PHM - Earnings call transcript Q4 2020

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Operator

Good morning, and welcome to the Fourth Quarter 2020 Pultegroup, Inc. Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to James Zeumer, Vice President of Investor Relations and Corporate Communications. ahead. go Please

James Zeumer

and to Andrew, I'm to pleased Thank Fourth good Quarter you PulteGroup's Earnings welcome you, morning. Call.

including those information and today's risk our the our could period. accompanying made today's of A comments and the in morning's I belated and For quarterly and Senior A in tables the analysis to time wishes on offer assist release your O’Shaughnessy, slides. our by accompany CEO; Ossowski, today's Ryan of performance. Vice detailed this We by future our today. business earnings factors everyone encourage from been XXXX. our presentation later morning's within of earnings significant discussing I'm forward-looking annual is Marshall, that have part Actual adjusted filings, results suggested of results the reserve within for affect of an future call website results that financial performance. to today's results about highlight copy These best President at call period posted the ended be other want as tax Jim presentation this reports. includes materially President Finance. reported December risk and morning and VP adjustments call are most corporate that audio XX, the and slides. reported to in review new release to to release exclude to fourth SEC of joined pultegroup.com. key statements in included We your Year. you slides this these Bob differ factors could and summarized benefits today. this appreciate certain today's our Executive and post to recorded our will Also, alert our I quarter that our results want We'll webcast impact reconciliation the The adjusted numbers also presentation company's we well as replay are and as expected CFO; of

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

Ryan Marshall

joining that you Jim, morning. your and unlike goes we've -- Thanks, good call. and you well New XXXX appreciate COVID-XX I healthy that made are has without year, Year today's and safe. that started a and that I resulting hope that remain saying the any experienced before. It challenges and everyone

of to very navigated our strongest engaged me and a Let of team, say that that the environment how Thanks our than successfully right responded accelerated remain a dedicated we started just I'm strong, demand through into then proud and has experienced the in to difficult efforts entire times. organization more industry sustained up a some during focused decade. how this year team front extremely our and halt slam

this read release, that you results XX% a completed in press per included gross XXX year a point in orders, increase outstanding earnings As an and a increase margin increase quarter PulteGroup exceptional fourth morning's by in in share. XX% adjusted delivering

converted in debt-to-capital net in increase full growth an year the XX% to a quarter line billion business, year PulteGroup closings XX,XXX margins, operating work home sale billion. gross with we and Benefiting expand along Reflecting revenues services X% ability pretax $X.X the income We and X% our to of a below homebuilding of top a financial and lot ratio X% $XX.X from full gains our homes by in hard of corresponding billion. $X.X also to realized ended increase with team a X%. cash a increase in dramatic amazing into

cash XXXX, during and operating billion year. generated billion in the our in beyond after development extend investing statement Our land we income $X.X outstanding as $X.X flow in results

to we made we having and I'm XXXX the equity suspended X cycle payment our increased the pandemic. we XXXX because XX.X% our that with repurchased shares realized Beyond we financial XXXX, a the of million land, opportunities of proud gains. a complete, at the light generating provide plan can't return $XXX in this can investing for as and plays looking in drive this will the multiple part further his mean high extraordinarily year months with let we over program common despite of we by month we With the returns the the at long for that how are the dividend of position vaccines specific numerous effective in also guidance we and consistent with business a optimistic getting operate business ahead. we year. are end a view how on note on offer pandemic tunnel. of our how enter in to Obviously, but the but me strong out, housing focus Bob XX%, distributed control comments, to that see

be in to population demand years. to household by underbuilt have which we and demand strong million experienced XXXX to starts into quarters We environment, created number for for around X.X and we well in housing that growth reality, formations. many thought a continue of much but this in needed X.X million can relative for meet to We natural XXXX, said COVID, years prior housing starts industry expect the XXXX. finally the reached We for

toward unmet single-family forward going the demand mix for our away shift more remain in living, need potential this Given strong demand believe business. we from and can and apartment

least as full has we well Such from in where as people demographic pandemic number homes their or can be profound tailwind, in caused located. need increase has be part homes a the the the their Beyond of of a time. what terms from implications will that permanent people who shift at believe also working home

With working buyer people the to and the plans For controlled builders floor XXXX example, time, homes, houses has largest with half of The backlog homes dynamic offer among such access same control trade than home working material to meet out which be to strong further in and factors works a the last over are purchase because XX,XXX locations. labor enter in to we remote combination of believe under suppliers land, a option and it with can which technology it allow to more demand potential to pool the with from affordable nation's expands environment, XX% homebuyers. more and partners. XXX,XXX allow that buy these intent XXXX features via by than more better lots We long-standing the today's advantage to of us the should increase relationships resources. increase new needs deliveries year. At our

change ability successfully and to the confident do I are built. over business organization's get although in of are battling to operate supply in chain for tight, demonstrated homes think and may we've are administration acknowledge it's remains As the friction to relief, I same immigration within COVID-related years, Labor the some there occasional their policies the allow assuming eased. plants. At am issues points in system. product that manufacturers the disruption our time, the But fair

our say been to provide beyond have above suppliers must tremendous we and going partners, the in need. I Although materials many instances

growth XXXX capital high we billion of over appropriate XXXX. year-end, to and investment, development given This sheet performance on we the our increase our of positioned allocation land balance roughly in our More think $XXX exceptionally priorities. for believe we are an is in and but Given the of execute $X.X specifically, spend targeting operating well I operations. acquisition strain all at expectations our are million company's

plant a then the details a later to owners within couple land begin have sites plant. few next off-site months under next expected year. We great our requisite with selecting of in have manufacturing and consideration progress the investment, finalize Beyond location of still for out the we the production to we made planning agreement equipment but the of our work installing hope and this

operation first up In caused press And the to this exceeded the we this Our Along our dividend, using read expectations Jacksonville we quarter $XXX first we in during continuing as third outstanding morning's second business year. year. quarters we to through fund repurchase to and last next to of pay are continue release, during repurchase uncertainties so our with available and will in and had investing response ICG of in funds the plant return running finally, will our you by activities has new in get to be excited to the shareholders quarter. pandemic, share the our of share down suspended program. excess the cash debt sometime million

to resumed the full As stock program detailed release, and year bringing million. press our the $XXX repurchased in our of we total fourth million $XX quarter, in

segments. of the Housing hope extremely than the expect rapidly millions this first It we we continued do report XXXX, of businesses has nor in remain for of to certainly devastating have active being and will few for not and has And we the going back that thousands and January. unabated that across X/X buyer our shares granted, this with outstanding weeks the of economic this fortunate people. of been of housing how has we approaching demand forget program, The an strength initiating since pleased all COVID-XX geographies engine, industry more been is take pandemic. buyer was I'm repurchased our but shares the certainly through are end of company's an in to half forward. We strength

over me to turn Let Bob. the call now

Robert O’Shaughnessy

and wishes and all that let coming navigate my hope Thanks, everyone, in best health morning, the can safety. Ryan. and year Good me add express we my

our reserves; resulting financial adjustments. to of benefit were valuation services million As pretax million review I'll credits from quarter. and from indicated million quarter results following our adjustments net press adjustments release, Where items: to reserves; the appropriate, impacted from a of $XX by in items tax a and impact financial tax charge the pretax reference my of fourth during tax $XX the $XX energy these benefit a deferred allowance insurance-related

closings of time, investment In the The active Consistent demographic active XXXX, first to of adult. first-time strategic mix moved adult time, and buyer strong increased our average was our for primarily X% billion. a quarter, revenues our to $XXX,XXX in buyer our to for price last groups. sales We're were first price pleased and X% the up basis, average XX% in changes in move closings in with and and average consisted of reflects slightly X% by XX% serve comprised a pricing were by report year reflects fourth revenues adult. quarter price buyers. period all and XXXX sales move-up quarter groups. closings fourth and The The X,XXX increase XX% these first in to move period XX% active the home higher by For sales as up up environment on sale our more year-over-year a for fourth increase closings over of that for was $X.X XX% the our driven the caused quarter both XX% pandemic to homes. dynamics, time increase

the as fourth X,XXX Our the higher year to net homes, last to our year elevated over and period close to was October. across out well average with while X% the last The slowing our earlier was community strong reflects faster quarter new orders in entire as paces. as year for essentially activities the due to actually demand were and increased of Demand quarter decrease toward XXX. community the this strong from environment count pandemic accelerated the down orders response period for XX% than in communities of November land the flat count absorption end and December related

our the our actions, specific pace Given ongoing so strength and are backlog overextended. production, demand, manage taking sales not does divisions get of

In costs to price our higher especially third adjusting experienced across all moved about of help quarter. cover what strong thoughtful was being the Consistent we house with cost the which X,XXX rising significantly the while quarter, adult of orders the first during time also demand in are lumber, the We in ongoing orders move XX% X,XXX including to and adult orders to homes. homes, fourth acceleration homes, active increased among XX% buyers. to up demand X,XXX brands, active increased increased XX% quarter,

fence. half a fact, adult in QX in than this buyers we first XXX active units orders high year. were all-time active our the have XXXX, clearly of the the In pause below off reported After quarterly gotten adult third the less of quarter

focused we're cancellation is the which At well sold fourth believe year-end in new over to continued extremely homes our were the our of significant total end XX,XXX down XXXX. large realize growth on billion markets. value positioned XX% the in at company production year-over-year spec. but quarter, last on fourth with We of we throughout last actively our Our XX%, spec which strength has and had year. backlog a Based $X.X increase inventory, rate sold the X,XXX from was last under quarter the backlog for compared increased or year. year quarter, XX% of of closing closings homes year-end homes. working our In construction, $X.X strong homes fourth demand and we of was XX,XXX to billion sales, XX% to Backlog

makes expect and Our XXXX. in approximately At line product process homes XX,XXX working between to to our would more deliver the X,XXX easier, suppliers XX% is -- be and this rate the going increase ensure large be as last full in the targeting with X,XXX to closely to this closings year are for homes we little midpoint, year. homes. we're growth homes first all with XXXX what at XX,XXX a over increase the trades we XX% in of we This for to deliveries backlog deliveries XX,XXX under capacity construction With of expect forward. a needed quarter year-end, and

sales, full prices expect strength XXXX. sales of backlog price on realized on groups, average for Based the quarter over our all both sales we for increases backlog, with X% across price the $XXX,XXX. and move-up the year along first closings the our adult $XXX,XXX, be $XXX,XXX was the in of active and last range price to year to in Given average to in buyer up our

mix third in benefits up in Reflecting our run pricing work in we've this of basis our we over higher year As efficient of can given the fourth said more homebuilding environment and will of of the favorable year. our by from XXX points operation, the gross costs points in any sales the be the quarter labor, XX% Driven quarter. house XX and deliver average final quarter margin a and increases the primarily influence ongoing past, deliveries basis to was lumber last XXXX. price

of increased However, strong conditions, given costs sales through prices. to pass-through demand we these expect most

the gross quarter margins approximately the we remain and As first year. a and expect both high XX.X% full be result, to for

million revenues. Our expense or X.X% reported home fourth for of SG&A the sale was quarter $XXX

Excluding the insurance or expense million X.X% the of was year, from in quarter $XX our reported adjust more a adjusted environment. we anticipation an Last X.X% home XX% adjustment insurance-related SG&A fourth revenues. revenues, revenues. million reserve our million overheads adjusted $XX SG&A the was to in the $XXX recorded pandemic, excluding million took expense of home or adjustments action of reserves year, expense $XXX SG&A million net quarter, or our home fourth of sale pretax $XXX to our At sale operating of last benefit of was sale outside difficult

of rejoined Although from realize present, XXXX which nearly back down still company, in quarter in the SG&A XX.X% At the first XXXX. employees of we range of year. the to expect all and many the overhead XX.X%, furloughed in hired expense XX.X% is released, expect last employees we be leverage to have we we to have improved

revenues, targeting home an from of sale basis the last year, down of year. For on full are we SG&A XX.X% an adjusted XX% expense

we rate. volumes reserves our fourth It's as our million, to of pretax resulting higher continued from and collapse. up to $XX as noting quarter income services $XX $XX XXXX conditions, settled year. to fourth the our the deliver which is include increase prior competitive with Our million results we business results capture issued worth quarter reported increase financial loan strong in million mortgages financial rate origination reflects mortgage from services along mortgage in last The charge adjustments that to claims an housing income market continued the in tied favorable from pretax quarter operations pretax from

quarter the XX% Our year. from last mortgage capture for XX%, was up rate

fourth energy tax be share. net effective my for of represents million, reflects $XX XX.X%, the approximately to adjustments of Finishing tax allowance tax our quarter of tax out including Our million reported energy recorded $XXX rate valuation resulting we the $XX the of quarter realize expect deferred per and of credits and income to credits rate XXXX, income expect this reported benefit XX.X%, fourth was we tax million, tax or expense benefit the $X.XX period. from an review in year. the which for we tax which the In statement,

for share. or and million share of $X.XX $X.XX period, net financial adjusted income the cash and was period the per income company from comparable net million homebuilding year adjusted $X.XX and net Our by per reported financial $X.X of services flows outstanding share. or the billion per $XXX the income prior resulting the we Benefiting of million cash. $XXX our ended or performance In generated operations, quarter $XXX with

repurchased fourth shares the the debt-to-capital net $XX an of X.X%. of the gross our ratio per price common million year, XX.X% is debt-to-capital our or was and $XX.XX share. average at was a addition, from we quarter, In end ratio In X.X cost XX.X%, year, last which at down million of

year, full the the shares X.X $XX.XX of returned For at common a through million million cost to the repurchase shareholders of company $XXX share. per

earnings our release, outstanding in transactions separate notes $XXX down this quarter during year. pay X million in noted the of As of we first senior to our expect

effective the February March senior scheduled million X year. redemption exercise notes we'll First, originally feature on $XXX early mature on this X to of

this initiated expect we XXXX for million senior addition, we a XXXX In to on morning notes, offer XX. $XXX of which February tender complete and our

our of spend brings $XXX execution full fourth pro annual gross quarter, XXXX full which $XX save and tender, and interest to our the on million we acquisition debt-to-capital ratio billion. charges to million the land in $XXX in In company retirement the Assuming approximately the forma million will invested $X.X XX.X%. of basis, a year the lower development

lots remain to our our development our want reached but As acquisition and options. and of options. cash to options. which through XX,XXX Ryan generation risks the use to lumpy, were acquisition in expected we've owned X the also And the our goals view on based and expect the guidance lots. given year more effectively currently returns be of could we've stated targeting around, mentioned, finally, flow investment the of pipeline slightly we and so we $X.X numbers, having disciplined can reached these in business, increase strong reducing billion the were of XX% and of given highlight our practices controlled having goal than move market land controlled closings positive through owned XXXX. under enhancing we I of on Land of years that 'XX XX,XXX through our of our XXX,XXX with numbers land focused control, And XX,XXX in ended investment

turn back call let the me Ryan. to Now

Ryan Marshall

as When first there several areas Bob. our control growth owned our for lot while Thanks, I via our XX% performance. opportunity to where took to option, over to enhance XXXX, business deliver pipeline shareholders. in of in expand CEO to to be time the place rates we to business, were of X/X saw were position lower land I targets lots, increase our long-term put years and high an continuing X our returns to our of Among

Given our it integrate our continue more successful and performance construction gratifying expand technologies with developing initial processes. business goals now these we've XXXX even this XXXX, in advancing achieved to foundational an our operations, and customer-centric say can we place, is expectations work that for innovative as we new

which capabilities establishing with I'm TRID same begin continued year extending presence new our strong entering Winston that established week's also off-site in our Carolina, and largest in manufacturing saw housing the the the that Denver and opportunities. in outstanding expansion Greensboro, as spoke time, decade, well to you Our market has Greater sure release is the as the the earlier has operations of of opportunities of last cities the in I division with capitalize We results Raleigh combination backlog in expansion At 'XX sheet well flexibility a of most XXXX press demand, about operations. homebuilding the area geographic our reach its our includes of that metrics area. us Salem strength gives with with North balance Burlington. tremendous PulteGroup a great on These and over a operating momentum. that along PulteGroup include

lot our We quickly areas. in our positions in to increase we're land and these working pipeline initial new have place,

our see our expansion with proud high $X.X we returns. in billion closings With in We our in XX% resources an goal trade other of XXXX. several and and continuing markets who The exceptional efforts and our their I our are know believe thoughtfully the and what both positioned we experience of are of to operations to year, provide along by We while quality. excited as well successfully this homebuying and also evaluating. expectations, well about all our to are tirelessly rage outstanding investing we the toward cities are needed In as with operate homes currently I thank working high want we and to our markets, to to employees increase to I more the our want will grow deliver continues suppliers accomplished opportunities into extremely land to organization thank for but business. run delivering to XXXX pandemic closing, business safely. new entered so we I'm than continue

the Jim. to Let me call turn back

James Zeumer

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

questions So to many the process the as questions. this [Operator And ask for get of during Andrew as call. the remaining now possible we call and Instructions]. can time me open explain again let completed

Operator

[Operator Instructions].

comes RBC from question Mike Capital of Markets. first The Dahl

Michael Dahl

guess you about your just land typical share your question to investment Not year, and balance think allocation your of guys in nose balanced current the ramp are relative does million first and away to or land investment paydown, through-cycle to it Nice at mentality? peers maintaining in results. environment the given How potentially potential of an community this kind up in to counts demand I when the $XXX your this and turn investment, well. spend strength in coming. for like really repurchases. about land started have land A around is allocation Bob, some you increase up you're more do Brian shortfalls our more debt thinking as capital significantly seem lot

Ryan Marshall

we part invest share I in that A fact question. first you. the but business the running and we're where that create I long-term we've of to are Mike, orient parts value. land, for a grow decade Yes, capital of you would would other there we allocation our the for balanced with one, cycle, the business, foremost, that maintained couple through want of better that believe thanks to Number and things

pretty year, land taking But this we in I delays a we've spend big a step-up It's where think this morning, as our $X.X have are there We Certainly, million. in think were in a were bump highlighted we to that pretty that, big adjusting step-up. from it's 'XX even some at XXXX. going 'XX. rolled big into for

We percentage to investment -- and just into step do specific you are thoughtful And an we We land revenue. are about sure long-term going XXXX back our into we what available that land we now the know returns have the strong types the for appropriate that of that peg we responsible as we're to very thing, continue number, -- that that market. mentality create last all numbers time a cash this is a we value. very don't be allocated and projected tell to while we appropriate I'd don't think land. get do reflective of up, spend is think is the funneled Mike, into in is making to where of believe driving The

Michael Dahl

margin drive second My you to price expansion. terms success goes and Okay. side, clearly and in costs margin had to of the question controlling utilizing

some to you're slightly on also, on in-house quantify being the come want to mostly able kind however elaborate per costs. the price little to increase and expecting been that foot between being P&L? potentially cost that lower of increase you've you of magnitude us offset XQ able And levels Could think if understand a alluded the costs, per square more could the foot share you help than of through you I or a of you to basis kind bit maybe balance better? in margins just price square that that, to sort achieve, just

Robert O’Shaughnessy

it's Yes, Mike, Bob.

don't certainly, position ton today. a the to ground very and from we're starting spec got important on spec of of think and quarter, some remember, a in margin the we strong fourth the I benefit sales, we have

we're are that forward sales So are costs our the the going into project contracted. where year, as we recognize But we're up. is house what looking prices that trying to we've

them neighborhood projecting to the of 'XX. next in in are X% up fiscal We be year

inclusive of labor. cost input commodity that's So and

the can we've So a than we little past is get strong. Obviously, bit couple that seen market for most back. think of the richer We years. price increase of

we cautious thing that can actually got sure affordability, that to pricing are people want other is The we of and on. we've close make to afford

our market. So as a equation managing in out of are teams nice that job price we're doing

of that be for again, guide having And very lumber, the the with do XX.X% So year on pressure at of reflective especially a bit a very, risen rapidly margins recognize, with but strong we environment. -- little so there'll that.

Operator

The Ivy next question Associates. comes from Zelman of Zelman &

Ivy Zelman

Or about in backyard. there us developed that builders acquisition lot housing, about land year that build this lots better municipalities a to overcoming change getting billion that? appears country anything there Maybe, be being on you we continue just Ryan, for some constraints you think our hear tax with thinking the And shelter or understand of want from strong development, it's focus some even municipality to is spend, quarter. complaining, has something a with change can affordable type a incentive maybe is not bottleneck? the you a by it's and administration. you're not on think we excluding in more the do of lot that to congrats acquisition to whether just when a developers? fourth There's But of on Biden the to can help And the side of COVID, demand $X.X that constraint

Ryan Marshall

the for question. thanks and Ivy, Yes,

an on and as while, talking you've the a item you for the and think touched been head. about on frankly, industry as I hit that, company an nail a we've

there. job shelter existing they or housing you their it's are door folks not long grow think want municipalities want local and base residents X economies. already as or they work I and grow it and other all as their own affordable more next as municipalities to But nailed that that

that's the from So a I -- municipalities certainly it I to do. issue being the national more help believe a issue but local top, think said, from than that what is and influence do can a tone local administration

challenges team through So think able out And there, think out the there, is but environment one are are and get of look, we that size. we're we what is a that our have, challenging there working the land highlighted entitled. our things I to talented we I

to feel you investment. are little we've the able developed, comfortable think a forward get about put numbers get very could to were able things are I We XXXX. it for do But easier, we more. we If that even

Operator

The question next Barclays. from Bouley Matthew of comes

Matthew Bouley

I the on to wanted margin side. follow-up

margins gross basis guiding 'XX other that up there's So increase in you any, cost, environment. just aware despite guess, that just should headwinds Bob. beyond this margin mentioned, be in-house pricing wondering we I'm if I points of XX

the now else maybe guide? takes what I'm it's of that mix option Or perhaps that's Just there of into and on coming So and thinking whether up might closings expected? more through? sort puts the first lands time come playing be

Robert O’Shaughnessy

as bringing years. appreciated really is don't as there's think I through, anything dramatic. more the kind lot worked expensive, Obviously, gets expensive land through the vintage the more land has on Matt, successive market you're Yes, each of

visibility mean, and in months than So to I fully be. isn't contracted into that's we our very ago margins sales going a houses we've a reflected that, backlog. pricing got good pretty the candor, these now. so our in We've large got contributor. what right environment X Other And are

pricing puts you going us. a bit in of little like that have instance, do right little lag us, we So us terms the our of we for where is lag into first environment quarter. can actually But contracting. a is a We a versus the closing we're of cost it kind understand now bit in a what in house on where of with position that because when it see for

Matthew Bouley

That's Understood. Okay. helpful.

Second pace. around one, just selling

I pace selling this color as of think I further like you normal? January you stronger misheard intentional guess, than the usual. correct sort of the see up even November. helpful ending any guys QX December continued you you, if pace. faster point have sort And into of mentioned I as to running others, of unabated. many quarter, at about there be I say But And heard talked Do Last you ended on that would I guess course. think you than additional obviously, well. think Pulte, just uptick slowing year I capacity me

Ryan Marshall

October a Matt, following think over November to We that's you those it's December to long as heard for you for equal sign-ups have October. up December. been downturn you have, we did a atypical. correctly, have as very to I the you that Normally, fourth industry And And November, were see in did quarter. strong Ryan. seasonally and of November what

I So then how a it's demand reflective And of is the strong very is. start. January think to off good

capacity production significantly of that matching we divisions the number increases or lot about were And we in rate either allowing to the really some sales our We've combination did, price increased produce or that releases manage via of we're the homes. that's we to majority sales be our So our that making of have. to sold sure ability both.

we're that. a think doing about factor I working got nice job lot then is And availability. you've that think to other the through So

full those release all into we've the the sales that for elements of given factor pricing our of and our strategy. in all we guide reflected So And year. those things are

So be it's demographic are remarks, number the help think a of in I some a I are trends strong there to continue great highlighted time business. -- And this of my economic going to prepared support industry. look, it's that in really as and to homebuilding

Operator

Evercore Kim ISI. The of next question comes from Stephen

Stephen Kim

of intrigued coming. was what some into a I things could give by quarter. Good be the Yes. glimpse really that

I interesting have is fully fourth quarter the like reflect environment, pointed doesn't the that of it quarter. think was the in what strong pretty that that build-to-order you model, we One sounds which which it out a really things, saw suggests enormously the in you fourth

So looks that's yet it to come. like still

the momentum in vein, price you about quick margins. did order that for closing year a And your relative strong. year. so that to in through and, And you commentary, 'XX price the price extremely back quarter. actual your just help I therefore, notice price the to wanted this is order analysis outlook to you in price pricing next And are of of have was full We building or like that never you're And full the outlook forecasting for couldn't your for but quarter your implicitly relative that your kind that in price. for decline ask anything I seemed that there year suggest everything seen that going time. took calling we to this

which that entry-level seeing, to so options assumption? Is that builders to And capture not that would have significant of what other is nearly embedded It's upgrades, more I is going mix And not are in seeing happening preference a to communities in your shift mix to negative homes. your you what consumers even there embedding seem larger guidance up for just kind wanted which would of and actually a to are suggest degree you you're seem about talk shift. the paying a that's BPO more be to Because that? you for curious. model and

that. was I So if wondering address you could

Ryan Marshall

the the think I along that we've pricing, guidance the first-time highlighted, it influenced geographic the there and question. ASP try key as largely we There year, the grab our it's business, we'll mix. touch is given But a coming business as in and anything, we've have was full amount being the seeing it follow-up. back elements. for miss to unpack, in And we and Ryan. pricing by robust for it on to Stephen, with Thanks that increasing come of a relates environment, a if lot are I'll I through

locations you like coastal California, Southern as et Northern in build know, So we of California, kind cetera.

influence places And relative have divisions an load come those so closings ASP. other can the country in to certainly out the on of that of

you think, and As large long to relates competition. that outperformance methodology a pricing in to has our price Stephen, relative ability it talked I know and take about the strategic we've company's the been that to how pricing our of margin contributor

We're not there's feel to any wouldn't think really reason be to so in strength from So is operating price. the and the will I and for we demand the real that push the else that uptake certainly, a everyone in continue same market benefit ability company. we that to believe

Stephen Kim

regard, both that the kind And that, the also dig had have they're that obviously, stuff. foot for because surprise part our your as Because lower somewhat foot It's margins kitchen what to somewhat versus like just give a square a option. it, seen in per roof it the as price. would the building should that much an report they didn't some build-to-order capture, pricing, because reason homes. they larger quickly couple you cost that numbers And Yes. thought. far, we agree model, of comes you we've far in X would couple maybe some of but a that when with that also well, have and the actual into I thought but because X that for seen seen it is of a only that your cases, there's that you is of I only seems certainly upside anything, builders to haven't And months to larger all we've spec allow homes more as little square think, bit found that. it we and per so if -- ability spec have In go builders of builders so even up of other and ago. we cost just they is might

I So will X per build of seeing XX you thinking you're have that you cost your over next months? if that to square about when what any foot more of if curious the be was a efficiency get you slightly incorporated into larger any and box.

Ryan Marshall

Yes, Stephen.

believe we've might be. a into -- given we've what certainly the going or from that, you sales you guide the So will X floor community, to -- we the Within factored offering within mix range that feet. customer office. X,XXX until to don't product have easily could plans, feet But the what plan that given they the X X,XXX come is could be there just into as know choose example, and an

So we have assumptions. some made

prepared space, I their home living cetera. space think on different more their situation, highlighted we home current in more seeing do remarks, work for more space need based our from we're situation, et customers for for as gyms, the their things current school,

told To your a is you, think I'd -- certainly there some point, are little I there's story that with to a be efficient. bit homes more there being homes are agree So built. bigger bigger

in everyone So as this factored we time best the think and are continue point updated tell. keep what time, our we'll will assumptions year We've at in to progresses.

Operator

Rehaut question comes of next The from Michael Jpmorgan.

Michael Rehaut

looking -- the in it little you up to levers beating was wanted margin the a to sense the back to versus I here. XX% guidance bit. full at get And margins, for is I quarter you first apologize just to a horse But look XX.X% and gross the in congrats the But a year this when you're hit a And price. better XX.X%. circle 'XX. dead bit of little and try And of and the quarter, on results. of fourth 'XX now wanted also the that on of

more I looking a have price temporary 'XX. So it gross you versus think some versus when or inflation, think was differential? curious, just was two, one, what been cost margin of And lot se? if decent I of towards about in that mix drove 'XX builders expansion number number driven And per level

the affordability from not builders, margins few higher any that's other versus perhaps last over being the just there's perspective the wondering a your most much if I'm expansion historically an or we're Given as perspective, limitations 'XX than much upward competitive on why price of higher so starting years 'XX, in given taking point? seeing if

Robert O’Shaughnessy

Yes.

think of degree, terms a apples-to-oranges I to it's versus in others. certain us

if margin, available on prevents do us the market. expansive nothing in performance. if to can't I to from that's clearly that comment it. And we're relative Mike, going And margin there's their accelerating it's price So

XXX year. saw up we've XX% demonstrated, think in 'XX fiscal it I over we the basis actually was were up year, that prior you the and versus prior points

market, to dollar can. to we're looking get attention and every that paying we we're So of price

market see what this, backlog, forward what year. But think And we've today, to of in we've costs everybody want is stop construction good There price vertical profile guide, question, do on said to homes a nothing clear I I estimate us margin answer a like be give side be you XX,XXX-plus of think the to aware asked visibility We I houses. busy we'll the to an our to we in a best into that kind of to as people of we expand next will pretty based terms earlier contribute got of. right? in want margin. out labor is the there. nothing, Lumber, got. going and lot is that. look We I that on there'll It's have we from that some be There's escalating. see trying about lot selling for think

same our we going can we're pleased try So the to it extent including here, end I you We'll we push recent forward. more And to day, going think we'll -- pretty get are forward. costs, seek with if covers than And there's this but the and more seek profile. margin that at of the price increase that we the can us that. outperformed there, in most message the in the no is see to land, do quarter. do opportunity If

Ryan Marshall

had inventory on Mike, spec in from, asked QX And you mixed more than come where anticipated. did I the outperformance, that we we in just QX --

of were some able outperformance to there's market pricing that get example a good kind in help provide current so QX. of we And

Michael Rehaut

declines. expect some if about pace cadence. that I your extent sure I in for And to you're bit guidance on metrics? not or Thanks sales just backlog sales you've year-end little your peers a year-over-year. at touch just should directional could the degree, comments, same community limited operate But me maybe wind a dramatic first managing and business up. 'XX consistent your for could wondering those make of think was in where work pace. on actually Ryan Which second growth time, wanted Bob, was of again, correct ahead off Obviously, towards next How in the if down any to to And very guess, sales the greater wrong get a I'm that count your relatively 'XX pace allowing of helpful. some much benefit having that And a community managed not that, focus here. far -- you're to through to should specifically, if made quarters? we I around kind give you've levels? to you few getting too the these even of relatively could perhaps and and community be we your and expect more count sales numbers, we At positive, believe, of just And secondly, quarter, think, consistent and I to versus your year-over-year the as the count, of I'm you pace, kind on peers. seeing quarter your your

Robert O’Shaughnessy

Yes.

to Where year? forward a years development it We'll if like, variability some the sales obviously And in end is weather the the a in a we of So rate X% to 'XX be? we'll in can. that at fast of contribute And obviously the year accelerate of as dependent be this way about communities year, environment some count delayed kind 'XX QX are I and beyond what's looking is versus to 'XX like? And year, what's as out we highlighted does about of we Ryan count, are have sales pretty looking we think closing year step-up How question next think is do sales of going thinking that. year, during obviously spend that much you on We'll we some down end we be the the is AC. for count of it where how X%. which environment the development community drive had of community I We've be about going you even of at against through would communities? we But number acquisition quickly versus community end big 'XX the And QX the to in more what's be will question spend next year, to too. see will go? that? think that that. sort we're are about walked then year And slowdown how at of we to think investing down aggressive your next ask

Operator

Zelman, apologies to The her follow-up with question or & from second Associates. a next Zelman question Ms. for

Ryan Marshall

hit my I scared with last thought Maybe answer. I you we away

Ivy Zelman

No, Yes. a follow-up.

Ryan Marshall

It was Zeumer's fault, right?

Ivy Zelman

right. Zeumer, Yes, was go. fault, there It you Zeumer's

on in a digging land the little bit spend. Just

is Are are You margin perspective lot the about spending spending own fully 'XX? from for option buying still margin you up just differential far price out versus are on the how lot? perspective the differential you give there billion. set between for think us you a buying? perspective? $X.X are a And And and just the Or on you -- If 'XX?

Ryan Marshall

most Yes, at point. well Ivy, set questions. of We're good 'XX this pretty for both up

the mostly the up. of 'XX that Some 'XX, set back influence in but half of we're spend will happen will

approvals So and like given this into in the we're doing. your first kind difficulties that, time. And XXXX entitlements into at and factored that that point everything of largely in things we've question you we're highlighted that with

-- that part terms second In one. of my lost thought of of and the your question, I on train

Ivy Zelman

The -- option differential? price option margin or the

Ryan Marshall

Yes.

the Ivy thing or -- -- So I

Ivy Zelman

or that. and know I it just I grab a pricing the right you thinking heated. the faster land return, pretty be in the recognize the I And on focus about a option better now is see But market, return. returns, we'd

margin, when a if differential impact seeing a to you better and there's gross may even if from you're return? are what optioning what it's lots So be that an

Ryan Marshall

Yes.

the you different underwrite most return do as is. on point, don't characteristics we come highlighted across So want Ivy, important has I depending who got this is every the deal nonanswer, very the to but single we seller which the

there rule we of though, return to And a free. the what getting we risk for options. is cost of into not reward the ultimate think They're kind As that factor and option. general we're is doing a thumb that overall balance the

else anything you'd Bob, So on that. highlight

Robert O’Shaughnessy

a market that are The that. of much or risk tying as right? option saying, that X trying to add self, or bigger X as manage optionality, else. lot parcel want couple against the of from lot lots terms is and X I anything years I'd X you all doing of or today, after right, X/X X up manifests lots, of the ways transaction that, X/X in we're of finished a now Are you Remember, you're years thing there's a X/X where

deal. so think as of option And kind margin of opposed a as is lot straight I on impactful don't to that because the doing that finished just step-up the

because pricing a retail So lot risk take they're for master in to real-time if you're plan that taking for just-in-time you all getting delivery.

I a more lot book, are you that's the what don't larger lot our transactions these are if as know positions I've of -- look more right just need So described than at having we now.

the then paying we're so be even bit be little It land lots. And finished people not for an of land. carry even a option we developing to the might might but

don't from sometimes they're did. looking is a So the people a think it's deleterious as exactly just at margin way when perspective it I think some you

Operator

of The comes Zener from next question Ken KeyBanc.

Kenneth Zener

mean, I your is To connected. was leverage I make quarter. flat. sure Great

Your our returns on on very capital, as look returns I at or inventory, are high.

in like investing doing. be should company you So your you're

X So I questions. have

play del web yet legacy land your does how then is your And much is that? capacity limiting start over into for go option logic XX% owned First, target you're my question, a builder, Perhaps. your this and build-to-order orders. second

homes. does that We what starts mean, X,XXX capacity? basically. I So kind mean start started can calculate you your your about of for

going? reflect guidance terms So where your capacity in is what XX,XXX quarterly is of your

Ryan Marshall

Ken, so is I'll maybe feel how capacity we our production take the about good machine And start first. running. question

certainly, supplier we lot et us. that to we But for and every production in full we that a so. And allow that pace We year that's think if moving there on we can quarter, believe do work are that, do parts to of cetera. have our the environment capacity is do reflective the and more, single guide almost of that, continue ramped it we'll would capacity, capacity, we've is the labor demand there's up given deliveries

level, it's everybody lower do So for in entry product. Ken, we've I priced well, reasons, build-to-order with long knows, of X specs and as that addition our the chosen part we've think kind to is big better especially of of are we largely what the a but a model that, employ to believed number and that

spec, sold is the point in addition as about you you've sold I we're don't build that got the limiting build-to-order much make a building got build. ground in model in point for some decision of can specs how at ability And have -- believe some or the that so the a time, got backlog, you we that in you've Whether number start also increasing not still to success a you time. to that put to system. you our started as the because at on build in our

keep So about some the going now. great for wins if you XXXX. we're great prospects are in year. still Andrew, time our can to a is in here, the We're excited right the sales at I think And there? of queue? have we Who we're next a

Robert O’Shaughnessy

X:XX. have Is . Could The timed they it.

Ryan Marshall

a Andrew? that can [Technical the confirmation Difficulty]. a of Jim, audience couple Yes. got I from still folks hear.

an it's challenge. like sounds operator it So

James Zeumer

still So anybody -- here. if we're wants to

So e-mail apologize difficulty, or if again, to this take I'm happy a best sure operator at our this in call I'm -- me how to another couple or point our of that it. where answer we're not I going for sure solve it wants we'll question technical of disappear a because a But me text text wants text terms a to And to. question, time minutes confusion. way it question, anybody happy in if anybody give to I'm this. me do to not we'll me we're

Operator

we're for call to just over middle correct? session. is and a that operator. it's are I'm looks now. take Is technical in It this the It ahead the of were guess our like we going Q&A the go seems experiencing some I difficulties. conference

Ryan Marshall

That's correct.

Operator

Okay.

next Our comes from question Jack with SIG. Micenko

John Micenko

isn't fault, always it? Zeumer's It's

Ryan Marshall

can we this to off this. sure I'm think let anything Jack, he hook. not I with Zeumer one, actually had the do

Robert O’Shaughnessy

your running know next was in cutters, the Jack? now Q? but with He that around what don't I wire so

John Micenko

right. All probably. Probably,

So we backlog. got a huge

build which not the rate things great kind looks we me back growth. of ramp it. the is the in about historically, of the conversion into pressure backlog guide year the backlog coming conversion back like half XQ Can Bob can in margin? It tells drivers surprisingly this backlog has you conversion seen continued out that half commentary for of The the spec got what talked You've while some year gives of unique come we of of I maintaining with you that increasing that think dealt confidence prepared of but of to on the calling a unpack sort in XX% industry visibility hit back some in down, XXXX. there's some

Ryan Marshall

work to of We opposed Ryan. it's our process to and inventory look as Jack, Yes, backlog. tend conversion at

So we've what that rates work increasing, you start sold working through started production very full and carry, feel we we comparable terms conversion. backlog given for than tell we that not do inventory giving and specific reflective a achievable. year is have without you guide the the like to can process the that are weekly, daily, is of numbers we've such the monthly in spec is very a larger the we're backlog which I historically sales running standpoint, ordinarily strong what From run And environment. of

think bit. spec bet of a backlog but getting inventory, really a to bunch alluding putting more So ground. through some to the not put sold huge spec which you we addition in on to I have necessarily in not been of reflective incremental it's it's a in little Certainly, there, want started more the may

Our little in chain. cycle disruptions supply the elongated, some times the a are given of

I sure. the we really team through product widely highlight is the our have. have, it We've size fairly out for procurement job the that but a standpoint I'd think company, there's we there the gears talented is done little that, nice from of the working challenge that a of that probably where a or areas in a bit sand some -- known. relationships

John Micenko

X the Jacksonville. plant got And in you've got then you've down

going the be like margin? kind reserves to gross over think show of we that You're looking G&A to up Is bringing going and right? that see in -- How that level, online early will to guys numbers? is expect a be another where 'XX, benefit Is early the lower think X the it should in Maybe model? that be of company warranty to time. Where of going can online, ratio? I at outside

Ryan Marshall

we maybe let that get these one. And we're the bought I'll Jack, the to benefits reason I'll do first And take we that Yes. Bob what the that I'll is of plants. going highlight think out increases that deal the one, we're labor up which reason a expanding in tremendous as is efficiency, well. we're our big picking and to cycle the one, the huge efficiencies we're second getting time that are

those the performing. things we're facilities cost that these with and manufacturing how very benefits getting, are pleased with combine off-site added You we're

of my working the So highlighted in site exceeded Jacksonville's plant expectations. We're on through prepared the contract I things. in We're as some remarks, two. selection number and final our just stages

this and Bob the what of see numbers. we're future where excited touch then prospect let you the of So about I'll can holds, the on

Robert O’Shaughnessy

Yes, Obviously. Jack, it's homebuilding. in

believe, with there the the talked benefit terms It's but contribution with the the builder you'll contracting so cost And couple consistent the line homebuilding this, side of we think, divisions than them. building of the our a of some from business. rest to a then our not in actual so I better with Ryan cost time the to a that it's margin our the business, it's But even both in of operation. of impacts. One line, obviously have see, out itself. the about. do And not benefit, is cycle you little on business bit is then And

-- won't that we for about. operations that I materially and intents the get it see talking things improved it other you So was purposes, all think than impact Ryan

James Zeumer

think there. Operator, we still X have more question still time you're there. I if call, you're for One more if

Operator

Our Sachs. next comes question Goldman from Maklari with Susan

Susan Maklari

first really question adult the active around My business. is

there. You lift nice another saw Quarter.

other do get in of color you country, thinking you you're that you really make up out parts I their market the Can in give bit prior maybe think fact definitely the little the like being think, Ryan, this transition? to demand allow terms of of COVID by driven is of how about that in your what these like on of seeing kind and weren't you're existing it picked that buyer people to of that mentioned is homes coming some really us the How kind just out fact there. as comments, that of the And trends feels maybe a areas there? and much have Northeast in and the strong kind that through?

Ryan Marshall

Yes. Susan, question. the and take

The they've there's active are number a sidelines One to how right comfortable they they I figuring certainly make strong to got easy retirement. think the finally, factor of kind think, has market, so a seller's go want for then it that into a that our existing in make our resale adult certainly buy out retirement accounts of the active to were first And to the as plays benefiting their now. to market buyer to flush. how and decisions stock adult new as that is move figuring home to made market that the very strong and sell are communities. out behavior, of the and more relates things I X it buyer

a to of that continue be brand will So that business, perform to our and is part expectation Webb continue our big the will buyer very well.

Susan Maklari

capital around my allocation. follow-up And question Okay. is

some You you you the talk that you're Can bit there? color about little just buy stock started kind And can to give a for thinking quarter. back any of fourth in 'XX? to how

Ryan Marshall

taken going given news. we've for We reinitiated to on have of pandemic. third part saw our is the second $XX fourth report highlighted quarter the buybacks in Yes, we you stance the is level. and allocation. What capital we'll continue as be stock that the But is the to Susan, quarter, paused it million the that we a

We're of So going to not of on we each will quarter, with we'll you forward end we've the at provide what the active rather be guidance throughout done. share XXXX. spend the amount

James Zeumer

to I your back out technical time, you to talking next it. to the run over of to kind the forward We'll getting the earnings day. of call. now and we've and everybody on our apologize look for certainly difficulties We of we look time, appreciate think I forward for course

Operator

today's has conference attending for presentation. now Thank concluded. you The

disconnect. now may You

PulteGroup (PHM) 28 Jan 212020 Q4 Earnings call transcript