PHM - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q2 2020 PulteGroup, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Mr. Zeumer. Jim ahead. go Please

Jim Zeumer

safe Sharon PulteGroup’s morning. We second been healthy you you, times. welcome hope want you have and remain to to quarter able these and Thank challenging I good to that throughout Great. earnings call.

recorded CEO; corporate of we QX reported adjusted accompanies on to We'll Marshall, are affect accompany These significant also along release website annual in the results. of from comments our reports. operations, Jim copy filings, could risk want and this our provide from our outside. adjusted an of Also, about and a summarized that Participating earnings release O’Shaughnessy, post as results an quarter earnings adjustments today's information to presentation today's financial impact results. detailed quarterly audio release presentation made A includes Ryan results call well in to most review Bob period. along severance want part detailed As SEC The pandemic's our other call, everyone Bob risk by and future update to these and been statements exclude President, webcast and President you our review I on our within of me within impact as results be are call replay is forward-looking your Vice later alert the with suggested are are have and materially of company's President our I differ Senior our tables slides. assist will today. in the will discussing insurance slides Ossowski, our Actual the our that reconciliation results our second at key the included call and Finance. A slides. results of expected performance. with and in our with the highlight results in and as future analysis pultegroup.com. on Executive morning's to Jim the morning's we reported factors of to to dialing this including factors presentation that could today's that our CFO; today's Vice today. We encourage posted those

me let to call turn the Now over Ryan. Ryan?

Ryan Marshall

morning. in nothing and that was new recovery very we Jim, of Thanks over course report the good outstanding. the I that of home to demand am second experienced the pleased quarter short

to up over the XX% first move last the demand adult year. in last quarter only during increasing resulted advanced. XX% from remarkable and quarter across results year, last geographies in buyers, strong meaningful demand only orders of among June. first-time as XX% for for increased rebound June buyer XX% all XX% quarter the active The our Led for from new time, as year. quarter Our see June orders for demand show by we X% improvement aggregate orders saw second a improvement year-over-year second orders declining This of fell culminated and in April net groups month in rebound

allowed improved dramatic dynamics balance industry as through encouraged that us in our fact the continues gains remained of We this and few in as financial leave business demand generation, are the us gains practices and strong our very momentum July. combination by the coupled position. we financial These planning, and include the of growth, position with through disciplined the with overhead the when leverage, results prudent of which year. Improving work strong revenue of operating meaningful margin expansion, has to in strength weeks first drive recovery cash

anything country. and more our the is to heartfelt as on this health and cannot the your trade to of are continues everyone toll well to It that of impacts situation. healthy the COVID-XX act been any serve it heroic. to a has a economy, our goes at remain we health dynamics safe. business. and partners our beyond as positive From implications, one the ongoing our on beings, pharmaceutical a front-line this and but communities call, It's simply human loss severe as the as this backdrop, as hope virus that tragic and but all battle experiencing employees, officials families look it With life we our workers, companies, For the in clear our business efforts people importantly, see

quickly brief we financial are insights the a update Before quarter business results, running on to in centers sales appointment let model with early into customers. of May. models we and our and that by remotely pivoted am me pandemic, second and pandemic and we homes and our outset are impacts currently. selling virtually. to the work sales closed walk-in the fully now staff of say discussing the provide I the to working open and our reopening get began we centers and our how pleased on we And At

are are and would processes to help disinfecting expect, enhanced to PPE, social the protect following our employees salespeople are of customers. distancing cleaning using adhering As and health appropriate you practices our and

comfortable with is our not because we preferred in-person on While everyone are their customers centers interacting sales with open, meetings. are terms

successfully of markets, virtually. take of homes the to sell start COVID-XX. that tools available was a service efforts from for building and essential home an have Except our deemed to handful advantage full supported We technology continue of

the at in all So early the even our to country. disruptions markets using are the working level. off-site, perform to operations to At model rate, workers with operations strong services purchasing their but with tremendous construction appropriate site financial still to are finally, high outstanding pandemic. distancing Thanks in high of protect adhering every minor suppliers. team, were the stages closing conjunction functional as did to team a present, of in handle continues our the partnership At quarter of to adjusting job and truly during effort remotely and working our practices our demonstrated are our the Again, across present, an mortgage the homes. fully very and the social and our by job, And business work results and PPE personnel on aspect virtually. in processes second group are we trades, the financial capture

ensure Our navigate supply key and to home has group with availability minimal disruptions building potential has with operations. our closely been products. shortages chain building held sales up purchasing of to well Working able our and ongoing around construction,

XX been to we anywhere where land in XX have Given primarily the relates increasing spend, negotiated rebound to this days. our acquisition deals delays housing, of from development we and land purchase

of closing new is Unfortunately, arrives. most clear completing now transactions anytime these it's not are away the when We going soon. date COVID-XX that

increasing This investments. account So we thoughtful and which for disciplined the lots of now our our options, of in control. use remain that XX% land includes we

market to the am to allowed say On majority improved back that dynamics side, the us that have pleased very quarter. of during the the employees bring I people we furloughed

had COVID-XX. to a individuals also small opportunity is shock people for I returning rehire May, roles. in over field are past XX the organization eight rebound have of has to construction of our Obviously, in from dramatic new that which we a weeks, the to demand number experienced a most the following the released We the feeling. the homes would note good the initial

are analyzing drivers the to additional demand certainly work of from continues there factors rates, low as historically interest housing likely suggests benefit demand While that well.

overlay view of we data, search trends home the Google at homes. commonly buying, can data a homes, there patterns that available internet been related searches terms new utilizing in searches Despite COVID-XX new for number consumer the related in buying associated been looking an terms since has home home. for with the of First, growing Particularly indicate specific to increase new mid-March. has interest

a we of multi-year related highs for Webb, searches similar I and that for of number we are routinely June. May note dramatically a have have fact, new seen pattern In terms in up Del in the would in Google shopping which home. to searches seen

our at per higher are In year. are XX,XXX week approaching time they last site Del now visitors to fact, this were and Webb trending than unique

centers that effectively available to our in for today. of the about year. demand. end to pandemic. units, the product very At code homes your global draw strangers analysis March our to and through finally, inventory opening many April. of home less system with magnitude, movement has And a our spec But it's business allowed prices to demand third report stock of can increase experienced show a presidents the Data their that the of divisions to some less end risk. also of possibly of on end comfortable us and can combination of modest during being was had across of has an in material of homes lot from demand available. in XX% largest driver to compete on a referenced the units having built several such XX% the we patterns million March and markets made new the build cycle see number model which also been total build-to-order debate demand by urban in helped all our we and buyer a I'm of was Based advantage The strong internal we up be buying housing has in X.XX inventory, renters very available we days has division June, roughly inventory the existing XX which down of limited communities. down allows suburbs. prior and in from absorb a Second, supply of ZIP the from of limited fell spec that the while The than into survey, housing a while a raise hard the sure where demand operate first-time of strong the May, for quick-move-in supply and increase sale appreciate the the for half homeowners from level buyers, points surrounding urban

in and/or their in In in increase divisions end is moving from and in typical the The price the dramatic has report greater positive confidence more about the business fact, of prices dynamics of been The forward. reductions includes to changes and June market gives more change or than April XX% of communities. to X% in raising of half base X% range incentives. us price our

Bob the say grow to review the severe, remainder will is alone caused are buyer economies. the number, turn and we July. during results. of I the want as has It industry Recession. our and by continue has impossible in guidance and for which XXXX, his That of weeks remained demand will pandemic strong such, months. of during quarter in Great As recovery unfold provide in said, and volatility to is the weeks anything forecast demand is regard, local In of experienced, fast state quarter the size this second second part is were of the that which unlike this quarter reestablishing dramatic to three clearly experienced and even dynamics worst of in the the COVID being the through swings reopening a first slowing coming in these down how hotspots The

will disciplined about For and be business. how measured conditions in PulteGroup, very optimistic remain market that our we future manage we

me call Bob second a results. turn Now, our for quarter let the Bob? review to of

Bob O’Shaughnessy

some but of Also Thanks, of about quarter, to our balance in the in providing volatility full I as detailed business during quarter context provide the we the And COVID-XX. through be finally, third XXXX quarter sheet, our insights and analysis talk Ryan progressed. income given and market in call, where year guidance our statement the expected our Ryan morning. Similar good won't first the business typical go I'll needed, the our will on quarter I will and results. as stated, conditions change on

State totaled the of For XX% including the homes, higher orders X,XXX in our quarter, tremendous Northern compares closings and X% driven increased second given down active X,XXX new adult. represents turnaround in by average XX% pandemic locations, consisted adult. would geographic Net partially up move of were the these billion, prior price that year, the second quarter orders the the up quarter, started a time, trends, lower changes XX% $X.X shutdowns active is X% for X% in last demand. the which highlight down This period by quarter mix homes to from prior first we move to changes Consistent a a the XX% closed. of in the with caused year and wholesale I Pennsylvania, higher and several offset quarter temporary and the for $XXX,XXX. closings of product California, price with homes, in XX% XX% revenues in market decrease X% average XX% this recent exaggerated that Closings sales Washington. in time, revenues increase year, primarily were with first from the as price sales April to reflects Michigan,

quarter, to orders X,XXX to were For orders buyers behaving. X,XXX gotten quarter were homes. move adult homes to X% were up entire homes, the are down time about active up the first XX% adult down XX% orders active over X,XXX questions how and We've

I note So this group two month want among to demand quarter. each improved that in to

In fact, orders recovery home, now ongoing feeling so finding our were in strong and with part selling process are are demand buyers adult and the June At they adult with routine. of last to that existing out amenities business. sell over our have this buying optimistic that is environment reopened up the comfortable time, year an an XX% we same going a communities, active buyers active more in more the

For the XX% rate last was in elevated compared quarter, our the orders XX% April, of June. rate higher cancellation year, cancellations driven in cancellation was our rate by XX% felt as only with the cancellation

increase to call, second consistent lower is homes, quarter the the an homes year. homes manage close. QX X% our X,XXX ended over last backlog, excited earnings is XX,XXX with have of homes starts that we decision are But in the were focused of quarter, We currently are collapsed down to in At aggregate, year. In specs. or as we sold early homes we during seen from XX% we tightly demand is last XX,XXX XX% which discussed with had As construction on the which of pandemic, our construction, under end increase while and production, in building XX% expect the under the be full an the number we buyers get to of the deliver in have us to starts of we number to the Based and approximately we specs, speculative of on now homes backlog year the deliveries XX,XXX closer X,XXX in for $XXX,XXX units to units XX,XXX in expect representing an XX% to homes, of $XXX,XXX, third of third to and number effort currently range with in expect average target we of in ratio backlog further, quarter $XXX,XXX. to of started the X,XXX approximately our quarter, in to price be production, the range ASP to production. between our

sales the on price to and year, deliveries full between For expect $XXX,XXX average be we $XXX,XXX.

to in will mix in XX the As quarter. the first we always, realized sold. the of price sequential the half deliveries the last represents environment our Back year were gross over homes quarter XX influence the average points given XXXX, which a strong sales quarter. of and was in of Margins increase from these gain points benefited from basis the the XX.X%, second when back of basis majority results, an sales review quarter for of of my quarter any margin

Our were down basis to this XX first discounts points XX of margins basis year also from X.X% reflect lower and quarter down the incentives, from last points as year. sales

favorable gross range margins gross back half Given with of the conditions, to we of the gross Currently, the of XX.X%. the margin be strong remain demand third quarter be for XX.X%, we year. XX.X% year today's in full to to expect in the XX.X%, margin range expect through

$XX million the previously reversal home insurance million was $XXX or partially SG&A actions charge taken an severance benefit, revenues the was quarter. quarter in million sale pre-tax our from announced pre-tax the included reported second the in or reserve in offset expense from $XX SG&A of reported staffing Our X% by resulting resulting of a

with last the to XX% of year. The in million in XX to growth leverage response volume actions by expenses better which $XXX two items, our the is improvement realized in of for points conditions. quarter Excluding basis expense second or SG&A overhead adjusted changing than revenues, the along home in sale driven was quarter quarter, lower these taken the overhead the was market

X.X% typically SG&A in of of revenues revenues XX.X% are to the expenditures, full the for SG&A to well. XX.X% numbers range be give to quarter in SG&A and We we be the we expense expect year third providing year. our for adjusted as QX only of range to full the of for While currently guidance XX.X%

services, operations year. higher operations rate. pre-tax and outstanding capture loan financial improved of to prior in million representing from over home The XXX% increase $XX generated our driven an higher Turning the by building company's an income, environment, increase volumes resulting was the a margin growth

the a reflects for represents increased in technology second services operations our to income investments without Closing services million compares The missing leverage rate home expense capture them comments our Mortgage to to quarter building This have finding tax on our for providing mortgage our of customers. our financial XX% XX.X%. last rate in their team to effective out building year. capture which quarter expense to fact, was my opportunity Pulte last tax an improved an operations $XX XX% of to transition The second tax virtual processing the In platform value-added with of allowed offsite our million, are from year. rate rate $XXX beat. effective statement, income XX.X% made

last energy realized the year tax Our periods. in guidance, tax lower the because rate of credits for and our was effective quarter primarily than historic

excluding credits that our continue forward, Going energy we may tax rate permanent the XX%, to any differences be arise. like expect to discrete approximately tax

Prior for or our for or was income income share. was while $X.XX adjusted Our million share. period $X.XX reported was $XXX second net $XXX $XXX or million per income year per the net $X.XX million quarter the per share, net

from the repaid $XXX in to of the revolving after million finished with we the we sheet, balance quarter over facility down having credit drew Moving our cash, billion March. $X.X

to I our land cash strong our as XX.X%, suspend our defer investments ratio our to second our quarter, in quarter repaid well and acquisition million acquisition. last the a and share included vertical billion construction million ended of land year months repurchase quarter capital to as and that $XXX a the $XXX debt-to-capital in related results, XXXX, American QX last the we developments, and we invested $XXX development. to with net spend In position note quarter approximately down activities. Having is related which land the benefited six operating of actions in million year. $X.X invested our of decision have West this first acquisition the addition costs, $XXX felt Through strategically second In of year from to we million ratio debt in from second revolver, in the would while XX.X%.

the Given purchase the investment our in conditions, land assets. are improving of both and market new we development land increasing

under expect such, highlight begin This target option to deals a or it we the the invest. influence progress previously completing ended position approximately As our which deferred. any we capital of continue on toward year we that and much in highest broader options. economy represents as as demand billion, the ultimately we investment our our decade, XX% of could land that with full like $X.X quarter consumer will XX% I'd material are pandemic We the be to impact and over and we how housing control, options. XXX,XXX XX% has land lots owned

Ryan? back final call now Let Ryan comments, the for me turn some to

Ryan Marshall

to that in performance, experienced Operating the our and financial rebound certainly few that company flows say we a cash we've encouraged are while volatility, the by strong outstanding months. and want midst global delivered flexibility. quarterly further strengthened acceleration I extreme earnings over that an in position past market demand of and the pandemic generating the

That backs groups, COVID-XX the the people the own. buyer even first looking reopening place across looking clear shared adventure, what in are this that for new all cities to and drivers step local thoughts whether for economies. adult of it's of want demand, the remains ownership the with to delays living home buyer country, being there we to in or a for said, high a time a continue call the their along acceleration monitor cases space of different active on exit desire While buyer the is is

to we Given to running committed these business. thoughtful a conditions, disciplined taking approach our remain and

the business not to alignment priorities While fundamental focus capital our means as adjust also business, when used dividend repurchases. we means practices, time. of have have stated through and criteria have against so This for risk to strategies our allocating weighted paying past through investing in that years. to returns had we our and continue same high we in changed, on capital to goals returning generating invest excess the and appropriate eight successfully operating the shareholders share This land with

resilient to for and to a thank to today's to and we’re global pulled done work Although, we during has in our operating moved their other company. these associated any lockdowns. everyone of personnel fast, of in our people and division we risks distancing, back invested working appropriate our transitioned site then given where sales challenging exited times, pandemic. tremendous corporate and elevated from appropriate markets environment, have technologies all field selling using and efforts most certainly assess are PPE our and our reopen offices each frontline centers I on virtual teams and as smart, together remotely with all could as maybe our operations want new implementing strategies, during From very social their

back call Jim. the turn to me Let

Jim Ossowski

open to call Thanks the now prepared We're questions. for Great. Ryan.

just can call. the would and ask of possible during you that the one – repeat we to limit So the get and instructions started. so ask follow-up. questions ask, we one get can remaining could we'll as question yourself as you and to many We Sharon time Thanks,

Operator

from Lovallo go America. [Operator of first question Your ahead. John Instructions] Please comes Bank with

John Lovallo

Thank question. you my for taking

back on what big are or forward, wondering gauge thing And of that to in monitoring answer, The the we've what difficult sustainable the been you're in I'm bit? sustainability is, of kind gas guess is, to step I be? the how kind going this things pull know that's bounce terms whether to maybe seen you a a but here first very should I and But the mind remarkable is, the our that obviously has question is here. going of question strength one is,

Ryan Marshall

monitoring we Well, Ryan all business. for the question. morning, the good We're and John the that we typically when it's metrics run same monitor thanks

which seeing at to of looking what consumer clearly the attention things in the on the happening in pay we're market, what's new home a behavior, we remarks. for what's described ownership, still to attention we the the by Certainly the that day desire creation, home pay home biggest this happening we So what's internet, there. to are happening remains some going our in at new with of resale We our but majority with sales with prepared on searches dominated competitor. what's We et competitors, job look we resale, home job being certainly market cetera. unemployment, have in what's happening with

high So through John, is would the we're thing that really focused delivering I emphasize focused, on we're time. biggest returns

And focused cash, making, we very type now cycle have little managing the investments managing with back way we're way debt, the the a got right we're demand, through you tailwind much certainly that we're of consumer a we're the bit at the our running movements. those on we're that way that so while that being company,

that The I kind in short-term orders, to of what an et shorter-term happen that other pay X, sales may as to on see demand X, got more a local to shelter state, have kind office. could economies Phase place certainly and revert thing, back is of Phase that attention cetera, in the we've might might think we potentially impact in the

John Lovallo

West. That's helpful. And specifically just the then American maybe in market on Vegas

seeing of to there some you have any the are – reopen? casinos as begun improvement what So

Ryan Marshall

a quarter you that fact I if and well, were a quite had of first the at economy. we performed of John, and June. That related the given call, highlighted end in has Vegas market travel market dominance about spectacular incredibly tourism concerned remember, the Surprisingly Yes. as

the limited to the casinos, casinos a seen lot the we've staying go and the local at of with are capacity, back at workers reopening folks the in back hotels. a And of So even work.

Vegas well we're So in and June, about very quite our did that. business happy

John Lovallo

much very guys. Thanks Great.

Ryan Marshall

John. Thanks,

Operator

from question Dahl. state company. comes your Next Mike Please

Your line open. is

Unidentified Analyst

ask, your I a Thanks which this the in questions. are Chris is question, to want on Hi, current latest My what's taking versus from for price environment. demand first our thoughts Mike.

were your I in X% past think over moving with able changed to XX% if And X%, to was we at running thinking communities, hoping of guys what we mentioned, to You well. of has terms When work that you demands should line price in given mentioned pricing. pricing kind about your is all right were raise up as you which now? of seeing see,

Ryan Marshall

our the on same process a Chris. local basis, used, we resale evaluated doing taking always as which influence, that going our things decisions. as we're can. the Those are competitive the against best our on that into in competitors. other new through home happening in we in efforts focused market we've really what's driving against Yes, It's well that is certainly community-by-community that what what's returns on the pricing We're we consideration compete cycle

remind as that really well, you umbrella to of for that make to would need to source that And pay that, rent decisions. so, consumer. with alternative first our that time theme shelter especially you we continues to an overarching is business I and use be the buyer attention

look what's constantly at more And so they're going economics to advantageous. the of

in we unfettered an So prices raise you work. is while good, that believe can demand don't

Unidentified Analyst

it. have some could as I then far weeks, for question, into gauge deeper to Florida, And like my second seen makes hotspots it's trends in as decipherable ultimately but latest sort impact the any what demand there? the just demand drill last sense. Arizona. there, of few you're look the you of really, trends tough I probably in That little Texas, Got the seeing a in COVID

Ryan Marshall

Yes.

temperature three strong pace. sales have they're Arizona, hot particularly us, for markets you The they been are of now, also Texas right Chris. Phoenix, hot and highlighted So those in incredibly that only in Florida, terms not

there that as offices in they translate have most well. COVID sales the seen And been has in of the aggressive despite in certainly fact success in we've our cases economies. an markets, in So that reopening been some those local the increase

Unidentified Analyst

it. the guys. Got Appreciate color

Operator

Next from JP Rehaut Michael with question comes Morgan.

Michael Rehaut

Hi, congrats thanks, and good morning, everyone, recent on results. the

Ryan Marshall

Mike. Thanks,

Michael Rehaut

around strength Where as I obviously, result June think But strong too it's the XX% and there and a back of the you of the rate incredibly tough year. the model out a of assume half don't to focus I obviously well. in July to want go that coming exit quarter. little is showing is talked hit, you know growth detailed. the people I But lot about order

perhaps far itself. rough there from of, very But just growth helpful. movement I maybe going of the it help lot sense and or far, up increased would is to third may July demand, are the a where be in give currently. quarter some meets very get there but may is COVID it's trying expectations demand any any of looking, trending, be numbers pent how around within directional quarter, some know it's and a settle the a can incremental just that so be July so around So to also is very, order idea obviously could forward volatile not how out of,

Ryan Marshall

your Yes reasons Mike, highlighted. of was a we there good prepared June of month that things and with the morning a the lot remarks do that and for listed question. for we're demand and the I up some in To spectacular point, very that. our thanks pleased some think you've pent was

other been. we're how tell – What that's growth our you so time rates to continue or weeks have three to from going will about tell. the July and like practice not I to the comment forward, that of July deviate traditional that So will first assume would on the than

somewhat a into be of albeit as The continued first kind of summer. had seasonally on strong, dog days adjusted weeks basis go we July the in three to

stop of happy of for has the third the very forecast performed, providing kind how about full short our we're kind summer quarter. for July we're will with selling But So months business. we’ll a what hold of optimistic

Michael Rehaut

try had because there, obviously of a again, And that. tremendous there amount appreciate to I focus. is Okay.

communities, see to and out increases price side current of Second talking see the has you inflation Obviously, the yourself about well. you question, environment hand as the at had lumber top price margin to the obviously ability which out costs how I your about cost half could and pricing encouraging. and gains inflation, least to a spike of had anything a couple you've you've when you guess, want Traditionally, ago? exceed, similar not cost believe maybe is But offset the Do do line current you've to to in expansion mention get actually had different business. you environment? allow cost had actually is industry your as to the don't years of being trying in

Bob O’Shaughnessy

Certainly And Yes. basis. lumber, it's a and margins fair question. on are familiar our Bob most given the purchased Hey year. XX with on guide week highs. time a way folks candidly I balance of think the to Mike, we trailing for We've trended lumber the a has it's all

pricing lumber year the so much pretty balance package And set. of the our is for

six more So over to XX these increases be how three of market, impact depending weeks. an really lumber next the the weeks, market performs will in XXXX, on the

the for margin So I into were an being on see balance, benefit commodities, pretty the drive pricing for able outlier. actually think year improving the the down, guide you try we of lumber And with market most as some trades see balance is our that, incorporated continue and work builders that's twice year. good through we'll to their for to

pretty to offset will costs. we those to it's goes trades world us the expect in that in looking reasonable ramp it increases potential business, be time I that's can for back the a usually that of where up your price modest by. point, Given increases the In think for money sufficient get quick some some as to

on we're is were the in up year, from year margin a QX XXXX, up but So balance giving – a that is from was up the QX, where last we you pretty and good. lot the can is QX, which not from tell guide which the market of which from guide sorry, beyond for

about always resale, of is pretty affordability our feel we And biggest competitor but pricing today. controls to overall conscious Ryan's and always the rent and\or are good point, so our cost we opportunities

Operator

Next question ahead. go comes from Zener with KeyBanc. Please Kenneth

Kenneth Zener

everybody. morning, Good

Ryan Marshall

Ken. Hi,

Bob O’Shaughnessy

Hi, Ken.

Kenneth Zener

Can you outlet the your the appreciate – volatility. and – given

to pre-build around you very what want your is a constraining comments but do You guys job losses. phase your But, can growth, I to XQ, particular in I go production? times, it of it's Pulte in your a a can specific mean, is growth? initial believe talk obviously construction a industry lot quarter. what time second closing how you do, Given of more actually guidance order in said is constrained under higher which be But build as model, really than a made demand buyers, it's XX don't normal, than you your little you construction is the There that in of to or might time out think the reflects not for you six days. want you units percent months? terms slower construction first of in

limits what the seeing we kind given that you. under about communities constraints you're where think is the go of in second year? construction really So within your can half units of as you the Thank protection

Ryan Marshall

that Good think it's the reasons down of And the be is one When in was to to made entire one the offsite manufacturing that number look we long has morning, by Jacksonville being continues which be more really for going earlier over in we're the it's industry time. and of years, way talked a long we to to to not of points about some with shell. about one labor, that theme, that Ken time the the constraints, pinch we could efficient new labor, – with question. acquisition the more moving ICG a production of the the eliminate thanks pole we able manufacture big felt that type the for the over ways

are the finding What that we be think I is labor, labor So to work. to one theme. wants the number continues

requirements, There little time, adds and appropriate some cycle I it have restrictions than a it's probably what in So and social PPE homes we've that place, because get as like. you'd and are using shelter additional just been able maybe a places more would tell you lifted ideally in to days distancing, bit built. few slower more to been

So might directly COVID. of that be related constraint a little added bit overlay an to

one municipality. The is other

inspectors are back their facilitation. municipalities lean permitting fairly typically and office permit, in So,

asked same, employees seen and overall in to so get in we ability they've our the those permits our place, sheltered a get municipalities to and And have cycle just as county experienced time, have their instructions. city do and and bit of delay in

Kenneth Zener

Thank you.

Ryan Marshall

Ken. Thanks,

Operator

Next with question Patterson Wells Truman comes Fargo. from

Truman Patterson

results, detail. There morning good Hi, Nice digest and there. the lot a all thank for to is you guys.

most densely seeing And the like or more more out populated populated a populated pronounced? over areas the are densely two? you forward, this of exit, urban are regions, So the do South? how year from you're seeing on looking Northeast you think regions just you to less the plays buyers that, next of kind like first or picture densely which migration areas, some big seeing And metros top actually question, as

Ryan Marshall

it’s for morning, Thanks Good Truman; Ryan. the question.

– to experiencing a for answer far I'll As long a the that's South, far first, second question time. as your Northeast we've as that been trend

due hard job it's and some worked to think other in number their any it's was really than already as things Southern so affordability housing And of South. have to what or States, opportunities it a more create that suggest and ramp I the the to up creation of solve

So I continues wouldn't I kind of accelerating. would suggest that, to suggest that and that it's happen necessarily

in Naples Pennsylvania. of also an in far business of of I'll Jersey then the Sarasota San a the use markets local as if would our and kind increase Florida, seeing term highlighted, you And will, where we North us seeing an bit the urban coast corridor, that the loosely Antonio, as, which and be is Southern Florida. Northeast middle it that Florida, West Myers, As Southwest Fort a in we result we're are exodus, of for which

folks looking think is living to there, I a York bit seeing an be City So closer city, maybe we some for and suburban New that that Pennsylvania. more in to little New opportunity Jersey the were are

Truman Patterson

level, kind an for some forward, towards portion a targeting that margin. push talk you of through the really that. benefit are moving brand Centex Is point? entry-level time you business your making of at first it's just everybody us? gross you like have of it through Okay. nationwide? seems your Thanks some all a parts of entry then What you're aggressive your seems to rotation And expanding like now a for And moving buyer of us your this segment. primarily it it those on been just Can makes thoughts – bit about more actually

Ryan Marshall

from trip machine to that target. a a had to back that felt of of intentionally that business I'll buyer and as the specifically that first XX% the bit that by – business. the effectively that mean us in our right parcels to is target and some company time Sure, QX. what targeted we our that were that of on we time the be we allow lots The compares do we quarter, through to go our first done to We our talked reposition wanted our time would first control time closings bit the for business business. most be And the represent targeted consumers our we coming go it of business would buy by a see to buyer And land We've of business. about it take time and balanced you more and control out our time wanted that lots are total and opportunity to is – equal in the specifically to and XX% XXXX. I take the we we is XX% buyer, What fall we that be in buyer we an talked you – first first was, out we acquire about evidenced time to to currently ideally to we to QX closings business. secure of that the or recent of highlighted it land way where XX% the successfully laid the time

second to prior and compared year’s quarter, – we were we're then, XX%. So

first in time being from our moving to much seen So gone what business XX% XX%, the that we're to you've ideal now is XX%. And XX%, XX%. target we're it's of closer

shy there, we we're that of mix points want done growth drive So where terms nice for point land this few at we in a percentage we're the think business, but closing we've our of time, that. pipeline in just wonders got will seeing be it's ideally probably to

Operator

Next Ratner question Alan & comes Zelman Associates. from from

Alan Ratner

where year XXXX I to you're the and Ryan, in guys, land gradually Hey you kind time. you're here, and sustainable. that this more. when is on on the But, you the pipeline XXXX you obviously again grow the trying you XXXX, on the think about where you're XXXX, of back could position mitigate this to morning. probably quarter the things this acquisition the through supply of land continues end a of you you of activity is would deliveries, take starting of spot and ramp last to this such optioning buying congrats have, side, as to look pipeline, in the But risks presumably up certain during point. pipeline Nice development view the sustainability land good late now in assuming the or kind thinking point through now, on would do air Do the any primarily, execution just flurry just not we're imagine for growing trends difficult do at maybe a do XXXX? at have be think sufficient pockets assuming to pipeline seeing the the is foresee a to and continue forward on you difficult

Ryan Marshall

able a XX/XX with bigger proud option. reason which mix been options, in on highest manage a I Yes, to tell any the this the not has that over guidance owned that XX% in at on to question. We do time. Alan, broadly healthy. XXXX is you it's our our point really forward just seen in how pipeline over is pushing about of that will the can what been team driving giving XXX,XXX it's lots. I'm you and to point ever for And control business I What we've your toward appreciate versus risk our we've land sustainable We're and it. about that decade. number that thanks how view,

in look approved when real So of actually the that's we've we that win. year, options the at are a percentage current XX%. And the over lots

isolate when of north we're acquisitions, XXXX we the while to just entire it Del So inclusive we've moved portfolio XX%. of Webb,

big big prior So I we're increase backlog, We've year. Alan, over think XX,XXX got a a really in that's of part homes XX% it. backlog, over

much into gives original able Certainly that visibility. in really in real it outlaid cautious this development six know our amount XXXX spend not QX we and did think QX. again, but We early And numbers land as part of running us that next of we were that land start we contribute gives have we positioned quarter, us materially the on that's generate. ability short-term of to continue in as it's to a impact did to the not So new of that that's our highlight impact We we're of months the on kind that the communities our to to going think a timeline. to kind the to opened it's of something get blip perform part to a dollars well. build-to-order ability in our deliver in is advantage a year, a and well early model nice of business which will is bit only of kind outsize kind margins continues so of is that big forward our what's we well,

Alan Ratner

that. Got a market positive Vegas on or of see the face And then to it. good I environment appreciate continuing to had comments That's and performing in that tough Ryan. earlier, you second, there. it's some helpful, job well

your like now and footprint, the on where or land whole have little conservative and diversified. land year being an bit reallocate well spend of you're look the right opportunities? land about do for going Orlando, the maybe elsewhere a Are you the any your to Vegas benefit half equal feel spend dollars you or very perhaps of more As be those at back there at markets, look has you thinking portfolio

Bob O’Shaughnessy

Yes, Bob. it's Alan,

that all the that think open. the is markets are to answer I simple

across positive walks seeing trends the you as demand Ryan through. country are We

see until is we're able view change, our to willing and so invest something And we everywhere.

Jim ago, You so team XX or and through our a little management with Ossowski deferred heard XX conditions. Ryan we lens. looking bit we've that days that tighter of we're things that new process for asset actually refreshes a instituted we example, the market the where or expectations an say as And, have XX

ago, for me final got XX that argument's waiting sake, some months approval entitlement. at So for

pro apply. that going move do okay, they formas we and back the actually still did money, Before saying, then we're we built

same We've applicable hurdle the more I put one And have. to market. characterize is think, using the discipline process. what is hurdle so that I in purchase always would we're every it we And

better. Florida, And gotten example improved in little so certainly, Vegas attitude and bit using towards has has North it or your Vegas as our a opened

really We're on the And making we're the regulators, investment governments current at And ground we're we state decisions. shelter-in-place. so are what to data. listening think about looking saying educated

in to don’t in want it disciplined I are to way know that all but if you business, the thought but you we're So open general, we process. gets for being be, that where

Operator

Evercore Next question ISI. from comes with Kim Stephen

Stephen Kim

about prices. one you half know Yes. really I'm you your a divisions. you Thanks and very crossed than mortgage much, probably your for in the now, guys said, raise communities lead opportunity XX of guys. and the your I raised most in to growth intrigued by to rate which above I'm And prices year-over-year. year half you threshold seeing over you've more rates thinking communities communities in absorption further of down raise also price. that We're basis points

and I'm paying And payment is more a probably and level your buyer seeing than monthly so that they're decline rents. thinking bit entry median the is the down down quite lot in a that probably

going this in to I'm few years? was there you different you from when to down very of is that's the payments be is in that last much is to, we've So seen raise prices, monthly going a versus provide you lot curious, that to headroom buyer's last saw reason the rents. there And think a what any time think way

Ryan Marshall

a a tough environment it. are simply factors just out there. favorable we is to demand there's now. And Stephen, right of There's than easier say, money One, try it think that. is maybe question. unpacking very a lot that as and really in I'll affordable I number Yes, driving that, a unpack And it's highlighted,

a prospect still probably home will a been is the better buyers time. it's first-time And able afford down saying I the long got of so caveat by payment. have it than new to being a to

rent. our it So or hurdle market. and interest the hurdle got buyer restrictor out home payment a rate there Stephen, needs rates market before being or somewhere I To your cleared has been that to often happen. in we enter the be the home ownership think make it's in the in that decline be impediment, to than huge there's see to but decline buying not point, enough resulting from that order a the first-time faster savings And is that can don't been that

And to desire more fact a constructed the probably live so in with complexes. combine apartment not you that densely that type there's

business. I think move those to certainly, the we And are as XX%, really we future bodes the entire first the of tailwinds industry. think well for our positive business time, closer for being that

Stephen Kim

does. certainly Historically, payment impediments down follow-up of comment the relates My key you're to payment it the has viewed been you first-time like to right, that as down Yes, one made. I'm forbearance payment found from But September. to through environment, that this a that nearly on buyers. student in we've month. the loan thinking average $XXX seen We is student March debt

of plus September go it both couple with mean, – ramp the you through payment. loans, alone may long take I grow a stimulus If checks. mean, student out a couple providing it can have way that pretty $X,XXX a match down that much towards or I

the with the lower hurdle as may curious sales I'm in ability a the communities, hearing fact, that savings. was. to from So down And up not not actually to given are come payment in folks increased that folks the or your the you it whether that is getting be hurdle once

Ryan Marshall

June the payment tell the We I buyer segment. by our evidenced direct from specifically What there we that highlight. would would concerns Stephen, feedback up is year-over-year I that were we've XX%, that that don't segment. related I on heard growth anything in XX-plus you rate know there's Yes, first-time in the sales percent down highlighted first-time

with you segment. means finding suggest are that buyers it to it's into if down environment and clearly come the that from of as ways So else, translating that's something suggested are able point, data wouldn't largely a is that there those favorable up the you money sales out that and use whether a a or payment,

Operator

Next question Maklari Susan Sachs. with from Goldman comes

Susan Maklari

Thank you. morning. Good

Ryan Marshall

Hi, Susan.

Susan Maklari

you the permanent about those us as you you of some from flowing give in of have How think you perhaps we're the even that us on that some bit back headcount where through? the did. taken headcount? is, give sounds can that to little SG&A you've question more furloughed you color it terms of more should And we are like adding of and especially side, first can reductions sense some the a My people

Bob O’Shaughnessy

Susan. Sure, Yes.

fiscal IT May. we sure XXXX I even furloughed think wait everything tell the work couple if has related to we folks make would save couple to been where beyond have landed. in of work because you of we rehired that thinking on all of almost had costs did back worth that I'm we reintroduce we we of I on million think principally we pretty balance, of to on actions And we the based work. included back kind remarks, to people the but brought the continue the that come remains the and much may would, in in together asked announced had advance a thought piece We've We that that side, to you a took. we business about to we where we $XX strong,

much is is it what was guide we the be to with thought our So going that gave. we pretty that spend that, in reflected

about the that of it, if had the points, at we than year revenues the year our by which to basis at beginning took of XX.X% the the we think pandemic. SG&A guide is better in beginning So XX about down full XX.X% guide of obviously you at

creep So of the furloughed be hadn't back disciplined We is And that. we a the want included lot don't in to save. good. about which see folks into business, we the

those to point, hoped had work. back, Ryan's so so folks and field come producing mostly expected to they're back activities. we bring they're personnel, revenue serving to And They've

for once are where we do overhead again, be to continues business. leveraged level, more think again heightened are our perform back might some that bringing the And a in people be we pretty would feel producing. I that an perspective, structure things we at need them bring good So about be business But the would bringing well we back. expense because to they to would from – if revenue

Susan Maklari

need That's repurchase And the and in we've to bit of just helpful. any color Okay. talk that get the on be? outlook, your very given potentially the activity could some you what start a to obviously, and the seen trends can to to then, resume comfortable, confidence you timing what see All of relative that to right.

Bob O’Shaughnessy

Yes.

drew think able come We pay revolver. comfortably. pretty We fully our fairness, were to through tough time. that back we've a in So I

very it ago is at position, a have We debt-to-cap and at nice XX%. cash XX% a was year

So we've made progress there.

XX.X% If you look it's at basis, a a year a on ago. it from down XX% net

position. of So we'll historically feel will news. said think a really we've done what Having do the still in we good about is we're report our I pandemic consistent the and financial with midst that, what is very so

done what we've with you'll come as no up through, when plan the work and think produces our I, we for So it. be, get the through the and a will to than But will different needs? that medium to equity. are What hear that, the into Ryan capital and business share about and board do the longer market game after pre-pandemic, and process we team work term repurchase how with here

Ryan priorities we if pay stock. It's capital back say our in return, will in to business earlier have not heard You still it it have extra, high call, dividend changed. buy the it's invested the at and our we use

we We at think talked and cash good needs March next will will satisfy. likely use a in weigh But we $XXX-some-odd that as closer. that about be leverage. That get cash something on market going we're conditions also do there. would for spot of obviously maturity to million. this in that to year, We're a capital We have point

about So we'll by. as that have goes time more to say

Operator

Jay McCanless comes question Next with from Wedbush.

Jay McCanless

taking guess, the Thanks could good community I you the I any give question had my year of questions. first a rest color for morning. this preview maybe hint expect is a for growth for us you or and on Hey, XXXX? where

Bob O’Shaughnessy

and the X% from quarter. the somewhere Yes, count to going preceding in year thinking X% each QX and so in QX we be are down is versus average growth between community

prior, versus purchase the delays land development QX the the of certainly delays. and QX So year

We've forward. heard community to that we You it impact back June. go Ryan we started through call, the it April call the from have that about talk count to come earlier that late ramp did, in middle as what our of beginning up will an on but

We we have end give We'll not fiscal any the process. and get provided go guidance XXXX. as of through for year you that closer planning our to the we

Jay McCanless

That's helpful. that. Thank for you

going talked for The you're core, I acquisition I terms is had new for, the larger starting land about in last from mean, lots, urban positions, away over months thinking has what positions, looking out the I COVID land Pulte further and you company are we've and look of way more some buying at to migration the guys or second a the you as seen affected of land guys four mean, question land forward? land about. everything

Ryan Marshall

is Jay, this Yes, Ryan.

risk consistent. what think remains I buying highlighted is very we evaluate that land we've with used associated to that the process

So have will consumer time. the COVID think clearly things over behavior that changes influence do in Certainly, there. changes major not I from we made

because land to influences design, be quite mostly some I think where home that's the bigger business are just going has suburban, our is. been always frankly. on or somewhat available But of

as big land, very schools, We're to good you and that us. locations going expect from really should making those bets far that disciplined entertainment, exurbs B shopping, access employment, going to that all C type on We think as know transportation in invest. see to and still think We into we the into continue I to cetera. So still and et be corridors, matter. where don't things

return. going to we're the pre-COVID, to And so elements in be, buying post-COVID. we And where through-cycle at look drive are think those think continue locations we buyers that want to

Jay McCanless

do you're And now, double guys talk working what you plans, more that? are from are not Do out, goes, customers or et house requests plan shape standpoint, you're good your as cetera? with from seeing to you guys about that of that right far or hearing a go if to to in maybe for lot home are as and some work kids you going the adapting think you are what further going you a and from the the the from students home environment,

Ryan Marshall

Yes.

or So been seven it's I just the and been Jay, not that for with allow been consumer focus doing a creating company the past and research commonly think think things of the some We've spectacular is consumer great designing meet really only that's plans. I floor managed one eight our we've strength the inspired current flexibility. needs, that real for they years plans for our

there suite. model, into home than light that or old. are the new accelerate call, are the to an XX flexible if things in can for. of portfolio second what's master currently listen our of keep in build-to-order all can have that office to gym have a our in mind, So promise a better spaces competitor a XX, in number be turned that. to any in-law or we where see XX, or you But plans especially allow We'll what highlighted things our to are early of plans customer, housing more the I continue years there's Those we resale. changing a that of I opportunity that is that's biggest current far And stock

Operator

presenters. the over the time, this turn At to I'll call

Jim Zeumer

this we'll be Great. on look very the call. with much. Thank you forward for We'll remainder available the questions of over you morning. the everybody's to next Appreciate speaking and day, time

Operator

call. conference today's concludes This

You disconnect. may now

PulteGroup (PHM) 23 Jul 202020 Q2 Earnings call transcript