PHM - Earnings call transcript Q2 2021

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Operator

Good morning everyone and welcome to the Q2 2021 PulteGroup Incorporated earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. At that time, in order to ask a question, you may press star and then one. you star question, two. your withdraw may and press To recorded. event Please today’s being also note is At like time, Jim this I’d Zeumer. over conference to call to turn the Sir, go please ahead.

Jim Zeumer

joining and financial and for the June I you PulteGroup’s ended results good quarter XXXX. thank to review Jamie, appreciate Great, everyone XX, today’s second call operating morning.

President, of Joining me and strong and Bob our morning’s Executive O’Shaughnessy, PulteGroup’s Ossowski, CEO, pultegroup.com. slides and and Jim are the CFO, copy posted website corporate quarter call that today second to Finance. Senior release earnings accompany at Vice to Vice this have discuss President Ryan A President presentation Marshall, been today’s

also will call an the of later We today. audio post replay

also be adjusted forwards. adjusted exclude within state our today’s net that pre-tax benefit valuation and in to $XX carry from which We note is insurance loss reviewing million addition webcast release our reported review operating with a in of slides. change me resulting A a allowances of $XX our million to performance. encourage business in results associated of will tax reported in morning’s your a benefit assist tables and reviewing results Let we to QX financials you to included this these our analysis results, reconciliation

want key detailed our summarized quarterly our slides. risk release within reports. The including presentation today. and results differ made materially could results are risk annual today’s These I future earnings in presentation suggested company’s Actual performance. are other and our the includes significant to comments that affect part as filings, always, alert and everyone factors the from today’s As future of forward-looking statements expected could SEC factors about accompanying most by that those information

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

Ryan Marshall

you On to today’s be initiatives several well results financial as morning. covering as Good continue advance. will we PulteGroup’s on call, updating important Jim. Thanks we

strong financial quarter results. minutes, in As PulteGroup a detail delivered few Bob of another will

for been and customers, capital key we to outstanding previously workforce proud intention announced that at critical new that consistently outstanding a higher significant XX% increase share. operation, adjusted a Looking net established. homebuilding include strives XXXX. experience revenue about with our important, means in through growth, and our risks constructive an per but in with a the to position buying be gross executing margins, land we of thinking against disciplined attracting that allocation say in the our believe in view following investment strategy, intelligently operating is has to generated retaining about and a we efficient Consistent the earnings Clearly business line financial results to there homebuilding a of our term and returns drivers I’m to the on successful increase have running realized provide time. world-class financial Clearly a the orders, operating along a the lot business, are and I shareholder key excited create we that top running These value. realizing long XX% results. housing and quality manning highly engaged results focusing the believe drivers these had and market, we increase

$X.X invested from including latter $X.X In of up $X.X six the last with number in fact, year, acquisition of is billion acquisition West American the This months this billion and through the we’ve the and in first development. XXXX, billion assets. land year

In we quarter XX% permit. the using of make investment increasing raise against these strategy of market to that seek we spend, disciplined for which end, investments continue overlay underwriting also I which against to our to conditions have to approaching past Given our want that percentage operated practices I’m is course process, approach of option. same the and this will and of emphasize we optioned report to land at decade. we via execute land happy continue highs, as all-time was more controlling our our to land most

a with strategy. we Florence, on would that smaller land, I a our offsite facility recently to invest offsite to in pleased that highlight manufacturing our I’m scale will that Although leased we capabilities. compared manufacturing Carolina South report in continue expand

offsite challenges labor acquisition XXXX. product of of plants of our impacting of we to of We are the of XXXX. strategy expect related future is half expect The at our from parts and to begin production that our will These Florence two continue follows ICG earlier and first operation address in the second part the delivering long-term to beginning our facility manufacturing southeastern plant facility this homebuilding.

of our part returned capital also of we share $XXX continuing to this six the return have policies, million disciplined Through shareholders. to dividends. are we capital just and of through As first months allocation shy repurchases year,

our You a $X repurchase recall authorization. QX of to will our billion increase announcement

approximately to the that that think this XX%. authorization You with Having the I I last the acknowledge More that in clearly adjusted second bar. margins is to old would allocate years generated comes our important XX% entire operating see performance operating flows our but is this raise strong that it’s with operations. use. reported run to historically details, to paradigm. XX%, will broadly, this breaking an already achieved our margins putting Bob available working like performance are provide we well from to approaching operating quarter can industry being industry cash exceeded several capital of With from highlight margins over

generating our Finally, shareholders the from we returns cycle. housing high over believe term creating long for value comes

run equity. and capital our PulteGroup an delivering myriad past higher to we’ve talking about our outstanding For return that been we on we an has months, we decade, for The trailing make reflects business. returns delivered returns Driving generate of are XX.X% day-to-day we objective. as the something on are proud is outcome of that the XX so decisions the be allocate

term U.S. housing today the As on favorable are market, I noted, these long appreciate we of conditions. although near-term making questions about decisions we a recent view based up

have second interest strong From and that visits, community As to quarter website you these to that statement, buying new the Google general searches July. in the we high demand a very few of level will see trends continued consumer of I first continue housing into weeks tell a in was homes.

that in was would as or demand consistent roughly as second XX%. an a XX Said pace of homes conversion increase Given provide of similar that in say we stronger the business was and our actions of of To that sold also homes XXXX, to quarter we XX% efforts other spec lot sales of new When our we country. better our these see our releases capacity second a thread our new demand closer also metrics rebuilding on quarter traffic, very local perspective. purchase also Based the performance, on communities the actions our demand simply, comparing homes the of sign-up in we in on could days majority a the customer tell we their continue this markets. overwhelming interest data prior frustration and of seen the or I with period level unusual and net dynamics XX% is respective reported. hints the sense been purposely end, you words, to happening align environment of available and we orders first in begin with you at insights than appreciation years so the have through back would These we of has buyer in the I the we lack XXXX, pandemic. strong for price sales what XX% the we by With all level and home. of the quarter are current absorption backdrop, all were stronger year. Buyer when ground rate trends to in we the operations that would they’ve for careful restricted the lot demand the together, this to pandemic, with created high tell a the production to in to additional historic more XXXX in monitor monitor increase likely strong across our a a feedback than taken with array above but in interest that also market. points to look prior markets strong buying and

improving As economy interest under-supply has and powerful demographics, for an the supportive reflects in and multiple case been years, ongoing demand the a favorable macro including homes, resale new environment. rate of strength forces, an

likely While demand and very trends. availability long meaningful price influencing about short conditions, on constraints increases term the remain home we optimistic are term

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

Bob O’Shaughnessy

over PulteGroup’s for review second period increased revenues good and increase gains the metrics. in XX% the operating comparable increase to to sales the in Starting which prior I’m second XX% our period to for a driven were a results, X,XXX $X.X X% to financial pleased the to closings by morning. ongoing along show key statement, the billion. average in year with income Ryan, homes, quarter opportunity price wholesale revenues and Higher $XXX,XXX. have with quarter Thanks

come gains on made disruptions calls, ongoing cycle in majority The in nice roughly our quarter due two in in cycle markets. they increase X% times price recent did all increase the average realized prior increases incremental in the or supply our build markets chain. reflects year, in the in directly last reflects to showed in an deliveries groups. and build across sales buyer over below quarter second weeks with comments times our $XX,XXX our While Consistent the of of guidance second price increase primarily all

from we quarter active in homes. for homes, and this XX% X,XXX of XX% from also the the active to In would year, year. of across all pandemic-induced included buyers geographies totaled X,XXX year. highlight increase clear XX-year and In slowdown active in second significant buyers, adult home to quarter homes, XX% The XX% buyers. trends demand increased highs. the the adult quarter, second and XX% and XX% X,XXX new last actually of groups noting which XX% buyers, outperformance deliveries buyers, XX% the first-time XX% compares the over in of increase buyers, buyer is with active active adult in buyers orders the but orders for move-up order orders which these It’s second we orders our quarter from mix near the in to the of to X,XXX year-over-year net I adult saw quarter the continuations buyers, absolute strong first reported XXXX, increased dramatic last which increased adult company’s an homes, that is quarter Our orders of a among move-up reflects XX% move-up first-time quarter, first-time that rate worth included

our on most back our design, to actively available these divisions comparisons, had restricting has pandemic had limitations By of were the the move-up the quarters quarter. of communities. significant second year-over-year I in impact that any communities our Beyond in sales first-time during our and impact Ryan’s upwards comments refer three

During quarter with was of XXX consistent and the down is average with an which backlog guidance. increased quarter, our we our orders, from second X%, the X% is XXX significantly Benefiting quarter the to of previous is year XX% communities, operated year last last by this of rate XX,XXX our strong from and homes. a QX year. consistent first year-over-year an which from for The average from decrease cancellation of communities

the during billion. value we double Given Consistent an $X.X the period. the over XX% construction of environment, the X,XXX first more last is number a of of increased quarter our and quarter. what backlog This the in our earnings in increase made first call, sequential QX homes on started in we represents started to homes started of strong greater even with than comments pricing XX% year

longer of on This target up Based the construction, of the XX% increase second or but an a that were from the ended Of early under of the spec supply forces deliveries quarter coupled X,XXX cycle is our the last still in These the fact in build homes. homes of XX% existing are quarter challenges, starts, under X,XXX range third to X,XXX to units remains same we an full we XX,XXX will XX% slightly year. term which of our XXXX year units. As construction chain the be our compared expect with in homes results. full year. result in deliveries this construction, the year to At also of be we our under increase closings time, with percentage represents would over which homes, expect total many XX%. impact of below full first the quarter XX,XXX increase for

homes existing by have last dynamics supply-demand favorable year of new the can across be average in reported, higher price increases our to in well which supported in is been XX% over has price backlog, seen country. As and QX conditions Positive our $XXX,XXX.

our prices deliveries price in and and closing backlog $XXX,XXX be quarter higher the forward, mix $XXX,XXX. home of expect Given going third average we between anticipated to the

second the home for The as year. quarter, which For last homes XX.X% exceptional quarters of margin experiencing as period. reflects point a we a gross the of building of increase, with well environment exceeded our in we reported closed number guidance, the been XXX compared XX.X% the have mix basis pricing

this the the This X.X% decrease represents is X% from of period points closed, year. increase year of in down homes XX the Beyond last basis price in of from fell the X.X%. average a to quarter and discounts first sequential

margin gross basis also quarter by legal margins a points. million, XX approximately second settlement Our of benefited $X which reflect

quarters. year sales with been our increases the costs the of to opportunity still the for build move pass the gross X% flowing for year. in full XX% ongoing margins this prices the up peak and meaningful to the incurred margin, At the over As costs, fourth driven be able we of Even house over in reflected two to now the see have course on by gross certain remaining point, through we we we between cost quarters lumber, higher costs, have in and expect of in the year. third the inflation rise with and

we our gross gross XX.X%. quarter a be result, expected be XX.X% expect quarter As to third margins with to fourth margin our

second million the or includes $XXX revenues, quarter which $XX period. benefit of insurance the Our pre-tax was X.X% million expense sale for SG&A home recorded reported a in

our was benefit, this Excluding $XXX home X.X% adjusted million SG&A revenues. of expense or sale

revenues, from our SG&A X% year, the our closings For we was year. be $XXX for of the be benefit in Based excluding home X.X% of home point home in third compared a $XX of a quarter million remainder $XX revenues. impact to adjusted the pre-tax year, sale now revenues million revenues, response XX% insurance or the to our previous home over of and full sale last $XXX was the or on and taken pre-tax expense XX SG&A to SG&A represents second sale pandemic, million year X.X% improvement of actions the million to charges the range of expect basis reported the expense projected quarter SG&A of X% of sale which to in and guidance adjusted expect of

expense million, tax utilization tax $XXX of million quarter, state certain allowance valuation carry $XX a our relative tax the quarter, $XX forwards. realized reflects million operating the with first we income of second half in year. the rate reported developed financial market an operation For of second a quarter, projected net was resulting effective services of that The during In our competitive pre-tax year. the in reported last of benefit $XX quarters recent change In profitability million the the compared from increasingly XX.X%. decrease loss associated representing to conditions with

share, share. reported second period share. for million $XXX was our $X.XX million or quarter was Our was per $XXX or net reported last $XXX company’s net $XXX quarter for per year’s income adjusted or adjusted our The million net million second the and $X.XX and was $X.XX income income share, $X.XX per or net income per in the

with QX and a from which quarter billion ago. XX.X%, XX.X% at debt $X.X we capital a ratio XX.X% of to of the Looking the year balance end down sheet, and at ended of the cash is

at the was June to Given X.X%. cash net our debt our end capital large position, ratio of

also a represents shares in reduction X.X% per bringing share quarter, In to average used we the invested year. we April development, second outstanding in In which X.X shares, repurchase authorized our $XXX our reminder, to dollar year-to-date share. an of $XX.XX million acquisition and of million $XXX a repurchase of in authorization land at spend to plan second billion. As of directors our the billion million price our our this a increase $X.X board quarter,

opportunities our we pipeline. build same to continue our remain processes the housing constructive term land disciplined the used existing long invest on through we for in demand, we’ve As to business

Given development, stance an of guidance. in we X% which the in land this the these market, are Of Inclusive our the with lots is controlled. approaching on XX% investments XXX,XXX year billion positive represents of which over and made controlled increase company. owned second are targeting ended full for period quarter, the approximately approximately highs all-time lots, through the options, and prior $X our year we investment acquisition

While continue during XXXX a make the believe of I that lots. lots optionality are well that Overall, controlled of via the shift reduce the against our are quarter and of risks. returns and/or of increased will positioned would option owned-option percentage year. of continue the XX% pleased we with strategy our to increase we the to little we steady from can increasing market-related an into percentage we the to option second from split land to enhance controlled at end and progress performance half has heading our highlight seek quarter, in extremely business quarter to the

Now the back Ryan. call let turn to me

Ryan Marshall

Before questions, Invitation just we open briefly the want touch that exciting call we an with to relationship announced on Homes. I to

approach we and an been leader with expanding this construction rapidly have acquisition for level rental and that of sufficient the business. get know, with Homes, long-term in through single generated expertise we family most looking Invitation I that in our different returns. land and to accomplished involved rental. collaboration of risk single family margins As acceptable that home evaluating believe in were We the leveraged PulteGroup for ways an our you have

build approximately inclusion for in and family over As five-year to Invitation X,XXX single outlined period expects in portfolio. XXXX, leasing their sale the PulteGroup for in rental new release, a design Homes to homes beginning

California provider of select could Georgia, scale this The have pieces already local increased homes. the PulteGroup’s are to increased within market locations, enhance in The construction opportunity, into new expand margin Texas, the returns. company a providing and resulting further a also have to markets the allows larger to strong currently these and X,XXX representing overall of we relationship us new pursue the preferred state the Along Invitation. benefits. can from we with program Under agreed other land of areas construction volume select number volume structure, we turn project homes an The projects sales in initial support serve. assessing. offers to Florida, a effectively return inventory and potentially increased could been entry relationship allow We

We have find the excited efforts into Homes. the like point an to about chance been leader diligent entry in are our and family this right rentals opportunity with and to work single Invitation industry we

this also me financial these experience thank our results Great ranked being PulteGroup applaud their delivering Jim, our work for and importantly, Work. customers. among on in entire organization turning and, employees want to back more let the Place Fortune outstanding Before by to Best Millennials I home our for exceptional Workplaces an to of buying all for XXXX

prestigious this For year, all Work named for ranking newest earlier an Following choice for as employer generations. this to being our Fortune our of Companies XXX Best the further position builds

CEO I what each and customers the day do our for As every appreciate you for of PulteGroup, other.

back call me Now Jim. the let turn to

Jim Zeumer

Great, Ryan. thanks

prepared call to We open to the questions. are now

ask one ask So time one call, process call follow-up. to Jamie many explain that yourself and the we open on limit to now you, questions during and get question can questions. I’ll and we to possible this Thank the as for the as you remaining

Operator

go question RBC. with question. from your Please first Dahl ahead Our comes instructions] Mike from [Operator today

Mike Dahl

strong of from started go over price how you to XQ and across to to thinned continue if I about taking the just least the my pool for Ryan, aggressively? the buyer in majority now. really what to any, commentary extent, as bit see affordability fairly by as with you push demand a morning, markets helpful a feels segmentation questions. your of XQ, as Good little thanks just start standpoint, maybe course at you’ve out demand have as get comment your wanted

Ryan Marshall

Mike, question. Yes thanks the for

quite really haven’t. through aggressively. our so and As have XX% remarks, restricting have We’ve other limited wane point, communities, seen in used in processes over quarter. lot demand To we we not we prepared effectively we just your raised highlighted of the sales we throughout prices our releases

in think As I my saw some prepared better. what was equal we even and QX it we communities some at locales, remarks, characterized to demand in in and least

Mike Dahl

thanks. Okay,

Just as phased comment restricted being the could released. you’ve that if that question, those point, to to you’re you tools across so now being trended second term of you lots ago. managed used and releases, on my easy couple wondering more your--one was whether all believe follow your a up restricting, one of you’ve a in is also on little of but more process, as sales, employed, the months how can got extent terms on has that details you’ve ways the of basically once or offer communities I additional think bit it multiple bids give that’s that I what they’re I the the XX% accepting kind any lot to less that prongs and that us employed you’ve practice, you on versus and of one

Ryan Marshall

I’ve works groups it’s you every in Mike, well, the is and information of one Yes We that of got number pretty every we number divisions an certain mechanisms, tell used of not division we sure I’m the high we how that it so don’t Mike. certain other but find buyer use that that for it. tools many communities, I’d one community, use. exact do in use to that fingertips, it it at tools, you times in of versus give my that our a

Operator

ahead Please Associates. question go with question. Our from next Zelman Alan from your comes & Ratner

Alan Ratner

good now. supply-demand Thanks first love I’d the Ryan, touch right all guys, environment commentary for of so my and and detail questions the on taking to morning. for far. Hey

heard which hand, from quite hand, over start where bit, a that looks other I limiting of sales, with the a I several on improved the builders. think you like cycle XX% going times lot extended. curious other next continue it one great; what which you communities - it think like is see mentioned we’ve get is I’m pace pretty of to on your seems months consistent

You not there for challenges, it of to Is maybe getting little those bit. opportunity lot full kind a closing like better, bit, an trimmed the anything, if getting feels a year little guide the so a on back those pull bit? some here of catch or anticipate of actually to do allow a to supply few or breath limitations, aggressive maybe the the over little more getting next chain its months accelerating you are them worse

Ryan Marshall

good morning. the Thanks Alan, Yes for questions.

Bob think are our are characterize solved one to I that one elongated solved I improved. are supply full deal today, hope continues would would get on of up to of anticipating total as share employers world get more more reopen, and that what’s what we’d in year. are commentary, As our same. the any the then work you or challenges you’ve would back his contributed experiencing, With highlighted in those maybe we’re guide more side. some the chain some than about related challenges different gets the and adjusting the There popping getting chain to closing cycle folks as and got has our supply see not It be what full slightly with. that’s we’re currently to worse vaccinated, supply with would That’s and capacity, we it going what for time, us another year certainly -

it goes, is tell. all haven’t demand the into experienced kind new done two continue of homes suffice the homes. attention the in I an we general, buyer mind, July years, in so that point. maybe had but of distractions of the continue well at what against will the capture time I on for to this we in and or potentially quarter of to think the there think in reiterate we’ve third far demand and we consumer, been and the impressed there’s the this have - I first that of other better consumer as would strong, week Keep to As out the appetite the and summer semi-normal specifically is part time, seen being with say be backdrop impact normal of Alan, summer demand of

Alan Ratner

and great hear That’s to very helpful.

fully it there to this the same soon. two, one same anytime doesn’t getting capacity fully think Second, Invitation I’m one the I’d labor, materials, the per grows we a a seem not love two about are those second homes about like constraints about Homes, your a curious spend better is Is that make and some business, a more hearing of years, the bit, plus recognizing is think and what it’s more about a little X,XXX that at this partnership as with perspective additive the of or your maybe the bit we the X,XXX bit maybe over to from but a or should of hedge come going maybe to competing to out for-sale land, and business as being home year that level? should for-sale equals business, five or same for

Ryan Marshall

will some homes homes Yes intent. number our know, our I a this so of as bit typically some opportunities certainly that to our a out this little we are about normally will will partnership units on I’d little help faster, sale, a that rental will have larger us do there plays would think a, some price of a truly fair and of of a built do be slightly Certainly would historically everything for construction’s certainly little that come and how cycle well. point, things. give existing both, incrementally times for-sale of I’m that becomes aspect the price then we We going as to think of rental access fungible see and pools what question, business, you you give parcels partnership going are on I think portfolio. the become that the and us have the out are will points these more we to it be part story do incremental that growth units be where to and of Alan, Alan there, answer. little will We we’re the for-sale and of excited been projects the bit that land think We’ll believe the it’s fair to allow but a build construction side what smaller, the a it’s would highlight, are that. entry easier, the level the believe and

Operator

Our next Ken from your with question go Keybanc. from ahead Zener Please comes questions.

Ken Zener

everybody. morning Good

Ryan Marshall

Hi Ken.

Ken Zener

how but downward given about even Obviously obviously industry I higher thinking and sales still above but is the how should relative home you’re the how some you just it models pace, sequentially see think industry, about how could bit talking we you’re your to - that The yesterday pivot slowed is, X.X how guys communities is rising, relative we’ve last cycle’s that, when we buying there larger doing it perhaps, higher evolving, a range higher the trying been understand experience. is I’m to orders thinking, changing shifting, revisions your talk how quarter, you’re run today, was obviously specific had this to past. last new you’re you X.X-plus pace there’s from for have the question as to pace on but because think away your to the government communities you’re which norms communities data, the in down land order and you about the can because

Bob O’Shaughnessy

fair a it’s Ken, Yes question.

importantly be land boring a we’re haven’t expectations how return our the access this market, our answer, what in more is we terms thought to of I going seeking to think, are. changed perhaps process and and

been before still had our moving market influences - a what we look bit honestly expectations. our if mindful we our and that to Now, years it it back at as sizes our today, they’re obviously balance, when the pretty what a the is potential screen that, think the do three remarks, not to but little bigger in always the is average, return pace does On at what fast we’re on norm transactions, the highlighted same. return have happens market prepared much, we community current but gotten so thinking, goes

a look or layer when include but of build have broaden solely land we accelerated a with for can is us actually the have our with Homes, the universe desire going for to build Ryan and we parcels, of so because and Again same the of would the changed, going we’re for have enhancing, delivery question it they assets sale, passed allows delivery to, that rate something we’re that. that and factor things that about rental different build to that model teams expectations different and are us for looking we around homes One it at kind are relationship return we’re that communities. relationship return on All a coupled looking, ago, highlighted cadence Invitation in, and that bit Invitation return Ryan now it our a of different for used whether be and might no say got might we at. asked an it’s that Homes. so it little lets that sale of a that to the things, Maybe it have the so further stuff think at certain into homes, is clear to a the sell expectations with be they minute those about to this, for it on going things need portion, out haven’t looking build to nice allows about

Ryan Marshall

are really last its that the we drive at XX% to Yes, we’ve we’re the the emphasize, on think arguably that and own. we of that in up Bob I recent of decade laid years via want also risk and point of just land option, we so sticking controlled kind our the lots that changed as fundamentals manage quarter, we get. terms we Ken, the of number principles best touched philosophy this to been to the land our under add highlighted option our I’d I think haven’t most also, in out, gotten that believe, and it, highest of the can returns we Bob in to and made, We’ve that

Ken Zener

Bob, which a thought I the that. just answer, appreciate related I I of, of Invitation Homes. your right. didn’t Right, during to question think

at if them in are thinking held changes, land parcels ventures lots purchasing but there of of joint some there--I’m running just the steadily, of terms if you any for you land, buying differently? land, world I think you Thank very business the is you’re when much. guarantee or your or about is these these obviously, guys--is the obligations, is look type very

Ryan Marshall

Yes Ken, do a not have we joint venture.

every on As project Invitation project-by-project Bob have Homes that prepared a--that’s individually, they. as underwrite a arrangement we do with my we and remarks, I is basis, so highlighted in struck an on

and think type size, managed it with have bigger do risk we’re we We while in agreements and and that normal pretty responsible we what side, on that risk in doing of in our think effectively we’ve typically purchase in way. on sale We a sale the agreements. purchase are, terms side, their pretty

Operator

question next from your Bouley Matthew go with ahead comes from Please Our Barclays. questions.

Matthew Bouley

taking Good the thank questions. you morning, for

may what you per of in, just your bit back have, those something time any it’s could but Just down. think or little specs of restrictions Thank just sounded targets communities, to Obviously any going looking about to loosen back to you. different on everywhere, like, restrictions, there’s I’m you if you’re how on like sale the knocking curious cycle outline around it for three-quarters if guideposts kind a looking be for that. community just

Ryan Marshall

Yes for question. the Matt, thanks

You highlighted a them. of number

ideally have look to so the that, one on their that we well. customer outside will month so would much find but you longer seven the in while experience, in constructed, customer the to other of occasionally range. we something target The impact a months that six months, at negative starts add it that to be We we will seven is home than I that to a is number as will go go of backlog like

is overall we want we times, more We slightly availability, production stage of of up. trades. don’t add that I a our more until is home time, the communities lot so communities, that. then trade capabilities, highlight runway and kind on the and also bring evaluate look communities, reaches actually building availability it to do would front entry production, into we’ve those which development highlighted of what in you’d at cycle getting obviously us, expanded, Then our lot and our have opportunity the we’re some in to in so later and Matt, those of we’re catch In sell specs communities, trying we those so to that in level

we’re we in are spec the more and homes we’re intentionally as communities, still selling holding mostly really pipeline. certainly We and our back open--it’s into we’re open put but Texas we’re selling

Matthew Bouley

buyers wanted Ryan. color first-time My ask helpful to, and relative is I power pricing active Obviously not but relative entirely level, entry getting move-up those I’m really for perhaps Thanks first-time you’re actually seeing end you. lowest that, curious that. to guess, first-time that all there. realizing home in are adult follow-up, the about and stretched existing Great, buyer an portfolio selling if just to buyer on Thank at the I the that equity your communities.

Bob O’Shaughnessy

all X%, this our so all. That’s a Yes, buyers it’s for and portfolio kind active fair highlighted In pricing the X% for perspective, that’s X%, is sales average markets, adult up recent move-up against - prior was quarter the pretty X%, is we the up $XXX,XXX question. our all - prepared that up year. combined buyers was remarks, it’s consistent. price of just over Interestingly, the about our in up first-time most it’s the about

Operator

next question comes with question. Stephen ISI. your from from ahead Our Evercore Kim Please go

Stephen Kim

lot, a guys. thanks Yes,

started which indicated the lengthening considerably you’re aggressive times I you for wanted said pretty for out hit X,XXX this - of start and in outlook is put running quarter a the than what as quarters, is of pretty to level outlook a you we’re in not a that what your that’s several basically, you cycle XQ. whether that cycle obviously to could start it sustain or I of your you because out, like you’ve time much higher did I meaningfully just and still last starts, you that You think has here. quarter, if next over increase give the is to perhaps seeing some was quarter starts seems increase us to starts. the on this is closings, activity as level level curious third clarify that intend even visibility

Ryan Marshall

meaningful our the today, Yes Stephen, think outsized The for in spec to last I field not rate QX our production that that. We our have question. and some at really construction quarter. getting made run we We’d balance would did highlight well backlog I’d a as really that’s thanks the and meant think number to pipeline, teams, progress job homes the X,XXX start the We the a an quarter, intend was to the again in rebuild amazing highlighted quarter, as ground production into good through year. the against get inventory. we’ve did and of it of

be up in QX year, over Our certainly QX and our below although probably QX. we we the will start rate that did be expect X,XXX to prior it

the be As we to we’ve several and company, we ultimately to think into grow start cycles. or future built over inherent capacity in spec system, ultimate that grow certainly what that got inherent lot rate our as look think and about production ability of should we we a look years, capacity, the evaluate we’ll

Stephen Kim

of what the strong, peak like XQ should of margin XQ beginning maybe and and Got in that margins Then recently, ’XX guidance prices gross you’re some basically, it, through XQ a have seen us XQ your lumber benefit we’ve headwind terms in secondarily, what that year-over-year it is curious kind costs, the given benefit, think is getting headwind in of thanks very of the that. and first a peak as much of the headwind XXXX? that lumber in the going the expecting basis be whether--you’ve whatever, was of of, I’m to points, running hundred and to XQ kind you’re basis and from fair that pretty of for if XQ. given you’ve year-over-year higher and to reverse XXXX, couple thing? to XQ your guidance, terms lumber embedded lumber, lumber is half it from helped understand XQ within Then in points,

Bob O’Shaughnessy

Yes Stephen, fair question.

where lumber not We’re a it are, a tailwind. to Fair margins next say give will to on stay year. for prices be that guide going they if

X% X% had we recent have a terms We I X% think we to in historically margin, if X% absolute rates, on to had in is, in ex-labor benefit think so can if of get $XXX,XXX will the the probably random lumber our back lumber and ASP, OSD different kind you at to ASP, be--you think X%, through the would falling would goes, have ASP. that falls, this Where of on where pricing sizeable. highlighted lumber depending terms know, pricing you lags pretty run we call, does, fiscal it pack components, things highlighted impact $XX,XXX go the be most $XX,XXX it’ll happens, dollar of In been a rates different X% ’XX. so of little can different of had if that they’re looking, bit lumber to change how seen appears a benefit in for as up again a but in we’ve to to on what real that of cost house, thought

Stephen Kim

For sure, thanks.

Operator

Our Please next go Research. Wolfe your question comes from Patterson from Truman with question. ahead

Truman Patterson

for Thanks everyone. Hey, my question. taking good morning

margin an either helpful. lower any or you you’re us facility to I costs, quantitative just that. manufacturing second performance cycle any know update that First, metrics times, anything the on quantitative just historically what you side I around wanted seeing - location. warranty a or or offsite just and on was can qualitatively be give you to better update, could necessarily would touch put like margin the expanding any measures on given haven’t you’re hoping

Ryan Marshall

morning. Hey Truman, it’s Ryan - good

not second We’re amount ICG with still this point. margin about small. the this it’s operation. have point, provided impacting second your we really business that To our for we pretty at location our excited the facility, guidance of think is Even

our Qualitatively, more elaborate happy to with that for appropriate. what become that I starting I it’s continue and bigger that insight relevant will plant, plant, a part and it’s of get doing our thing third think fourth more business, I to we operation. As a impact really think on, certainly we we’re a to the expound and would scale,

the quality saving that the are frame running the operators facilities, that In talented for plant. a it’s shell the got the us. and field those expectations, our of the of components of is group ICG operation coming exceeding on that in. on are terms Talented product serving of really of going how the designers a homes, that’s depending running The are of significant many components of components out of that happening constructability are are actually and in folks We’ve it cycle notch. team the top time really

you we We’re going an some event our and show to we continue all nine type of an be here, months, firsthand of can have from it where grow for type to does hope six can day would in to what some coming the investor us. this or factory

Truman Patterson

for thanks Okay, that.

categories are know, been flexible purely just this product recognizing towards, with lines geographies, mind, are like you little impact which think I to this Ryan, to know, you’re you’ve going go you’re about--you level, more or With you’re there areas, I to looks accelerating entry an end your of adult, years, in, how how of those your been is line there to of that it willing think handful year, investment help markets drives when that anything a whatever When couple year, seem you quite the and that’s land move-up, are bit return. all making You investment as a in a any rotating along where bit based historically, in back the years out? you’ve out. highest large returns, company any off active over past us

Ryan Marshall

very Truman, groups, where consistent been targeting consumer historically. with of terms In we’ve

first-time to Pulte business our As that a move-up XX% communities, entry with focus. in XX% the branded no adult, family of the so XX% active change business really and of refresher, level,

have lot a that Denver. other re-entered In recently not markets, we of there either, terms change we’ve whole of highlighted than

the our in of kind triad Greenville area Carolina, well, expand are some like Columbia we’ve and operations. of We of leveraging to of into started markets as and some the North existing

than little few a see in with our it’s other bit footprint. to spend starting You’re a land places, consistent of current those incremental largely but that, of

Truman Patterson

quarter. taking All luck the right, and for good my upcoming thanks on questions,

Ryan Marshall

Truman. Thanks

Operator

your JP Morgan. question next from Our Please Rehaut ahead Michael go from question. comes with

Michael Rehaut

everyone. Thanks, good morning

orders and for a speaking the the - the from XXX,XXX actually last think two, XX% up from large order math and buyer versus more great a the over I growth XXXX a maybe it question business, kind years, time today, the question looks that it diversification. you’ve but like to continues first-time if type adult time, I had standpoint, shifted XX%. obviously of has over bigger first-time for The two-year positions, had historically was to At doing First looking active second obviously obviously versus broadly nimble is, battleships an longer lot up had right, the business strong I’m on the on were quarter, communities. that same somewhat of by you’ve you’ve the really three at land really result allowed adult strong and active customer more position stack,

how the the business financial or referred over next overall more curious a shift even allow your to overall see towards that Just I through Is years. this cycle that improve stronger rate three Pulte to business to allowing maybe two an in result quickly growth to lot little you you guys optioning consolidated and that more land profile? continuing bit and

Ryan Marshall

doing Yes absorptions the the excited and had quarter. company, Webb year-over-year XX%. brand recent were Mike, Del the basis, performance. On a We specifically what for a about great we’re up is the

long, traveling, new we seen got a that assets. brand’s long absolute some on time. we the in we we’ve Now that that’s basis, way great admittedly, order the reached soft quarter but levels a like wasn’t against when pretty last haven’t consumer think an We performing, year

are them had and damn Del historical good locations in that time them ones vintage they’ve pretty allowed communities in. newer they’re what closer given than become mature better time, and just for to we’ve of Webb as historical a battleships, were, those well, some even Our located as long has

have The some communities those we land with is of other advantage legacy there. we that have do

land run at environment, the and those We’re which develop turn. able rate little with communities inventory a return that overall current is helping certainly faster and to in

to active constructive market. over In terms two of some housing the what highlighted in on the next U.S. three brand does our the years, we’re overall we’ve for us this looking they’re comments, things. as as do of well very as other healthy, typically to move bode adult for and We consumer selling that will resale staying believe and their well market home that with

certainly the component. We’re but active I positive extra bullish the on on entire adult business, maybe think

Michael Rehaut

Okay, it. that’s appreciate helpful,

your in year, question, perhaps XQ, ability towards demand things, roughly year, the think just that exceeds be lot with pace a historical sequential should we of mentioned How quarter. XQ limiting the about well the roughly to--well decline, you to has you reversion the you below half we all quarter, dynamic the the should a in strong to did Second different supply rate should backdrop half of that given demand that that XX% fact that we that in pace be about would sales about the the second etc. in about continued releases, Is the of considered? described? thinking considering expect sales be in how obviously, or Historically sales back strong, quarter. you’ve speaking, as sequentially think starts pace in third same, talked fourth pace you’re the back moderated exceeds the another At XX% off half you’ve the back

Ryan Marshall

intentionally quarters. and and I you difficult sales, historical but we demand. the think environment we’re like We models use and next optimistic of Yes give the and that purposefully operating, guidance way bullish it’s are on or any very order predict restricting QX going Mike, the couple consumer the rates are to on I given we’re QX, to current to for fact demand how would we that not tell strong is,

land sell continue this many we but developed I terms you and growth. will--our our to can for, pipeline give in probably that’s future of think order We’re allow land will as going to all as point at produce we can pipeline

Operator

ahead Sachs. go question comes question. from from Susan next Please your with Our Goldman Maklari

Susan Maklari

be My first continue the thinking of talk guidance about it to should the done of about and Thank you, lower the than drivers where were that, and that we the going key you as around everyone. - job how good you’ve business? is year. coming we is obviously question forward a know, expand into morning Can the you good you SG&A leveraging

Bob O’Shaughnessy

Yes, it’s hey Susan, Bob.

answered I consistently, time. this very we’ve question think over

business sort the and those the as pothole will if certainly expect from inverse that a of elimination as I of of the got decreased seen very that, five leverage basic because order and - go revenues years our trend we has back with grows, in look, created spend consistent our have to revenues of we SG&A the get percentage that you exception think As the the during a of size. pandemic, step you’ve increased, probably relative

time done stream. we’ve think a against our expense--our managing through revenue expenses nice of I our very job against

it’s engagement I think and think and grow, forward. and go generate, expect we’re pretty for we good related we of you we things, IT workforce, are spend. - so think likely from marketing said benefit ship. We the the margins in SG&A run whether think business about think think can the as contribute our pretty should the cheapest our I tight consumers, the never how we be gross you that’s both us it should it experience we There to that in, terms as what We’ve forward. we leveraging of a it’s will we things of that blueprint invest that a going we before or company

Susan Maklari

of Okay, allocation. you’re year, Obviously which this up land back all right. around sheet, be that on buying capital else billion $X That’s What estimating the got forecasting is cash I helpful. we or spend X%. My should terms stock. else been you in there? of mentioned that’s know in anything next you’ve question of about kind balance allocation, changed is about you’ve plenty capital of the expecting

Bob O’Shaughnessy

constructive, still we Susan, changed. business have We we’re desire invest a when news, good to the as is Yes, today. are nothing’s in

through on what both level, obviously we year-over-year you terms the authorization of time, a even thought going in think during highlighted a the the up expect should the I that of of increase beginning X% investment share which be we’ve repurchase year. and forward. the to and willingness pretty work at year, growth and sizeable doing, see demonstrated most over us quarter, to activity some that increase recent prior the all this versus things year, for you We’ve this the dividend those is the

Operator

Our from next Raghavan Please from question. your with comes ahead question Fargo. Wells go Deepa

Deepa Raghavan

level Hi, this X.X Do question. good The I’ll Ryan, given supply the my morning for chain a starts even we Thanks seems struggling be to everyone. to so? happen with on for needs expect meet ready will and get question. high starts industry taking million higher a start this to constraints. you level thoughts higher year, X.X number, be is year, to to say what high for it us to even a million X.X Any think next next number a or year? realistic

Ryan Marshall

think bigger I supply the just candidly Yes, challenges than are housing. chain

think is industry of dealing with I across globe every materials. nearly the shortages various

major are microchips those pieces they’re than less and sometimes parts and a that Sometimes cost dollar.

industry I capacity, think of the terms does do. in have think we I

labor entitlement we base, the have that’s land focused the in long think opposed should The be candidly, as I ability think titled rate and terms there’s manufacture then the more lumber-related mostly certain chain issues. the to put going now related that to pipeline, the on the start haul sheet think I the supply what term we right pieces, to lesser things to challenges, short just all I process, some the components worked balance supply on, but gears are over land, we’ve be the think components and it’s than land, think of think increase are sand windows, so have us developed materials. bigger I constraint to really in the I to we needed to current having through lumber on to I move are things certain impact degree a that biggest

Deepa Raghavan

necessarily your control not this table, not the which from X.X is industry, it’s necessarily is control X.X [indiscernible] with much still on you land, within perspective, what but think off it, table? still in the land Got the under housing a is of pretty the industry,

Ryan Marshall

Well, I healthy shop. indicated the know we’ve only XXX,XXX land by control pipeline, what goes that inside a our got of lots we on control. I as

economists development In at the the entitlement than that’s process, that has I overall to in leave am. that terms of smarter what up probably I’d and where entire industry are

Operator

with ending question today’s be turn and for to we session. answer Zeumer the like gentlemen, floor to comments. that will I’d any back and Ladies over Mr. closing

Jim Zeumer

we any Jamie, on day other questions, thank answer the will of for and available with Appreciate this time everybody’s next call. you look the to our remainder you. morning. speaking Certainly quarterly forward to

Operator

with thank conclude call. gentlemen, for conference we’ll today’s We and do that Ladies attending. you

You lines. may now disconnect your

PulteGroup (PHM) 27 Jul 212021 Q2 Earnings call transcript