consumer is a bit more unsure, a bit more cautious. How would you generally characterize the health of them as you come into the third quarter, think about the back half, and what do you think is causing that increased caution? Is there anything that you're hearing from your salespeople or on the ground that seems to be a more motivating factor in there for them?

Susan Marie Maklari: Good morning, everyone. Thanks for squeezing me in.

Susan Marie Maklari: My first question is, you know, you mentioned in your comments that the consumer is a bit more unsure, a bit more cautious.

Susan Marie Maklari: How would you generally characterize the health of them as you come into the third quarter and think about the back half? And what do you think is causing that increased caution? Is there anything that you're hearing from your salespeople or on the ground that seems to be a more motivating factor in there for them?

Susan Marie Maklari: Is there anything that you're hearing from your salespeople or on the ground that seems to be a more motivating factor for them? Yeah, Susan, good morning. Thanks for the question. I think it's really around two things. One, psychology and consumer confidence.

Ryan Marshall: Yeah, this is a good morning. Thanks for the question. I think it's really around two things. One, psychology, and consumer confidence. So when rates, you know, upticked in early, kind of early April, I think that had a real, had a real impact in kind of the confidence level of consumer when it comes to is now a right time to buy. We do some surveying on our website with prospective buyers, where we ask that question, how do you feel about now as a good time to buy? And it was right in that time period that we saw kind of a noticeable change in kind of response to that question.

Speaker Change #115: Yeah, Susan, good morning. Thanks for the question. I think it's really around two things. One,

Ryan R. Marshall: So when rates, you know, increased in early kind of early April, I think that had a real impact on the confidence level of consumers when it comes to is now the right time to buy. We do some surveying on our website with prospective buyers where we ask that question, how do you feel about now being a good time to buy? And it was right in that time period that we saw kind of a noticeable change in the kind of response to that question.

Speaker Change #116: psychology and consumer confidence. So when rates, you know, upticked in early, kind of early April , I think that had a real, had a real impact in

Speaker Change #116: kind of the confidence level of consumer when it comes to is now a right time to buy. We do some surveying on our website with prospective buyers where we ask that question, how do you feel about now is a good time to buy?

Speaker Change #116: And it was right in that time period that we saw kind of a noticeable change in kind of response to that question. So some of it, I think, is just rate change and the things that people are hearing in the news.

Ryan Marshall: So some of it, I think, is just rate change and the things that people are hearing in the news and reading in the newspapers. Some of it is impacted by affordability. You know, how much is a attributable one versus the other heart to know? So I think, you know, the prospect that potentially rates might come down later in the year. I think that, you know, similarly could play into consumer confidence and buyer psychology in a positive way.

Ryan R. Marshall: So some of it, I think, is just rate change and the things that people are hearing on the news and reading in the newspapers. Some of it is impacted by affordability, you know; how much is attributable to one versus the other is hard to know.

Speaker Change #116: and reading in the newspapers. Some of it is impacted by affordability.

Speaker Change #116: You know, how much is attributable, one versus the other, hard to know.

Susan Marie Maklari: So I think, you know, the prospect that rates might come down later in the year, I think that, you know, similarly could play into consumer confidence or buyer psychology in a positive way. Okay, that's helpful. And then you also mentioned that you recently reentered Utah.

Speaker Change #116: So I think, you know, the prospect that potentially rates might come down later in the year, I think that, you know, similarly could play into consumer confidence or buyer psychology in a positive way.

Susan Maklari: Okay, that's helpful.

Ryan Marshall: And then you also mentioned that you recently re-entered Utah. As you think about your current geographic footprint and hitting that 5% to 10% growth target over time, how do you think about the current markets that you're in? Are there more markets that perhaps could fit your profile for some of the products that you offer, and anything else that's interesting to you out there from a market or geographic perspective? Yeah, we're always, you know, we're always looking at where is the population going? And are there new growth cities that could create interesting opportunities for us with the seven markets that we've entered over the last two or three years?

Speaker Change #117: Okay, that's helpful. And then you also mentioned that you recently re-entered Utah. As you think about your current geographic footprint and hitting that 5 to 10 percent growth target over time,

Ryan R. Marshall: As you think about your current geographic footprint and hitting that 5 to 10% growth target over time, how do you think about the current markets that you're in? Are there more markets that perhaps could fit your profile for some of the products that you offer? And anything else that's interesting to you out there from a market or geographic perspective? Yeah, we're always, you know, we're always looking at where the population is going.

Speaker Change #118: How do you think about the current markets that you're in? Are there more markets that perhaps could fit your profile for some of the products that you offer? And anything else that's interesting to you out there from a market or geographic perspective?

Speaker Change #119: Yeah, we're always looking at where is the population going and are there new growth cities that could create interesting opportunities for us. With the seven markets that we've entered over the last two or three years, I think we've

Ryan R. Marshall: And are there new growth cities that could create interesting opportunities for us? With the seven markets that we've entered over the last two or three years, I think we're in all of the markets that we need to be in today. You know, could there be opportunities down the road? Sure, I'd never kind of close that off, but we don't have any kind of remaining major growth cities that I think we've got to get into.

Ryan Marshall: I think we've been in all of the markets that we need to be in today. You know, could there be opportunities down the road? Sure, I'd never kind of close that off, but we don't have any kind of remaining major growth cities that I think we've got to get into. And then, as it relates to kind of the cities that we're in and the growth targets, you know, we're pleased with how all those cities are performing, and they're small, you know, relatively smaller businesses today. And kind of our view of growth in those new markets, that's all embedded into our 5% to 10% growth rate.

Speaker Change #120: We're in all of the markets that we need to be in today. You know, could there be opportunities down the road? Sure, I'd never kind of close that off, but we don't have any kind of remaining major growth cities that I think we've got to get into.

Ryan R. Marshall: And then, as it relates to kind of the cities that we're in and the growth targets, you know, we're pleased with how all those cities are performing. And they're small, you know, relatively smaller businesses today, and our view of growth in those new markets, that's all embedded into our five to 10% growth rate.

Speaker Change #120: And then as it relates to kind of the cities that we're in and the growth targets, you know, we're pleased with how all those cities are performing.

Speaker Change #120: And they're small, you know, relatively smaller businesses today, and kind of our view of growth in those new markets, that's all embedded into our 5-10% growth rate.

Susan Marie Maklari: Okay, thanks for the color and good luck with everything. Thanks, Susan. And that concludes our question and answer session. I will now turn the call back over to Jim Zeumer for his closing remarks. Thank you. I appreciate everybody's time this morning. We're certainly around the bell at the end of the day. If you have any questions... Please submit them, and otherwise, we will look forward to speaking with you on our next call. This concludes today's conference call. Thank you for your participation. You may now disconnect. [inaudible]

Susan Maklari: Okay, thanks for the color and good luck with everything. Thanks, Susan.

Speaker Change #121: Okay, thanks for the color and good luck with everything.

James Zeumer: And that concludes our question-and-answer session.

James P. Zeumer: Thanks, Jim.

James Zeumer: I will now turn the call back over to Jim Zumer for closing remarks. Okay, thank you. Appreciate it. It's time this morning. We're certainly around available in Andrew today. Any questions?

Speaker Change #122: And that concludes our question and answer session. I will now turn the call back over to Jim Zeumer for closing remarks.

James P. Zeumer: Okay, thank you. Appreciate everybody's time this morning. We're certainly around and available at the end of the day. If you have any questions, please submit them, and otherwise, we will look forward to speaking with you on our next call.

James Zeumer: Please submit them, and otherwise we will look forward to speaking with you on our next call.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #123: This concludes today's conference call. Thank you for your participation. You may now disconnect.