Q2 2025 PulteGroup Inc Earnings Call

Thank you for watching, and thank you for standing by.

Jeannie: My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup Inc. second quarter 2025 earnings conference.

Good morning, and thank you for standing by. My name is Jeanne and I will be your conference operator today.

Jeannie: All lines have been placed on mute to prevent any background. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. We do ask that you limit yourself to one question and one follow-up. Thank you.

At this time, I would like to welcome everyone to the py Group Inc, second quarter 2025 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question and answer session.

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

If you would like to withdraw your question, press star 1 again.

James Zeumer: I would now like to turn the call over to Jim Zeumer. Please go ahead. Thank you, Jeanne.

We do ask that you limit yourself to 1 question and 1 follow-up. Thank you. I would now like to turn the call over to Jim Zoomer. Please go ahead.

Ryan Marshall: Good morning, and thank you for joining today's call. As we look forward to discussing PulteGroup's second quarter operating and financial results. With me today are Ryan Marshall, President and CEO, Jim Ossowski, Executive Vice President, CFO, and David Carrier, Senior VP, Finance. As always, a copy of earnings release and this morning's presentation have been posted to our corporate website at PulteGroup.com. We will also post an audio replay of this call later today. I would highlight that today's presentation includes forward looking statements about the company's expected future performance. Actual results could differ materially from those suggested by our comments.

Jim Zoomer: Great. Thank you, Jeanne, good morning and thank you for joining today's call. As we look forward to discussing multi-group, second quarter operating and financial results with me today are Ryan Marshall, president and CEO. Jim ossowski Executive Vice President CFO, and David carrier, senior VP Finance.

Jim Zoomer: As always a copy of our earnings release. And this morning's presentation have been posted to our corporate website at polygroup.com. We will also post an audio replay of this call later today.

Ryan Marshall: The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation.

I would highlight the today's presentation includes forward-looking statements about the company's expected future performance. Actual results could differ materially from those suggested by our comments made today.

Ryan Marshall: These risk factors and other key information are detailed on our SEC filings, including our annual and quarterly reports.

Jim Zoomer: The most significant risk factors that could affect future results or summarized, as part of today's earnings release within the 8 company presentation.

Ryan Marshall: Now, let me turn the call over to Ryan Marshall. Ryan? Good morning, and thank you for joining our call. As always, I appreciate the opportunity to update you on PulteGroup and our work in delivering outstanding business results. PulteGroup's earnings release details, another important piece of information, are available on our website at PulteGroup.com. We have seen a quarter-to-quarter positive financial performance as the company delivered strong closings, gross margins, and overhead leverage. Consistent with such results, we also continue to realize high returns as the company generated a return on equity of 23% for the trailing 12 months ended June 30.

These risk factors and other key information or details on our SEC filings including our annual, and quarterly reports. Now, let me turn the call over to Ryan Marshall. Right, good morning, and thank you for joining our call. As always, I appreciate the opportunity to update, you on Multi Group in our work and delivering outstanding business results.

Strong closings, gross, margins and overhead Leverage.

Ryan Marshall: In a few minutes, I'll turn the call over to Jim for a detailed review of the numbers. Our results demonstrate that in an operating environment that has grown more challenging, our diversified and balanced operating model offers strategic benefits to help sustain performance. In this competitive operating environment, we are reaping the advantages of being diversified across all buyer groups, particularly our industry leading position and serving active adult buyers. Specific to this group, I am pleased to report that we are experiencing a great response to our newest Dell Web and Dell Web Explorer communities as buyers embrace the active lifestyle at the core of both brands.

Consistent with such results. We also continue to realize High returns as The company generated a return on Equity of 23% for the trailing 12 months and in June 3, 0.

Jim Zoomer: In a few minutes, I'll turn the call over to Jim for a detailed review of the numbers. Our results demonstrate that it in an operating environment that has grown more challenging, our Diversified and balanced operating model offers strategic benefits to help sustain performance.

Jim Zoomer: In this competitive operating environment, we are reaping, the advantages of being Diversified across all buyer groups, particularly our industry-leading position and serving active adult buyers.

Ryan Marshall: As it relates to this part of our business, I would highlight that along with being among our higher priced homes, these homes typically represent our highest margin clothing. Along with a broad customer base, we have geographic breadth and market diversity that are again proving their value. Our business results continue to demonstrate the benefit of having large and stable operations in the Midwest, Southeast and Northeast. As these work to offset some of the more challenging market conditions the industry is facing out west and in Texas. And I'm pleased to highlight the relative strength of our Florida operations displayed in the quarter, as net new orders increased 2% over the last, over last year.

Jim Zoomer: Specifically to this group, I am pleased to report that we are experiencing a great response to our newest Del Webb and Del Webb Explorer communities as buyers embrace the active lifestyle at the core of both brands.

Jim Zoomer: As it relates to this part of our business. I would highlight that along with being among our higher priced homes. These homes typically represent our highest margin closings.

Along with a broad customer base. We have Geographic breadth and Market diversity that are again proving their value.

Jim Zoomer: Our business results, continue to demonstrate the benefit of having large and stable operations in the midwest, Southeast and Northeast.

Ryan Marshall: Beyond Florida remaining a beneficiary of long-established migration patterns in this country, we have exceptional land positions throughout the region. I would also highlight that our operating teams across Florida are second to none, and I truly believe we are seeing the importance of having such experienced leadership in place. And finally, our ability to serve both the buyer who needs the immediacy of an in-production spec home as well as the buyer seeking to build a more personalized home from scratch remains an important competitive advantage. The former allows us to effectively serve the first-time buyer and use our national rate incentive, while the latter allows the buyer to select the lot and options that they value most, which in turn provides margin enhancement opportunities for us.

Jim Zoomer: As these work to offset some of the more challenging market conditions, the industry is facing out west and in Texas. And I'm pleased to highlight the relative strength of our Florida operations, displayed in the quarter as net new orders, increase 2% over the last over last year.

Jim Zoomer: The on Florida remaining a beneficiary of long established migration patterns in this country. We have exceptional land positions throughout the region.

Jim Zoomer: I would also highlight that our operating teams across Florida are second to none and I truly believe we are seeing the importance of having such experienced leadership in place.

Jim Zoomer: And finally, our ability to serve both the buyer who needs the immediacy of an in production spec home as well as the buyer seeking to build a more personalized home from scratch remains an important competitive advantage.

Ryan Marshall: Through the first half of 2025, we realized an average of $109,000 of options and lot premiums. which is an important driver of PulteGroup's Superior Gross Margin. with half the year.

Jim Zoomer: The former allows us to effectively serve the first time buyer and use our national rate incentive. While the latter allows the buyer to select a lot and options that they value, most which in turn provides margin enhancement opportunities for us.

Jim Zoomer: Through the first half of 2025, we realized an average of 109,000 of of options and lot premiums, which is an important driver of Pi groups. Superior gross margins.

Ryan Marshall: including the important spring selling season now complete. I thought it would be useful to offer a few high-level comments on the demand dynamics we have been experiencing. Over the past few quarters, our industry has routinely referenced demand conditions as being volatile, and that remains the most accurate description of buyer activity in the first and second quarters. Within a market demonstrating a typical seasonal pattern from month to month, we do see days of strong demand, followed by days displaying a step-down in sign-up activity. Feedback from would be home buyers indicates a variety of concerns ranging from affordability, and the inability to sell an existing home to a slowing economy and the fear of potentially losing their job.

Jim Zoomer: With half a year including the important selling spring selling season. Now, complete

I thought it would be useful to offer a few high-level comments on the demand Dynamics. We have been experiencing

Jim Zoomer: Over the past few quarters, our industry has routinely referenced demand conditions as being volatile and that remains the most accurate description of buyer activity in the first and second quarters.

Jim Zoomer: Within a market demonstrating, a typical seasonal, seasonal pattern from month to month. We do see days of strong demand, followed by days, displaying a step down and sign up activity.

Feedback from would be home, buyers indicates a variety of concerns, ranging from affordability and the in inability to sell an existing home.

Ryan Marshall: In some, I think consumer confidence is uncertain at best. And confidence is something that's difficult to solve with a lower price or higher incentive. This is where our disciplined approach to the market to the market focuses on capturing incremental volume without giving up too much price. If we look beyond the day-to-day volatility, the overall demand environment isn't far off our historical pre-COVID absorption pace. Our Q1 absorption pace of 2.7 homes per month was consistent with our pre-COVID averages, while our Q2 absorptions of 2.4 homes per month were just under our 2.6 pre-COVID average. In other words, our demand is reasonable, but we are having to compete for each home sale.

Jim Zoomer: To a slowing economy in the fear of potentially losing their job and some I think consumer confidence is uncertain at best and confidence is something that's difficult to solve with a lower price or higher incentive.

This is where our disciplined approach to the market.

Jim Zoomer: To the market focuses on capturing incremental, volume without giving up too much price.

Jim Zoomer: If we look beyond the day-to-day volatility, the overall demand environment isn't far off our historical preco absorption paces.

Jim Zoomer: Our q1 absorption pace of 2.7 homes per month was consistent with our preco averages.

Jim Zoomer: while our Q2 absorption of 2.4 homes per month were just under our 2, our 2.6 preco average,

Ryan Marshall: And we are seeing meaningful differences in demand strengths and weaknesses from market to One of the most encouraging dynamics that I would highlight is that a drop in interest rates does stimulate traffic into our communities and a corresponding increase in sign of activity. This was clearly evident as rates dropped in the last two weeks of June, as well as at different points during our first and second quarters. I think this supports our view that people desire homeownership and remain actively engaged in the process. They just need the value equation to work and to have confidence in their financial circumstances to feel more comfortable signing the contract.

In other words, our demand is reasonable but we are having to compete for each home sale and we are seeing meaningful differences in demand, strengths, and weaknesses from Market to Market 1 of the most encouraging dynamics that I would highlight, is that a drop in interest rates, does stimulate traffic into our communities and a corresponding increase in sign of activity.

Jim Zoomer: This was clearly evident as rates dropped in the last 2 weeks of June, as well as at different points during our first and second quarters.

Ryan Marshall: Given the demand conditions we have experienced in the first six months, and an overall heightened sense of uncertainty among consumers, we have taken actions to adjust our operations to today's market conditions. We made the decision early in the year to slow our land spend, reduce our starts rate, and we have worked aggressively to sell excess speck and We have been proactive and very tactical in responding to demand conditions as they exist in each market. Our focus on achieving high returns doesn't change, but the approach may as we balance the primary drivers of pace and price within each community.

And remain actively engaged in the process, they just need to. They just need to value equation to work and to have confidence in their financial circumstances to fill more comfortable, citing, the contract,

Jim Zoomer: Given the demand conditions. We have experienced in the first 6 months and an overall heightened sense of uncertainty among consumers. We have taken actions to adjust our operations to today's market conditions.

Ryan Marshall: Before turning the call over to Jim, I do want to recognize and thank our incredibly talented team as they continue to deliver the highest quality homes and customer experience, while still achieving exceptional financial results.

Jim Ossowski: Now let me turn the call over to Jim Ossowski. Thank you and good morning. As Ryan indicated, while there are challenges within today's housing market, there are certainly positives to be taken from PulteGroup's second quarter results and how we have positioned our business for long term success. Net new orders in the second quarter totaled 7,083 homes, which is down 7% from last year's second quarter. The year-over-year decline in net new orders for Q2 reflects a 13% decrease in overall absorption pace, partially offset by a 6% increase in our average community count for the quarter to 994.

We made the decision early in the year to slow our land. Spend reduce our starts rate and we have worked aggressively to sell excess spec inventory. We have been proactive and very tactical in responding to demand conditions as they exist in each market. Our focus on achieving High returns doesn't change, but the approach may as we balance the primary drivers of pace and price. Within each Community before turning the call over to the gym, I do want to recognize and thank our incredibly talented team as they continue to deliver the highest quality homes, and customer experience while still achieving exceptional Financial results. Now, let me turn the call over to Jim ossowski

Jim Ossowski: Thank you, and good morning, is Ryan indicated, while there are challenges within today's housing market. There are certainly positive to be taken from policy groups, second quarter results. And how we have positioned our business for long term success, net new orders in the second quarter totaled, 7,083 homes, which is down 7% from last year's second year.

Jim Ossowski: As a percentage of starting backlog, our cancellation rate for the second quarter was 11%, which is consistent with Q1 and only a point and a half increase from Q2 of last year. Stability in the cancellation rate suggests that most homebuyers remain comfortable and confident in completing their home purchase once they are undercover. Our second quarter absorption pace of 2.4 homes per month was down from 2.7 homes per month in Q2 of last year. year-over-year differential of roughly 0.3 ohms was fairly constant through the three months of Q2. Said another way, we experience a typical seasonal trend, but the core demand is simply running at a lower rate.

Jim Ossowski: Quarter. The year-over-year decline in net new orders for Q2 reflects a 13%, decrease in overall, absorption phase. Partially offset by a 6% increase in our average Community, count for the quarter to 994.

Jim Ossowski: As a percentage of starting backlog. Our cancellation rate for the second quarter was 11%, which is consistent with q1 and only a point and a half increase from Q2 of last year. Stability in the cancellation rate suggests that most home buyers, remain comfortable, and confident in completing their home purchase. Once they are under contract.

Jim Ossowski: Our second quarter absorption pace of 2.4 homes. Per month was down from 2.7 homes per month in Q2 of last year,

Jim Ossowski: The year-over-year differential of roughly 0.3 homes was fairly constant through the 3 months of Q2.

Jim Ossowski: Set another way. We experience a typical seasonal trend of the core demand is simply running at a lower pace.

Jim Ossowski: Looking at our net new orders by fire group, first time in move up buyers were down 9% and 14% respectively from last year, while our active adult business was up 9%. specific to our active adult. In addition to the underlying demand among these buyers, we are benefiting from new community openings coming up. To be clear, while these active adult orders make up 24% of the total this quarter, they will primarily deliver as 2026 close. It is fair to say that we are pleased to see the new Dell Web Communities being well-received. Second quarter home sale revenues of $4.3 billion were down 4% from prior year revenues of $4.4 billion.

Jim Ossowski: Looking at our net new orders by fire group, our first time and move up, buyers were down 9% and 14% respectively from last year. While our active adult business was up 9%.

Specific to our active adult business. In addition that the underlying demand among these buyers, we are benefiting from new community openings coming online this year.

Jim Ossowski: To be clear while these acts of adult orders, make up 24% of the total this quarter, they were primarily deliver as 2026 closing.

Jim Ossowski: is fair to say that we are pleased to see the new de Webb communities being well received

Jim Ossowski: The decrease in home sale revenues was driven entirely by lower closing bonds. Deliveries were down 6%, 7,630. The decrease in closings was partially offset by a 2% increase in average sales price of $559,000. By buyer group, closings in the second quarter were 38% first-time, 42% move-up, and 20% active adult. In the second quarter of last year, the closings mix was 40% first-time, 37% move-up, and 23% Given second quarter orders and closing activities, the end of the quarter with a backlog of 10,779 homes valued at $6.8 billion. In the comparable prior year period, the company's backlog totaled 12,982 homes, the value of $8.1 billion.

Jim Ossowski: second quarter home, sale revenue is a 4.3 billion, we're down, 4%, from prior year, Revenue, support 4.4 billion,

Jim Ossowski: The decrease in home. Sale revenues was driven entirely by lower closing volume. Its deliveries were down 6% to 7,639 homes.

Jim Ossowski: The decrease in closings was partially offset by 2% increase in average sales price of 559,000.

By buyer group, closing to the second quarter were 38%. First time 42%, move up in 20%, active adult.

Jim Ossowski: In the second quarter of last year, the closing is mixed was 40%. First time 37% move up in 23, active adult.

Jim Ossowski: Given second quarter of orders and closing activities. We entered the quarter with a backlog of 10,779 homes today at 6.8 billion dollars.

Jim Ossowski: in the comparable prior year, period companies backlog total 12,982 homes, the value of 8.1 million

Jim Ossowski: In the second quarter, we started 7,220 homes, which is down 11% from the 8,146 homes we started in the second quarter of 2020. Given the volatility and demand that we've experienced thus far in 2025, we continue to carefully manage our starts pace to better align our available inventory with the current rate of supply. As such, we ended Q2 with a total of 16,105 homes in production, of which 47% were speculated. On a sequential basis, our inventory of 7,606 spec homes under production is down 3% from the first quarter and down 13% from the start of the year.

Jim Ossowski: in the second quarter, we started 7,220 homes, which is down 11% from the 8,146 homes. We started in the second quarter of 2024,

Given the volatility and demand. We have experienced thus far in 2025, we continue to carefully, manage our starts Pace to better. Align, our available inventory with current rate of sales

Jim Ossowski: As such, we end a Q2 with a total of 16,155 homes in production, but which 47% were spec units.

Jim Ossowski: % for the first quarter and down, 13% from the start of the year.

Jim Ossowski: Based on expected home sales and starts, we anticipate our spec inventory to be within our target range of 40% to 45% of overall units in production, i.e. In managing specs, we are trying to achieve multiple objectives, including having enough units to meet buyer demand while still allowing our sales counselors to sell from a position . The market evolves over the third and fourth quarters. We'll be making decisions as to how much production to start as we plan ahead for 2020. Given the recent pace of sales and stage of units under construction, we currently expect to close between 7,200 and 7,600 homes in the 30 years.

Based on expected home sales and starts. We anticipate our spec inventory to be within our target range of 40% to 45% of overall units in production by year end.

In managing specs, we are trying to achieve multiple objectives including having enough units to meet buyer, demand while still allowing our sales counselors to sell from a position of strength.

Jim Ossowski: And the market of all over the third and fourth quarters will be making decisions as to how much production to start as we plan ahead for 2026.

Given the recent pace of sales and stage of units under construction, we currently expect to close between 7,200 and 7,600 homes in the third quarter.

Jim Ossowski: As it relates to the full year, given our level of backlog and a slightly lower absorption pace as we have realized over the past several months, we are refining our full year 2025 closings guide to 29,000. We still expect the average sales price of closings to be in the range of $560,000 to $570,000 for each of the remaining and intern for the full year. Consistent with our prior guide, we expect our Q3 and Q4 average community counts to be 3-5% higher than the comparable prior year period. For our second quarter, we reported gross margin of 27.0%, which was at the top end of our gap.

Jim Ossowski: As it relates to the full year, given our level of backlog and a slightly lower absorption Pace. As we have realized over the past several months, we are refining our full year 2025 posing guide to 29,000 homes

Jim Ossowski: We still expect the average sales price of closings to be in the range of 560,000 570,000 in each of the remaining quarters and in turn for the full year.

Jim Ossowski: Consistent with our prior guy. We expect our Q3 and Q4 average Community counts to be 3 to 5% higher than a comparable prior year period.

Jim Ossowski: Relative to our guidance, our key to gross margin reflects both the benefit of a favorable mix of homes closed, as well as the headwind of higher The incentives for the second quarter were 8.7% of gross sales price, which is up from 6.3% last year, and on a sequential basis, up from 8.0%. As we assess the back half of 2025, we are affirming our guidance as we expect gross margins in the 3rd and 4th quarters to be in the range of 26.0% to 26.5%. During our Q1 call, we had indicated a potential impact of tariffs of approximately $5,000 per unit that could hit in the latter part of At this time, we now expect any impact from tariffs in Q4 to be lower, which will help offset the cost of elements.

For our second quarter, we reported gross margin of 27.0% which was at the top end of our guide.

Jim Ossowski: Relative to our guidance, our T2, gross margin, reflects both the benefit of a favorable mix of homes closed as well as the headwind of higher incentives.

Jim Ossowski: Incentives for the second quarter were 8.7% of gross sales price which is up from 6.3% last year and a sequential basis up from 8.0%.

As we assess the back, half of 2025, we are affirming our guidance as we expect gross margins in the third and fourth quarters to be in the range of 26.0% 26.5.

Jim Ossowski: During our q1 call, we had indicated a potential impact of tariffs of approximately 5,000 dollars per unit that it could hit in the latter part of our Q4.

Jim Ossowski: At this time, we now expect any impact from tariffs in Q4 to be lower, which will help offset the cost of elevated incentives.

Jim Ossowski: While we have reasonable visibility into giving this gross margin guide, I will note that we still need to sell and close a meaningful number of spec homes to achieve our closing target. SG&A expense in the second quarter totaled $390 million, or 9.1% of home sale revenue. In the prior year, a reported SG&A expense of $361 million, or 8.1% of home sale revenues, included a $52 million pre-tax insurance benefit, according to We remain diligent in controlling our overhead costs and we expect SG&A expense for the full year of 2025 to be in the range of 9.5% to 9.7% home sale revenue.

Jim Ossowski: well yeah while we have reasonable visibility into giving this gross margin guide, I will note that we still need to sell and close a meaningful number of spec homes to achieve our closing sky,

Sgna expense in the second quarter total of 390 million or 9.1% of home sale revenues.

In the prior year are reported as CNA expensive, 361 million or 8.1% of home sale. Revenues included a 52 million pretext insurance benefit, according to the period.

Jim Ossowski: We remain diligent in controlling our overhead costs and we expect sgna expense for the full year of 2025 to be in the range of 9.5% to 9.7%, home sale revenues.

Jim Ossowski: For the second quarter, our financial services operations reported a pre-tax income of $43 million, down from $63 million. This decrease in pre-tax income for the corridor reflects the impact of lower closing bonds and slightly higher. capture rate in the second quarter was 85% compared with 86% last PulteGroup's reported pre-tax income for the second quarter was $807 million. For the period, we recorded a tax expense of $199 million for an effective tax rate of $199 million. We continue to expect our tax rates to be approximately 24.5%, excluding the impact of any discrete, period-specific taxes. On the bottom line, we reported second quarter net income of $608 million, or $3.03.

For the second quarter, our financial services operations, reported pre-tax, income of 43 million down from 63 million in the prior year.

Jim Ossowski: The decrease in pre-tax income for the quarter, reflects the impact of lower closing volumes and slightly higher expenses.

Jim Ossowski: Capture rate in the second quarter was 85% compared with 86% last year.

Holding groups reported pretext income for the second quarter was 807 million.

Jim Ossowski: For the period, we recorded the tax expense of 199 million for an effective tax rate of 24.6%.

Jim Ossowski: We continue to expect our tax rate to be approximately. 24.5%, excluding the impact of any discrete period, specific tax events,

Jim Ossowski: On the bottom line, we reported second quarter, net income of 608 million or 3.3 cents per share.

Jim Ossowski: In a comparable prior year period, we reported net income of $809 million for $3.83 million. Prior results are inclusive of $0.25 per share related to an insurance benefit and favorable resolution of certain state tax Our second quarter earnings per share was calculated based on 201 million diluted shares, which is a decrease of 5% from the prior year as the company continues to execute its share repurchase program. In the second quarter, we repurchased 3 million shares for $300 million for an average price of $100.54 per share. Through the first two quarters of 2025, the company has returned $600 million to shareholders through its share repurchase act.

Jim Ossowski: In the comparable prior year period, we reported net income of 809 million for $3.83 per share.

Jim Ossowski: Prior to your results, are inclusive of 25 cents per share related to an insurance benefit and favorable resolution of certain pay state and Tax Matters.

Jim Ossowski: Our second quarter earnings per share was calculated based on 2011 million diluted shares, which is a decrease of 5% from the prior year, as the company continues to execute, its share repurchase program.

Jim Ossowski: Million shares to $300 million for an average price of $100.54 per share.

Through the first 2 quarters of 2025 company, has returned 600 million to shareholders through its share, repurchase activities.

Jim Ossowski: Along with allocating excess capital back to shareholders, we invested $1.3 billion in land acquisition and development. Through the first six months of 2025, we invested $2.5 billion in land acquisition and development, which keeps us on track with four year guidance of investing $5 billion in land. Inclusive of these most recent investments, we have further advanced our land pipeline in two critical areas. First, we have increased the total number of lots under control to approximately 250,000. Second, continue to make progress in becoming more land-like, as option labs now comprise 60% of our total land pipeline. It is gratifying to see the progress we are making towards achieving our target of having our land pipeline be comprised of 70% options.

Jim Ossowski: Along with the allocating excess Capital, back to shareholders, we invested 1.3 billion dollars in land, acquisition and development.

Quarter.

Do the first 6 months of 2025 we invested 2.5 billion dollars in land acquisition in the development which keeps us on track with full year guidance of investing 5 billion dollars in Land Development.

Jim Ossowski: Inclusive of these most recent Investments. We have further Advanced our land pipeline in 2 critical areas. First, we have increased the total number of lots under control through approximately 250,000 and second continue to make progress in becoming more land. Light is option Labs. Now for Price, 60% for a total land pipeline.

Jim Ossowski: 30%. Just the past 12 months, we have added almost 30,000 option lots to the pipeline. We're reducing our own lot count by approximately 4,000. Relative to peers, our land options are differentiated in that the vast majority of all these land options are with the underlying land seller or one-off transactions with a select number Assessing each and every land transaction, we work to strike a balance in evaluating the cost versus the risk mitigation opportunities that result from auctioning the land. As Ryan noted earlier, in an operating environment that has become more challenging, we are adhering to our disciplined business practices while making any needed adjustments consistent with our focus on generating strong cash flow and higher returns.

Jim Ossowski: As gratifying to see the progress, we are making towards achieving. Our Target of having our land pipeline, be comprised of 70% options and 30% on black.

Just the past 12 months we have added almost 30,000 option, Lots the pipeline or reducing our own black count by approximately 4,000 bonds.

Jim Ossowski: Relative to peers or land options are differentiated and that the vast majority of whose land options are with the underlying land seller or 1-off transactions with a select number of land bankers.

Jim Ossowski: An assessing each and every land transaction in order to strike a balance in evaluating the cost versus the risk mitigation opportunities that result from optioning the land parcel.

Jim Ossowski: Ryan noted earlier and an operating environment that has become more challenging for adhering to our discipline business practices, while making any needed adjustments consistent with our focus at generating strong cash flow and high returns.

Jim Ossowski: Consistent with this focus, we continue to expect cash flow generation for 2025 to be approximately $1.4 billion. Looking at the balance sheet, PulteGroup continues to maintain a strong and highly supportive financial position. We ended the quarter with $1.3 billion of cash and debt-to-capital ratio of 11.4%. Adjusting for the cash balance, a net debt-to-capital ratio at quarter end was 2.8%.

Jim Ossowski: Consistent with its focus to continue to expect cash flow generation for 2025 the approximately 1.4 billion dollars.

Looking at the balance sheet, multi-group continues to maintain a strong and highly supportive financial position.

Jim Ossowski: at the end of the quarter with 1.3 billion dollars of cash and debt to Capital ratio of 11.4%,

Jim Ossowski: adjusting for the cash balance, a net debt to Capital ratio in quarter end with 2.8%

Ryan Marshall: Now, let me turn the call back to Ryan. Thanks, Jim. As I discussed at the outset of this call, beyond the overall volatile demand dynamics, we are seeing meaningful differences in relative buyer strength across our portfolio. More specifically, in the second quarter, we experienced very positive demand conditions in key markets in the Midwest and Southeast, including Cleveland, Chicago, Indianapolis, Charlotte, and the coastal Carolinas. I would also call out the positive net new order numbers realized in Florida, as our operations grew orders 2% over the prior year. Within the state, gains in our Central, West, and Southwest markets were partially offset by softer numbers in our Northeast and Southeast Florida operations.

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

Ryan Marshall: We fully appreciate there is inventory on the ground and builders are competing hard, but we are selling from exceptional communities following years of hard work to assemble an outstanding land pipeline. As shown in this morning's press release, we are experiencing less favorable demand out west and in our Texas market. Within these geographies, we are seeing some of our biggest challenges in Dallas, Austin, and our Northern and Southern California markets, most notably among move-up buyers. While these are very different markets serving different buyers and price points, they do share some commonalities. These are markets that have realized significant price appreciation in recent years and have a meaningful tech employment component within their local economies.

Ryan Marshall: Thanks Jim. As I discussed at the outset of this call beyond the overall volatile demand Dynamics. We are seeing meaningful differences in relative buyer strength. Across our portfolio more specifically in the second quarter. We experience very positive demand conditions, and key markets in the Midwest and Southeast, including Cleveland Chicago, Indianapolis Charlotte, and the Coastal Carolina. I would also call out the positive, net New Order numbers realized in Florida as our operations grew orders 2% over the prior year within the state gains in our Central west and southwest markets or partially offset by softer numbers in our Northeast and Southeast Florida operations. We fully appreciate there is inventory on the ground and Builders are competing hard but we are selling from exceptional communities. Following years of hard work to assemble an outstanding land pipeline as shown in this morning's press release.

We are experiencing less favorable demand out west and in our Texas markets Within These geographies, we are seeing some of our biggest challenges in Dallas, Austin and our northern and southern California. Markets, most notably among move up buyers while these are very different markets serving different buyers and price points. They do share some commonalities.

Ryan Marshall: These are markets that have realized significant price appreciation in recent years and have a meaningful text.

Ryan Marshall: Employment component within their local economies.

Ryan Marshall: Given the tremendous variation in market conditions, it's so important to have experienced operators who know what actions In some markets, this means raising prices, starting homes, and pushing aggressively to get new communities open. In other markets, it means slowing starts, focusing on selling finished inventory and taking the opportunity to retrade or even exit land deals.

Ryan Marshall: Given the tremendous variation in market conditions. It's so important to have experienced operators, who know what actions are needed, and some markets, this means raising prices starting homes and pushing aggressively to get new communities open.

Ryan Marshall: With an average tenure approaching 20 years among our division presidents, we have experienced leaders running our operations.

Ryan Marshall: And other markets. It means slowing starts focusing on selling finished inventory and taking the opportunity to retrade or even exit land deals.

Ryan Marshall: And finally, before opening the call to questions, I want to note a press release issued earlier this month announcing plans for Deb Still to retire at the end of this year. Deb is currently the Vice Chair of Pulte Financial Services, but if you have had any involvement with Pulte over the years, you know Deb is a force in the mortgage industry. We and the entire lending industry have benefited from Deb's four decades of insightful leadership and tireless work to make the industry better and more accessible to all homebuyers.

With an average tenure approaching 20 years among our division presidents, we have experienced leaders running our operations. And finally, before opening the call the questions, I want to note a press release issued earlier this month. Announcing plans for depth, still to retire at the end of the year.

Speaker Change: Financial Services.

But if you have had any involvement with policy over the years, you know, Deb is a force in the mortgage industry.

Ryan Marshall: On behalf of our board, the company, and the shareholders of Pulte, I want to thank Deb for the success she has delivered and the foundation she established and upon which we will continue to build going forward.

Speaker Change: We and the entire lending industry have benefited from debts debts for decades of insightful leadership and tireless work to make the industry better and more accessible to all home buyers.

James Zeumer: Now let me turn the call over to James Zeumer. Great. Thanks, Ryan.

James Zeumer: 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, one follow-up, Jeannie, if you would again explain the process, we will open the call for questions.

Speaker Change: On behalf of our board, the company and the shareholders of multi I want to thank Deb for the success. She has delivered and the foundation she established and upon which we will continue to build going forward. Now let me turn the call over to Jim. Zoomer. Great. Thanks. Ryan for now. Prepared to open the call for questions, so we can get to may as many questions as possible.

Speaker Change: Um, during the remaining time of this call, we ask that you limit yourself to 1. Question 1, follow-up G. If you would again explain the process, we will open the call for questions.

Jeannie: At this time, I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad.

Speaker Change: At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad,

John Lovallo: And your first question comes from the line of John Lovallo with UBS. Please go ahead. Morning, guys. Thanks for taking my questions. The first one I had is that you guys talked about, you know, some encouraging signs Yeah, John, we did see, you know, real positive response from the consumer the last couple of weeks of June when rates came down, as we highlighted in the prepared remarks, it drove extra or incremental traffic into the communities. And we saw good conversion out of that incremental traffic. So we're, we're certainly encouraged by the consumer response.

Speaker Change: And your first question comes from the line of John Livalo with UBS. Please go ahead.

John Livalo: Good morning guys, thanks for taking my questions. Um, the first 1 I had is that you guys talked about um, you know, some encouraging signs.

John Livalo: Um, as a as a way to kind of pull back in late, June, curious, you know, rates had been, you know, a little bit bouncy but fairly stable I guess through July. So I'm curious if the you know, the Improvement that you saw in June kind of carried through into July. And we've also seen some reason um Improvement in consumer confidence is that helping um you know kind of support this demand in your view.

Ryan Marshall: July, you know, I would tell you, July's been, you know, a little up and down. There's been some really good days. And there's been, you know, some down days as well. The first week of July was, was, I feel like the entire country went on vacation with the way the fourth of July fell. But, you know, we're encouraged by what we've been seeing the last couple of weeks. Okay, that's great.

Speaker Change: Yeah, John we did see um, you know, real positive response from the consumer, the last couple of weeks of June 1 came down. Um, as we highlighted in the prepared remarks, uh it drove extra incremental traffic into the communities and and we saw good conversion out of that incremental traffic. So we're we're certainly encouraged by the consumer response. Um, July, you know, I would tell you July has been, um, you know, a little up and down. There's been, you know, some really good days and, you know, there have been, uh, you know, some down days as well. Um, the first week of July was was, um, I I feel like the entire country went on vacation with the wave, the 4th of July fell. Um, but you know, we're encouraged by what we've been seeing the last couple of weeks.

Jim Ossowski: And then maybe just on stick and brick costs, you know, maybe how they trended in the quarter. And then on the land side, you know, we've heard some signs of perhaps a little bit relief on the development side of the cost equation. Maybe if you can comment on both of those, that'd be great.

Jim Ossowski: Sure. Thanks, John. The sticks and bricks, they were at $79 per square foot. So consistent with last year and sequentially the same as Q1. So they're holding firm for us. On the development side, yeah, we're hearing some of the same things, a little bit of opportunity on the development side. You've got trade out there, a lot of heavy machinery. People want to put it to work. So it's encouraging with what we're seeing. Don't really see that coming through in kind of our quarterly results. But as we look forward, you know, we're hoping that we see some benefit from that going forward.

John Livalo: Okay. Now that that that's great and then maybe just on, um, stick and brick cost, you know, maybe how they trended in the quarter and then on the land side, um, you know, we've heard some signs of of perhaps a little bit relief on the development side. Uh of the cost equation. Maybe if you can comment on both of those would be great.

Speaker Change: Sure, thanks John, uh, the Sticks and Bricks, uh, they were at 79 dollars per square foot so consistent with last year and and sequentially the same as q1. Um, so they're holding firm for us and the development side. Yeah, we're hearing some of the same things, a little bit of opportunity on development side. Uh, you've got trades out there a lot of heavy machinery. Um, people want to put it to work, so um, it's encouraging with what we're seeing. Don't really see that coming through in kind of our quarterly results but as we look forward um you know, we're hoping that we see some benefits from that going forward.

John Lovallo: Appreciate it, guys. Thank you.

John Livalo: Appreciate it guys. Thank you.

Ivy Zellman: Your next question comes from the line of Ivy Zellman with Zellman & Associates. Please go ahead. Good morning, great quarter, guys. Congrats, really strong performance. Maybe we can start with the comments you made, Jim, as it relates to the land options that you're predominantly utilizing land developers as you're the one selling you those options, as opposed to land bankers. Can you elaborate as to why you think that's better? Or maybe there's, it's a lower cost, I presume? Can you just go through your rationale there?

Ivy zelman with zelman and Associates. Please go ahead.

Speaker Change: Good morning, great quarter guys, congrats really strong performance. Maybe we can start with, um,

Speaker Change: The comments you made uh Jim as it relates to the land options that you're predominantly utilizing land developers as your your the 1 selling you those options as opposed to land. Bankers can you elaborate as to why you think that's better? Or maybe there's, it's a lower cost I presume is, can you just go through your rationale there?

Ryan Marshall: Yeah, Ivy, it's Ryan. Good morning. Good to hear from you. And we've, we've made optionality specific with land bankers, a piece of our business, our primary focus is with underlying land sellers. And with those individual, you know, those individual families or owners that own that land, we think in those, the reason that we like that Ivy is we end up with a more diversified risk profile. And we also get better execution of price with those underlying land sellers and what it costs us to get the options. We found that we ran into natural resistance somewhere between 50, you know, around 50% is kind of we was about as high as we could get.

Ryan Marshall: Yeah, Ivy, it's Ryan, good morning. Good to hear from you. And um, we've we've made optionality specific with land Bankers. Um,

Speaker Change: Piece of our business.

our, our primary focus is with underlying land sellers um and and with those individual uh,

Ryan Marshall: And so to get more optionality, we went to, you know, the idea of using land bankers in a in a moderate way. And we think that that's the tool that allows us to go from 50% option to 70% option. You know, the other, and the reason that we've kind of elected this type of mix is we think that it's the best tool to give us risk mitigation, which is the primary thing that we're looking for when we think about optionality. Certainly, there is a trade off, we give up a little bit of return or a little bit of margin to get a better return.

Speaker Change: Way. Um, and we think

Ryan Marshall: And we know that return is what creates value for a shareholder. We think that is a second order or a follow on benefit, the primary benefit we're after with optionality is risk mitigation.

that that's the tool that allows us to go from 50% option to 70% option. Um, you know, the other, uh, and the reason that we've kind of elected, this type of M mix. So we think that it's the best tool to give us risk mitigation, which is the primary thing that we're looking for. Uh, when we think about optionality, um, certainly there is a trade-off, we give up a little bit of return, or a little bit of margin to get a better return. Um, and we know that return is what creates value uh, for our shareholder. Um, that we think that is the second order or a follow-on benefit. The primary benefit, we're after with optionality is risk, going to be risk, mitigation.

Ryan Marshall: No, that's really helpful. And thinking about you spent $1.3 billion, you invested in land acquisition development. Are you able to take some of the options that you have right now and retrade them and get better pricing because the market's been soft? We've been hearing from our land contacts that there is a lot of trading going on, retrading, I should say. Yeah, we're definitely taking advantage of that. Where appropriate, Ivy, we value the relationships that we have with land sellers. So I think we're being responsive to the current market conditions, and I think land sellers recognize that as well.

No, that's really helpful. And thinking about, you spent 1.3 billion invested in land, acquisition development, are you able to um, take some of the options that you have right now and retrade them and get better pricing because the Market's been soft. We've been hearing from our land context that there is a lot of trading going on. Retraining I should say.

Ryan Marshall: In some cases, we're getting better price and we're closing. In other cases, price might be staying similar to what it was in the underlying contract, but we're getting more time. And so I think our really experienced operators in the field are picking the lever that needs to be pulled in order to yield the best outcome. That's great.

Speaker Change: Yeah, we we are definitely taking advantage of that. Um, where appropriate Ivy, we we value the relationships that we have with land sellers. So um, you know I I think we're, we're being responsive to the current market conditions and I think land sellers recognize that as well. Um, and some cases we're getting better price and we're closing, um, in other cases, you know,

Price might be staying similar to what it was in the underlying contract, but we're getting more time. Um, and so I think our our really experienced operators in the field are picking the lever that needs to be pulled in order to yield the best outcome for the company.

Ivy Zellman: One quick last one. We see news about Canadian tariffs potentially doubling. Can you comment on, I don't even know if you guys are using US source lumber or what percent is Canadian, but maybe you can give us some perspective on what that doubling impact might be to your direct costs.

Ryan Marshall: Great question, Ivy. You know, today, about 20 to 25% of our lumber comes from Canada. The rest of it, we're domestically sourced. Got it. And therefore, the ones that you're acquiring from the Canadian, how much will that impact just double, assume that 25% will go up by double, or you think you'll get better pricing despite that? Yeah, you know, hard to say where that ultimately kind of plays out, Ivy. If tariffs double on 25% of our lumber load, we would see, you know, a higher cost load. So, you know, it didn't have an impact. I don't know that it would necessarily be catastrophic.

Speaker Change: Well, that's great. 1 quick, last 1. Um, we see news in about Canadian tariffs potentially doubling. Can you comment on? I don't even know if you guys are using, uh, us Source, uh, Lumber or what percent is Canadian, but maybe you can give us some perspective on what that doubling impact might be to your direct cost.

Speaker Change: Uh, great question Ivy. You know today about 20 to 25% of our lumber comes from Canada, the rest of it, we're a domestically sourcing.

Got it. And therefore, the ones that you're acquiring from the Canadian. How much will that impact? Just double assume the 25% will go up or by double or you think you'll get better pricing, despite that,

Ryan Marshall: You know, I know there was an article that was out last night or this morning early that was talking about adding significant cost to housing. You know, I think that article likely alluded to the fact that the entire lumber package would be Canadian lumber, which in our case is not true.

Yeah, you know, hard hard to say where that ultimately kind of plays out Ivy, if if tariffs double on 25% of our lumber load, we would see, you know, a higher cost load. So, you know it it'll have an impact, I don't know that, um, it would necessarily be catastrophic, uh, you know, there I know there was an article and uh, that was out last night or this morning early. That was talking about um adding significant cost to housing. You know, I think that article likely alluded to the fact that the entire Lumber package would be Canadian Lumber which are

Cases is not true.

Ivy Zellman: Great.

Ivy Zellman: Well, good luck, guys. Thanks again. Appreciate taking my questions.

Speaker Change: Great. Well, good luck guys. Thanks again. Appreciate taking my question.

Michael Rehaut: Your next question comes from the line of Michael Rehaut with J.P. Morgan. Please go ahead. Thanks. Good morning, everyone.

Speaker Change: Your next question comes from.

Speaker Change: HUD with JP Morgan, please go ahead.

Speaker Change: Uh, thanks. Good morning, everyone.

Jim Ossowski: Wanted to first just kind of talk about the pluses and minuses on gross margins in the second quarter, came in at the high end of guidance and just kind of curious about how you saw incentives trend during the quarter, maybe compare it to the first quarter. And if there was any outliers and the kind of drivers to, you know, I know it's only, you know, 25 bits from the midpoint of guidance, the high end, but if there's any kind of. Additional tailwinds or headwinds even that you saw in the quarter relative to what you were expecting three months ago.

Speaker Change: um,

wanted to, uh, first just kind of talk about the pluses and minuses on Gross margins. In the second quarter came in at the high end of guidance, um, and just kind of curious about, you know, how you saw incentives Trend during the quarter. Maybe compare it to, uh, the first quarter and if there was any outliers in the kind of drivers to, you know, I know it's only, you know, 25 B from the midpoint of guidance to the high end. But if there's any kind of

Speaker Change: additional Tailwinds or headwinds even that you saw on the quarter relative to what you were expecting uh 3 months ago.

Jim Ossowski: Yeah, great question, Mike. You know, as we looked at the quarter, you know, we really just had a different mix, product and geography in the quarter, you know, to give you, you know, a frame of reference or 1200 homes that we both sold and closed within the quarter. So, you know, we make assumptions about where we're going to sell and when we're going to sell and what the costs are associated with that. And we figured a little bit better than we thought. So, you know, as we looked at it, you know, incentives were 8.7 on what we closed for the quarter.

Speaker Change: Yeah, great question Mike, you know as we uh looked at the quarter, you know, we really just had a different mix um product in the geography in the quarter, you know, to give you, you know, a frame of reference or 1,200 homes that we both sold and closed within the quarter. So you know we make assumptions about where we're going to sell and when we're going to sell them and what the costs are associated with that and we figured a little bit better than we thought. So, you know, as we looked at it, um, you know, incentives were 8.2

Jim Ossowski: And, you know, again, the mix gave us a little lift and got us to the top end of our guide. Great, great.

Speaker Change: 7 on what we closed for the quarter. And, you know, again, the mix gave us a little lift and got us to the top end of our guide.

Jim Ossowski: And then maybe just kind of looking forward, reiterating the three Q and four Q gross margin guidance. I know you talked, I believe I heard that you said maybe incentive at least, I'm sorry, tariff headwinds as they are today, maybe outside of, you know, the recent headlines around Canadian lumber. It sounded like, you know, you talked about maybe. Hara Pedwin's being a little less than expected, offsetting maybe a little bit higher incentives than maybe you were at the beginning of the year. Is that the right way to think about it in terms of? You know, being able to reiterate that that back half gross margin guide, you know, in other words, maybe if, you know, and specifically, I guess I'm just wondering around the incentive loads, you know, that has maybe been a little bit higher.

Speaker Change: Great great. And then maybe just kind of looking forward. Uh reiterating the 3Q and 4q gross margin guidance.

Speaker Change: Um, I know you talked. I believe I heard that you said maybe incentives.

Speaker Change: as they are today maybe outside of you know the recent uh headlines around Canadian Lumber, it sounded like you know you talked about maybe

Jim Ossowski: It almost sounded like you said. you know, incentives are a little higher, but tariffs are a little lower, and hence we're able to reiterate the back half guide. I wasn't sure if that was the right way to think about it, or if there are other pluses and minuses to consider. Yeah, Mike, I think it's really as simple as exactly what you just laid out there. Our procurement teams are the best in the business. They've done a wonderful job navigating, you know, another, you know, difficult procurement environment. You know, I think we've also gotten a little bit of luck on our side with there being more inventory in the supply chain that has allowed prices to stay more stable, to stay stable longer.

Speaker Change: Power of headwinds being a little less than expected offsetting. Maybe a little bit higher incentives, um, than maybe you were at the beginning of the year, is that the right way to think about it? Um, in terms of, you know, being able to reiterate that that back half gross, margin guide. Um, you know, in other words, maybe if you know and and specifically I guess I'm just wandering around the incentive loads. Um, you know, if that has maybe been a little bit higher, it almost sounded like you said, you know, incentives are a little higher but tariffs are a little lower and hence we're able to reiterate the back half guide. Uh wasn't sure if that was the right way to think about it. Or if there are other pluses and minuses to consider

Jim Ossowski: You know, I don't think anybody believes that's going to last forever, and we're certainly anticipating, you know, a tariff load hitting our closings in next year, but, you know, we think for this year it's going to be minimal, and mostly in the back half of Q4. So a little bit of the upside, a little bit of upside to our expectations from a quarter ago on that. You can see the sequential lift in incentives, you know, I think you're hearing from some of our competitors as well that are seeing, you know, similar elevated incentive loads as we work to solve the affordability equation for customers.

Yeah, Mike. I think it's, it's, it's really as simple as exactly what you just laid out there. Uh, our procurement teams are the best in the business. They've done a wonderful job navigating, you know, another, um, you know, difficult procurement environment. Um, you know, I think we've also gotten a little bit of luck, uh, on our side with, with her being more inventory, in the supply chain, um, that is allowed prices to stay more. Stay with to stay stable longer. Um, you know, I I don't think anybody believed

Michael Rehaut: And, you know, in total, I think that balances out and we're able to maintain, you know, our margin guide, which continued to be the best in the business. Great. Really appreciate the call, Ryan. Thanks for that. It's all from me. Good luck for the rest, for the upcoming quarter. Thank you, Mike.

Speaker Change: Believes that's going to last forever. And we're certainly anticipating, uh, you know, a tariff load hitting our our closings in in next year. But, you know, we think for this year, it's going to, uh, be minimal and mostly in the back half of Q4. Um, so a little bit of The Upside, uh, a little bit of upside to our expectations from a quarter ago on that. Um, you can see the sequential lift in incentives. Um, you know, I think you're hearing from some of our competitors as well that are seeing, um, you know, similar elevated, uh, incentive loads, as we work to, uh, solve the affordability equation for customers and, you know, in in total, we think that balance is out and we're able to maintain, um, you know, our margin guide, which continued to be the best in the business.

Speaker Change: Great, really appreciate the color Ryan. Thanks for for that. Uh, it's all from me. Good luck for the rest. Uh, for the upcoming quarter.

Mike: Thank you, Mike.

Stephen Kim: Your next question comes from the line of Stephen Kim with Evercore ISI. Please go ahead. Yeah, thanks very much, guys. Ryan, I think you mentioned in your in your press release that you're positioning to grow market share as demand strengthens in the future. And I wanted to see if you could elaborate, you know, what you mean, and maybe also what you don't mean, with respect to that statement about growth. For instance, I guess my question would be like, are you planning for spec homes to be up on a year over year basis as you head into next spring?

Speaker Change: Your next question.

Please go ahead.

Speaker Change: Yeah, thanks very much guys. Um, Ryan. I think you mentioned in your, in your, um, press release that your positioning to grow market share as demand strengthens in the future and I wanted to see if you could elaborate, you know what you mean and maybe also what you don't mean. Uh with respect to that statement. Uh, about growth uh,

Ryan Marshall: Or are you willing to carry more owned land in the near term in order to accelerate community count next year? I just wanted to try to frame out what you mean by, you know, looking to grow market share as demand strengthens. Yeah, Stephen, it's really around the strength of our land pipeline. We've got 250,000 lots that we control now, which is, you know, we're up about 25,000 total lots that we control compared to, you know, this time last year, probably even a little bit more than that. So I think our division teams have just done an outstanding job putting new communities in the pipeline that are going to be great performers.

Speaker Change: For instance, um, I guess my question would be like, are you planning, uh, for spec homes to be up on a year-over-year basis as you head into next spring, um, or are you willing to carry more owned land in the near term, in order to accelerate Community count next year? Um, I just wanted to try to frame out what you mean by, you know, looking to grow market share as demand strengthens in the future, thanks.

Ryan Marshall: The most recent, you know, this most recent quarter that we just reported, our new Del Webb communities are a great example of that. So, and, and no, I don't think it means that we'll have more owned land. In fact, we've gone the other direction. We own less land, we control more via option, and our option percentage is as high as it's ever been. So I feel like we're, we're doing all the things that we want to do. We're, you know, we continue to think that we have the opportunity to grow this company long term 5 to 10%.

Speaker Change: Stephen, it's really around the strength of our land pipeline. We've got 250,000, lots that we can control now, which is, you know, we're up about 25,000 total, lots that we control compared to the, um, you know, this time last year, probably even a little bit more than that. So I think our our, uh, division teams have just done an outstanding job, putting new communities in the pipeline that are going to be great performers. Uh, the most recent um, you know, this most recent quarter that we just reported are Del Webb. New Del Webb. Communities are a great example of that. So um and and no I don't think uh, it means that we'll have more

Ryan Marshall: So I continue to reiterate that. And we're, we're seeing in this type of difficult market quality sells. And we have, we have high quality land positions, we have high quality homes, we're delivering great customer experience. And all of those things we think yield in the ability to take market share. And so, you know, my comments about being positioned and prepared to do that, we're really alluding to those things.

Speaker Change: Owned land. In fact, we've gone the other direction, we owned less Land, We control more via option and our option percentage is as high as it's ever been. So I feel like, we're, we're doing all the things that we want to do. We're, you know, we continue to think that we have the opportunity to grow this company, Long Term, 5 to 10%. Um, so I'd continue to reiterate that. Um, and we're we're seeing in,

This type of difficult Market quality cells and we have, we have high quality land positions. We have high quality homes, we're delivering great customer experience. Um, and all of those things we think yield in the ability to take market share. And uh, so you know, my my comments about being positioned and prepared to do that. We're, we're really alluding to those things.

Stephen Kim: That's helpful.

Stephen Kim: And then one other question. You talked again today a lot about your land positions and how proud you are of them. And this is brought to mind something that we've fielded a lot of questions from regarding your land positions from investors. A lot of people seem to have this view that you have a lot of land that's maybe legacy land from, you know, sort of pre-COVID type vintages and that that's supporting your margin, your gross margin specifically. I was wondering if you, that is not, by the way, what we see running our, you know, sort of quick analysis.

Ryan Marshall: I was curious if you could elaborate a little bit more on what you see in your land positions. You know, how much of your active communities would you say are actually from, you know, kind of pre-COVID vintage land? In terms of pre-COVID vintage landscape, when we really have none left, I mean, there's probably a few stragglers here and there, but we're turning our land pipeline every three and a half years. So you know, we're on fresh land, I think, just like the rest of our competitors. Do we have, you know, some bigger, longer legacy community?

That's helpful. And then uh, 1 other question, you talked again today? A lot about your land positions and how proud you are of them. And this is being brought to mind something that we've take fielded. A lot of questions from uh, regard uh, regarding your land positions. Uh from investors. Um, a lot of people seem to have this view that you have a lot of land, that's maybe Legacy land from uh, you know, sort of preco type vintages and that that's supporting your margin. Your gross margin specifically. I was wondering if you that does that is not by the way, what we see um, running our, you know, sort of quick analysis was curious, if you could elaborate a little bit more on what uh you see in your land positions, you know how much of your active communities would you say are actually from, you know, kind of preco vintage land

Ryan Marshall: Sure. But it's, you know, it's a very small number of our actual closings and a very small number of our total 250,000 lots that we control.

Ryan Marshall: So, you know, this myth that, you know, some continue, or this narrative that some continue to push, I'm going to see if I can get that Discovery TV channel, MythBusters, to come and, you know, do a show on the idea that our... Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: And in terms of pre-code vintage landscape when we really have none left. Um, I mean there there's probably a few stragglers here and there, but we're turning our land pipeline every 3 and a half years. So, um, you know, we're we're on Fresh land, I think just like, uh, the rest of our competitors do we have, you know, some bigger Longer Legacy Community? Sure. But, um, it's, you know, it's, it's a, a very small number, uh, of our actual closings in a very small number of our total 250,000 loss that we control. So, um, you know, this myth that

Um, you know, some continue this narrative that some continued to push. I'm, I'm going to see if I can get that, uh, Discovery uh, TV channel, a MythBusters to come. And, you know, do a show on on the idea that our margin performance comes from Old Land. It's just simply not true.

Yeah, that's that's what I was. Uh hoping you'd say. All right. Great. Appreciate it guys. Thanks a lot.

Matthew Bouley: Your next question comes from the line of Matthew Bouley with Barclays. Please go ahead. Morning, everyone. Thank you for taking the questions. I wanted to ask a question around product mix and how that's going to impact your margins. I know you mentioned some of the improvement in the active adult business and the new community openings, and it sounded like you're speaking to the benefit of that mix as that delivers in early 2026, if I heard you correctly. I think at the same time, you're seeing some of that pressure on the move-up business, as you spoke to.

Your next question comes from the line of Matthew Boule with Barkley's, please go ahead.

Jim Ossowski: So, I guess my question is, I guess, number one, how does move-up margins compare versus active adult margins? And I guess any additional color on how that mix of your product types may affect the gross margins here over these next several quarters. Thank you.

Jim Ossowski: Yeah, Matt, good morning. Thanks for the question. We had really good performance with our new Dell Web communities. And as we've highlighted in the prepared remarks, those will be next year closings. We haven't given any kind of a guide to next year's margin. We'll do that as we get toward the end of the year. What we have talked about in the past is when you look at our three consumer groups, the entry-level first-time buyer group, that's our lowest margin performer, our lowest margin buyer group. The move-up communities generate about 200 basis points higher than that.

Matthew Boule: Uh, good morning everyone. Thank you for taking the questions. Um, wanted to ask a question around uh, product mix and and how that's going to impact your margins. I, I know you mentioned, uh, some of the Improvement, uh, and the active adult business and the new community openings and and it sounded like, you're speaking to the benefit of that mix, um, as that delivers, an early 2026, if I heard you correctly, I think at the same time, you're seeing some of that pressure on the move up business as you spoke to. So, I guess my question is, I guess number 1, how does move up margins compared versus active adult margins? And I guess any additional color on how that mix of your product types. May affect the gross margins here. Over these next several quarters. Thank you.

Jim Ossowski: And then we get an incremental 200 basis points out of the active adult communities. So, they are, and I mentioned it in my prepared remarks, they are among our higher-priced homes. They're also our highest margin homes. So, it's certainly favorable to our overall margin performance. And it's part of the reason that we've been sharing. Today, the overall mix of our Dell Web business is 20%. We'll see that going back to the more traditional 24% to 25% in 2026 as these new communities came online, which we're certainly going to see that coming. But I'd just reiterate, we haven't given a margin guide for 2026.

Matthew Boule: Yeah. Matt good morning. Thanks for the question. Uh, we had we had really good performance with our our, uh, new, uh, Del Webb communities. Um, and and as we've highlighted, in the prepared remarks, those will be next year, closings. Um, we haven't given any kind of a guide to next year's March, and, you know, we'll do that as we get toward the end of the year. Um, what we have talked about in the past is, um, our when you look at our 3 consumer groups, the entry level, first time, buyer group, that's our lowest margin, uh, performer or lowest margin. Uh uh uh, buyer group, the move up communities generate about 200 basis points, higher than that. And then we get an incremental, 200 basis points, uh, out of the, the active adult communities. So, um, they are, you know, and I mentioned it in my prepared remarks. They are among our higher priced homes, and they're also our highest margin homes. So, you know, it's certainly favorable to our over.

Matthew Bouley: We'll do that as we get later into the year. Understood. Yeah. And even still, that was very, very helpful, Culler.

Matthew Boule: Overall margin, uh, performance. And it's part of the reason that we've been highlighting and sharing today the overall mix of our Del Webb business is 20%. We're we'll see that going back to the more traditional 24 to 25% in 26, as these new communities came online, which, you know, we're certain going to see that coming. But, um, you know, I I'd uh, just reiterate. We haven't given a margin guide for 2020.

Matthew Boule: 6, we'll do that as we get later into the year.

Jim Ossowski: So then secondly, I wanted to ask back on construction costs. You know, we've certainly seen from a couple of your peers that, you know, they've been able to push back a little bit on construction costs. It sounded like you guys were seeing flat stick and brick and appreciating, obviously, regional differences and product type differences and all that. My question is, if there is room for you guys to drive construction costs lower at some point? And, you know, if so, when might we begin to see that?

Speaker Change: Understood. Yeah, and and even still that, that was very, very helpful caller. Um,

Jim Ossowski: Thank you. You know, as Ryan said earlier, our procurement teams are all over this stuff, you know, best in the business as it relates to it. Similar to my comments a little earlier on land development, you know, you'd hope to see some opportunity, our teams are certainly working to see what they can do. Again, the $79 a square foot that we have now, these are, you know, homes that we contracted six months ago and started. So, as we go forward, our teams are certainly pushing for opportunity and we'd like to see that opportunity come through in the future.

Ryan Marshall: And Matt, we have seen, you know, in certain categories, prices come down. You know, we've taken cost decreases. There's been other things where we've had offsetting increases. To Jim's point, you know, we're going to continue to push, you know, to get the best prices that we possibly can so that we can pass that value on to the consumer. Portability is tough out there for everybody and we want to do, you know, everything in our power to, you know, pass that savings on to the consumer.

You know, um our as Ryan said earlier, our procurement teams are, are all over this stuff, um, you know, best in the business as it relates to it. Uh, similar to my comments a little earlier on Land Development, you know, you'd hope to see some opportunity. Our teams are certainly working uh, to see what they can do. Again, the, the 79 dollars, a square foot that we have now. These are, you know, homes that we contracted 6 months ago and started. So as we go forward, um our teams are certain pushing for opportunity and you'd like to to see that opportunity come through in the future and and Matt we have seen, you know in certain categories prices come down. Um you know we we've taken cost decreases. There's been other things where we've had offsetting increases. Uh, the Jim's point, you know, we're going to continue to push, um, you know, to get the best prices that we possibly can. So that we can pass that value on to the consumer portability is tough out there for everybody, and we want to do, um, you know, everything in our power to, um, you know, pass that safe.

Speaker Change: Savings on to the consumer.

Matthew Bouley: All right.

Matthew Bouley: Thank you both. Good luck, guys.

All right. Thank you, both. Good luck, guys.

Speaker Change: Thanks man.

Anthony Pettinari: Your next question comes from the line of Anthony Pettinari with Citigroup. Please go ahead. Good morning. I'm just staying on the cost side. I'm wondering if you could talk a little bit about labor availability, and maybe where labor costs might shake out for the full year. And if that's changed, you know, maybe relative to expectations on on January 1. Yeah, labor's available. Anthony, we haven't seen any change there. We continue to be an employer of choice. We've got consistent, consistent, predictable work. We pay on time, we pay well and fairly. So I think we'll continue to be a place that will attract available labor.

Speaker Change: Your next question comes from the line of Anthony pettinari with cgroup. Please go ahead.

Anthony Pettinari: Uh, good morning. Um, just staying on the call side. I'm wondering if you could talk a little bit about Labor availability and and maybe where labor costs might shake out, uh, for the full year. And if that's, uh, changed, you know, maybe relative to expectations on on January 1st.

Anthony Pettinari: You know, in terms of our cost assumptions, really no change from what we rolled out at the beginning of the year. on the labor front. Got it. Thank you.

Anthony Pettinari: Yeah, Labor's available. Uh Anthony we haven't seen any change. Uh there we continued to be an employer of choice. We've got consistent, consistent predictable, work we pay on time, we pay well and fairly. So I think we'll continue to be a place that will attract available labor. Um you know in terms of uh our cost assumptions uh really no change from what we rolled out at the beginning of the year.

Anthony Pettinari: On, on the labor front.

Anthony Pettinari: And I'm just curious on ICG and offsite manufacturing. How is that business performing? And any kind of learnings about offsite as we've moved from kind of this, you know, white hot market in the pandemic to kind of more of a choppy volume environment today? How that fits in, in the portfolio? Yeah, I think the things that you know, we've learned are consistent with what we've shared in kind of previous cycles. So I wouldn't suggest that there's a lot that's different today. We're getting a lot of benefit out of cycle time improvements, with the amount of work that can be done ahead of time in a factory.

Speaker Change: Got it, got it. Um, thank you. And I'm just curious on icg and off-site Manufacturing. How is that business performing? And are there any kind of learnings about, um, off-site as we've moved from kind of this, you know, White Hot Market in the pandemic, to kind of more of a choppy volume environment today, um, how that fits in, uh, in the portfolio.

Ryan Marshall: We're getting really good product quality. You know, we're certainly getting some efficiencies and economies of scale based on the way that we buy lumber when we're bringing it into the factory as opposed to, you know, buying a load of lumber for a specific house. So I think there's a lot of benefits that we continue to get from it.

Ryan Marshall: You know, it's a it's been a an important part of our overall innovation work. And, you know, we look forward to continuing to see that part of the business expand.

Speaker Change: Yeah, I think the, the things that, you know, um, we've learned are consistent with what we've shared and kind of previous, uh, Cycles. Uh, so I wouldn't suggest that there's a, a lot that's different. Today, we're getting a lot of benefit out of cycle, time, improvements with the amount of work that can be done ahead of time in a factory. Um, we're getting really good product quality. Um, you know, we're certainly getting some efficiencies and economies of scale based on the way that we buy lumber, when we're bringing it into the factory, as opposed to, um, you know, buying a load of lumber for a specific house. So, um, I think there's a lot of benefits that we continue to get from it. Um, you know, it's a, it's been a, a, an important part of our overall Innovation, uh, work. And, you know, we look forward to continuing to see that part of the business. Expand

Ryan Marshall: Okay, that's helpful.

Mike Dahl: I'll turn it over.

Okay, that's helpful. I'll turn it over.

Mike Dahl: The next question comes from the line of Mike Dahl with RBC Capital Markets. Please go ahead. Morning, thanks for taking my questions. Just to go back on labor quickly. Anecdotally, it sounds like maybe a little more noise in the market in terms of some ice related dynamics. It doesn't sound like you're necessarily seeing that on your job sites.

Speaker Change: Your next question comes from the line of Mike dull with RBC Capital markets. Please go ahead.

Ryan Marshall: But can you just give us your view on or take from the market in terms of any impacts there? Yeah, you know, really nothing, nothing that I can probably share with you that's different than I think what you're seeing play out, you know, in the news media, we have always and continue to require all the the labor that's on our job site to be able to work legally in the country. That's always been the case, we continue to make that a priority. You know, there, there certainly is, I think, disruptions within the broader labor force, not just in construction related to kind of ICE enforcement.

Mike Dull: Good morning. Thanks for taking my questions. Um just to go back on labor quickly uh anecdotally. It sounds like maybe a little more noise in the market and in terms of some ice related Dynamics it doesn't sound like you're necessarily seeing that on your job sites. But can you just give us a um, you know, your your view on um or take from from the market in terms of any impacts their

Ryan Marshall: And, you know, that's something that I think the, the country is going to have to grapple with and, you know, if that impacts the total available labor force, I don't think it'll be specifically just a construction challenge, depending on on what level of enforcement, deportation, ultimately, we have. Got it. Okay, thanks.

Mike Dull: Labor force. I don't think it'll be specifically just a construction, um, challenge depending on on what level of enforcement. Deportation ultimately happens.

Mike Dull: Got it, okay. Thanks.

Mike Dahl: And Shifting Gears. Your order ASP was down a decent amount, 5% sequentially, 4% year on year. Obviously, there's always a lot of mixed dynamics in there.

Um, and shifting gears.

Jim Ossowski: Can you help us understand kind of what's like for life versus what's mixed related in that, and maybe how to think about just the back half of the year from, obviously, your closing ASP is supported by a backlog to a certain degree, but just help us think through on the ground how your order ASP is shaking out. Sure, you know, as we look at order ASP in the quarter, you know, what we saw there was both mix in product and geography, you know, if you look at our West business, and Ryan alluded to it, was the softest, and particularly in some of the move-up segments, if you look at places like the California, our two regions out there, so you've got a mix influencing that with some of the move-up, taking a little bit of a step down in some of our higher price markets, and then as well, you've got the incentives that are underneath that as well, so primarily the mix, and then as well as the incentives played into the 549 reported.

Mike Dull: Um your order ASP was down in decent amount of 5% sequentially 4%. Year-on-year obviously there's always a lot of mixed Dynamics in there. Can you help us understand kind of what's like for like versus what's

Mike Dull: Um, mixed related in that. And and maybe how to think about back half of the Year from, obviously, your closing ASP supported by a backlog to a certain degree, but just help us think through, um, the ground, how your order ASP is shaking out.

Jim Ossowski: Order is. Okay. Thanks, Jim. Thanks.

Sure. Um, you know, as we look at, uh, order ASP and the quarter, um, you know, what we saw there was both mix and and product and geography, you know, if you look our our West business, uh, and Ryan alluded to, it was, uh, the softest and, and particularly in some of the move up, uh, segments. If you look at places like, uh, the California are 2 regions out there, so you've got a mix, uh, influencing that with some of the move up, uh, taking a little bit of a step down in some of our higher price markets, uh, and then as well, you've got the incentives, uh, that are underneath that as well. So, primarily the mix. And then, as well as the incentives, um, played into the 549 reported for the quarter as a quarter, asp

Speaker Change: Okay. All right. Thanks Jim. Thanks Ryan.

Kenneth Zener: Your next question comes from the line of Kenneth Zener with Seaport Global. Please go ahead. Morning, everybody. What do you expect your inventory units? I know you talked about the spec mix, but what do you expect your inventory units to be roughly at the end of the year? And then in Florida, how many of those buyers which are largely active adult are actually coming from Florida as opposed to from other states?

Speaker Change: Your next question comes from the line of Kenneth. Zener with Seaport Global, please go ahead.

Speaker Change: Morning everybody. Um, what do you expect? Your inventory units? I know you talked about the spec mix, but what do you expect? Your inventory units to be roughly at the end of the year. Um, and then in Florida,

Speaker Change: How many of those buyers which are largely active, adult are actually coming from?

Speaker Change: Florida as opposed to from other states.

Jim Ossowski: Yeah, Ken, finished inventory at the end of the year is not a number we guide to. So let me start with that. That said, you know, we have guided that overall spec inventory will be in the 40 to 45% range. Our finished inventory today is running a little higher than what we'd normally like to typically like it to be around one and a half, you know, one, one and a quarter to one and a half finished units per active community. So, you know, we're probably 400 units north of, of kind of where we we'd like to be optimally.

Jim Ossowski: But, you know, on the margin, I just, I just don't, I don't, I don't think it's moving the needle one way or the other. But I think our bias would be to continue to work that down.

Yeah, Ken, um, inventory finished inventory. At the end of the year, is not a number we guide to. Um, so let me start with that. That said, um, you know, we we have guided that overall spec inventory will be in the 40 to 45% range. Um, our our finished inventory today is, uh, running a little higher than what we'd normally like to see. We typically like it to be around 1 and a half. You know, 1, 1 1/4 to 1 and a half finished units per active community. So, you know, we're probably 400 units north of of, kind of where we we'd like to be optimally but, um, you know, on the margin, uh, I just I just don't, I don't, I don't think it's moving the needle 1 way or the other, um, but I, I think our bias would be

Ryan Marshall: And then in terms of kind of Florida, you know, as I mentioned, in some of my prepared remarks, we're really happy with the performance that we're getting there. And then where those buyers come from, you know, Florida is a big melting pot. And so we see a lot of buyers coming from all over the country, the you know, the Midwest, the Northwest, Canada, foreign, we get buyers from all over the country, all over the world to come into Florida. We also see a healthy mix of folks moving within Florida as well. We can certainly follow up with you on specific numbers.

Ryan Marshall: That would be great. with my fingertips, but... I, you know, I think what you'll find is that it's a it's a melting pot of buyers.

Speaker Change: To continue to work that down and then in terms of, of kind of Florida, um, you know, I, as I mentioned in some of my prepared remarks, we're really happy with the performance that we're getting there, um, and and then where those buyers come from, um, you know, Florida's a, a big, Melting Pot and so we see a lot of buyers coming from all over the country. Uh, the you know, the Midwest, the north, the West Canada foreign. Um, we get buyers from all over the country, all over the world that come into Florida. We also see a healthy mix of folks moving within Florida as well. Um, we can certainly follow up with you on specific numbers. Um, that would be great.

Fingertips. But um,

Speaker Change: I I, you know, I think what you'll

Ryan Marshall: I would also, Kenneth, if you don't mind, I would add that you made reference to it being heavy active adult. I mean, there's parts of it. So if you look at our, you know, our Southwest business, yeah, you may be more active adult, but you get into Orlando, you get up in the Jacksonville, you get into Tampa, it's pretty well diversified across first time move up and active adult. Again, you obviously get a draw because of the weather down there. But it is we've built a business for the divisions of the very diversified businesses down there.

Speaker Change: Find is that it's a, it's a Melting Pot of buyers. I would also kind of, if you don't mind, I would add that because you made reference to it being heavy, active adult, I mean there's parts of it. So if you look at our, you know, our

Speaker Change: Southwest business. Yeah, you may be more active adult, but you get into Orlando, you get up into Jacksonville, you get into Tampa, it's pretty well Diversified across first time, move up and active adult.

Ryan Marshall: So it is not just, you know, Dell Web, Dell Web Explorer. Thank you very much.

Speaker Change: Um again you obviously get a draw because of the weather down there, but it is we've built a business with the the divisions of the very Diversified businesses down there. So it is not just, um, you know, Del Webb Del Webb Explorer or anything.

Speaker Change: Thank you very much.

Paul Zavilsky: Your next question comes from the line of Paul Zavilsky with Wolf Research. Please go ahead. Thank you. Good morning. I guess to start off, are you seeing any difference in the elasticity of incentives between, you know, your different consumer segments? And then if you could provide some color on the incentive levels across the consumer segments relative to the 8.7% average in the quarter? Yeah, Paul. I think the commentary that you've heard from us is that there's actually inelasticity in, you know, pricing, and that more incentive doesn't necessarily translate into incremental volume. So we're trying to get incentives.

Speaker Change: Your next question comes from the line of Paul's vilki with wolf research. Please go ahead.

Paul's vilki: Thank, thank you. Good morning. Um, I guess to start off. Are you seeing any difference in the elasticity of of incentives between, you know, your different consumer segments? And then if you could provide some color on on the incentive levels, across the consumer segments, relative to the 8.7% average in the quarter.

Ryan Marshall: you know, to the level where we get the appropriate level of volume. But pouring more incentives on top of that doesn't necessarily translate in the incremental volume that would justify those incentives. So, you know, that's why we've tried to continue to maintain some discipline around around what we're doing on the incentive load. I'd continue to reiterate, we think the opportunity is to bring incentives lower over time.

Paul's vilki: Uh, yeah, Paul. Um, I I think the commentary that you've heard from us is that there's actually in elasticity and um, you know, pricing and that more incentive doesn't necessarily translate into incremental volume, so we're trying to get incentives

Paul's vilki: you know, to the level where we get the appropriate level of volume,

Ryan Marshall: We're clearly not there right now, but, you know, I would I long for the days of, you know, more normal incentive loads of kind of three to three and a half percent. You know, hopefully, as we get out into kind of future years, that that will will become possible again. And then in terms of kind of where the incentives are, you know, they're everywhere. They're in all buyer groups. They just come in different shapes and sizes. When we're in the, you know, the first time buyer, those incentives predominantly are in our forward commitments and interest rate incentives and things of that nature.

Paul's vilki: But pouring more incentives on top of that doesn't necessarily translate in the incremental volume that would justify those incentives. So you know, that's why we we've tried to continue to maintain some discipline around around what we're doing on the incentive load. Um, I'd continue to reiterate, we think the opportunity is to bring incentives lower over time. We're clearly not there right now. But, um, you know, I would, I long for the days of, you know, more normal incentive, loads of, kind of 3 to 3 and a half percent. Um, you know, hopefully as we get out into kind of future years, that that will will become possible again. Um, and then, in terms of kind of where the incentives are, um, you know, they're everywhere, they're in all buyer groups. They just come in different shapes and sizes when we're in the, uh, you know, the first time buyer, those incentives predominantly are in our forward, commitments, and the interest rate incentives.

Ryan Marshall: When you're getting into the, you know, the active adult, the move up, they tend to come in the form of either just outright price discounts or lot premium incentives or option incentives or, you know, targeted incentives that aren't necessarily forward commitments. So it's a you know, it's it's fairly consistent. It's just in different shapes and sizes based on buyer.

Paul's vilki: Uh and things of that nature when you're getting into the you know the active adult, the move up. Um they tend to come in the form of either just outright price discounts uh or lot premium incentives or option incentives or you know contributions toward financing and financing related incentives that aren't necessarily forward commitments so it's a

Paul Zavilsky: Okay. And did you see any impact on orders this quarter from the change in FHA eligibility for non-resident buyers? Any pull forward maybe before the May 25th deadline and then, you know, slowness afterwards? Yeah, we really didn't see an impact, a very small portion of our Okay, thank you.

You know, it's it's fairly consistent. It's just indifferent shapes and sizes, based on buyer group.

Paul's vilki: Okay, excuse me. And did you see any impact on on orders, uh, this quarter from the change and FHA eligibility for non-resident? Buyers any, any pull forward, maybe before the the May 25th deadline and then, you know, slowing us afterwards.

Yeah, we really didn't see an impact at the very small portion of our business.

Paul Zavilsky: Appreciate it.

Paul's vilki: Okay, thank you. Appreciate it.

Thanks.

Susan Maklari: Your next question comes from the line of Susan Maklari with Goldman Sachs. Please go ahead. Good morning, everyone. The first question is on the SG&A, which came in a little lower than we had modeled in terms of both dollars and the percent of the revenues. Could you just talk about maybe some of the puts and takes there and how we should be thinking about the next two quarters? You know, great question, Susan, you know, we stay very diligent all the time, as we look at our SG&A, you know, we talk with our teams constantly about the discretionary spend that they have, we look at our people costs.

Speaker Change: Your next question comes from the line of Susan maclari with Goldman Sachs. Please go ahead.

Speaker Change: Hey, good morning, everyone.

Speaker Change: The first question is on the sgna which came in a little lower than we had modeled in terms of both dollars and as a percent of the revenues, could you just talk about maybe some of the puts and takes their, and how it should be thinking about the the next 2 quarters.

Speaker Change: Great question. Susan, you know, we stay very diligent all the time.

Jim Ossowski: So I think we're running a very effective and efficient business that we have, you know, we reiterated our guide of 9.5 to 9.7%. And we still think that's a good guide. But you know, again, it's something we talked about all the time. And I think our experienced operators are doing a nice job in this space.

Susan Maklari: For more information visit www.FEMA.gov Okay, that's helpful.

Speaker Change: Constantly about the discretionary spend that they have. We look at our people cost, so, um, I think we're running a very effective uh, and efficient business that we have, you know, we reiterated our guide of 9.5 to 9.7%. Um, and we still think that's a good guy but, you know, again, it's something we talk about all the time. And uh, I think our experienced operators are doing a nice job in this space.

Jim Ossowski: And then I guess maybe just thinking about capital allocation, you know, with the operating environment being what it is, the guide for the land spend that you reiterated, any thoughts on just buyback activity in the next couple quarters and how you're thinking about that given the valuation relative to the outlook for the business? Yeah, so, you know, on share buyback, our, the way we operate there is we report what we do in the quarter. You know, I would, I would reiterate that we've been a consistent buyer of our equity. And we're using it as an opportunity to return excess capital back to the shareholder.

Thinking about Capital allocation, you know, with the operating environment, being what it is the, um, the guide for the land spend that you reiterated. Any thoughts on, just buy back activity in the next couple quarters and how you're thinking about that? Given the valuation relative to the outlook for the business?

Speaker Change: Yeah. So, you know, on, on share buyback, our our um, the way we operate there, is we report, what we do in the quarter? Um, you know, I would, I would reiterate that we've been a consistent buyer of our Equity, um, and we're using it as an opportunity to return.

Jim Ossowski: So, you know, we did another $300 million in the most recent quarter, following $300 million in Q1. And, you know, I think our practice will be to, you know, share Q3, Q4 results as they happen.

Speaker Change: Uh, Access Capital back to the shareholder. So, you know, we did, uh, another $300 million in the most recent quarter following dollars in q1. And, you know, I think our practice will be to, you know, share Q3 Q4 results as they happen.

Susan Maklari: Okay, thank you. Good luck with everything.

Speaker Change: Okay, thank you. Good luck with everything.

Speaker Change: Thank you.

Jay McCandless: Your next question comes from the line of Jay McCandless with Wedbush. Please go ahead. Hey, good morning, everyone. So the first question, what percentage of communities were able to raise prices quarter? You know, probably about 10% for the quarter.

Speaker Change: Your next question.

Speaker Change: Line of Jay McCanless with wedbush. Please go ahead.

Hey, good morning everyone. Um, so the first question, what percentage of communities were you able to raise prices quarter?

Speaker Change: Yeah, probably about 10% for the quarter.

Ryan Marshall: And then I know you talked about Del Webb a lot, but when we think about the communities coming online, is the bulk of these new Del Webb communities coming online by year end, or is it going to go into maybe first half of 2026? Well, you saw, Jay, in this quarter, the percentage of signups in the quarter were 23%, 23 or 24% of this quarter signup. So, you know, typically from the time we sell until deliver, it's about six months. So this quarter signups will end up being first quarter 26 closings. So what you should expect is that we'll get back into the, you know, the Del Webb closing mix being about a quarter of our business once we hit 2026.

He's coming online is the bulk of these new Del Webb communities coming online by year end, or is it going to go into maybe first half of 26?

Well, you saw Jay in in this quarter, the the percentage of signups in the quarter were 23%.

Speaker Change: Uh 23 or 24% 24% of this quarter sign up. So um you know typically from the time we sell until deliver it's about 6 months. So this quarter sign up will end up being first quarter. 26 closings. Um so what you should expect is that uh, we'll we'll get back into uh the you know, the Del Webb closing mix being about a quarter of our business once we hit 2026,

Ryan Marshall: And we'll see those communities coming in over the balance of this year and next year. I mean, I tell you, a lot of excitement, you know, we've got a couple more that are opening in the Tampa market, first one in Greenville, another one opening in Charleston, another one out in Southern California. So I'd say in the coming quarters, we're going to have a, you know, kind of a good flow of new DELWEBs coming online. Great. That's what I was looking for. Appreciate y'all taking the questions.

Speaker Change: And we'll see those communities coming in over the balance of this year. And next year, I mean, I tell you a lot of excitement, you know, we got a couple more that are opening in the Tampa Market, first 1, in Greenville, another 1 opening in Charleston, another 1 out in, Southern California, so I see in the coming quarters, we're going to have a, you know, kind of a good flow of of New Dell webs coming online.

Speaker Change: Okay, great. That's what I was looking for. Appreciate you taking a question.

Rafe Jadrosich: Your next question comes from the line of Rafe Jadrosich with Bank of America. Please go ahead. Great, thanks. Thanks for taking my questions. I just wanted to, you spoke a little bit about land, seeing some relief on the land cost and development side, and some more retrading there. Can you talk about when that would potentially start to flow through your P&L and on the actual cost side? Yeah, you know, Ray, it typically land development occurs, you know, roughly six to 12 months before you see the closings hit, you know, a typical land development cycle of six to nine months, then you have, you know, the home construction period of call it four months, and then you start to see those closings.

Speaker Change: You next question.

Speaker Change: Of race. Droict with Bank of America, please go ahead.

Speaker Change: Great, thanks. Thanks for taking my questions. Um, I just wanted to uh so you spoke a little bit about Landing some relief on the land cost and development side, um, and and some more retraining their can you talk about when that would potentially start to flow through your your European L and on the actual cost side?

Ryan Marshall: So, it depends on how big the phase is, it depends on, you know, there's a lot of variables, but I think if you got savings today at this moment in time, you're likely, you know, back half of 2026 is when you'll start to see the benefit of those lots closing that had lower land development costs. That's helpful. And then you spoke a little bit about Dell Web Explorer that launched earlier this year. Can you tell us how that differs from like the legacy Dell Web business and what the size of that is, like how you're planning on growing?

Speaker Change: Yeah, you know, Ray it typically Land Development, um occurs you know roughly um 6 to 12 months before you see the closing hit. Um you know a a typical Land Development cycle is 6 to 9 months, then you have um, you know, the home construction period of call it 4 months and then you start to see those closings.

Speaker Change: So it depends on how big the phase is. It depends on, um, you know, there's a lot of variables but but I, I think if, if you got savings today at this moment in time, you're likely you know, back half of 2026 is when you'll start to see the benefit of those, lots closing that had lower Land Development costs,

Ryan Marshall: Yeah, we think it's a huge growth opportunity for the Delweb kind of overall brand and the difference between Delweb Explorer and our traditional Delwebs. The Delweb Explorers are not age restricted. The target consumer for that is the Gen X buyer. So think about buyers that are over the age of 45. They're high on home ownership, they've got wealth, you know, they may be looking to start to make that semi retirement type transition, but they still consider themselves to be very young and active. And so they're, they're looking for a community that gives them all those benefits without the restriction of being age restricted.

That, that that's helpful and then uh, you you spoke a little bit about Delaware explore uh, that launched earlier this year. Uh, can you say about how that differs from like the the Legacy Del Webb business and what the size of that is like how, how you're planning on growing that?

Ryan Marshall: One, they don't qualify just through physical age, they're not 55 yet. And two, mentally, they don't see themselves or think of themselves as anywhere near the age of 55. And so, but they love the, you know, the way that these Delweb communities provide lifestyle, and that's what it's really intended to be. You will see some changes in the programming. So while still heavy on lifestyle, the types of physical activities, the types of physical fitness will be slightly more geared to that demographic. And then you'll see more in terms of kind of dining and social, almost private club type dining and social as opposed to, you know, in our Delweb communities, you tend to see more large community, large scale community gatherings.

Speaker Change: Yeah, we think it's a huge growth opportunity for the Del Webb um, kind of overall brand and the the the difference between Del Webb Explorer and our traditional Del webs, the Del Webb explorers are not age restricted. Um, the target consumer for that is the Gen X buyer. So think about buyers that are over the age of 45. Um, they they've, uh, they're high on home ownership, they've got wealth. Um, you know, they may be looking to start to make that semi-retirement type transition, but they still consider themselves to be very young and active. And so they're, they're looking for a community that gives them all those benefits without the uh, restriction of being age restricted 1, they don't qualify. Um, just through physical age, they're not 55 yet and 2 mentally. They don't see themselves or think of themselves as anywhere near uh, the age of

Ryan Marshall: So a lot of similarities with some nuance around how the programming is actually rolled out.

Speaker Change: 55 and so but they they love the, you know, the the way that these Del Webb communities, provide lifestyle and that's what it's really intended to be. Um, you will see some changes in the programming. Um, so while still heavy on Lifestyle, the types of physical activities or the types of physical fitness will be uh, slightly more geared to uh that demographic. And then you'll see more uh in terms of kind of dining and social almost, uh, private club type, uh, dining and social as opposed to, you know, in our Del Webb communities. You send to see more large large scale Community Gathering. So, um, a lot of similarities with some Nuance around how the programming is actually uh, rolled out and implemented.

Ryan Marshall: Thank you, that's really helpful.

Speaker Change: Thank you, that's really helpful.

Buck Horn: And your final question comes from the line of Buck Horn with Raymond James. Please go ahead. Hey, thanks. Good. Appreciate it. Good morning.

Speaker Change: Send your final question comes from the line of Buck Horn. With Raymond James, please go ahead.

Ryan Marshall: I just wanted to go back to Florida real quick and the positive shift you're seeing in those regions and those markets there. Specifically, just wondering for a little extra color if you can provide it in terms of like buyer segments, you know, are we seeing Any particular buyers responding more positively right now? It seems to be coinciding with, you know, a decline in resale inventory in Florida, which seems to be a little bit, you know, happening sooner than seasonal patterns would project. So, just wondering if you've noticed any particular dynamics within Florida, within the buyer groups or any other, you know, characteristics.

Hey, thanks good. Appreciate it. Good morning. Um just wanted to go back to Florida real quick. In the positive shift you're seeing uh in in those regions in those markets there. Um specifically just wondering for a little extra color, if you can provide it in terms of like you know, buyer segments, you know, are we seeing

Ryan Marshall: You can explain why that shift is occurring now. Yeah, Buck, we're, you know, we're really happy with what we're what we what we saw out of Florida. I don't know that I'm terribly surprised. We just admit we're bullish on Florida. And and then your comment about buyer groups, the move up buyer in Florida was up 18% for us year over year. So we were pretty pleased with what we got out of move up.

Speaker Change: Uh, any particular buyer responding more positively right now, it seems to be coinciding with, you know, a decline in resale, inventory in Florida, which seems to be a little bit, you know, um, happening sooner than than seasonal patterns would project. So just wondering if if you've noticed any particular Dynamics within Florida, within the buyer groups or any other, you know characteristics, you can explain why that shift is occurring now.

Ryan Marshall: The you know, the the Northeast Florida market was a little slower for us that tends to be, you know, a part of the state where we have a little bit more entry level product. So I don't I don't know that it was I don't know that I would consider it to be down rather it's you know, that's a buyer group that continues to be challenged by affordability. No matter where you live in Florida search the Florida entry level buyers certainly not immune to some of those affordability challenges. Overall, though, I'm very pleased with how the inventory has started to clear up in Florida.

Yeah, uh, Buck. We're, you know, we're, we're look, we're we're really happy with what, we're what we, what we saw out of Florida, um, I don't know that I'm terribly surprised. We've just, we've been more bullish on Florida. Um, and, and then, do your your comment about buyer groups, the the move up buyer in Florida was up 18% for us year-over-year. Um, so we're pretty pleased with what we got out of move up. Um, the active adult buyer performed very well in Florida. I highlighted that um, you know, the, the northeast Florida Market was a little slower for us, that tends to be, um, uh, you know, a, a part of the, the state, where we have a little bit more,

Ryan Marshall: And and we've certainly seen our business perform incredibly well in the most recent quarter.

Speaker Change: Entry-level product. Um, so I don't, I don't know that it was, um, I don't know that I would consider it to be down, rather. It's, you know, that's a buyer group, that continues to be challenged by affordability. Um, no matter where you live in Florida, search the Florida entry level buyer. Certainly not immune to some of those affordability challenges overall though. I'm very pleased with how the inventory. Um, has started to clear up in Florida and and we've certainly seen our business, uh, perform incredibly well in the most recent quarter.

Ryan Marshall: Single Family Rental Partnerships Blending single-family rentals into the operating platform. What's your current line of thinking on rentals right now? Yeah, even going back to the go go days of single family rental, we wanted it to be a fairly small part of our business, we were targeting somewhere around 5% of our total volume. You know, in terms of what we're delivering today, Buck, it's it's, you know, in that kind of three, 4% of our total volume, a single family rental on new orders for kind of future business. It's certainly been slower and those buyers are not as active.

Speaker Change: That's great news. I appreciate the, uh, the additional feedback there. And just lastly, um, in terms of single family, rental Partnerships, just wondering if you're getting any further, you know, opportunities, inquiries of interests, you know, how you're thinking about, you know, blending single family rentals into the operating platform. What's your, what's your kind of current line of thinking on on rentals right now?

Ryan Marshall: But, you know, in the last couple of quarters, we started to do some more deals. You know, not back to the level we were doing a couple of years ago, but there's activity out there. And we'd expect it to still be, you know, a small part of our business, you know, today and well into the future. Appreciate the color. Congratulations. Thanks.

Speaker Change: Yeah, I even going back to the go go days of single family rental. We wanted it to be a fairly small part of our business. We were targeting somewhere around 5% of our total volume. Um, you know, in terms of what we're delivering today Buck, it's it's, you know, in that kind of 34 percent of our total volume a single family, rental on new orders, for kind of future business. Um, it's certainly been slower and and those buyers are not as active. But you know, in the last couple of quarters we've started to do

Speaker Change: Do, um, some more deals. Um, you know, not back to the level we were doing a couple of years ago, but but there there's activity out there and we'd expect it to still be, you know, a small part of our business, you know, today, and well into the future.

Speaker Change: Perfect. Appreciate the color. Congratulations. Thanks.

James Zeumer: That concludes our Q&A.

James Zeumer: I will now turn the call back over to Jim Zeumer for closing remarks. Appreciate everybody's time this morning. I know it was a busy, busy morning for everyone. We're available for the rest of the day. Got any other questions?

That concludes our Q&A.

Sumer: Sumer for closing remarks.

James Zeumer: Otherwise, we will look forward to speaking with you on our next earnings call. Thank you.

Speaker Change: Appreciate everybody's time this morning. I know it was a busy uh busy morning for everyone. We're available for the rest of the day. Got any other questions? Otherwise we will look forward to speaking with you on our next earnings call. Thank you.

Jeannie: Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen, that concludes today's call, thank you for joining you may now. Disconnect