PHM - Earnings call transcript Q1 2022

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Operator

Good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup Q1 2022 Earnings Conference Call. Today’s conference is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator you your Zeumer, may Jim conference. begin And

Jim Zeumer

VP XXXX. morning. for PulteGroup’s strong participating O'Shaughnessy, and Thank May quarter call you, slides I off today’s financial Ryan our everyone, a Marshall, Good Abby. XX, ended gotten period discuss this Senior Great. Bob results on Jim CEO; pultegroup.com. CFO; and today’s and in and by website Finance. quarter corporate the of Executive joined have Thanks, call copy President great for start am the and represents us. has Vice release QX another earnings to year A our of of Ossowski, President first at been to earnings posted presentation to for morning’s

accompanying as other and part about could includes could suggested risk affect that release this results reported post today. reports. statements are today. business presentation of the adjusted also morning’s our call, quarterly the of results and impact the want also I from an later that part forward-looking those prior We in and with of review is recorded our and of $XX company’s to million performance. performance. a key to detailed SEC that comments tables of as million information review slides. earnings by $XX our reconciliation A today’s your and results replay and everyone our audio filings, bond today’s webcast in year today’s These of annual call as made will results materially risk these summarized are as presentation factors we this analysis pretax note charge Please exclude We morning’s year to within assist a to benefit adjusted period. expected significant factors the this The release differ in reported prior financial in included alert including and encourage pretax results our you Actual within most slides. future insurance tender the will future associated

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

Ryan Marshall

morning. and Jim, Thanks, good

will that, from industry scarce XX year the investors of was dynamics are expanded of and home selling adjusted and Bob share. in months. incoming terms is trends available strong, detail including is areas, supply consistent results, string more. in gross in specifics year-over-year PulteGroup earnings outstanding revenues a back The XX% QX per to PulteGroup’s our performance. experiencing increased the most quarter first or sale growth in a a financial excited with Taking were about the our first the In financial demand the a the quarter of recent XX% significant return our inventory the the past that share As has There per financial for was program. step earnings prices, shortly, company’s and supply/demand short, equity number been raised fair our strong QX limited. repurchase reflects leverage gains be delivered of results of for increase to with of in higher XX.X% active think, have just overhead I margins, first on lot it’s and quarter share say operating the financial trailing for to quarters results the

Let me on these a thoughts. minute expand take to

favorable and points, home job an demographics, economy, side, and all that buyer With new environment. the strong consumer purchasing benefit interest quarter. a price U.S. markets was demand a demand throughout in wage remained the strong a we to groups the market outstanding serve. exceptions, continues The housing On few across market rising high from

John year. while to prior Estate in for lease rates ongoing are X% increased XXXX, increases benefiting dwellings. homes of sales rental single approximately upwards single-family also and significant rental According over numbers in indicate Consulting, by multifamily Real home and the Burns were for prices rates their that from XX% by New multifamily up

further prices stable XXXX. can comparable higher and consumers. Even to owning homebuyers today’s economic get a only for home that in rates, increases point time. is but payment rising clear sense monthly lower Not can with still Forecast even or many a make more payment, over

the increases in strength raise our effectively this were in Given quarter, country. to price range prices communities X% across with the to of all X% in we demand of able the first common sequential

of and how benefiting to competitive car addition inventory supply of who is In Similar This fundamental days, a the new a me these in buying home lack available appreciation for understand price new is. people to the market equation. are side to from the resale. brings strength the home both demand, shopping in homebuyer a

guidance. As little our and I of efforts people demonstrated through and construction. land at best have homes areas want and has to certain construction manage the surpassed everything of our by same, recognize development that materials our conditions entitlement did impacting build Depending longer. and the on through cycles of and outstanding but labor our home teams closing are our in availability the the to to the gotten have the gotten from worse materials specific homebuilding first remain market, the a of and quarter an advancing job high end results, constraints operations process even availability the

appreciate dramatically production will XXXX control meaningful homes Given and our by any With not change divisions. include remaining a in or and that to which cycles XXXX production. of highlight dynamics With labor not our improvement we for XXX supply us the most our the these the XX,XXX across comments continue both remaining a the it production would does XXX these can assumes strategic of likely more we of stages, expect consumers, challenging extended, conditions, in to to would We look Bob’s homes chain the in a another benefit are to sense of tightly start next more the perspective, back experience frustrating initial and these country. for in that I would in communities at challenges, Even year and these a about time only X,XXX it started weeks, quarter better homes days one backlog in almost most up. April, homes this business the be availability now of provide the the days majority couple that first materials stand From our risk conditions. unless days to quarter expected guidance reaffirming right customer guide make doesn’t our change of of houses first for couple in we worse. deliveries want with does to extended X,XXX of now in of week that record in deliver sales lines overall in have to all the or these spec approximately highlight The decisions and is I out production. but given but half and framing our restrictions we extend XXXX. just sign

market and industry. clear There supply fair As in control economy level noted that inflation That intent rates on prior a being of they constrained. that to Reserve calls, spec communities. favorable seek face continue support it’s has to to said, and slowing as homes highs. the the down remains has have housing our the this can rise focused lot interest demand has the prices to that I we our Federal demand think strong, is market on new construction home going is are that the coming entry sum, largely housing are higher rates, been say production XX-year ongoing in signaling very the hit In but to higher is buyer potential the of dynamics of Fed impact certainly in

for our makes business sense it actions continued us dynamic, for take position this to Given success. to

a our of For lot controlled this practices. acquisition to means position have committed our increasing option now, having to are future focusing option. and land set of on Internally, we XX% pipeline land goal under XX% our

land to closing that process closing Our years be over we helped in under and us the we past -- control place on investment on some be will great positions land XXXX. will disciplined several

will conditions. expect to Going projects in identify to forward, only approach our opportunities, the will and we in certainly approved. to teams land adjustments continue that prepared our best continue land market ultimately make response tremendous the want to sure we be business but can we that changing We thoughtful get investing to make

Now let Bob? to turn quarter. our Bob over me for comments first additional on

Bob O'Shaughnessy

Thanks, Ryan, and good morning.

the prior well we first XX%, in As were the quarter primarily excellent of in the chain. sales home decrease the first an the quarter, XX% aggressively driven revenues over of impact quarter gains XX% was were move-up adult. buyer balanced closings off quarter the price active also the supply the with last primary in $X.X given Ryan groups. for last billion. first-time, active period, of as count, group, $XXX,XXX, up the new year. highlighted, down controlling with X% move-up first paces, of our to for move-up period across X,XXX comparable in while XX% by first-time gotten homes the for homes, revenues combined remain from orders Higher the The year buyers average buyer is was XX% active within last community increase made XX% In to were was In adult -- of X,XXX year year, which ongoing the with start in driven net were year orders and sale double-digit to breakdown first ASP adult. XX% Lower we were for recorded In by last the were higher an closings has year. and were and we groups. our time, fire as By mix consistent sales consistent pricing quarter, quarter XX% XX%, the disruptions

several has for restrict the communities past in to the many order sales continue current case pace. align quarters, As production we in sales been to with

homes the at buyers to of it started for to to move that to time to X,XXX back delays by land spec production Between Looking closely incremental XX% approvals availability and adult extended for XXXX development taking some longer the to declined orders. among XX% lines, we some orders decreased is buyers our buyers the in orders open homes. XX% is communities active half sale. of supported X,XXX lower in X,XXX orders due while up were The first-time order first-time to homes, outperformance activity, and relative more municipal

As a previous from XXX slightly our down count first guidance. addition year, our the result, was quarter average in community of being below prior to

the the community We expect in continue of year. to for remainder we the the experienced in drag openings modest that quarter the first

quarter, the we will XX% fourth remained the in strong growth we and quarter. value X%. cancellation such, that growth quarter increase year. backlog in our In expect -- backlog. at count our a now significant our be increase XXX an ended over of and of in which in Reflective demand the experienced second The to $XX.X XXX, strength XXX X% quarter with which is the with conditions we homes, the of average ASP low first the backlog As in dollar increased rate exceptionally community total, third our to quarter unit unit of last a XX,XXX billion, reflects with combined year-over-year X% the

moving a availability Ryan and the through facing job As great the is light of noted, and of in production the doing the challenges cycle our teams industry are labor materials. homes

spec our were year. as this quarter XX% to units first the XX%. progress result, production which number production an spec are make homes in of XX% goal XX% year. includes end, construction, triple pipeline, over X,XXX that last homes toward a This almost time continue currently steady is units specs under to under we we of is quarter the our at of At with which ended increase last As XX,XXX

specs, framing Our finished at lever of we as on XX,XXX second expect overall construction, comments no assuming the in XX% that or at construction homes still Again, between be homes the currently quickly. of which production consistent X,XXX increase X% the homes supply to sell for the in in meaningfully we that, prior the production, would pipeline XX stage. improvement price initial ended as stage of our labor is X,XXX and with these the bigger we and/or opportunity last on deliver an constraints year. with only erosion noted quarter to the well process we of for our their We made are the call, would as which in increase deliver start quarter. the early to availability materials, still of On earnings year, is XX% with stage Based to as available homes limited pace, universe sale homes homes rely return. given construction and significant over maximize expect the of

our we on $XXX,XXX first-time we have the Inclusive average deliver, can has price value price orders, to sales the occurred. average price back to average that $XXX,XXX. realized second our in and what year, homes of in Based deliver range quarter the expect new homes now our to the in expect at you the spec is QX $XXX,XXX expect we to closings backlog to in dollar backlog this see to of sales mix expect the be and an for also range the year $XXX,XXX. and Looking of the ASP of in the half full $XXX,XXX the of of we

average we price final As quarter. always the influence we the highlight, sales in of given any deliveries realized can mix

rising to our to sales In an which year first the is have XXX offset last increase we been costs was Given basis margin. sufficiently prices points gross gross over basis XX%, the the and margin is demand conditions, ongoing points quarter, first expand of and XXX of sequentially. to able quarter further strong increase homebuilding up

In of in a the half higher demand had lower in of flow-through cost the pricing environment, significantly year. lumber, half products beginning lumber this of Until which strong closings from over back deliveries also addition will for the impact benefited year, prices of prices back the our wood last the rolled our moved and since the QX as year. recent pullback, to

and in we labor lumber, continuing meaningful to Beyond are materials inflation costs. see most

now for cost of of the margin to the quarters exclusive our for cost XX% recent on house three in year. selling volatility we conditions year. the land pullback of expect and in in XX% the despite we each and the in to As to market, the be Based expect such, of gross lumber, range range recent of of be materials to inflation XX% the with even full the labor the remaining XX.X% strength

lumber expect lower towards range end -- impact the this of the and the other end we the Given input toward likely costs, and quarters. of but end QX, and timing higher to of third be in in range fourth the

if the there will guidance a our moving gross always, you margin so are needed of on through update we lot pieces, we year. as As move

comparable our year sale million. Our the in pretax was guidance. Exclusive $XXX of million insurance SG&A sale expense benefit quarter which sale In earlier XX.X% our revenues, or benefit, SG&A home our SG&A expense that revenues. revenues line period, of a million $XXX of first home was or $XX home in the with is prior XX.X% included $XXX of adjusted of of expense million or XX.X% reported

Given quarters, midpoint. be would in to currently be year quarter prior expense expect the to range a X.X% at revenues for of the SG&A over the in second expected the we homebuilding XX-basis-point which coming X.X%, improvement the

For the sale the of X.X% full in now expect year, home expense to to X.X% we SG&A revenues. be range of

of of income capture which capture year for competitive the more loan. XX%, overall per rate $XX compared First period last from income the pretax reflective our quarter quarter was was a Lower prior down $XX and conditions market million. much is our services pretax current million, negatively profitability impacted income year. operations for for financial XX% rate with Mortgage pretax

reported tax the quarter Our XX.X%. million for effective $XXX tax expense rate an for of was first

equity compensation guidance. period was in to recorded related benefits effective in the quarter. tax lower recent than We Our our rate the

XX% estimate balance in year. of ahead, each to quarter our Looking tax be the the we rate approximately over

year, per reported million Our $X.XX income was per net $XXX prior period, XX.X the to X% million company repurchased is was million was share. million the or share. of average of net or per first income income the $X.XX year $XXX while count net XX%. adjusted quarter In the for shares reported XXXX at $XXX approximately end $X.XX at quarter, shares Relative share, outstanding In first or comparable our common almost last the first or by share quarter an the of the price $XX.XX. our down of

prior $XXX In track to acquisition first $X.X development. we of billion the $X.X invested guidance billion quarter, billion This allocating land achieve repurchases on share keeps of our spend to year, million in addition for land of development to of us to $X spend spend, with lots of approximately our the that first the under of of which quarter being assets. quarter we more XX% held Inclusive full under XX% control, than option. with were XXX,XXX land for ended existing and

gross Even a operations on as our -- Our PulteGroup’s this when allowing strong the mentioning approximately with after standards. debt-to-capital allocating morning’s BaaX repurchases, with projects the earnings Service recently worth our grow from Investors underwriting land financial our pipeline us It’s unsecured need and senior that $X.X we overall provides future of focus meet of lot upgraded investment investment ended cash strength to in billion while and release, to they in position from ratio $X.X highlighted business share the us the Moody’s billion BaaX of ratings to quarter business, XX.X%. here and noted to BaaX. that

Federal our of discussed, change ways were Reserve acutely years, pipeline conditions the that support future. land Ryan period in on but rates, land risk. given mitigate of recent focused ongoing demand comments that can operations, to should provides for optionality the related are In we we the established a growth have a As in we rising

or Going our percentage will our land to to emphasize forward, rather comparable are to within structures we and the we portfolio. own option increase continue working of actively than options of control use lot lots positions

to let call Ryan. Now the back me turn

Ryan Marshall

is limited year demand industry We of XXX-basis-point remain remained high the demand, mortgage in start a That and likely means to available in Even impact rates April. buyer for puts construction potential through since with Thanks, to and volatility. has the being strong interest prices increase said, demand buyer realized future an advantageous in homes the the Bob. have changes high on continued quarter supply I of consumers. the position in the weather think an can first

the today, put possible here now I sit actions that houses getting take them personally best by you position built. on field getting entire from work teams the has can find I That we an sourcing to change can numerous it materials said, and getting to want to far and this corporate thank challenge bigger situations. amazing and success. job our the isn’t important we walking our our recent continued highlight the have job As challenging homes our even tell week-to-week, that doing most sites, their in but is rather and PulteGroup but the constructed. of basic are visits most to procurement for organization field-based for teams, sold, adapt learned I efforts solutions to Based group

Before certainly actually opening supportive to is Best This rank Fortune PulteGroup on want an but again retain Work positions also makes talented list. XXX ranked nice to to again a having among We to important a important the and to Being Great the XX year jumped much people advantage up would most just culture the where an amazing be. for but like is I questions, by ranked and to call this is to individuals. acknowledgment, was working number the when place PulteGroup that Work attract more XX Companies competitive Place highlight and didn’t Magazine. that

Now back the let to me turn Jim. call

Jim Zeumer

Great. Thanks, Ryan.

the are for to questions. We now call prepared open

and of remaining questions will Thank explain many this get can time you. if we to one the started. We limit will one ask process, possible as you as during get we the follow-up. Abby, question to you yourself that call. So

Operator

with Barclays. take And our Matthew from you. Bouley Instructions] question we [Operator Thank first will

Ashley Kim

is today. for Thanks Hi. all colors. Matt the for Kim This Ashley on

just buyers are thinking of greater first those the order across specifically any kind if that So, are reason challenges business, question, going? think saw level rates communities just begin to given see entry but may my there’s wondering to strength you that understanding where

Ryan Marshall

I think, it’s question. actually, a fair Well,

that exceptionally your will be continued the if first As in certainly into that the rates, by that’s buyer. we rising To the is there highlighted and group was point, in more first-time demand a buyer April. our prepared quarter strong remarks, impacted we it’s saw

our reason, diversified that and maintained for balanced that others strategy. the it’s among we consumer have -- importance For of

that’s of level. group. at We XX% about our tend the entry to have We points the within play entry-level to business consumer do higher targeted specifically price

it gives I to think room some us So around. move

they the of other of done backlog. The for the and to that those have which shortens with until not most window, buyer home here were delivery kind buying specs to sale the think process help closer our delivery that of are in amount them a piece we are waiting starting be releasing of we will homes take I is time to their to

Ashley Kim

you backlog backlog buyers your risk there then done any what lock sit Thanks stress potential kind for And rates? tests a to your recent of while in as that. of have kind see on the to in for

Ryan Marshall

give actually, -- you will a Bob, little We color that. have on

Bob O'Shaughnessy

Yeah.

we contact think close are backlog. always I in our with obviously

there that have perhaps, folks longer their in position and that expressed people built are they of rate interesting, XXX-basis-point in lock have taking rates increase is an to have backlog. seen the a a impact so equity on most so close. we house and want We increases our rate that -- up highlighted they significant single-digit have single-digit, a It’s

have different can programs. whether lots ways And so payment income, down we of if there, they we help source additional it’s to people some get that have additional different

try get and have the obviously, to them with them people in closing best we is can So as pretty changed to solid, we table. backlog circumstances work to

Ashley Kim

the Thanks luck for good quarter. that and on

Operator

will our next Associates. & with question We from take Alan Ratner Zelman

Alan Ratner

questions Good morning. quarter. nice and Thanks guys. my taking for Hey,

Ryan Marshall

you. Thank

Alan Ratner

an timeframe So, at from about we a the homes I over are probably timeframe of have that that lots making over and well. it. XX,XXX guess, about XX,XXX there Maybe portfolio. talk the share that’s higher. about I kind your look lot end drill option as on guess, XX,XXX, count delivered today, land just you effort I bit Obviously up a lots, you lot XXX,XXX of XXXX, could first If little XX,XXX, guys or

of pieces XXX,XXX, been I roughly lot XX portfolio and or so of last there’s own the your tied to it moving there. way agnostic to right that about So months months, contracted XX,XXX, for maybe of kind know months over the XX has is split option XX -- or think up the XX% that a

I has to land of you been up maybe figure color as of some on So tied am and trying much how vintage provide your the late? portfolio out can if of actually

Bob O'Shaughnessy

of I to a it and half way it its in so post-pandemic, is a to advance the to to pre communities lots you simple open. On control, from pre- into is fair and that amount time oftentimes of Obviously, us would when think get think XX that. -- we actually option and it’s we it’s down to taken post. about things of just XX and put versus balance, be plays usually contract of we take getting under months owned Alan, months Yeah. half tell

gets if is to two you years but three know pre-pandemic don’t there, ago. roughly years I So XX% that or

Ryan Marshall

[Inaudible]

Bob O'Shaughnessy

Yeah.

Alan Ratner

Got it.

And I Okay. to getting guess, was, there. That’s to helpful. that pretty the I close was numbers

in kind of Have what’s is inflation forward, and little soften is mean, today you if do move much land might I that going what’s spoken and get move a now for land embedded towards that market running over seen just profit at right going the you forward? on general. few the them things right or And bit off-balance of sheet competitiveness the margin these What’s industry the So think likely think what’s up so now? last market? across do kind some your deals outlook to months portfolio the going when you I of about the there the rate in and in of re-traded the guess led any

Ryan Marshall

options have the be that parcels for and I Ryan. would buying it’s users of or apartments well, you homebuilders remains the new Certainly, it for might market Alan, tell land Yeah. prime other the other are there’s types we land. competitive. other as

a So if you will always land, always it’s I think, I parcel been, likely think competitive, be. well-located has have of got

kind what more recent seen terms In with of optionality. of have we

options. amount or kind the pushed ago terms have range of where sit from years at in in We XX% XX%s, XX%. years of of Today, we two we ago three were

XX% goal of heard, have you have push be are XX% set for As we to and we target to kind that a to the going ourselves a in higher, range.

In things is potential be for re-traded. to terms about, there your of question

We point, parcels I likely of are purchasing you are so, months or would going this months to ago put them. deals under there’s great control and for on we XX value. XX are need a year, that under lot they there’s were To your that. to embedded close These and tell no Alan, contract are

got being maneuver. in portfolio the tighter We are of in have that going to reason terms think, standards judicious in underwriting. are flexibility the parcels important and part thoughtful are optionality be gives will that XXXX and think what that so we XXXX. we closings and What be susceptible that, under it’s your are now to of are you Those around our I control meet putting really more we to economics that it it’s land the because you

Alan Ratner

of quarter if you am color there could but I sure the disclosure do non-primary would be orders just I That’s that, single-family And question, rental, one sneak great. can there. you any homeowners. your if be that have in not the the share this appreciate investors/like give kind I of thinking trend you buyers great? track housekeeping and considered

Bob O'Shaughnessy

Yeah. It’s X% pretty consistent Alan. about to with history at X%,

Alan Ratner

Great. All that right. SFR And you includes involved with? that the been have business

Bob O'Shaughnessy

year. have closings much this at don’t next are that We coming point. of Those

Alan Ratner

Appreciate guys. Thanks Perfect. Okay. it.

Bob O'Shaughnessy

Yeah.

Operator

will question our with from take Dahl Markets. next Capital We RBC Mike

Mike Dahl

supply bit, I Thanks think of the we this for a I but thing evolving wanted little obviously, to a rates. strategy the to for commentary. are because issues, on been quarters, morning. right is pretty especially question. market, recent balanced sales with do, taking Ryan, press restricting synthetic chain dynamic to that’s and Good and very clear that, the rapidly the all thanks my

at You or guarded the not with acknowledging little being in demand a least seem around may bit to what more may be happen near-term.

give the why locks be things extended to little a work able so it you them strategy and into visibility? then could them so restrictive like sales versus, be buyers still with say, is the or to on and And that more certainty get backlog on up, rate bit get signed

Ryan Marshall

great a it’s Mike, Yeah. question.

think biggest the reason is inflation. I

think we all be They another a a things of hyperinflationary And rates, another in in which that mentioned home terms experience sign the in to plus in at to that’s year, anybody. -- don’t and their had or world. are think going of And then for of as some I potential what and and not that commodity then the to want The on we our to inflation it backlog the to consumer long. point of consumer and environment fluctuations for interest locked they go are doesn’t have all economics. we may prepared to contract. customer moves in exposed sense a we buyer our put don’t And sense certainly their that make charging susceptible economics wait we great are remarks our close experience just able it’s out in doesn’t be handle. we may able We to in are as for kinds for makes potential not in year we the for

were guide, down so are production are our we can really close forward I moving the quarter, bringing end homes which actively production we that that that demonstrates at a things started and to think more we are high moving. pretty way around and demonstrates able we So the the predictability our have in sale to we got for environment start almost We in I were units release like good control what’s are ground. fact backlog getting to looking We of level that. the and X,XXX the think also in the we to where which through homes certainly -- we

Mike Dahl

to follow-up just as And the it. last a one. Got

you year your and out restrictions kind of As that different progress, mean, the second could terms And playing to to in do you first those. I add the I of envision how a question. if make the then ability but lift follow-on one, as

options, highlighting in Just of be things seeing some anything new you that around might more are terms sensitivities? leading edge buyer upgrades,

Ryan Marshall

as I guide we don’t we Mike, don’t Yeah. -- new are to orders. aware, think you

that short will of So on stop call. we doing this

homes getting and pretty some We the having the are we in in ground. are chain seeing wins luck minor good supply

still of where a quarter first deal fair quarter amount weather. The is a with you

X,XXX production the get moved. that I demonstrates starts, that new supply -- to has our pipeline So think,

to continue homes are releasing start rate, see some at way and on the of the year. I sale restrictions for will you can we fair it’s over potential lots think the that So assume balance releasing to if we that lifted

are we right that assumes did of and kind We that it about reaffirming like reaffirm of the XX,XXX our guide supply or for chain guide environment kind year is now. our closings the stays of

Bob O'Shaughnessy

most and strength spend. this It almost That’s -- XX%, Yeah. on reflects And of we we print. we think prices in up, in taken, much of -- a premium And being sales $XXX,XXX provide the unit all. to orders I are up you that your but lot the which you the level question average option was market. can that detail on the -- have on from our don’t on can seeing at see not the change

Mike Dahl

Okay. Great. Ryan. Thanks, Thanks, Bob.

Ryan Marshall

Yeah.

Operator

JPMorgan. Rehaut take with our We from Mike next question will

Mike Rehaut

my taking question. for Thanks. everyone. Good Thanks morning,

know the that move wanted was I any month-to-month in First, I any during or But a but I missed quarter, are month. of of with change dial not cancellation rates occurred? in marketplace, say, little or have price terms curious have regards let’s either rate to just but you intra-quarter in witnessed just to you you, get if seen, to you and apologize I reticent and change if even discounts of obviously, incentives wanted or rates sometimes in the increases this tremendous bit a to in earlier, into terms trends month to I as

Ryan Marshall

Ryan. Hey, we was incredibly were the quarter controlling Good consistent, Mike. This pace And because it. throughout the question. sales Good morning. is

sell cadence would So was season, didn’t February, the let have been the a quarter We quarter, were Ordinarily, saw March. last year. nine price to that performance months. so in this February build in non-existent. year. months on through and where to down predictable the that it you which less same to spring Discounts and orders quarter we consistent with very remained And from a set were are X% increases you see at a what fairly than past similar is January six over in -- willing we you actually, sales the just to given rate we selling it’s we would think, the I a

are is strong, right So homes I healthy, answer more to market think now. the than we build still buyers there for demand is, is able still short the are there out

Mike Rehaut

Thanks Great. Great. for that.

was that’s driven forward question to owned planned going and I option, on simply the not or keeping just Secondly, to a be going lots lot an perhaps just by the option increase wondering flat. whether by predominantly lots increase in

roughly if lots that the so XX% And few significantly or reverse go reduced capital? like other looks a the, of want cash last to of uses running say, higher You did of requirements quarters, like about, even. might up, over how or wondering business that if with the see I with own your a might repurchase cash change lot or level your that, flow optioning, generation

Bob O'Shaughnessy

Yeah. speculate on point time. actual want at one Mike, any I to lots wouldn’t owned in

are do grow to trying the to think I business that. we

the on to have ground. You have lots

You have to them. develop

if are provide lots. it will whether of self-developing we are have depend Some raw we us we that on or finished buying that arrangements

of So that things lot that. influence there’s will a

continue ultimately of we seen the cash and you been of terms to have what as amount to In think, stock. business significant that have percentage our buy that invest does option higher, cash that driven a I using allocation, us, been have and we in we generating back to have to capital

back You this bought saw of lot we obviously stock quarter. that a

efficient is capital being those sheet, on that we share more capital So, lens going needs Our have by and be for that will to a change, balance that’s one and the excess doesn’t if evaluate generated right? we of if repurchases.

it have and free things for with would years. and yields One, some done does flexibility I us. think what of a from the It consistently provides end it market risk. we higher couple day, use, the higher us we So that yields cash XX again, returns the protection it past of at over

Mike Rehaut

Great. Thanks Appreciate so much guys. it.

Ryan Marshall

Mike. Thanks,

Operator

our Rafe Bank from America. with of take Jadrosich question next will We

Rafe Jadrosich

Hi. question. morning. my Thanks for Good taking

quickly that rates? of impact in compared have to spike then and how seen First wanted an most prior with does have ask, you responded rates, periods would I just how rising mortgage this to compare to recent homebuyers how

Ryan Marshall

different. I be environment run hot. those an that to so of Well, difficult economy inflationary compare And is periods we of to rates pretty rising rates, are happen with that factors an in the are because continuing rising think, to it’s driving

We are seeing real growth. wage

supply. low environment a shortage unemployment a of there’s We and are real seeing

highlighting, compare so the you pandemic there thing to sure, do think -- rate work So rising I I this in other environment, and can to impact think am of rate well, I that it. its environment the is the trying

drop informative. be I not likely will think will terrible the conclusion

Rafe Jadrosich

And work to talk give you on shift of land bankers to of have lot the and color shift then, little about option you then, there contract? ability to And just shift a Okay. That sense. for do XX% to makes and the you just sort more can more the more towards initiatives serve developers line towards XX%? willingness can option, with time

Ryan Marshall

Yeah.

And will it. of some move the community two see have for out guide, we that the confidence with it that have to we It certainly there. us is this we that do targets take will us frankly, team. executive target progressively think, our give laid So here that have against reason investment probably We got next will kind put history there. it out shared that the like time. years well, that when us we plus operating you gives which as think But be I we

I think that’s to sellers. very that we it. of directly where optionality, will effectuate land with the way from to do We with There the sit think ways today level moving best arguably number doable. will it’s of are some done in of higher which

work get book arrangements land there we lots the as ground in that finished you some the use development can partners actually that Sometimes will other on with for and are alternative us are putting optionality to well.

very a we more certainly think to highlighted that as drive of all of it risk. in including use should it’s expect optionality. probably you minute capital flow lot and those So the for Bob will use move a But to to ago, returns terms to managing of we efficient, place of We a helps things that I some things of got cash better mix us think repurchases. benefits share in a

Rafe Jadrosich

Okay. Great. Thank you.

Operator

our question next We with Truman will Patterson take Wolfe from Research.

Truman Patterson

Good Hey. everyone. morning,

doing the or you appetite land deals? from. prior any terms bankers are just all follow-up landowners, in any sort question six versus that developers deposits, that over hoping, to look with costs, targeting of even today or the cetera Have deals, you interest option you change continue of months years, seen in optioning more et change their to if wanted I regarding ago, on maybe am at land couple next Just of you

Bob O'Shaughnessy

pretty Yeah. efficient. really, Truman, not mean, the think, I I is I -- market, right? don’t

desire. We have reduction in not a seen

there for and economics little we the bit, can is money us question you if make a folks, The seen So to talking we good. are available. things make sense have been, always has which tighten is

acceptable is and to and the that I create transaction that appreciably. changed For return a us, some again, and the goal us flexibility yields an gives think try market us has don’t

broaden to trying are relationships. We

are different not are and take they probably that make More What a before sense dirt party to land Ryan’s a to to at saying, start really some to with will if if it willing put time. a it’s trying talking some to them working do first. work folks. does still are okay, we We seller deal through out third to the we close. doing We we point. now But are option, It sort on of us is between it. come

Truman Patterson

market of increasing deposit escrow I for and you face that. And in have and to strength buyers rate you all you in increase your programs? earlier the you that in similar hoping in are are locks. am Okay. then, light, interest them the lock, been And a buyer either mentioned back gone some rate just proactively encourage I Bob, all Thanks to extended rising believe requirements there’s the given rates? lock to current introducing understand,

Bob O'Shaughnessy

we fair continuing to Yeah. deposit we always To are a and the seek one, that today. do latter

consumers, rate lock we think capture attractive with a very do We offer. enjoy our still working terms In programs. robust of rate. We

And a We seems we going people little because bit out locking have environment them the against rate little They has bit a encouraging is are to to go longer. them. do move, that, it and moved seen are earlier.

which closing environment, is rate particular, lock seen, of typically. XX-day sort the So people the when are dates in we have getting

We people of have that. in lot a seen participating

Truman Patterson

Got not XX too much longer Okay. than you. But days?

Bob O'Shaughnessy

the individual, We to Yeah. candidly. it. That goes offer

locks. We expensive, it rate long But have gets got Truman.

So are… they

Truman Patterson

Okay.

Bob O'Shaughnessy

consumer. great … for the

Truman Patterson

year. Thank the and All you right. luck in upcoming good

Bob O'Shaughnessy

Truman. Thanks,

Operator

from UBS. our John take will next We Lovallo question with

John Lovallo

guys. morning, Good taking my Thank question. you for

you The seem expectations over your quarters on we count in see a your half, that? lines, could take in incorporate just the what we that room that, mean, along back, see the so doesn’t on orders your ramp do next any improvement and potential spec those to probability thoughts production? could current the first some I some and like outlook your in few step the one, back it in how the could community with if in include materials. areas And back production a then reacceleration in curious view curious improvement assess we sounds is the if labor But in half we just nice or see

Ryan Marshall

Thanks Yeah. question. John, for the good morning.

to city councils around bit I and On planning where with just from we and community we It’s to hard dragging have and I zoning mostly have entitlement it’s liked taken are are back working, while been little tell the delays would a count it’s process. been always longer. you, a optimally the would long side, and taking through cities simply it’s and boards, get most entitlement time think and municipalities.

than other months it’s highlight would ideal. than I us that there few nothing longer really a taken So

the I that chain XXXX at are end very back supply year we we the the are going which why environment, means still there. that’s is assumption QX, are that reaffirmed we to for you take terms gave to have to kind -- the we that continue that things are going supply balance remain to a remain we the In gave. difficult of will XXXX, of and was assumption our guide under hard of we operating commentary the of

like and got to to I I’d are our John, we That’s see highlighted prepared if turning soon. the As think, going have in some benefit I production. start my mostly we optimistically, remarks, to XXXX improvement corner

sales not kind of giving orders guidance. communities of and are more finally, yet We terms terms in and of then, less there And clearly of restrictions. new kind in

future. orders. positive guidance in I for interpreted as of forward think be a the can that give But all terms we don’t

news the So there. we we while will get we we optimistic, will -- when are report

John Lovallo

of just the couple just helpful, That’s Okay. can us, does how compare last then lastly, And to increases price remind quarters? X% of you the Ryan. X%, sequential to on that

Ryan Marshall

of similar. to lot It we change. year. similar and a very a strong saw quarter It’s what pretty Not in QX QX was and last of

John Lovallo

Great. Thank guys. you,

Operator

next question will Stephen ISI. Evercore with from Kim take our We

Stephen Kim

it’s come good such thought the demand is a greater higher Yeah. really understand to Thanks lot, really that Ryan, are of I demand how guys. job in struggling just rates, holding My observation but the that clarifying up. can face demand investors is that, the down, still be a of just constrained you did will supply that it the is than supply. still so And

are when talk locks, just been confirm you orders little that lot to rate but builders hearing the about buyers that basically have at push is in I at recent they they are have a the qualifying orders, you about about last forgetting that you the say, to -- are locking, bit and and So that taken, rate talk the today’s those taking today’s over are let’s want are we something rate. closings, that if today’s a to days, clarify, month, on more and which more buyers but just

for you have today environment. rate there’s about us? to the So just I nothing orders that an wanted reflects obsolete that confirm

Ryan Marshall

the exactly at about we rate and are still period. that them the touched Yeah. Stephen, they in those would buyers prior maybe And whatever largely, a a qualified for able to ones rate our was tighter. little testing backlog, stress those there qualify made the are that we buyers for purchased qualified at mortgage. It’s right. today when Bob that of the applied or the comment that’s are quarter, part that on, reason a first in purchasing Buyers have

rate are are rate to We get the question, have important got to rate making I But of out might that is the programs the think trade today cost reason between that Stephen, and that locks yeah, longer the doing And the longer lock today’s in do thing rate play or your they buyers in and things they think that locking the help are volatility environment. term up the can forward is, qualifying most because they environment. the are them interest that over against signing hump. we

Stephen Kim

I where been some have a totally get I that’s confused getting conversation, some got think that people little people important, because think and we I that. super Yeah. about

clarifying. for thanks So

on The in rate second incentives. question also relates the situation

rate move quarters have higher closing the So have you or that, of expired have couple one over the cases, that them didn’t when where as a up might situation rate wondering and of would have is you lock extended. it they is been rates buyers In a to home have exposing you seen and you next, cycle have many I things the say, let’s later times lock a rate who the than close. they seen about ordinarily

forward your or degree -- might that been buy this down are Just get And some so to a guidance? that your be maybe closing increase table, is due for or in I it’s or like today, -- something be sort circumstance sounds guidance margin and an issue and and that your what gross like we margin how in you when a incentives, am might by does trying of comes envisioned? of contemplated that it like does rate the go being sort unusual wondering, sense locks is to be that as the may gross borne things factored to last assume buyer. But it rate there to minute something

Ryan Marshall

purchased. of be up and negotiation backlog closing backlog they their are tremendous based really closing. table. need -- on equity tremendous there are lot and homes. through do We want think, the doing tremendous the customer consumer, up. with consumer. experience so in for by some Stephen, got I kind a of pride that buyers have situation a for The the are kind They value certainly challenging in and a one-off we to have the to outstanding are scenarios we at to thing on They close large, Yeah. always. where of work right built ourselves have excited which not got They built when there’s They

margin, we I the information quarters the given incorporates of coming gross all that we gross of it’s what healthy as and the we would can and have, probably margin expect guide balance over So of play the you think, have the and the kind that to year -- out appreciate. a

Stephen Kim

Thanks Oh! Yeah. Absolutely. for Well, the great. help.

when owned, half effective right, lots, said -- which lots your is actually because making are the of just equivalent -- are of about your right? one lots a of all of observation, of owned owned comment If your pre-pandemic. controlled, Just all that, your have controlled than little basically your pre-pandemic. land It’s you you less of that, land, sure about which that about your half that’s means also half

Ryan Marshall

Yeah. fair. Stephen, that’s

Stephen Kim

guys. Okay. you, Thank

Operator

We will question Fargo Wells Deepa from next take our Securities. with Raghavan

Deepa Raghavan

am was of all even guide. supply talk for closings or Hi. guided? on Good particularly There’s not drove taking resources I end additional a just when around curious the chain how had you anything above work as find like you Thanks of in constrain, question. high were there anticipated quicker morning, this, your Omicron that maybe as just like came beat, lot weather bad better you better, elongated. my fact, maybe everyone. getting it’s a in your was than expected, week things But of did with originally or

Ryan Marshall

we we so look, end are which thrilled with. are and guide, end slightly our high on Well, of the high

our environment it’s out hard of the in incredibly testament homes tough deliver team think our it’s a that to hard more construction to operations strength work and a really I there. team,

a our are it it a not there, that’s but continues have probably anything think move job on we team cycle. going and knocked and away really now to probably, taking for the things we the assuming that be year, how quickly how through forecasting tough better being I out years out on two based from think of But done methodologies to better got I have construction going environment in park. this that almost

Deepa Raghavan

No. That’s fair.

to execution. buyer So, little Anyways, tougher the categories chain any is issues follow-up supply curious issues, based. But just doubt. begin experiencing versus was categories a again, versus levels other, your go is you I supply good products like -- more can active constraints? any through most on, unique conservatively No if you guide Is if that you. it or you maybe of into was yeah, also, my but chain was with. a of market similar first-time set Thank in? should level can the some we and near-term, categories to we perhaps think these which share the categories just And some slowdown given of when talk take it

Ryan Marshall

there to And supplies? particular question are first your No. on

the same same are continue some I commodities, consistent of for and constrained come commodities, think difficult components are by. There that across it’s buyer items see that some the microchips sure. that to groups it’s are hard involve kind things to lumber

anything. in differences but buyer I terms So, of wouldn’t between highlight groups,

grow As you, company consumer share. take could are Board. I we to for segments we are kind of there would the across tell where looking our

we remains our brand consumer all so to mix look and Webb positioned do will it I’d the business active and Adult to we that Our brand segments. equally today we is across where highlight the look exactly want the powerful Consumer of within recognized most Group. company, as Del it grow

prior we to our are in just finished. product, as like do there. home like level home space product is being or sold spec able being entry mostly to we so the gains sold started what we the with that and a that Similarly, which And the consumer we have made Centex

Deepa Raghavan

I very Thanks pass on. will Good it much. luck.

Operator

Reichardt We will Carl question from take our with next BTIG.

Carl Reichardt

so actually guys. of using just all you that guys. you interest one. am it use heavy pricing how marketing, traffic of April. think all indicator during I one we frequently perspective lists the into to wanted best just and are I still ask more matter? in leading and and on Deepa been. Thanks, got. questions, then traffic interested sales And more can I morning, your are trended Internet used has and the have If does Good offer that’s is that to relative to quarter Thanks. my much I have and asked how what it final

Ryan Marshall

I point, Most communities the don’t your to off indicator Carl, speak. good of used to maybe market inventory you be. Yeah. think, as have to as available that of lot, not so our the can of an strength traffic buy what is it the

are traffic really paying website, customers the stores actually come is today the we virtual the things or to So addition to into some to of model in visits, our the parks that physically. attention that the

with maybe basis, traffic. it’s it a going different our virtual So watch is is to it’s a something on But now it strong is little maybe a right it, traffic, ridiculously what’s how and compared the me, attention important, to now that weekly which compared used pre-pandemic we to I be. pay on between trust bit The prior to difference cycle.

Carl Reichardt

walk-in quarter, over the course And April? how Ryan, the was and of into

Ryan Marshall

don’t asking... you were those Does Carl, I walk-in, numbers. have that

Carl Reichardt

Walk-in. Walk-in.

we traffic, old school Just say. let’s consider what

Bob O'Shaughnessy

to Yeah. pre-pandemic because everything at. but there’s just declining people I Ryan of interesting, good, that a It’s little relative because mostly said, to bit is know and think look no inventory

that limited to homes there’s figuratively. such Many go into anything coming places at. and they and for have releases not stores not often lot literally searching are the still they are look but So

Carl Reichardt

Appreciate you, Bob. it. Thank Okay. Thanks, Ryan.

Ryan Marshall

Yeah.

Operator

question-and-answer gentlemen, Mr. over and ladies the today. session Zeumer, I you. our back call And for this will to concludes turn

Jim Zeumer

Great. Thank time Abby. today. everybody’s Appreciate you, Appreciate it.

we We you. Thank on day the available through will with forward for remainder are of go and certainly speaking questions the next as you we look to call. our

Operator

conference This concludes call. today’s

You now may disconnect.

PulteGroup (PHM) 28 Apr 222022 Q1 Earnings call transcript