Q2 2026 PulteGroup Inc Earnings Call

July 22, 2026

Speaker #1: All participants, please continue to stand by. Your meeting will begin momentarily. Once again, please continue to stand by, and we thank you for your patience.

Operator 2: All participants, please continue to stand by. Your meeting will begin momentarily. Once again, please continue to stand by, and we thank you for your patience. Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the PulteGroup Inc. Q2 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. 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'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to James Zeumer. Please go ahead.

Operator: All participants, please continue to stand by. Your meeting will begin momentarily. Once again, please continue to stand by, and we thank you for your patience. Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the PulteGroup Inc Q2 2026 Earnings Conference Call.

Speaker #2: Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the PulteGroup Inc. Q2 2026 earnings conference call.

Speaker #2: 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.

Operator: All lines have been placed on mute to prevent any background noise. 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'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to James Zeumer. Please go ahead.

Speaker #2: If you'd like to withdraw your question, press *1 again. Thank you. I would now like to turn the call over to Jim Zeumer.

Speaker #2: Please go ahead.

Speaker #3: Thank you, Jordan. Good morning. I want to welcome everyone to today's call to review PulteGroup's operating and financial results for our second quarter ended June 30, 2026.

James Zeumer: Thank you, Jordan. Good morning. I want to welcome everyone to today's call to review PulteGroup's operating and financial results for our Q2 ended 30 June 2026. Joining me on today's call are Ryan Marshall, President and CEO, Jim Ossowski, Executive Vice President and CFO, and David Carrier, Senior VP, Finance. In advance of this call, a copy of our Q2 earnings release and this morning's webcast 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 made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation.

Speaker #3: Joining me on today's call are Ryan Marshall, President and CEO; Jim Ossowski, Executive Vice President and CFO; and David Carrier, Senior VP of Finance. In advance of this call, a copy of our Q2 earnings release and this morning's webcast presentation have been posted to our corporate website at pultegroup.com.

Speaker #3: 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.

James Zeumer: 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 made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation. These risk factors and other key information are detailed on our SEC filings, including our annual and quarterly reports. Let me turn the call over to Ryan. Ryan?

Speaker #3: Actual results could differ materially from those suggested by our comments made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation.

Speaker #3: These risk factors and other key information are detailed in our SEC filings, including our annual and quarterly reports. Now, let me turn the call over to Ryan.

James Zeumer: These risk factors and other key information are detailed on our SEC filings, including our annual and quarterly reports. Let me turn the call over to Ryan. Ryan?

Speaker #3: Ryan?

Speaker #4: Thanks, Jim. And good morning. Let me start by saying that I'm extremely pleased with the operating and financial results PulteGroup delivered, both for our second quarter and for the first six months of 2026.

Ryan Marshall: Thanks, Jim. Good morning. Let me start by saying that I'm extremely pleased with the operating and financial results PulteGroup delivered both for our Q2 and for the H1 of 2026. Specific to our Q2 performance, I want to highlight a few key metrics that I think demonstrate the ongoing success of the company. Net new orders in the quarter increased by 6% over the same period last year as we realized higher orders across all buyer groups. Active adult orders were up 12%, while orders among first-time buyers increased 5%. On a sequential basis, incentives on closings in Q2 dropped 50 basis points from the Q1. We continued to execute a successful transition back to build to order, as build-to-order sales increased to 45% of new orders in the quarter.

Speaker #4: Specific to our second quarter performance, I want to highlight a few key metrics that I think demonstrate the ongoing success of the company. Net new orders in the quarter increased by 6% over the same period last year, as we realized higher orders across all buyer groups.

Ryan Marshall: Net new orders in the quarter increased by 6% over the same period last year as we realized higher orders across all buyer groups. Active adult orders were up 12%, while orders among first-time buyers increased 5%. On a sequential basis, incentives on closings in Q2 dropped 50 basis points from the Q1. We continued to execute a successful transition back to build to order, as build-to-order sales increased to 45% of new orders in the quarter.

Speaker #4: Active adult orders were up 12%, while orders among first-time buyers increased 5%. On a sequential basis, incentives on closings in Q2 dropped 50 basis points from the first quarter.

Speaker #4: We continued to execute a successful transition back to built-to-order, as built-to-order sales increased to 45% of new orders in the quarter. We further reduced our finished spec inventory, which dropped to 1.3 homes per community at quarter-end.

Ryan Marshall: We further reduced our finished spec inventory, which dropped to 1.3 homes per community at quarter end. Before turning the call to Jim for a thorough review of the quarter, let me offer a few additional comments about our results and general market conditions. Expanding on my earlier comment, on a year-over-year basis, net new orders were higher by 6% in Q2 and up 5% year to date. Through H1 2026, we sold 720 more homes than this same period last year. I'd also highlight that as a percentage of total orders, year to date sign-ups for build-to-order homes were up 500 basis points from 39% for the same six-month period last year.

Speaker #4: Before turning the call to Jim for a thorough review of the quarter, let me offer a few additional comments about our results and general market conditions.

Speaker #4: Expanding on my earlier comment, on a year-over-year basis, net new orders were higher by 6% in the second quarter, and up 5% year-to-date. Through the first six months of 2026, we sold 720 more homes than this same period last year.

Ryan Marshall: Expanding on my earlier comment, on a year-over-year basis, net new orders were higher by 6% in Q2 and up 5% year to date. Through H1 2026, we sold 720 more homes than this same period last year. I'd also highlight that as a percentage of total orders, year to date sign-ups for build-to-order homes were up 500 basis points from 39% for the same six-month period last year.

Speaker #4: I'd also highlight that it's a percentage of total orders—year-to-date sign-ups for built-to-order homes were up 500 basis points, from 39% for the same six-month period last year.

Speaker #4: The ongoing increase in built-to-order homes is consistent with the plan we articulated coming into this year, namely to increase the percentage of built-to-order homes sold among our move-up and active adult home buyers.

Ryan Marshall: The ongoing increase in build-to-order homes is consistent with the plan we articulated coming into this year, namely, to increase the percentage of build-to-order homes sold among our move-up and active adult home buyers. These are individuals who expect choice, and our operating model allows them to choose their preferred lot and select the options and upgrades they desire. I know our field teams are excited to execute the strategy as it affirms our build cycles have fully recovered from the global supply chain disruptions that hit the industry after COVID. Our decision to build more spec homes when supply chains collapsed and build cycles effectively doubled was the right one at the time, but we much prefer having a growing backlog of sold homes. Consistent with our operating strategies, we are achieving greater sales while still maintaining strong gross margin.

Speaker #4: These are individuals who expect choice, and our operating model allows them to choose their preferred lot and select the options and upgrades they desire.

Speaker #4: I know our field teams are excited to execute the strategy, as it affirms our build cycles have fully recovered from the global supply chain disruptions that hit the industry after COVID.

Ryan Marshall: I know our field teams are excited to execute the strategy as it affirms our build cycles have fully recovered from the global supply chain disruptions that hit the industry after COVID. Our decision to build more spec homes when supply chains collapsed and build cycles effectively doubled was the right one at the time, but we much prefer having a growing backlog of sold homes. Consistent with our operating strategies, we are achieving greater sales while still maintaining strong gross margin.

Speaker #4: Our decision to build more spec homes when supply chains collapsed and build cycles effectively doubled was the right one at the time, but we much prefer having a growing backlog of sold homes.

Speaker #4: Consistent with our operating strategies, we are achieving greater sales while still maintaining strong gross margin. More specifically, we delivered homebuilding gross margins of 25% for the quarter, and 24.7% for the first half of the year.

Ryan Marshall: More specifically, we delivered home building gross margins of 25% for Q2 and 24.7% for H1. In some instances, our home building gross margins are several hundred basis points higher than those of our peers. For PulteGroup, our performance is reflective of a disciplined land underwriting process, an operating model that is well-diversified across markets and buyer groups, and a balanced price pace approach to driving high returns on invested capital. Part of this balanced approach has been to continue to thoughtfully manage our starts pace as we reduce spec inventory and implement the transition back to build-to-order. Reflective of this approach, through H1 2026, our net new orders totaled 15,570 homes, but we intentionally started only 14,378 homes.

Speaker #4: In some instances, our home-building gross margins are several hundred basis points higher than those of our peers. For PulteGroup, our performance is reflective of a disciplined land underwriting process and operating model that is well diversified across markets and buyer groups, and a balanced price/pace approach to driving high returns on invested capital.

Speaker #4: Part of this balanced approach has been to continue to thoughtfully manage our starts pace, as we reduce spec inventory and implement the transition back to built-to-order.

Ryan Marshall: Part of this balanced approach has been to continue to thoughtfully manage our starts pace as we reduce spec inventory and implement the transition back to build-to-order. Reflective of this approach, through H1 2026, our net new orders totaled 15,570 homes, but we intentionally started only 14,378 homes.

Speaker #4: Reflective of this approach, through the first six months of 2026, our net new orders totaled 15,570 homes, but we intentionally started only 14,378 homes.

Speaker #4: With build cycles down to 100 days or fewer in some cases, we can effectively manage our starts cadence while still meeting our overall production goals.

Ryan Marshall: With build cycles down to 100 days or fewer in some cases, we can effectively manage our starts cadence while still meeting our overall production goals. To put this into a slightly broader context, at the end of 2024, we had approximately 8,800 spec homes in production. By the end of 2025, we had lowered this number to 7,200 specs, and now we are down to approximately 6,600 specs in production. I would note that we've achieved this dramatic reduction in spec inventory while growing overall community count. I want to recognize and applaud the discipline of our teams that are maintaining as we continue to work down specs and increasingly sell from a position of strength. At 44% of total production, I think we've gotten to the right spec level of inventory.

Speaker #4: To put this into a slightly broader context, at the end of 2024, we had approximately 8,800 spec homes in production. By the end of 2025, we had lowered this number to 7,200 specs, and now we are down to approximately 6,600 specs in production.

Speaker #4: I would note that we've achieved this dramatic reduction in spec inventory while growing overall community count. I want to recognize and applaud the discipline of our teams as they are maintaining this as we continue to work down specs and increasingly sell from a position of strength.

Ryan Marshall: I would note that we've achieved this dramatic reduction in spec inventory while growing overall community count. I want to recognize and applaud the discipline of our teams that are maintaining as we continue to work down specs and increasingly sell from a position of strength. At 44% of total production, I think we've gotten to the right spec level of inventory.

Speaker #4: At 44% of total production, I think we've gotten to the right spec level of inventory. We still have some work to do in select communities, but as we've demonstrated over the past 18 months, we are committed to this strategy.

Ryan Marshall: We still have some work to do in select communities, but as we have demonstrated over the past 18 months, we are committed to this strategy. As a backdrop to our successful efforts to sell homes, manage inventories, and generate strong financial results, the Q2 demonstrated a typical seasonal demand pattern. Namely, sales and absorption paces eased as we moved from month-to-month during the period. Within the seasonal pattern, I think it is fair to say from day-to-day and week-to-week, consumer activity was impacted to varying degrees by global tensions, macroeconomic uncertainty, and the material movement in interest rates. Still, we were able to drive higher orders in the period with strong performances across all buyer groups. Along with increased sales, we are also seeing home buyers that are willing to pay for superior locations and the upgrades that they value most.

Speaker #4: As a backdrop to our successful efforts to sell homes, manage inventories, and generate strong financial results, the second quarter demonstrated a typical seasonal demand pattern; namely, sales and absorption paces eased as we moved from month-to-month during the period.

Speaker #4: Within this seasonal pattern, I think it's fair to say, from day to day and week to week, consumer activity was impacted to varying degrees by global tensions, macroeconomic uncertainty, and the material movement in interest rates.

Ryan Marshall: Within the seasonal pattern, I think it is fair to say from day-to-day and week-to-week, consumer activity was impacted to varying degrees by global tensions, macroeconomic uncertainty, and the material movement in interest rates. Still, we were able to drive higher orders in the period with strong performances across all buyer groups. Along with increased sales, we are also seeing home buyers that are willing to pay for superior locations and the upgrades that they value most.

Speaker #4: Still, we were able to drive higher orders in the period, with strong performances across all buyer groups. Along with increased sales, we are also seeing home buyers that are willing to pay for superior locations and the upgrades that they value most.

Speaker #4: In the second quarter, options and lot premiums on homes closed approached $107,000, which is comparable to the prior year and prior quarter. Beyond any differences in demand among buyer groups, we continue to experience different demand dynamics across the markets we serve.

Ryan Marshall: In the Q2, options and lot premiums on homes closed approached $107,000, which is comparable to prior year and prior quarter. Beyond any differences in demand among buyer groups, we continue to experience different demand dynamics across the markets we serve. For example, order pace in the Midwest was strong in a number of our markets, including Columbus, Cleveland, and Chicago. Stronger demand conditions also carried into our Greenville and Coastal Carolina markets, and our Florida operations continue to generate outstanding results. While it is too early to read too much into the numbers, I would note that on a year-over-year basis, orders in Dallas and Houston were also better in the period. In our West operations, we realized improved orders in California and the Pacific Northwest, but we are having to compete aggressively for sales as core demand remains soft.

Speaker #4: For example, order pace in the Midwest was strong in a number of our markets, including Columbus, Cleveland, and Chicago, stronger demand conditions also carried into our Greenville and coastal Carolina markets, and our Florida operations continue to generate outstanding results.

Ryan Marshall: Stronger demand conditions also carried into our Greenville and Coastal Carolina markets, and our Florida operations continue to generate outstanding results. While it is too early to read too much into the numbers, I would note that on a year-over-year basis, orders in Dallas and Houston were also better in the period. In our West operations, we realized improved orders in California and the Pacific Northwest, but we are having to compete aggressively for sales as core demand remains soft.

Speaker #4: And while it's too early to read too much into the numbers, I would note that, on a year-over-year basis, orders in Dallas and Houston were also better in the period.

Speaker #4: In our West operations, we realized improved orders in California and the Pacific Northwest. But we are having to compete aggressively for sales, as core demand remains soft.

Speaker #4: As was the case in the second quarter, through the first few weeks of July, we continue to experience seasonal demand trends along with the week-to-week variability caused by macro factors ranging from global tensions and inflation to movements in interest rates and consumer confidence.

Ryan Marshall: As was the case in the Q2, through the first few weeks of July, we continued to experience seasonal demand trends, along with the week-to-week variability caused by macro factors ranging from global tensions and inflation, to movements in interest rates and consumer confidence. Overall, there are a lot of positives to be taken from PulteGroup's Q2 operating and financial results. But I think the biggest positive remains the fundamental benefits we realize from our strategic business model and our unmatched business platform. With that, let me turn the call over to Jim for a review of our Q2 results. Jim?

Speaker #4: Overall, there are a lot of positives to be taken from PulteGroup's second quarter operating and financial results. But I think the biggest positive remains the fundamental benefits we realized from our strategic business model and our unmatched business platform.

Ryan Marshall: Overall, there are a lot of positives to be taken from PulteGroup's Q2 operating and financial results. But I think the biggest positive remains the fundamental benefits we realize from our strategic business model and our unmatched business platform. With that, let me turn the call over to Jim for a review of our Q2 results. Jim?

Speaker #4: With that, let me turn the call over to Jim for a review of our second quarter results. Jim?

Speaker #2: Thank you, Ryan, and good morning. I look forward to providing a detailed review of PulteGroup's second quarter operating and financial results. Second quarter net new orders increased 6% over the prior year to 7,536 homes, as we realized higher net new orders across all three buyer groups.

James Ossowski: Thank you, Ryan, and good morning. I look forward to providing a detailed review of PulteGroup's Q2 operating and financial results. Q2 net new orders increased 6% over the prior year to 7,536 homes as we realized higher net new orders across all 3 buyer groups. The value of orders in the period also increased, gaining 5% to $4.1 billion. The year-over-year increase in Q2 orders reflects an 8% increase in average community count to 1,074, partially offset by a 1% decrease in absorption pace to 2.3 homes per month. Overall, core consumer demand trends followed a typical seasonal pattern as we moved through this year's spring selling season. The strength of demand in our Florida operations continued to stand out, as net new orders in Q2 increased by 19% over the same period in 2025.

Jim Ossowski: Thank you, Ryan, and good morning. I look forward to providing a detailed review of PulteGroup's Q2 operating and financial results. Q2 net new orders increased 6% over the prior year to 7,536 homes as we realized higher net new orders across all 3 buyer groups. The value of orders in the period also increased, gaining 5% to $4.1 billion.

Speaker #2: The value of orders in the period also increased, gaining 5% to $4.1 billion. The year-over-year increase in second quarter orders reflects an 8% increase in average community count to 1,074, partially offset by a 1% decrease in absorption pace to 2.3 homes per month.

Jim Ossowski: The year-over-year increase in Q2 orders reflects an 8% increase in average community count to 1,074, partially offset by a 1% decrease in absorption pace to 2.3 homes per month. Overall, core consumer demand trends followed a typical seasonal pattern as we moved through this year's spring selling season. The strength of demand in our Florida operations continued to stand out, as net new orders in Q2 increased by 19% over the same period in 2025.

Speaker #2: Overall, core consumer demand trends followed the typical seasonal pattern as we moved through this year's spring selling season. The strength of demand in our Florida operations continued to stand out as net new orders in Q2 increased by 19% over the same period in 2025.

Speaker #2: In fact, orders increased over the comparable prior-year period in each region, except for the West, where consumer demand has generally been slower to recover.

James Ossowski: In fact, orders increased over the comparable prior year period in each region, except for the West, where consumer demand has generally been slower to recover. As a percentage of starting backlog, our cancellation rate in Q2 was 11%, which is comparable to last year. As I mentioned earlier, net new orders were higher within each of our buyer groups in Q2. For the period, orders among first time, move-up, and active adult buyers increased over Q2 2025 by 5%, 4%, and 12%, respectively. Reflecting the benefits of our ongoing investment in the growth of our business, higher orders in Q2 were positively impacted by increased community count. As discussed on previous calls, we are working to increase our build to order business with a long-term goal for orders to be approximately 60% BTO and 40% spec.

Jim Ossowski: In fact, orders increased over the comparable prior year period in each region, except for the West, where consumer demand has generally been slower to recover. As a percentage of starting backlog, our cancellation rate in Q2 was 11%, which is comparable to last year. As I mentioned earlier, net new orders were higher within each of our buyer groups in Q2.

Speaker #2: As a percentage of starting backlog, our cancellation rate in the second quarter was 11%, which is comparable to last year. As I mentioned earlier, net new orders were higher within each of our buyer groups in the second quarter.

Speaker #2: For the period, orders among first-time, move-up, and active-adult buyers increased over the second quarter of 2025 by 5%, 4%, and 12%, respectively. Reflecting the benefits of our ongoing investment in the growth of our business, higher orders in the second quarter were positively impacted by an increased community count.

Jim Ossowski: For the period, orders among first time, move-up, and active adult buyers increased over Q2 2025 by 5%, 4%, and 12%, respectively. Reflecting the benefits of our ongoing investment in the growth of our business, higher orders in Q2 were positively impacted by increased community count. As discussed on previous calls, we are working to increase our build to order business with a long-term goal for orders to be approximately 60% BTO and 40% spec.

Speaker #2: As discussed on previous calls, we are working to increase our build-to-order business, with a long-term goal for orders to be approximately 60% BTO and 40% spec.

Speaker #2: In the second quarter, the order mix was 45% BTO and 55% spec. Given our build cycle time is down to 100 working days, and even lower in many markets, we are now able to selectively use more great buy-downs to facilitate BTO sales.

James Ossowski: In Q2, the order mix was 45% BTO and 55% spec. Given our build cycle time is down to 100 working days, and even lower in many markets, we are now able to selectively use market rate buydowns to facilitate BTO sales. Breaking down Q2 net new orders by buyer group, orders were comprised of 39% first time, 36% move-up, and 25% active adult. I would highlight that active adult orders in the period benefited from the opening of our newest Explore by Del Webb communities in Tampa and Columbus. By comparison, in Q2 2025, net new orders were 40% first time, 36% move-up, and 24% active adult. For Q2, the company generated home sale revenues of $3.8 billion compared with home sale revenues of $4.3 billion last year.

Jim Ossowski: In Q2, the order mix was 45% BTO and 55% spec. Given our build cycle time is down to 100 working days, and even lower in many markets, we are now able to selectively use market rate buydowns to facilitate BTO sales. Breaking down Q2 net new orders by buyer group, orders were comprised of 39% first time, 36% move-up, and 25% active adult.

Speaker #2: Breaking down second quarter net new orders by buyer group, orders were comprised of 39% first-time, 36% move-up, and 25% active-adult. I would highlight that active-adult orders in the period benefited from the opening of our newest Explore Buy Dell web communities in Tampa and Columbus.

Jim Ossowski: I would highlight that active adult orders in the period benefited from the opening of our newest Explore by Del Webb communities in Tampa and Columbus. By comparison, in Q2 2025, net new orders were 40% first time, 36% move-up, and 24% active adult. For Q2, the company generated home sale revenues of $3.8 billion compared with home sale revenues of $4.3 billion last year.

Speaker #2: By comparison, in the second quarter of 2025, net new orders were 40% first-time, 36% move-up, and 24% active-adult. For the second quarter, the company generated home sale revenues of $3.8 billion, compared with home sale revenues of $4.3 billion last year.

Speaker #2: The decrease in home sale revenues in the second quarter reflects an 8% decrease in closings to 6,997 homes, along with a 3% decrease in average sales price to 544,000 dollars.

James Ossowski: The decrease in home sale revenues in Q2 reflects an 8% decrease in closings to 6,997 homes, along with a 3% decrease in average sales price to $544,000. Mix was a meaningful driver of our lower ASP as we realized fewer closings out of our Northeast and West operations, which represent our two highest priced operating geographies. Q2 closings by buyer group were as follows: 41% first time, 37% move-up, and 22% active adult. In the comparable prior year period, our closing mix was 39% first time, 41% move-up, and 20% active adult. At the end of Q2, our backlog totaled 10,966 homes with a value of $6.8 billion. We ended Q2 with 14,980 homes in production, of which 44%, or 6,638 homes, were spec.

Jim Ossowski: The decrease in home sale revenues in Q2 reflects an 8% decrease in closings to 6,997 homes, along with a 3% decrease in average sales price to $544,000. Mix was a meaningful driver of our lower ASP as we realized fewer closings out of our Northeast and West operations, which represent our two highest priced operating geographies.

Speaker #2: Mix was a meaningful driver of our lower ASP as we realized fewer closings out of our Northeast and West operations which represent our two highest-priced operating geographies.

Speaker #2: Second quarter closings by buyer group were as follows: 41% first-time, 37% move-up, and 22% active-adult. In the comparable prior-year period, our closing mix was 39% first-time, 41% move-up, and 20% active-adult.

Jim Ossowski: Q2 closings by buyer group were as follows: 41% first time, 37% move-up, and 22% active adult. In the comparable prior year period, our closing mix was 39% first time, 41% move-up, and 20% active adult. At the end of Q2, our backlog totaled 10,966 homes with a value of $6.8 billion. We ended Q2 with 14,980 homes in production, of which 44%, or 6,638 homes, were spec.

Speaker #2: At the end of the second quarter, our backlog totaled 10,966 homes, with a value of $6.8 billion. We ended Q2 with 14,980 homes in production, of which 44%, or 6,638 homes, were spec.

Speaker #2: Relative to this time a year ago, we successfully lowered our total spec inventory by approximately 1,000 homes, or 13%, as we remain disciplined in managing the cadence of home starts with the pace of sales.

James Ossowski: Relative to this time a year ago, we successfully lowered our total spec inventory by approximately 1,000 homes, or 13%, as we remain disciplined in managing the cadence of home starts with the pace of sales. With respect to completed inventory, I would highlight that we ended Q2 with approximately 1,400 finished spec homes, or an average of 1.3 finished spec homes per community. This is down from 1.9 finished specs per community at the end of Q2 2025. Our field teams continued to do an outstanding job managing spec home production as we have rebalanced our inventory, which helps our Pulte community sell from a position of strength. Given the recent pace of sales and the number of homes under construction, in Q3, we expect to close between 7,000 and 7,400 homes.

Jim Ossowski: Relative to this time a year ago, we successfully lowered our total spec inventory by approximately 1,000 homes, or 13%, as we remain disciplined in managing the cadence of home starts with the pace of sales. With respect to completed inventory, I would highlight that we ended Q2 with approximately 1,400 finished spec homes, or an average of 1.3 finished spec homes per community.

Speaker #2: With respect to completed inventory, I would highlight that we ended Q2 with approximately 1,400 finished spec homes, or an average of 1.3 finished spec homes per community.

Speaker #2: This is down from 1.9 finished specs per community at the end of the second quarter of 2025. Our field teams continue to do an outstanding job managing spec home production as we have rebalanced our inventory, which helps our Pulte community sell from a position of strength.

Jim Ossowski: This is down from 1.9 finished specs per community at the end of Q2 2025. Our field teams continued to do an outstanding job managing spec home production as we have rebalanced our inventory, which helps our Pulte community sell from a position of strength. Given the recent pace of sales and the number of homes under construction, in Q3, we expect to close between 7,000 and 7,400 homes.

Speaker #2: Given the recent pace of sales and the number of homes under construction, in the third quarter we expect to close between 7,000 and 7,400 homes.

Speaker #2: For the full year 2026, we reaffirmed closings to be in the range of 28,500 to 29,000 homes, although we still have many homes to sell and close over the balance of the year.

James Ossowski: For full year 2026, we reaffirm closings to be in the range of 28,500 to 29,000 homes, although we still have many homes to sell and close over the balance of the year. Based on the timing of community openings and closings over the remainder of 2026, we expect year-over-year community count growth will be consistent with our previous guidance of up 3% to 5% in each of the remaining quarters. Given current demand dynamics and the mix of homes we anticipate closing, we expect the average sales price of closings to be in the range of $550,000 to $560,000 for both the Q3 and Q4. For the Q2, we reported gross margin of 25%, a sequential increase of 60 basis points from Q1 of this year.

Jim Ossowski: For full year 2026, we reaffirm closings to be in the range of 28,500 to 29,000 homes, although we still have many homes to sell and close over the balance of the year. Based on the timing of community openings and closings over the remainder of 2026, we expect year-over-year community count growth will be consistent with our previous guidance of up 3% to 5% in each of the remaining quarters.

Speaker #2: Based on the timing of community openings and closings over the remainder of 2026, we expect year-over-year community count growth will be consistent with our previous guidance of up 3 to 5 percent in each of the remaining quarters.

Speaker #2: Given current demand dynamics, in the mix of homes we anticipate closing, we expect the average sales price of closings to be in the range of $550,000 to $560,000 for both the third and fourth quarters.

Jim Ossowski: Given current demand dynamics and the mix of homes we anticipate closing, we expect the average sales price of closings to be in the range of $550,000 to $560,000 for both the Q3 and Q4. For the Q2, we reported gross margin of 25%, a sequential increase of 60 basis points from Q1 of this year.

Speaker #2: For the second quarter, we reported a gross margin of 25%, a sequential increase of 60 basis points from Q1 of this year. I would also note that incentives in the quarter were 10.4%, a sequential decrease of 50 basis points from the first quarter of this year.

James Ossowski: I would also note that incentives in the quarter were 10.4%, a sequential decrease of 50 basis points from the Q1 of this year. While there are positive implications to be derived from both numbers, the mix of Q2 closings also contributed to the improvement in these metrics. More specifically, we benefited from a greater mix of closings from our higher-margin Florida markets in combination with lower than anticipated discounts on the homes sold and closed within the quarter. These were the key drivers of the sequential improvement and the outperformance relative to our prior margin guide. Our Q2 gross margin also benefited from lower build costs in the period. At just under $75 per square foot, our Q2 house costs were down 5% from last year, down approximately 1% from this year's Q1.

Jim Ossowski: I would also note that incentives in the quarter were 10.4%, a sequential decrease of 50 basis points from the Q1 of this year. While there are positive implications to be derived from both numbers, the mix of Q2 closings also contributed to the improvement in these metrics. More specifically, we benefited from a greater mix of closings from our higher-margin Florida markets in combination with lower than anticipated discounts on the homes sold and closed within the quarter.

Speaker #2: While there were positive implications to be derived from both numbers, the mix of Q2 closings also contributed to the improvement in these metrics. More specifically, we benefited from a greater mix of closings from our higher-margin floor-to-markets, in combination with lower-than-anticipated discounts on the homes sold and closed within the quarter.

Speaker #2: These were the key drivers of the sequential improvement in the outperformance relative to our prior margin guide. Our second quarter gross margin also benefited from lower build costs in the period.

Jim Ossowski: These were the key drivers of the sequential improvement and the outperformance relative to our prior margin guide. Our Q2 gross margin also benefited from lower build costs in the period. At just under $75 per square foot, our Q2 house costs were down 5% from last year, down approximately 1% from this year's Q1.

Speaker #2: It just under 75 dollars per square foot, our Q2 house costs were down 5% from last year, down approximately 1% from this year's first quarter.

Speaker #2: Going forward, we will lose the tailwind of lower lumber costs as we move through the year, but we still expect year-over-year house costs to be down slightly from 2025.

James Ossowski: Going forward, we'll lose the tailwind of lower lumber costs as we move through the year, but we still expect year-over-year house costs to be down slightly from 2025. Given house cost trends and the anticipated closing mix, we expect Q3 gross margin to be in the range of 24.5% to 25.0%. At this time, we are reaffirming our 2026 full-year closing gross margin guide to also be in the range of 24.5% to 25.0%. On a dollar basis, homebuilding SG&A expense in the Q2 was down 2% from the prior year to $383 million. Fewer home closings in this year's Q2 resulted in some lost leverage as SG&A expense totaled 10.1% to home sale revenues, compared with 9.1% in the Q2 of last year.

Jim Ossowski: Going forward, we'll lose the tailwind of lower lumber costs as we move through the year, but we still expect year-over-year house costs to be down slightly from 2025. Given house cost trends and the anticipated closing mix, we expect Q3 gross margin to be in the range of 24.5% to 25.0%.

Speaker #2: Given house cost trends and the anticipated closing mix, we expect third quarter gross margin to be in the range of 24.5 to 25.0 percent.

Speaker #2: At this time, we are reaffirming our 2026 full year closing margin or gross margin guide to also be in the range of 24.5 percent to 25.0 percent.

Jim Ossowski: At this time, we are reaffirming our 2026 full-year closing gross margin guide to also be in the range of 24.5% to 25.0%. On a dollar basis, homebuilding SG&A expense in the Q2 was down 2% from the prior year to $383 million. Fewer home closings in this year's Q2 resulted in some lost leverage as SG&A expense totaled 10.1% to home sale revenues, compared with 9.1% in the Q2 of last year.

Speaker #2: On a dollar basis, home-building SG&A expense in the second quarter was down 2% from the prior year to $383 million. Fewer home closings in this year's second quarter resulted in some lost leverage, as SG&A expense totaled 10.1% of home sale revenues compared with 9.1% in the second quarter of last year.

Speaker #2: Overall, SG&A in the second quarter was in line with our expectations, so we are maintaining our guidance for full year SG&A expense to be in the range of 9.5% revenues.

James Ossowski: Overall, SG&A in the Q2 was in line with our expectations. We are maintaining our guidance for full-year SG&A expense to be in the range of 9.5% to 9.7% of home sale revenues. For the Q2, Pulte's financial services operations generated pre-tax income of $37 million, compared with pre-tax income of $43 million in Q2 of last year. Relative to last year, financial services pre-tax income in the Q2 was impacted primarily by lower closing volumes in our homebuilding operations. Q2 mortgage capture rate was 85%, which is comparable to the Q2 of 2025. For its Q2, PulteGroup reported pre-tax income of $622 million and a tax expense of $150 million, or an effective tax rate of 24.2%. Our Q2 tax rate was generally in line with our annual guidance, which remains 24.5% for full year 2026.

Jim Ossowski: Overall, SG&A in the Q2 was in line with our expectations. We are maintaining our guidance for full-year SG&A expense to be in the range of 9.5% to 9.7% of home sale revenues. For the Q2, Pulte's financial services operations generated pre-tax income of $37 million, compared with pre-tax income of $43 million in Q2 of last year.

Speaker #2: For the second quarter, Pulte's financial services operations generated pretax income of $37 million, compared with pretax income of $43 million in Q2 of last year.

Speaker #2: Relative to last year, financial services pretax income in the second quarter was impacted primarily by lower closing volumes in our homebuilding operations. Q2 mortgage capture rate was 85%, which is comparable to the second quarter of 2025.

Jim Ossowski: Relative to last year, financial services pre-tax income in the Q2 was impacted primarily by lower closing volumes in our homebuilding operations. Q2 mortgage capture rate was 85%, which is comparable to the Q2 of 2025. For its Q2, PulteGroup reported pre-tax income of $622 million and a tax expense of $150 million, or an effective tax rate of 24.2%. Our Q2 tax rate was generally in line with our annual guidance, which remains 24.5% for full year 2026.

Speaker #2: Fourth, in the second quarter, PulteGroup reported pretax income of $622 million and a tax expense of $150 million, or an effective tax rate of 24.2 percent.

Speaker #2: Our Q2 tax rate was generally in line with our annual guidance, which remains 24.5 percent for the full year 2026. Our expected tax rate does not take into consideration any discrete, period-specific tax events that might occur.

James Ossowski: Our expected tax rate does not take into consideration any discrete, period-specific tax events that might occur. Net income for PulteGroup's Q2 was $472 million, or $2.48 per share. In the Q2 of last year, we reported net income of $608 million, or $3.03 per share. Earnings per share for Q2 2026 was calculated based on 191 million diluted shares outstanding, which is down 10 million shares, or 5%, from the Q2 of 2025. This year's Q2, we repurchased 3.1 million common shares for $373 million. With increased community count remaining an important driver of near-term growth, we continue to invest in our future land pipeline. In the Q2, we invested $1.4 billion in land acquisition and development. This brings our year-to-date spend to $2.7 billion, keeping us on track to invest approximately $5.4 billion in land in 2026.

Jim Ossowski: Our expected tax rate does not take into consideration any discrete, period-specific tax events that might occur. Net income for PulteGroup's Q2 was $472 million, or $2.48 per share. In the Q2 of last year, we reported net income of $608 million, or $3.03 per share. Earnings per share for Q2 2026 was calculated based on 191 million diluted shares outstanding, which is down 10 million shares, or 5%, from the Q2 of 2025.

Speaker #2: Net income for Pulte Group's second quarter was 472 million dollars, or 2 dollars and 48 cents per share. In the second quarter of last year, we reported net income of 608 million dollars, or 3 dollars and 3 cents per share.

Speaker #2: Earnings per share for the second quarter 2026 was calculated based on 191 million diluted shares outstanding, which is down 10 million shares, or 5 percent, from the second quarter of 2025.

Speaker #2: In this year's second quarter, we repurchased 3.1 million common shares for $373 million. With increased community count remaining an important driver of near-term growth, we continue to invest in our future land pipeline.

Jim Ossowski: This year's Q2, we repurchased 3.1 million common shares for $373 million. With increased community count remaining an important driver of near-term growth, we continue to invest in our future land pipeline. In the Q2, we invested $1.4 billion in land acquisition and development. This brings our year-to-date spend to $2.7 billion, keeping us on track to invest approximately $5.4 billion in land in 2026.

Speaker #2: In the second quarter, we invested $1.4 billion in land acquisition and development. This brings our year-to-date spend to $2.7 billion, keeping us on track to invest approximately $5.4 billion in land in 2026.

Speaker #2: We ended the second quarter with 228,000 lots under control, which is down approximately 6,000 lots from the end of 2025, with 55 percent of our land pipeline controlled via option.

James Ossowski: We ended the Q2 with 228,000 lots under control, which is down approximately 6,000 lots from the end of 2025, with 55% of our land pipeline controlled via option. As with all our land investments, option deals need to underwrite to acceptable risk-adjusted returns while also mitigating risk. As discussed on our last earnings call, and as demonstrated by the company's Q2 land spend, our acquisition teams are still finding great land opportunities that meet our required returns. In this type of market environment, if you have the discipline and the capital, you can secure the land assets needed for ongoing business success. We ended the Q2 with $1.4 billion of cash and a debt-to-capital ratio of 12.3%.

Jim Ossowski: We ended the Q2 with 228,000 lots under control, which is down approximately 6,000 lots from the end of 2025, with 55% of our land pipeline controlled via option. As with all our land investments, option deals need to underwrite to acceptable risk-adjusted returns while also mitigating risk.

Speaker #2: We continued to look for opportunities to expand our controlled lot count. But, as with all our land investments, option deals need to underwrite to acceptable risk-adjusted returns while also mitigating risk.

Speaker #2: As discussed on our last earnings call, and as demonstrated by the company's Q2 land spend, our acquisition teams are still finding great land opportunities that meet our required returns.

Jim Ossowski: As discussed on our last earnings call, and as demonstrated by the company's Q2 land spend, our acquisition teams are still finding great land opportunities that meet our required returns. In this type of market environment, if you have the discipline and the capital, you can secure the land assets needed for ongoing business success.

Speaker #2: This type of market environment, if you have the discipline and the capital, you can secure the land assets needed for ongoing business success. We ended the second quarter with $1.4 billion of cash and a debt-to-capital ratio of 12.3 percent.

Jim Ossowski: We ended the Q2 with $1.4 billion of cash and a debt-to-capital ratio of 12.3%. Finally, given expected volume, margin and land spend for the year, we continue to expect 2026 operating cash flow generation to be approximately $1 billion. Now, let me turn the call back to Ryan.

Speaker #2: And finally, given expected volume, margin, and land spend for the year, we continue to expect 2026 operating cash flow generation to be approximately $1 billion.

James Ossowski: Finally, given expected volume, margin and land spend for the year, we continue to expect 2026 operating cash flow generation to be approximately $1 billion. Now, let me turn the call back to Ryan.

Speaker #2: Now, let me turn the call back to Ryan.

Speaker #1: Thanks, Jim. Before opening the call to questions, I want to briefly touch on the topic of industry consolidation, as the recent increase in M&A transactions has prompted a number of questions from investors.

Ryan Marshall: Thanks, Jim. Before opening the call to questions, I wanted to briefly touch on the topic of industry consolidation as the recent increase in M&A transactions has prompted a number of questions from investors. When it comes to assessing M&A opportunities, before we even run the numbers, the first question we ask ourselves is, Will this transaction make us better, not just bigger? Integrating businesses, organizations, and cultures is hard work. We have to see the value in terms of the transaction truly enhancing our business. If the strategic benefit is there, we maintain a disciplined valuation process that focuses on the return potential of the underlying land assets. Given the broad business platform we already maintain, M&A for PulteGroup is primarily just another way for us to buy land, we underwrite it accordingly.

Speaker #1: When it comes to assessing M&A opportunities, before we even run the numbers, the first question we ask ourselves is, will this transaction make us better not just bigger, integrating businesses, organizations, and cultures as hard work?

Ryan Marshall: Integrating businesses, organizations, and cultures is hard work. We have to see the value in terms of the transaction truly enhancing our business. If the strategic benefit is there, we maintain a disciplined valuation process that focuses on the return potential of the underlying land assets. Given the broad business platform we already maintain, M&A for PulteGroup is primarily just another way for us to buy land, we underwrite it accordingly.

Speaker #1: So we have to see the value in terms of the transaction truly enhancing our business. If the strategic benefit is there, we maintain a disciplined valuation process that focuses on the return potential of the underlying land assets.

Speaker #1: Given the broad business platform we already maintain, M&A for PulteGroup is primarily another way for us to buy land, so we underwrite it accordingly.

Speaker #1: What we certainly have the financial and organizational capabilities to successfully execute a large, multi-market acquisition, our preference is for smaller, tuck-in types of transactions that help build local market scale.

Ryan Marshall: While we certainly have the financial and organizational capabilities to successfully execute a large multi-market acquisition, our preference is for smaller tuck-in types of transactions that help build local market scale. If you look over the past decade, you see us having acquired Dominion in the Midwest, John Wieland here in the Southeast, and American West in Las Vegas. Again, good land pipelines that could help accelerate market share growth and acquired at prices that allowed us to realize acceptable risk-adjusted returns. Based solely on the public comments I've read about the transactions, I think they point to a growing recognition that scale, particularly local market scale, matters. I believe the improved access to land and labor that comes with scale is critical to a homebuilder's long-term success in any given market.

Speaker #1: If you look over the past decade, you see us having acquired Dominion in the Midwest, John Whelan here in the Southeast, and American West in Las Vegas.

Speaker #1: Again, good land pipelines that could help accelerate market share growth and acquired at prices that allowed us to realize acceptable risk-adjusted returns. They solely on the public comments, I've read about the transactions, I think they point to a growing recognition that scale, particularly local market scale, matters.

Ryan Marshall: Again, good land pipelines that could help accelerate market share growth and acquired at prices that allowed us to realize acceptable risk-adjusted returns. Based solely on the public comments I've read about the transactions, I think they point to a growing recognition that scale, particularly local market scale, matters. I believe the improved access to land and labor that comes with scale is critical to a homebuilder's long-term success in any given market.

Speaker #1: I believe the improved access to land and labor that comes with scale is critical to a homebuilder's long-term success in any given market.

Speaker #1: Before opening the call to questions, I want to thank the entire Pulte Group organization for another great quarter of operating and financial performance. When we report quarterly earnings, for obvious reasons, everyone focuses on the numbers.

Ryan Marshall: Before opening the call to questions, I want to thank the entire PulteGroup organization for another great quarter of operating and financial performance. When we report quarterly earnings, for obvious reasons, everyone focuses on the numbers. Behind every order, every home closing, and every satisfied customer are the people across this company who make these outcomes possible. We can have the right strategy and a strong business model, these only create value for shareholders when they are paired with great execution. Now let me turn the call over to Jim Zeumer.

Speaker #1: But behind every order, every home closing, and every satisfied customer are the people across this company who make these outcomes possible. We can have the right strategy and a strong business model, but these only create value for shareholders when they are paired with great execution.

Speaker #1: Now, let me turn the call over to Jim Zoomer.

Speaker #3: Great. Thanks, Ryan. We're now prepared to open the call for questions. So we can get to as many questions as possible during the remaining time of this call.

James Zeumer: Great. Thanks, Ryan. We're now prepared to open the call for questions. We can get to as many questions as possible during the remaining time of this call, we ask that you limit yourself to one question and one follow-up. Jordan, we'll start taking questions now.

Speaker #3: We ask that you limit yourself to one question and one follow-up. Jordan, we'll start taking questions now.

Speaker #4: Your first question comes from the line of John Lavallo from UBS. Your line is now live.

Operator 2: Your first question comes from the line of John Lovallo from UBS. Your line is now live.

Operator: Your first question comes from the line of John Lovallo from UBS. Your line is now live.

Speaker #5: Good morning, guys. Thanks for taking my questions. In the press release, you noted early signs of stabilization. That's something that we've heard numerous times across our channel checks.

John Lovallo: Good morning, guys. Thanks for taking my questions. In the press release, you noted early signs of stabilization. That's something that we've heard numerous times across our channel checks. I'm just curious if you could expand on that comment and maybe talk about specific geographies where you're seeing it.

Speaker #5: I'm just curious if you could expand on that comment and maybe talk about specific geographies where you're seeing it.

Speaker #1: Yeah, John, we highlighted some of it in the prepared remarks. In all of our five regions that we report on, we saw positive year-over-year growth in four of them, the West being the one that I think is probably still the softest.

Ryan Marshall: Yeah, John, we highlighted some of it in the prepared remarks. All of our five regions that we report on, we saw positive year-over-year growth in four of them, the West being the one that I think is probably still the softest. Specific to the four where we saw some stabilization and I think some positive signs, I would definitely call out some of the Midwest markets. We continue to see strength there. We're also seeing some favorable trends out of the Southeast markets. We particularly like what's going on in the coastal Carolinas markets in Greenville. Look, I've got to highlight Florida again. Florida was up 19% year-over-year. In a continuation of a theme that we've talked about for the last couple of calls, we've got great operating teams there and good assets, and we're seeing nice performance there.

Speaker #1: Specific to the four where we saw some stabilization, and I think some positive signs, I would definitely call out some of the Midwest markets.

Speaker #1: We continue to see strength there. We're also seeing some favorable trends out of the Southeast markets. We particularly like what's going on in the coastal Carolinas markets and Greenville.

Ryan Marshall: We're also seeing some favorable trends out of the Southeast markets. We particularly like what's going on in the coastal Carolinas markets in Greenville. Look, I've got to highlight Florida again. Florida was up 19% year-over-year. In a continuation of a theme that we've talked about for the last couple of calls, we've got great operating teams there and good assets, and we're seeing nice performance there. I'm also encouraged by what we're starting to see in Texas. I'm not ready to declare victory there, the fact that we saw positive year-over-year orders I think is a good sign.

Speaker #1: And then look, I've got to highlight Florida again. Florida was up 19 percent year over year, and in a continuation of a theme that we've talked about for the last couple of calls, we've got great operating teams there and good assets, and we're seeing nice performance there.

Speaker #1: I'm also encouraged by what we're starting to see in Texas. I'm not ready to declare victory there, but the fact that we saw positive year-over-year orders, I think, is a good sign.

Ryan Marshall: I'm also encouraged by what we're starting to see in Texas. I'm not ready to declare victory there, the fact that we saw positive year-over-year orders I think is a good sign.

Speaker #5: Yeah. And I think that's really encouraging. And then at the midpoint of the third quarter outlook, deliveries are up about 3 percent sequentially, but gross margin is down about 25 basis points sequentially.

John Lovallo: Yeah. No, I think that's really encouraging. At the midpoint of the Q3 outlook, deliveries are up about 3% sequentially, gross margin is down about 25 basis points sequentially. Just curious if this is mix of expected closings or how would you characterize that?

Speaker #5: I'm just curious if this is a mix of expected closings, or how would you kind of characterize that?

Speaker #1: Yeah, I would say that's probably a fairly accurate assumption, John. We got a little bit of favorable mix in Q2, with just where closings came from, and that benefited the margin.

Ryan Marshall: Yeah. I would say it is probably a fairly accurate assumption, John. We got a little bit of favorable mix in Q2 with just where closings came from that benefited the margin. Maybe that goes back a little bit the other way in Q3. As Jim highlighted, we are reiterating our full-year guide. The fact that we are growing orders, we think we outperformed relative to order growth expectations in the most recent quarter and did it all the while delivering great gross margin. We feel pretty good about how our teams are executing.

Speaker #1: Maybe that goes back a little bit—the other way, in Q3. But as Jim highlighted, we're reiterating our full-year guide. And so, the fact that we're growing orders—we think we outperformed relative to order growth expectations in the most recent quarter.

Speaker #1: And did it all the while delivering great gross margin. So we feel pretty good about how our teams are executing.

Speaker #5: Perfect. Thanks so much.

John Lovallo: Perfect. Thanks so much.

Speaker #4: Your next question comes from the line of Sam Reed from Wells Fargo. Your line is now live.

Operator 2: Your next question comes from the line of Sam Reid from Wells Fargo. Your line is now live.

Operator: Your next question comes from the line of Sam Reid from Wells Fargo. Your line is now live.

Speaker #6: Thanks so much, guys. Great to see the improvement on incentive loads this quarter. We'd just love to get your sense as to what's embedded on incentives, specifically for the third and fourth quarters. Should we expect kind of flattish sequentials there?

Sam Reid: Thanks so much, guys. Great to see the improvement on incentive levels this quarter. Would just love to get your sense as to what is embedded on incentives specifically for Q3 and Q4. Should we expect kind of flattest sequentials there, or could we see some additional improvement with the build-to-order mix benefits?

Speaker #6: Could we see some additional improvement with the bill-to-order mix benefits?

Speaker #1: Sam, our expectation is that the market is going to continue to remain competitive and that we're going to continue to see elevated incentive loads. Beyond the guidance that we've given you on gross margins, we typically don't comment specifically on numbers for incentives.

Ryan Marshall: Sam, our expectation is that the market is going to continue to remain competitive and that we are going to continue to see elevated incentive loads. Beyond the guidance that we have given you on gross margins, we typically do not comment specifically on numbers for incentives. We did highlight that last quarter was going to be our high watermark, and that is indeed proven to be true. I am very pleased to see that our incentives came down 50 basis points in the quarter. They are still high, even though they did come down, and we would expect, just given everything that the consumer is dealing with and the affordability challenges, that will remain in an elevated incentive environment.

Speaker #1: We did highlight that last quarter was going to be our high watermark. And that is indeed proven to be true. I'm very pleased to see that our incentives came down 50 basis points in the quarter.

Ryan Marshall: I am very pleased to see that our incentives came down 50 basis points in the quarter. They are still high, even though they did come down, and we would expect, just given everything that the consumer is dealing with and the affordability challenges, that will remain in an elevated incentive environment.

Speaker #1: They're still high. Even though they did come down, and we'd expect, just given everything that the consumer's dealing with and the affordability challenges, that we'll remain in an elevated incentive environment.

Speaker #6: That's helpful. And then maybe switching gears to community count. So community count grows up 8 percent during the quarter, but the guide for the year implies something closer to 3 to 5 percent.

Sam Reid: That is helpful. Maybe switching gears to community count. Community count grows up 8% during the quarter, the guide for the year implies something closer to 3% to 5%. Just maybe walk us through the sequential community count, Q2 to Q3, and then just one other maybe side question on community count. Is the growth primarily coming from active adult?

Speaker #6: So just maybe walk us through the sequential community count from Q2 to Q3. And then just one other, maybe, side question on community count. Is the growth primarily coming from active adult?

Speaker #7: So, great question, Sam. What I'd tell you on the community count: we've seen community count growth across all of the segments. And really, what I'd tell you is, as we've seen a little bit higher-than-guided level in the second quarter, it's just some of the communities are taking a little bit longer to close out.

James Ossowski: Great question, Sam. What I tell you on the community count, we have seen community count growth across all of the segments. Really what I tell you is, as we have seen a little bit higher than guided level in Q2, it is just some of the communities are taking a little bit longer to close out. As we continue to work through the balance of the year, we still feel really good that that 3% to 5% year-over-year is really what we are looking for. That is Q3 of 2026 versus Q3 of 2025. Q4 of 2026 versus Q4 of 2025.

Jim Ossowski: Great question, Sam. What I tell you on the community count, we have seen community count growth across all of the segments. Really what I tell you is, as we have seen a little bit higher than guided level in Q2, it is just some of the communities are taking a little bit longer to close out. As we continue to work through the balance of the year, we still feel really good that that 3% to 5% year-over-year is really what we are looking for. That is Q3 of 2026 versus Q3 of 2025. Q4 of 2026 versus Q4 of 2025.

Speaker #7: And so, as we continue to work through the balance of the year, we still feel really good that that 3 to 5 percent year-over-year is really what we're looking for.

Speaker #7: That's Q3 of '26 versus Q3 of '25, and then Q4 of '26 versus Q4 of '25.

Speaker #4: Your next question comes from the line of Matthew Bulley from Barclays. Your line is now live.

Operator 2: Your next question comes from the line of Matthew Bouley from Barclays. Your line is now live.

Operator: Your next question comes from the line of Matthew Bouley from Barclays. Your line is now live.

Speaker #8: Hey, good morning, everyone. Thanks for taking the questions. Apologies if I didn't hear this, but just to double-check on the gross margin—I think you said last quarter that you were looking toward the sort of low end of the 24.0% to 24.5% range for the year.

Rachel Smith: Hey, good morning, everyone. Thanks for taking the questions. Apologies if I didn't hear this, but just to double-check on the gross margin. I think you said last quarter, that you were looking towards the low end of the 24.5% to 25% range for the year. I just wanted to clarify if that's now changed and could we actually suggest that you're now pointing towards the higher end of the margin range or just, I'm obviously asking around 50 basis points here, but just any clarity on or update on that. Thank you.

Matthew Bouley: Hey, good morning, everyone. Thanks for taking the questions. Apologies if I didn't hear this, but just to double-check on the gross margin. I think you said last quarter, that you were looking towards the low end of the 24.5% to 25% range for the year. I just wanted to clarify if that's now changed and could we actually suggest that you're now pointing towards the higher end of the margin range or just, I'm obviously asking around 50 basis points here, but just any clarity on or update on that. Thank you.

Speaker #8: So I just wanted to clarify if that's now changed and could we actually suggest that you're now pointing towards the higher end of the margin range or just I'm obviously asking around 50 basis points here, but just kind of any clarity on or update on that.

Speaker #8: Thank you.

Speaker #1: Yeah. Matt, it's a fair question. We did highlight that last quarter. We did not emphasize that this point, but I would not I'd encourage you not to run to the high end.

Ryan Marshall: Yeah, Matt, it's a fair question. We did highlight that last quarter. We did not emphasize that at this point, but I'd encourage you not to run to the high end. I think we still have a lot of homes to sell. As I mentioned on one of the earlier questions, we think incentive loads are going to remain relatively elevated. We've seen a little bit of turmoil come back into the mind of the consumer with some of the things that are going on globally. I think there's a lot out there, but we feel confident about the 50 basis point guide that we've given how our teams are performing right now.

Speaker #1: I think there's we still have a lot of homes to sell. As I mentioned, on one of the earlier questions, we think incentive loads are going to remain relatively elevated.

Speaker #1: And we've seen a little bit of turmoil come back into the mind of the consumer with some of the things that are going on globally.

Speaker #1: So I think there's a lot out there, but we feel confident about the 50 basis point guide that we've given. Given how our teams are performing right now.

Speaker #8: Okay. Perfect. Thank you for that clarification. And then secondly, I guess this kind of follows along with that. If I'm looking at sort of the implied cadence of closings in the second half, it seems like you're going to have a bigger step up in the fourth quarter.

Rachel Smith: Okay. Perfect. Thank you for that clarification. Secondly, I guess this kind of follows along with that. If I'm looking at sort of the implied cadence of closings in the H2, it seems like you're going to have a bigger step-up in the Q4. Maybe a little bit higher than we've seen the past few years. Obviously, if we go back historically, we have seen larger step-ups in the Q4. I guess the question is sort of your visibility to that and is there an expectation that a lot of that spec gets cleared out in the Q4 and that drives the step-up? Or is sort of cadence of community openings regionally, et cetera, just any kind of color you could give to give some confidence on that implied Q4. Thank you.

Matthew Bouley: Okay. Perfect. Thank you for that clarification. Secondly, I guess this kind of follows along with that. If I'm looking at sort of the implied cadence of closings in the H2, it seems like you're going to have a bigger step-up in the Q4. Maybe a little bit higher than we've seen the past few years. Obviously, if we go back historically, we have seen larger step-ups in the Q4.

Speaker #8: Maybe a little bit higher than we've seen the past few years. Obviously, if we go back historically, we have seen larger step-ups in the fourth quarter.

Speaker #8: So I guess the question is, sort of, your visibility to that and, kind of, is there an expectation that a lot of that spec gets cleared out in the fourth quarter and that drives the step-up? Or is it more about the cadence of community openings regionally, etc.? Just any kind of color you could give to provide some confidence on that implied fourth quarter?

Matthew Bouley: I guess the question is sort of your visibility to that and is there an expectation that a lot of that spec gets cleared out in the Q4 and that drives the step-up? Or is sort of cadence of community openings regionally, et cetera, just any kind of color you could give to give some confidence on that implied Q4. Thank you.

Speaker #8: Thank you.

Speaker #1: Yeah, sure. So we have had visibility to this, and this has been part of our plan for the entire year. So, as we've talked about, with new communities coming online, moving from a predominantly—or a higher level—of specs to more build-to-order, and then matching our start rate to the sales that we have, we knew that this is the situation we were going to be in, and it was going to come from homes that are sold as dirt sales.

Ryan Marshall: Yeah, sure. We have had visibility to this, and this has been part of our plan for the entire year. As we've talked about new communities coming online, moving from a predominantly or a higher level of specs to more build to order, and then matching our start rate to the sales that we have. We knew that this is the situation that we were going to be in, and it was going to come from homes that are sold as dirt sales that get built and closed in the Q4. As we've highlighted, we still have some homes to sell. But with our 100-day cycle times, we still have quite a bit of time left to sell and start homes that we'll still deliver in the year.

Speaker #1: They'd get built and closed in the fourth quarter. So as we've highlighted, we still have some homes to sell. But with our 100-day cycle times, we still have quite a bit of time left to sell and start homes that will still deliver in the year.

Ryan Marshall: As we've highlighted, we still have some homes to sell. But with our 100-day cycle times, we still have quite a bit of time left to sell and start homes that we'll still deliver in the year. That work's got to be done, but there's nothing in the guide for Q3 or Q4 and how that relates to the full year that hasn't been kind of part of our full-year visibility from the very beginning.

Speaker #1: So that works got to be done, but there's nothing in the guide for Q3 or Q4 and how that relates to the full year that hasn't been kind of part of our full-year visibility from the very beginning.

Ryan Marshall: That work's got to be done, but there's nothing in the guide for Q3 or Q4 and how that relates to the full year that hasn't been kind of part of our full-year visibility from the very beginning.

Speaker #4: Your next question comes from the line of Stephen Kim from Evercore ISI. Your line is now live.

Operator 2: Your next question comes from the line of Stephen Kim from Evercore ISI. Your line is now live.

Operator: Your next question comes from the line of Stephen Kim from Evercore ISI. Your line is now live.

Speaker #8: Yeah, thanks a lot, guys. Appreciate all the color so far. Ryan, if I could just sort of follow on your comments about consolidation in the industry—you talked a little bit about your interest in inorganic growth on the homebuilding side, but I wanted to talk a little bit about what you're seeing in terms of, and envisioning in terms of, the consolidation that's happening in distribution.

Stephen Kim: Yeah. Thanks a lot, guys. Appreciate all the color so far. Ryan, if I could just sort of follow on your comments about consolidation in the industry. You talked a little bit about your interest in organic growth on the home building side, but I wanted to talk a little bit about what you're seeing in terms of and envisioning in terms of the consolidation that's happening in distribution. Wondering if there's any impacts or changes to the supply chain that you envision near or long-term, and maybe also if you could throw in there consolidation within home building. If you're not doing it, but others are, is there some change in the competitive environment that you're observing or anticipate? Thanks.

Speaker #8: And wondering if that if there's any impacts or changes to the supply chain that you envision near or long term and maybe also if you could throw in there consolidation within home building if you're not doing it, but others are, is there some change in the competitive environment that you're observing or anticipate?

Stephen Kim: Wondering if there's any impacts or changes to the supply chain that you envision near or long-term, and maybe also if you could throw in there consolidation within home building. If you're not doing it, but others are, is there some change in the competitive environment that you're observing or anticipate? Thanks.

Speaker #8: Thanks.

Speaker #1: Yeah. Stephen, there's definitely a lot going on in the market. On both fronts, and maybe let me start with the distribution channels. To this point, we've not seen any changes to the way that we interact with either the old companies or in some cases, the new companies.

Ryan Marshall: Yeah, Steven. There's definitely a lot going on in the market, on both fronts, and maybe let me start with the distribution channels. To this point, we've not seen any changes to the way that we interact with either the old companies or in some cases the new companies. In some cases, without naming names, some of the consolidators, we've already derived some nice strategic benefits from the increased scale of those new companies and the way that they're able to serve and meet our needs. I'm personally engaged in some strategic conversations with our procurement teams and some of those partners as we think about how they could do even more for us down the road. Net-net, Stephen, at this point, I think it's generally a positive.

Speaker #1: And in some cases, without naming names, some of the consolidators—we've already derived some nice strategic benefits from the increased scale of those new companies and the way that they're able to serve and meet our needs. I'm personally engaged in some strategic conversations with our procurement teams and some of those partners, as we think about how they could do even more for us down the road.

Ryan Marshall: I'm personally engaged in some strategic conversations with our procurement teams and some of those partners as we think about how they could do even more for us down the road. Net-net, Stephen, at this point, I think it's generally a positive.

Speaker #1: So net, Stephen, I mean, at this point, I think it's generally a positive. Certainly, these companies that are consolidating, they want to get a return on their capital as well.

Ryan Marshall: Certainly, these companies that are consolidating, they want to get a return on their capital as well. We hope that as far as it relates to us, that return can come from increased efficiencies as opposed to just forcing higher prices on us or their customers. Then, with some of the things that are going on inside of home building, we do watch it a lot. The things that are happening, we're not surprised by, because for a long time, we've appreciated the value of having local market scale. We definitely believe we have national market scale, but in our own operations, where we see the appropriate amount of market share in a specific market, we perform better. I think some of this consolidation that's going on are other companies' attempts to achieve some of that.

Speaker #1: And we just, we'd hope that—we hope that, as far as it relates to us, that that return can come from increased efficiencies as opposed to just forcing higher prices on us or their customers.

Speaker #1: And then with some of the things that are going on inside of home building, we do watch it a lot. The things that are happening we're not surprised by because for a long time, we've appreciated the value of having local market scale.

Ryan Marshall: The things that are happening, we're not surprised by, because for a long time, we've appreciated the value of having local market scale. We definitely believe we have national market scale, but in our own operations, where we see the appropriate amount of market share in a specific market, we perform better. I think some of this consolidation that's going on are other companies' attempts to achieve some of that.

Speaker #1: We definitely believe we have national market scale. But where we in our own operations, where we see the appropriate amount of market share in a specific market, we perform better.

Speaker #1: And I think some of this consolidation that's going on is other companies' attempts to achieve some of that. As it relates to competitive dynamics, the competitors that are being consolidated—the competitors that were there yesterday—they're there today.

Ryan Marshall: As it relates to competitive dynamics, the competitors that are being consolidated, they're the competitors that were there yesterday, they're there today. They're just under a different umbrella. We've not seen a change in competitive behavior to this point. My crystal ball's not clear enough at this point to say what will happen down the road, but to this point, we haven't seen a change.

Speaker #1: They're just under a different umbrella. We've not seen a change in competitive behavior to this point. My crystal ball's not clear enough at this point to say what will happen down the road, but to this point, we haven't seen a change.

Speaker #8: Okay, appreciate it. That’s very helpful. Second question relates to ICG and that. I believe you indicated that you were looking to maybe divest that.

Stephen Kim: Okay. Appreciate it. That's very helpful. Second question relates to ICG and that. I believe you indicated that you were looking to maybe divest that. Shortly afterwards, though, we've had the Road to Housing Act now become law, and within there, it seemed like there were some things that might open the door to some more attractiveness in factory-built construction. So I was curious as to whether or not, in your view, that has really any effect or impact or influence on how you're thinking about the ICG business or things like it. If you could maybe just comment on factory-based construction techniques.

Speaker #8: Shortly afterwards, though, we've had the Road to Housing Act now become law. And within there, it seemed like there were some things that might open the door to some more attractiveness in factory-built construction.

Speaker #8: And so I was curious as to whether or not, in your view, that has really any effect, or impact, or influence on how you're thinking about the ICG business or things like it.

Speaker #8: So if you could maybe just comment on factory-based construction techniques.

Speaker #1: Yeah. Stephen, our efforts in ICG were really focused on the structural components that could go into site-built homes. And I think most of the stuff in the road to housing bill is directed at manufactured housing.

Ryan Marshall: Yeah, Stephen, our efforts in ICG were really focused on the structural components that could go into site-built homes. I think most of the stuff in the Road to Housing bill is directed at manufactured housing, which I think can be favorable for overall housing supply, but that's not where we were innovating or attempting to innovate with ICG. As it relates to ICG, we're kind of moving through the process of that divestiture. We're making great progress. I think we'll have more to share in the next quarter. Then we absolutely continue to partner with all of the advanced manufacturing companies that we currently work with, including whoever may potentially be the buyer of ICG. We really see the value of the benefits and the value of the production methodologies employed there.

Speaker #1: Which I think can be favorable for overall housing supply, but that's not where we were innovating or attempting to innovate with ICG. So as it relates to ICG, we're kind of moving through the process of that divestiture.

Speaker #1: We're making great progress. And I think we'll have more to share in the next quarter. And then we absolutely continue to partner with all of the advanced manufacturing companies that we currently work with, including whoever may potentially be the buyer of ICG, because we really see the value of the benefits and the value of the production methodologies employed there.

Ryan Marshall: Then we absolutely continue to partner with all of the advanced manufacturing companies that we currently work with, including whoever may potentially be the buyer of ICG. We really see the value of the benefits and the value of the production methodologies employed there. We want to continue to be an implementer, a user of these innovative technologies and techniques. We just would prefer not to be the operator. We think others are probably better suited to do that.

Speaker #1: So we want to continue to be an implementer, a user of these innovative technologies and techniques. We just would prefer not to be the operator.

Ryan Marshall: We want to continue to be an implementer, a user of these innovative technologies and techniques. We just would prefer not to be the operator. We think others are probably better suited to do that.

Speaker #1: We think others are probably better suited to do that.

Speaker #4: Your next question comes from the line of Alan Ratner from Zelman. Your line is now live.

Operator 2: Your next question comes from the line of Alan Ratner from Zelman. Your line is now live.

Operator: Your next question comes from the line of Alan Ratner from Zelman. Your line is now live.

Speaker #6: Hey guys, good morning. Really nice results, and thanks for all the detail so far. Ryan, a couple of things you mentioned that I wanted to dig in on.

Alan Ratner: Hey, guys. Good morning. Really nice results, and thanks for all the details so far. Ryan, a couple things you mentioned that I wanted to dig in on. First, on the cost side, very impressive cost control there. I think you mentioned down, it was 5% year over year, if I remember correctly. You did kind of allude to the fact that maybe that tailwind is going to subside over the next few quarters. Without pushing for a 2027 commentary at this point, I'm just curious as you look at the cost landscape today, it looks like lumber is at the highest levels we've seen in several quarters, and presumably that'll flow through closing starting maybe early next year. We still have high oil prices.

Speaker #6: First, on the cost side, very impressive cost control there. I think you mentioned down, I think it was 5% year-over-year, if I remember correctly.

Speaker #6: But you did kind of allude to the fact that maybe that tailwind is going to subside over the next few quarters. And without pushing for a 27 commentary at this point, I'm just curious, as you look at kind of the cost landscape today, it looks like lumber's at the highest levels we've seen in several quarters.

Alan Ratner: Without pushing for a 2027 commentary at this point, I'm just curious as you look at the cost landscape today, it looks like lumber is at the highest levels we've seen in several quarters, and presumably that'll flow through closing starting maybe early next year. We still have high oil prices.

Speaker #6: And presumably, that'll flow through closing starting maybe early next year. We still have high oil prices. Do you actually expect your overall cost basket to begin inflecting higher here over the next handful of quarters, if nothing on the ground changes?

Alan Ratner: Do you actually expect your overall cost basket to begin inflecting higher here over the next handful of quarters if nothing on the ground changes? Do you feel like you can hold on to the relief you've been able to recognize thus far?

Speaker #6: Or do you feel like you can hold on to the relief you've been able to recognize thus far?

Ryan Marshall: Yeah, Alan, it is a fair question. We are not quite to the point of putting numbers out for next year, but I will address it thematically. I think if you went back to a period of time pre-COVID, you would generally see modest increases year-over-year, 1 to 1.5, maybe 2% cost increases year-over-year. We were able to more than offset that with price increases. Reasonable price increases that we would see in the home price. The environment that we are in right now, there is a lot of focus on affordability in every consumer product or everything that society consumes, especially housing. I think we are going to do everything we possibly can to maintain cost control. There are some things like lumber, like oil, that are commodities that make it much more difficult to influence because they are much bigger than just housing.

Speaker #1: Alan, it's a fair question. We're not quite to the point of kind of putting numbers out for next year, but I'll address it thematically.

Speaker #1: I think if you went back to a period of time pre-COVID, you would generally see modest increases year over year, one to one and a half, maybe 2% cost increases year over year.

Speaker #1: And we were able to more than offset that with price increases. Reasonable price increases that we would see in the home price. So the environment that we're in right now, there's a lot of kind of focus on affordability in every consumer product or everything that society consumes.

Ryan Marshall: The environment that we are in right now, there is a lot of focus on affordability in every consumer product or everything that society consumes, especially housing. I think we are going to do everything we possibly can to maintain cost control. There are some things like lumber, like oil, that are commodities that make it much more difficult to influence because they are much bigger than just housing.

Speaker #1: Especially housing. So I think we're going to do everything we possibly can to maintain cost control. There are some things like lumber, like oil, that are commodities that make it much more difficult to kind of influence because they're they're much bigger than just housing.

Speaker #1: Lumber aside, which we can see where that's going, oil probably continues to be the one that I'm most nervous about just because of how many how much oil is in some pretty big-ticket items like land development.

Ryan Marshall: Lumber aside, which we can see where that is going. Oil probably continues to be the one that I am most nervous about, just because of how much oil is in some pretty big-ticket items like land development. I talked about this last quarter, but asphalt, underground piping. There is some real big dollars that go into land development, never mind the diesel fuel that goes into the tractors that are moving dirt around. Those are things that we are really paying attention to, Alan, that could have an impact on not just price per square foot house costs, but ultimately maybe developed land costs and, of course, that ultimately goes into the total cost basket for the house.

Speaker #1: And I talked about this last quarter, but asphalt, underground piping—all of those, there's some real big dollars that go into land development, never mind the diesel fuel that goes into the tractors that are moving dirt around.

Ryan Marshall: There is some real big dollars that go into land development, never mind the diesel fuel that goes into the tractors that are moving dirt around. Those are things that we are really paying attention to, Alan, that could have an impact on not just price per square foot house costs, but ultimately maybe developed land costs and, of course, that ultimately goes into the total cost basket for the house.

Speaker #1: So those are things that we're really paying attention to, Alan, that could have an impact on not just price per square foot, house costs, but ultimately maybe developed land costs and, of course, that ultimately goes into the total cost basket for the house.

Speaker #4: Your next question comes from the line of Mike Dahl from RBC. Your line is now live.

Operator 2: Your next question comes from the line of Mike Dahl from RBC. Your line is now live.

Operator: Your next question comes from the line of Mike Dahl from RBC. Your line is now live.

Speaker #7: Hi. Thanks for taking my questions. Appreciate all the detail so far. On the incentive dynamic, I know Ryan, you've referenced several times kind of the week-to-week variability in some of the consumer and order dynamics.

Mike Dahl [Managing Director, Equity Research: Hi, thanks for taking my questions. Appreciate all the details so far. On the incentive dynamic, I know, Ryan, you have referenced several times kind of the week-to-week variability in some of the consumer and order dynamics. Can you just give a little more clarity on, from an order standpoint, what the cadence on incentives has looked like and if that kind of went down through the quarter, then ticked back up, and that is why the guide is kind of flattish, or if it is just held steadier than that. Any more detail on the cadence of incentives on orders, including through July, would be helpful.

Mike Dahl: Hi, thanks for taking my questions. Appreciate all the details so far. On the incentive dynamic, I know, Ryan, you have referenced several times kind of the week-to-week variability in some of the consumer and order dynamics. Can you just give a little more clarity on, from an order standpoint, what the cadence on incentives has looked like and if that kind of went down through the quarter, then ticked back up, and that is why the guide is kind of flattish, or if it is just held steadier than that. Any more detail on the cadence of incentives on orders, including through July, would be helpful.

Speaker #7: Can you just give a little more clarity on from an order standpoint, what the cadence on incentives has looked like and if that's kind of if it kind of went down through the quarter, then ticked back up and that's why the guys kind of flattish or if it's just held steadier than that?

Speaker #7: Any more detail on the kind of incentive, and the cadence of incentives on orders—including through July—would be helpful.

Speaker #1: Yeah, we don't really provide that level of granularity on incentives, Mike. I will tell you, as it relates to seasonality, it was a normal quarter.

Ryan Marshall: Yeah. We don't really provide that level of granularity on incentives, Mike. I will tell you, as it relates to seasonality, it was a normal quarter as we moved from April into June. Kind of normal step-downs and seasonality that we've seen for a long time, really nothing surprising there. We did see week-to-week variability based on some things that were going on in the economy, and in the world rather, maybe better said. We're paying attention to that. As we've gotten into July, I think we've continued to see pretty normal seasonal trends that are influenced by some of the more recent events that are going on globally.

Speaker #1: As we moved from April into June, kind of normal step-downs and seasonality that we've seen for a long time. So really nothing surprising there.

Speaker #1: We did see week-to-week variability based on some things that were going on in the economy. And in the world, rather, maybe better said. So we're paying attention to that.

Speaker #1: And then as we've gotten into July, I think we've continued to see pretty normal seasonal trends that are influenced by some of the more recent events that are going on globally.

Speaker #7: Okay. Understood. Shifting gears to SG&A, the full-year guide maintains it seems like that is the one part that where the math looks difficult because you've delivered on SG&A as a percentage of sales caught 90 basis points in the first half of the year.

Mike Dahl [Managing Director, Equity Research: Okay. Understood. Shifting gears to SG&A. The full-year guide maintained, it seems like that is the one part where the math looks difficult because you've delevered on SG&A as a percentage of sales, call it 90 basis points in H1. You're guiding revenues kind of flat year-on-year for H2. A lot of your SG&A is some form of variabilized cost. It seems to imply that you'd need a pretty big step-down in the fixed component or something else that would drive a lot more leverage versus the deleverage we've seen year to date. I just wanted to drill down a little bit more on just how to get down to the 9.5 to 9.7 for the full year when you're at 10.7 for H1.

Mike Dahl: Okay. Understood. Shifting gears to SG&A. The full-year guide maintained, it seems like that is the one part where the math looks difficult because you've delevered on SG&A as a percentage of sales, call it 90 basis points in H1. You're guiding revenues kind of flat year-on-year for H2. A lot of your SG&A is some form of variabilized cost.

Speaker #7: You're guiding revenues as kind of flat year on year for the back half of the year. And a lot of your SG&A is some form of variabilized cost.

Speaker #7: So, it seems to imply that you'd need a pretty big step-down in the fixed component, or something else that would drive a lot more leverage versus the deleverage.

Mike Dahl: It seems to imply that you'd need a pretty big step-down in the fixed component or something else that would drive a lot more leverage versus the deleverage we've seen year to date. I just wanted to drill down a little bit more on just how to get down to the 9.5 to 9.7 for the full year when you're at 10.7 for H1.

Speaker #7: We've seen year-to-date, so I just wanted to drill down a little bit more on how to get down to the 9.5 to 9.7 for the full year when you're at, kind of, 10.7 for the first half.

Speaker #6: Sure, Mike. Thanks. Great question. You know, you're right. We've lost some leverage in the first half of this year. We've seen our lowest ASP levels of the year in the first half of the year as we've guided, we expect them to be 550 to 560 over the balance of the year in Q3 and for the full year.

James Ossowski: Sure, Mike. Thanks. Great question. You're right. We've lost some leverage in H1. We've seen our lowest ASP levels of the year in H1. As we've guided, we expect them to be 550 to 560 over the balance of the year in Q3 and for the full year. You'll see a lift from that. We have our volume that's increasing in H2. What I'd tell you is there really isn't anything structurally or anything that we need to do. We still feel really good about it. We check it every quarter.

Jim Ossowski: Sure, Mike. Thanks. Great question. You're right. We've lost some leverage in H1. We've seen our lowest ASP levels of the year in H1. As we've guided, we expect them to be 550 to 560 over the balance of the year in Q3 and for the full year. You'll see a lift from that. We have our volume that's increasing in H2. What I'd tell you is there really isn't anything structurally or anything that we need to do.

Speaker #6: So you'll see a lift from that. We have our volume that's increasing in the back half of the year. But what I'd tell you is there really isn't anything structural or anything that we need to do.

Speaker #6: We still feel really good about it. We check it every quarter. And as I said in my prepared remarks, I mean, we were right on where we thought we would be as at the end of the second quarter and still feel very confident in getting there over the balance of the year within that guide.

Jim Ossowski: We still feel really good about it. We check it every quarter. As I said in my prepared remarks, we were right on where we thought we would be as of the end of Q2 and still feel very confident in getting there over the balance of the year within that guide.

James Ossowski: As I said in my prepared remarks, we were right on where we thought we would be as of the end of Q2 and still feel very confident in getting there over the balance of the year within that guide.

Speaker #4: Your next question comes from the line of Anthony Pettenari from City. Your line is now live.

Operator 2: Your next question comes from the line of Anthony Pettinari from Citi. Your line is now live.

Operator: Your next question comes from the line of Anthony Pettinari from Citi. Your line is now live.

Speaker #5: Oh, good morning, Ryan. Just following up on M&A—you reaffirmed your preference for tuck-ins. I'm just curious, as you look at the pipeline, do you see more competition for those kinds of targets, or, given a tougher market, maybe you can see picking them up at more reasonable valuations?

Anthony Pettinari: Good morning.

Ryan Marshall: Good morning.

Anthony Pettinari: Ryan, just following up on M&A. You reaffirmed your preference for tuck-ins. I'm just curious, as you look at the pipeline, do you see more competition for those kinds of targets? Given a tougher market, maybe you can see picking them up at more reasonable valuations. I'm just wondering what that pipeline kind of looks like versus the last few years. Are there geographies, MSAs, where it would make a lot of sense for Pulte to be in that you're not in currently?

Speaker #5: I'm just wondering what that pipeline kind of looks like versus the last few years. And then, are there geographies or MSAs where it would make a lot of sense for Pulte to be in that you're not in currently?

Speaker #1: Yeah, I'll take the last part first. Anthony, in terms of the geographies that make a lot of sense, it's really the geographies where we've recently decided to expand to.

Ryan Marshall: Yeah. I'll take the last part first, Anthony. In terms of the geographies that make a lot of sense, it's really the geographies where we've recently decided to expand to. Those are places that would be great M&A targets, it would allow us to build local market scale a bit faster. We haven't been able to find acceptable M&A targets, we've elected to grow those markets organically, which we're fine with as well. As it relates to the pipeline, the pipeline's pretty steady. We see a lot of things that come across our desk. We look at all of them. As I mentioned in my prepared remarks, the first question that we really ask, is this something that fits with us strategically? Is it the right buyer groups? Is it in the right parts of the MSA that we want to target?

Speaker #1: So those are places that would be great M&A targets, and it would allow us to build local market scale a bit faster. If and we haven't been able to find acceptable M&A targets, and so we've elected to grow those markets organically, which we're fine with as well.

Speaker #1: As it relates to the pipeline, the pipeline's pretty steady. We see a lot of things that come across our desk. We look at all of them.

Ryan Marshall: As it relates to the pipeline, the pipeline's pretty steady. We see a lot of things that come across our desk. We look at all of them. As I mentioned in my prepared remarks, the first question that we really ask, is this something that fits with us strategically? Is it the right buyer groups? Is it in the right parts of the MSA that we want to target?

Speaker #1: As I mentioned in my prepared remarks, the first question that we really ask is, is this something that fits with us strategically, or is it the right buyer groups?

Speaker #1: Is it in the right parts of the MSA that we want to target? And if we can say yes to all of those things, then we go down the path of, can we offer a price that makes sense?

Ryan Marshall: If we can say yes to all of those things, we go down the path of, can we offer a price that makes sense? The place where most of these break down is we really underwrite these transactions as if we're acquiring additional land. We already have an operating model. We already have a branding and our house of brands. Some of the intangibles and the things that a seller might want to get paid for, it doesn't mean there's not value there, it's just not as valuable to us because we already have our own. A lot of the, even if we're able to answer the first question, which is the hardest, if you can get past that, sometimes the underwriting, the risk-adjusted underwriting doesn't make sense.

Speaker #1: The place that where most of these break down is we really underwrite these transactions as if we're acquiring additional land. We already have an operating model.

Speaker #1: We already have a branding that is our house of brands, so some of the kind of intangibles and the things that a seller might want to get paid for—it doesn't mean there's not value there.

Speaker #1: It's not as valuable to us because we already have our own and so a lot of the even if we're able to answer the first question, which is the hardest, if you can get past that, sometimes the underwriting, the risk-adjusted underwriting doesn't make sense.

Ryan Marshall: A lot of the, even if we're able to answer the first question, which is the hardest, if you can get past that, sometimes the underwriting, the risk-adjusted underwriting doesn't make sense. It's pretty rare that you go from looking at a deal to actually getting super interested in making offers. Just the probability, I think, of all those things lining up is on the lower side.

Speaker #1: So it's pretty rare that you go from looking at a deal to actually getting super interested in making offers just the probability, I think, of all those things lining up is on the lower side.

Ryan Marshall: It's pretty rare that you go from looking at a deal to actually getting super interested in making offers. Just the probability, I think, of all those things lining up is on the lower side.

Speaker #5: Okay. No, that's very helpful. And then just one quick follow-up on incentives. I know you don't break this out with too much granularity, but if we were to think about incentive levels for active adult versus move-up versus entry-level, are you seeing a real divergence in incentive levels between your buyer types, or is it just really dependent on community and there's a fair amount of noise there?

Anthony Pettinari: Okay. No, that's very helpful. Just one quick follow-up on incentives. I know you don't break this out with too much granularity, but if we were to think about incentive levels for active adult versus move-up versus entry level, are you seeing a real divergence in incentive levels between your buyer types, or is it just really dependent on community and there's a fair amount of noise there?

Speaker #1: Where you see the difference in incentive level is based on built-to-order versus spec. And most of our spec is an entry-level. And so you see higher incentives in entry-level because of that.

Ryan Marshall: Where you see the difference in incentive level is based on build to order versus spec. Most of our spec is in entry level. You see higher incentives in entry level because of that. It's not the buyer group that's driving it's the difference between spec versus build to order.

Speaker #1: But it's not the buyer group that's driving it. It's the difference between spec versus built-to-order.

Speaker #4: Your next question comes from the line of Trevor Ohlenson from Wolf Research. Your line is live.

Operator 2: Your next question comes from the line of Trevor Allinson from Wolfe Research. Your line is live.

Operator: Your next question comes from the line of Trevor Allinson from Wolfe Research. Your line is live.

Speaker #7: Hi, good morning. Thank you for taking my questions. You mentioned built-to-order was 45% of your orders in Q2, so good progress there. How should we think about built-to-order as a percentage of your orders in the second half of the year, and then any update on your expected timeline to hit your 60% target?

Trevor Allinson: Hi, good morning. Thank you for taking my questions. You mentioned build to order was 45% of your orders in Q2, so good progress there. How should we think about a build to order as a percentage of your orders in H2 of the year? Any update on your expected timeline to hit your 60% target?

Speaker #1: Yeah. Really no change on the timeline, Trevor. It'll likely be sometime next year that we get to that 60%. So we haven't set a target out there for the back half.

Ryan Marshall: Yeah. Really no change on the timeline, Trevor. It'll likely be sometime next year that we get to that 60%. We haven't set a target out there for H2. I'd like to see us continue to chip away at it and make measured and steady progress. Between now and sometime next year, I'd like to chip away at those incremental 15 percentage points that we want to go after.

Speaker #1: I'd like to see us continue to chip away at it and make measured, steady progress. So between now and sometime next year, I'd like to chip away at those incremental 15 percentage points that we want to go after.

Speaker #7: Okay, makes sense. Thanks for that, Ryan. And second question is following up on the cost side, focusing maybe specifically on your trades here and your ability to continue to recognize relief there.

Trevor Allinson: Yeah, makes sense. Thanks, Ryan. Second question is following up on the cost side, focusing maybe specifically on your trades here and your ability to continue to recognize relief there. Do you think there's room for incremental concessions from your trades here to help you lower your overall vertical costs? Or you think you've kind of gotten everything you can out of concessions from your trades here in the current environment? Thanks.

Speaker #7: Do you think there's room for incremental concessions from your trades here to help you lower your overall vertical cost? Or do you think you've kind of gotten everything you can out of concessions from your trades here in the current environment?

Speaker #7: Thanks.

Speaker #1: Yeah. Our procurement teams are really good. And they really operate on data and facts. So they do a really nice job kind of looking at our overall cost structure and identifying places where we are arguably paying more than the market warrants.

Ryan Marshall: Yeah. Our procurement teams are really good and they really operate on data and facts. They do a really nice job looking at our overall cost structure and identifying places where we were arguably paying more than the market warrants. That's where we go after. We want our trade partners to be successful. We want them to have healthy profit. We're cognizant of that as well. I think our procurement teams have done a wonderful job, and the fact that we're down 5% and sitting at $75 a foot in this environment, I think it's a job well done.

Speaker #1: And that's where we go after. We want our trade partners to be successful. We want them to have healthy profit. And so we're cognizant of that as well.

Speaker #1: I think our procurement teams have done a wonderful job in the fact that we're down 5%. And sitting at $75 a foot in this environment, I think it's a job well done.

Speaker #4: Your next question comes from the line of Jonathan Bettenhausen from Truist Securities. Your line is now live.

Operator 2: Your next question comes from the line of Jonathan Baumgarten from Truist Securities. Your line is now live.

Operator: Your next question comes from the line of Jonathan Baumgarten from Truist Securities. Your line is now live.

Speaker #8: Yeah. Hey, guys. Quick model question related to the cash flow guide. So you've maintained the operating cash guide for '26. So there's a little work to do in the back half of the year.

Jonathan Baumgarten: Yeah. Hey, guys. A quick model question related to the cash flow guide. You've maintained the operating cash guide for 2026, so there's a little work to do in the back half of the year. I'm assuming the expectation here is that inventory will be a cash tailwind in the back half. Is that the way you're looking at it or is there anything else meaningful to call out?

Jonathan Bettenhausen: Yeah. Hey, guys. A quick model question related to the cash flow guide. You've maintained the operating cash guide for 2026, so there's a little work to do in the back half of the year. I'm assuming the expectation here is that inventory will be a cash tailwind in the back half. Is that the way you're looking at it or is there anything else meaningful to call out?

Speaker #8: I'm assuming the expectation here is that inventory will be a cash tailwind in the back half. Is that the way you're looking at it, or is there anything else meaningful to call out?

Speaker #9: No, nothing else meaningful to call out. We have a higher volume—a closing is coming in the back half of the year. Spring selling season is when you’re starting to put inventory in motion.

James Ossowski: No, nothing else meaningful to call out. We have a higher volume of closings coming in H2 of the year. Spring selling season is when you are starting to put inventory in motion. You are doing land development, you are doing home construction. Yeah, inventory reduction with extra closings is the tailwind in H2.

Jim Ossowski: No, nothing else meaningful to call out. We have a higher volume of closings coming in H2 of the year. Spring selling season is when you are starting to put inventory in motion. You are doing land development, you are doing home construction. Yeah, inventory reduction with extra closings is the tailwind in H2.

Speaker #9: You're doing land development. You're doing home construction. So yeah, inventory reduction with extra closings is the tailwind in the back half.

Speaker #8: Yeah. Okay. Got it. And then in terms of the land pipeline, any big pipeline moves during the quarter outside of trend relative to kind of the geographic footprint?

Jonathan Baumgarten: Yeah. Okay. Got it. In terms of the land pipeline, any big pipeline moves during the Q outside of trend, relative to kind of the geographic footprint? Kind of piggybacking off of that, with Florida continuing to be a top growth region for orders, but lot count there, call it flat with where it was in 2023. Is that more of a right sizing of the land position in Florida, or should we expect to see that lot count start to tick up a bit?

Jonathan Bettenhausen: Yeah. Okay. Got it. In terms of the land pipeline, any big pipeline moves during the Q outside of trend, relative to kind of the geographic footprint? Kind of piggybacking off of that, with Florida continuing to be a top growth region for orders, but lot count there, call it flat with where it was in 2023. Is that more of a right sizing of the land position in Florida, or should we expect to see that lot count start to tick up a bit?

Speaker #8: And then, kind of piggybacking off of that, with Florida continuing to be a top growth region for orders, but lot and cap count there, call it flat with where it was in 2023.

Speaker #8: Is that more of a right sizing as a land position in Florida, or should we expect to see that locked count start to tick up a bit?

Speaker #9: No, I would tell you from a lot count standpoint, or what we saw going on in the quarter, not a whole lot of change.

James Ossowski: I would tell you, from a lot count standpoint or what we saw going on in the Q, not a whole lot of change. It was a pretty typical Q for us. I think the numbers, we put about 13,000 lots under control. We walked from 6,000, we closed 7,000. It was kind of a push. It was a fairly normal Q for us. As it relates to lot count across the geographies, what I tell you what we really focus on more is just the lots that we control. We talk about it often. Let's put some deposits, responsible deposits down. Let's get that land pipeline in front of us. That way, if we need to lean into it because the market's strong and healthy, we will do it. If it's a little bit softer market, we can always pull back in that.

Jim Ossowski: I would tell you, from a lot count standpoint or what we saw going on in the Q, not a whole lot of change. It was a pretty typical Q for us. I think the numbers, we put about 13,000 lots under control. We walked from 6,000, we closed 7,000. It was kind of a push. It was a fairly normal Q for us. As it relates to lot count across the geographies, what I tell you what we really focus on more is just the lots that we control.

Speaker #9: It was a pretty typical quarter for us. I think the numbers—we put about 13,000 lots under control. We walked from 6,000. We closed 7,000.

Speaker #9: So, it was kind of a push. It was a fairly normal quarter for us. As it relates to lot count across the geographies, what I'll tell you is what we really focus on more is just the lots that we control.

Speaker #9: We talk about it often. Let's put some responsible deposits down. Let's get that land pipeline in front of us, and that way, if we need to lean into it because the market's strong and healthy, we'll do it.

Jim Ossowski: We talk about it often. Let's put some deposits, responsible deposits down. Let's get that land pipeline in front of us. That way, if we need to lean into it because the market's strong and healthy, we will do it. If it's a little bit softer market, we can always pull back in that. I wouldn't read anything more into kind of the variability of the lot count over the past couple of years.

Speaker #9: If it's a little bit softer market, we can always pull back in that. So I wouldn't read anything more into kind of the variability of the lot count over the past couple of years.

James Ossowski: I wouldn't read anything more into kind of the variability of the lot count over the past couple of years.

Speaker #4: Your next question comes from the line of Rafi Jadrasik from Bank of America. Your line is live.

Operator 2: Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is live.

Operator: Your next question comes from the line of Rafe Jadrosich from Bank of America. Your line is live.

Speaker #10: Hi, good morning. It's Rafe. Thanks for taking my questions. How do we think about the starts, first closings cadence and the second half of the year?

Rafe Jadrosich: Hi. Good morning. It's Raff. Thanks for taking my questions. How do we think about the starts first closings, cadence in the H2, and that finished spec number of 1.3 per community, is that the right level going forward?

Speaker #10: And then that finished spec number of 1.3 per community—is that the right level going forward?

Speaker #1: Yeah. Rafe, good morning. The spec level that we're at, we think is about perfect. So you might see that go up a little down a little depending on kind of what's going on.

Ryan Marshall: Yeah, Raff, good morning. The spec level that we're at we think is about perfect. You might see that go up a little, down a little, depending on kind of what's going on. We think we're kind of mission accomplished on reducing spec inventory. As it relates to starts in the H2, really what we've been doing is we've been working to match starts with kind of prior Q sales as kind of the best linkage. With the caveat that we intentionally under started the sales that we had in the H1 because we had more spec inventory than we wanted. A lot of the sales that we had in the H1 were specs that we wanted to get out of the system.

Speaker #1: But we think we're kind of mission accomplished on reducing spec inventory. And then as it relates to starts in the back half of the year, really what we've been doing is we've been working to match starts with kind of prior quarter sales.

Speaker #1: That's kind of the best linkage. And with the caveat that we intentionally understated the sales that we had in the first half because we had more spec inventory than we wanted.

Ryan Marshall: With the caveat that we intentionally under started the sales that we had in the H1 because we had more spec inventory than we wanted. A lot of the sales that we had in the H1 were specs that we wanted to get out of the system. Now, as we continue to make this transition back to build to order, I think you'll see a more stronger linkage between what we're selling and what we're starting.

Speaker #1: So, a lot of the sales that we had in the first half were specs that we wanted to get out of the system. And now, as we continue to make this transition back to build-to-order, I think you'll see a stronger linkage between what we're selling and what we're starting.

Ryan Marshall: Now, as we continue to make this transition back to build to order, I think you'll see a more stronger linkage between what we're selling and what we're starting.

Speaker #10: Great, that's helpful. And then the debt-to-cap at 12%—obviously, it's pretty low. What would you have to see to bring that higher, and how should we think about the right level going forward or longer term?

Rafe Jadrosich: Great. That's helpful. The debt to cap at 12%, obviously, it's pretty low. What would you have to see to bring that higher, and how do we think about the right level kind of going forward or longer term?

Speaker #1: Yeah, Rafe, we've talked about this the last several quarters. And really, when we think about capital allocation and the needs of the business, we talk about what we want to accomplish.

Ryan Marshall: Yeah. You know, Raff, we've talked about this the last several quarters. When we think about capital allocation and the needs of the business, we talk about, what do we want to accomplish? Where do we want to grow the business? Where do we want to make strategic investments in land, in house, et cetera, new markets? We go through the capital planning exercise to determine how much money that's going to take, and we figure out whether or not that can be financed and supported or cash flowed through operations, or do we need debt to do it. That drives whether or not we're going to go to the capital markets and ask for money. I know that it's a normal thing to look at debt leverage ratios, and I understand that more debt can make some efficiency.

Speaker #1: Where do we want to grow the business? Where do we want to make strategic investments—in land, in-house, etc.—new markets? And then we go through the capital planning exercise to determine how much money that's going to take.

Ryan Marshall: We go through the capital planning exercise to determine how much money that's going to take, and we figure out whether or not that can be financed and supported or cash flowed through operations, or do we need debt to do it. That drives whether or not we're going to go to the capital markets and ask for money. I know that it's a normal thing to look at debt leverage ratios, and I understand that more debt can make some efficiency.

Speaker #1: And we figure out whether or not that can be financed and supported or cash flowed through operations or do we need debt to do it?

Speaker #1: And then that drives whether or not we're going to go to the capital markets and ask for money. I know that it's an enormous thing to look at debt leverage ratios.

Speaker #1: And I understand that more debt can make some efficiency there's an efficiency argument that if you have the right amount of debt or more debt, it's a beneficial lever to return.

Ryan Marshall: There's an efficiency argument that if you have the right amount of debt or more debt, it's a beneficial leverage to return. In this environment, I think we're positioned with lower leverage and doing all the things that we've said we're going to do. We're growing the company, we're growing our land pipeline, we're growing community count, we're growing markets, we're paying our dividend and increasing it, we've been really consistent with our share buybacks. There's not an argument, at least not one that I've been unable to convince myself with to suggest that we need more debt.

Speaker #1: But in this environment, I think, where we're positioned with lower leverage and doing all the things that we've said we're going to do—we're growing the company, we're growing our land pipeline, we're growing community count, we're growing markets, we're paying our dividend and increasing it, and we've been really consistent with our share buybacks—there's not an argument, at least not one that I've been able to convince myself of, to suggest that we need more debt.

Speaker #4: Your next question comes from the line of Susan McLaurie from Goldman Sachs. Your line is open.

Operator 2: Your next question comes from the line of Susan Maklari from Goldman Sachs. Your line is live.

Operator: Your next question comes from the line of Susan Maklari from Goldman Sachs. Your line is live.

Speaker #11: Thank you. Good morning, everyone.

Susan Maklari: Thank you. Good morning, everyone.

Speaker #1: Good morning.

Ryan Marshall: Morning.

Susan Maklari: Good morning. My first question is on the active adult segment. You mentioned that the Explore by Del Webb product is contributing to the growth that you're seeing there. Can you give us a bit more color on where those communities are in terms of their ramp, and as we look out, what that could mean for future growth in that segment?

Speaker #11: Good morning. My first question is on the active adult segment. You mentioned that the Del Webb Explorer product is contributing to the growth that you're seeing there.

Speaker #11: Can you give us a bit more color on where those communities are in terms of their ramp, and as we look out, what that could mean for future growth in that segment?

Speaker #1: Yeah. Susan, I'm really excited about Explorer by Dell Web and the ideas we're taking these highly amenitized lifestyle communities that have historically been targeted to the age-restricted over 55 buyer.

Ryan Marshall: Susan, I'm really excited about Explore by Del Webb, the idea is we're taking these highly amenitized lifestyle communities that have historically been targeted to the age-restricted over 55 buyer. Now you're opening it up to a broader range of buyers, particularly the Gen Xers that are approaching retirement that maybe aren't as interested in being in the age-restricted community. I think it'll be just tremendous opportunity. Jim mentioned we've got our first two communities, actually first three communities that are now open, one in Southern California in the desert, the Palm Desert area, one in Columbus that just opened in the most recent quarter, and one in Tampa, Florida, that just opened. Then, our next opening will be in Utah, just kind of east of Park City, east of the new Deer Valley expansion.

Speaker #1: And now you're opening it up to a broader range of buyers, particularly the Gen Xers that are approaching retirement, who maybe aren't as interested in being in the age-restricted community.

Speaker #1: So I think it'll be just a tremendous opportunity. Jim mentioned our first—we've got our first two communities, actually, first three communities, that are now open: one in Southern California in the desert, in the Palm Desert area; one in Columbus that just opened in the most recent quarter; and one in Tampa, Florida, that just opened.

Ryan Marshall: I think it'll be just tremendous opportunity. Jim mentioned we've got our first two communities, actually first three communities that are now open, one in Southern California in the desert, the Palm Desert area, one in Columbus that just opened in the most recent quarter, and one in Tampa, Florida, that just opened. Then, our next opening will be in Utah, just kind of east of Park City, east of the new Deer Valley expansion.

Speaker #1: And then our next opening will be in Utah, just kind of east of Park City, east of the new Deer Valley expansion. So these are communities that have got a heavy, heavy amount of lifestyle.

Ryan Marshall: These are communities that have got a heavy amount of lifestyle, really kind of speak to buyers that maybe they're retired, maybe they're getting closer to retirement. We think it can be just a really nice augmentation and growth opportunity within our already very successful Del Webb business.

Speaker #1: And we're really kind of speaking to buyers that maybe they're retired, maybe they're getting closer to retirement. And we think it can be just a really nice augmentation and growth opportunity within our already very successful Del Webb business.

Speaker #11: Okay, that's great color. And then I guess as you think about the mix of the business evolving around these newer products, as well as the shift to BTO versus spec, can you talk a bit about the optimal sales pace for the business and how getting this mix helps you in terms of hitting that longer-term growth target of 5 to 10 percent that you've put out there?

Susan Maklari: Okay. That's great color. I guess as you think about the mix of the business evolving around these newer products as well as the shift to BTO versus spec, can you talk a bit about the optimal sales pace for the business and how getting this mix helps you in terms of hitting that longer term growth target of 5% to 10% that you've put out there?

Speaker #1: Yeah. So the way that we've thought about growing the business is we've made the investments into land and into new communities that will grow. You've seen us pretty consistently over the last three to five years, where we've grown our community count somewhere in the 3% to 5% range.

Ryan Marshall: Yeah. The way that we've thought about growing the business is, we've made the investments into land and into new communities that will grow. You've seen us pretty consistently over the last 3 to 5 years where we've grown our community count somewhere in the 3% to 5% range. You're seeing that we've been very consistent and predictable on that, and I expect that to continue. If we can see some normalization of absorption paces, I think you've got a very good opportunity to be total volume growth in the 5% to 10% range. Some of that coming from community count growth, some of that coming from a slight expansion in absorption rates.

Speaker #1: And you're seeing that we've been very consistent and predictable on that, and I expect that to kind of continue. If we can see some normalization of absorption paces, then I think you've got a very good opportunity to see total volume growth in the 5% to 10% range.

Ryan Marshall: If we can see some normalization of absorption paces, I think you've got a very good opportunity to be total volume growth in the 5% to 10% range. Some of that coming from community count growth, some of that coming from a slight expansion in absorption rates.

Speaker #1: Some of that coming from community count growth, some of that coming from a slight expansion in absorption rates. In terms of the right number of sales per community for us, we're of the view that we want to strike the right balance between pace and price to drive ultimate return.

Ryan Marshall: In terms of the right number of sales per community for us, we're of the view that we want to strike the right balance between pace and price to drive ultimate return, and every community's a little bit different. That said, we are a production home builder, the general rule of thumb is every community's got to sell at least two homes per month. If it's not doing that, I think it's hard to get the economies of scale that you need in order to be a successful production home builder. That'd be the de minimis kind of minimum level. Hopefully, we're operating at something higher than that makes sense for the return objectives that we have.

Speaker #1: And every community is a little bit different. That said, we are a production homebuilder, and the general rule of thumb is that every community has got to sell at least two homes per month.

Speaker #1: If it's not doing that, I think it's hard to get the economies of scale that you need in order to be a successful production homebuilder.

Ryan Marshall: If it's not doing that, I think it's hard to get the economies of scale that you need in order to be a successful production home builder. That'd be the de minimis kind of minimum level. Hopefully, we're operating at something higher than that makes sense for the return objectives that we have.

Speaker #1: So that would be the de minimis, kind of minimum level. And then hopefully we're operating at something higher than that, that makes sense for the return objectives that we have.

Speaker #4: Your next question comes from the line of Kenneth Zanger from C-Port Research Partners. Your line is live.

Operator 2: Your next question comes from the line of Kenneth Zener from Seaport Research Partners. Your line is live.

Operator: Your next question comes from the line of Kenneth Zener from Seaport Research Partners. Your line is live.

Speaker #3: Good morning, everybody. I appreciate the time and the answers. Could you, Ryan, expand? You talked about strengths in Texas, which I think is really more the entry-level Centex area.

Kenneth Zener: Good morning, everybody. Appreciate the time and the answers. Could you, Ryan, expand, you talked about strength in Texas, which I think is really more the entry-level Centex area, obviously Florida, which is doing quite well. What % of buyers in Florida are from out of state? I combined my questions. Thank you.

Speaker #3: And then, obviously, Florida, which is doing quite well. What percent of buyers in Florida are from out of state? I combined my questions. Thank you.

Speaker #1: Texas—Ken, with the two that we highlighted, we saw positive improvement in Dallas and Houston. In Dallas, we have a very diversified business, so we do everything from entry-level to move-up to active adult.

Ryan Marshall: Texas, Ken, the two that we highlighted, we saw a positive improvement in Dallas and Houston. Dallas, we have a very diversified business, so we do everything from entry level to move-up to active adult. Houston tends to be more affordable, the fact that we're seeing some I said it's a little early to declare victory, but we are seeing some positive trends there. As it relates to Florida, I don't have those numbers off the top of my head, Ken. It really varies by city also by the type of community. Tampa, as an example, we have a fair number of first-time buyer and entry-level communities in Tampa. Those are going to be predominantly local buyers.

Speaker #1: Houston tends to be more affordable. So the fact that we're seeing some—I'd say it's a little early to declare victory, but we are seeing some positive trends there.

Speaker #1: And then as it relates to Florida, I don't have those numbers off the top of my head, Ken. It really varies by city and then also by the type of community.

Ryan Marshall: As it relates to Florida, I don't have those numbers off the top of my head, Ken. It really varies by city also by the type of community. Tampa, as an example, we have a fair number of first-time buyer and entry-level communities in Tampa. Those are going to be predominantly local buyers.

Speaker #1: Tampa is an example. We have a fair number of first-time buyer, entry-level communities in Tampa. Those are going to be predominantly local buyers.

Speaker #1: And then you go to the Fort Myers, Naples area. We do a lot of second-home, seasonal, kind of retirement communities, and you've got a much, much higher percentage of folks that are probably coming from out of state.

Ryan Marshall: You go to Fort Myers, Naples area, we do a lot of second home seasonal kind of retirement communities, and you've got a much higher % of folks who are probably coming from out of state. Florida, I think Florida continues to do really well despite some of the things that have been talked about with Florida-related challenges. The fact that this is now our probably third or fourth Q in a row where we've had positive year-over-year order growth. It's not as if we're comparing on soft comps. We're seeing real momentum and growth in Florida, and I think it's reflective of the land positions and the operators that we have there.

Speaker #1: So, Florida—I think Florida continues to do really well, despite some of the things that have been talked about with Florida-related challenges. The fact that this is now probably our third or fourth quarter in a row where we've had positive year-over-year order growth.

Ryan Marshall: The fact that this is now our probably third or fourth Q in a row where we've had positive year-over-year order growth. It's not as if we're comparing on soft comps. We're seeing real momentum and growth in Florida, and I think it's reflective of the land positions and the operators that we have there.

Speaker #1: So, it's not as if we're comparing on soft comps. We're seeing kind of real momentum and growth in Florida, and I think it's reflective of the land positions and the operators that we have there.

Speaker #3: Thank you.

Kenneth Zener: Thank you.

Speaker #4: Your final question will come from the line of Ryan Gilbert from BTIG. Your line is live.

Operator 2: Your final question will come from the line of Ryan Gilbert from BTIG. Your line is live.

Operator: Your final question will come from the line of Ryan Gilbert from BTIG. Your line is live.

Speaker #5: Hi. Thanks. Good morning, guys. On cycle times, I'm just wondering if you could remind us of the difference between order-to-close cycle times between spec homes and build-to-order.

Ryan Gilbert: Hi, thanks. Good morning, guys.

Ryan Marshall: Good morning.

Ryan Gilbert: On cycle times, I'm just wondering if you could remind us the difference between order to close cycle times between spec homes and built to order.

Ryan Marshall: Order to close, well, the build time, we really measure it from start to final. That's how all of our cycle times are calculated, and both spec and build to order are in those 100-day numbers that we're giving you. There is no difference. In terms of order to close, it depends. It really depends on, does a spec home sell during the production process, in which case there is no difference. If the house finishes and it sits for 60 days, well, you're adding 60 days to the end of the finished timeline. That's why to get consistent measurement on that, Ryan, it's always from the time that you put a shovel in the ground and dig the foundation to when you get your final inspection.

Speaker #1: Order to close? Well, the build time—we really measure it from start to final. So that's how all of our cycle times are calculated.

Speaker #1: And both spec and build-to-order are in those 100-day numbers that we're giving you, so there is no difference. In terms of order to close, it depends.

Speaker #1: I mean, it really depends on whether a spec home sells during the production process, in which case there is no difference. If the house finishes and then sits for 60 days, well, you're adding 60 days to the end of the finish timeline.

Ryan Marshall: If the house finishes and it sits for 60 days, well, you're adding 60 days to the end of the finished timeline. That's why to get consistent measurement on that, Ryan, it's always from the time that you put a shovel in the ground and dig the foundation to when you get your final inspection.

Speaker #1: So that's why, to get consistent measurement on that, Ryan, it's always from the time that you put a shovel in the ground to dig the foundation to when you get your final inspection.

Speaker #5: Okay, got it. Thanks. And then, second question—just on, I guess, the bigger picture and demand stabilizing: orders are up, gross margins are up, and you're able to pull incentives off.

Ryan Gilbert: Okay. Got it. Thanks. Second question, just on, I guess, bigger picture and demand stabilizing, orders are up, gross margin's up, you're able to pull incentives off. Why not target a higher delivery level and get some SG&A leverage in 2026?

Speaker #5: Why not target a higher delivery level and get some SG&A leverage in '26?

Speaker #1: Yeah, I mean, look, we're focused on running the best holistic business that we can that's going to drive the best return in this environment.

Ryan Marshall: Yeah. Look, we're focused on running the best holistic business that we can that's going to drive the best return. In this environment, I think we've been pretty crystal clear, and if we haven't, I'll do it now, to say we are prioritizing the pace price balance. Right now, I think there's plenty of examples out there of where just driving volume for volume's sake isn't necessarily yielding the best results. Not to say that our way's perfect, but it's the way that we've decided to run the business, which is, I think we're getting volume, but we're doing it in a pretty responsible way. If that means that our overhead leverage is a little less than optimal, I can live with that.

Speaker #1: I think we've been pretty crystal clear, and if we haven't, I'll do it now to say we are kind of prioritizing the pace, price, balance.

Speaker #1: And right now, I think there are plenty of examples out there where just driving volume for volume's sake isn't necessarily yielding the best results.

Speaker #1: So not to say that our way is perfect, but it's the way that we've decided to run the business, which is—I think—we're optimized.

Ryan Marshall: Not to say that our way's perfect, but it's the way that we've decided to run the business, which is, I think we're getting volume, but we're doing it in a pretty responsible way. If that means that our overhead leverage is a little less than optimal, I can live with that.

Speaker #1: We're getting volume, but we're doing it in a pretty responsible way. So if that means that our overhead leverage is a little less than optimal, I can live with that.

Speaker #1: And, all that said, the total SG&A leverage is going to be pretty consistent with where we've been the last number of years, at 9.5% to 9.7%.

Ryan Marshall: All that said, the total SG&A leverage is going to be pretty consistent with where we've been the last number of years at 9.5% to 9.7%. I think the ultimate benchmark and report card is operating margin, which I think we continue to perform pretty well in that category.

Speaker #1: And then I think the ultimate benchmark and report card is operating margin, which I think we continue to perform pretty well on in that category.

Operator 2: That concludes our question and answer session. I'd like to turn the call back over to James Zeumer for closing remarks.

Operator: That concludes our question and answer session. I'd like to turn the call back over to James Zeumer for closing remarks.

Speaker #4: That concludes our question-and-answer session. I'd like to turn the call back over to Jim Zeumer for closing remarks.

Speaker #3: Okay, appreciate everybody's time today. We'll certainly be available for any additional questions as we go forward. Otherwise, we look forward to speaking with you on our next earnings call.

James Zeumer: Appreciate everybody's time today. We'll certainly be available for any additional questions as we go forward. Otherwise, we will look forward to speaking with you on our next earnings call. Thank you.

Speaker #3: Thank you.

Operator 2: That concludes today's meeting. You may now disconnect.

Operator: That concludes today's meeting. You may now disconnect.

Q2 2026 PulteGroup Inc Earnings Call

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