PHM - Earnings call transcript Q2 2022

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Operator

Good morning. My name is Chris and I'll be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup Inc. Q2 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After may Jim [Operator you, you begin. instructions] Thank Zeumer,

James Zeumer

Great. Thank conference and period to our you, Chris quarter ended review joining appreciate second -- today June everyone XX, our for PulteGroup results call XXXX. review good to the morning. I

today's results $XX state well results year. a last to for earnings Ryan A also slides. to of adjusted reconciliation impact of We'll our of President to today's this Vice and Adjusted resulting audio me CFO; within post with million our valuation been results, addition tax President benefit, call encourage release be Joining posted are change call our as the to operating Jim discuss this second will insurance of CEO; had from of that in highlight and Ossowski, have strong a corporate allowances PulteGroup's financials President quarter the as reviewing of We to $XX Vice to Finance. our website in replay and copy A pre-tax assist associated tables in adjusted carryforwards. reviewing exclude net performance. of want at benefit this your release Bob review pultegroup.com. business and results these QX to morning's also quarter included Senior slides later in you morning's I presentation second Marshall, O'Shaughnessy, today. the loss Executive reported reported our an a accompanied webcast of million analysis we

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

Ryan Marshall

Thanks, Jim and morning. good

in As earnings earnings Led release, last exceptional PulteGroup a share price of many XXX appreciation per cases per of financial in and reported another XX% morning's setting respectively delivered quarter you share. record over $X.XX read our by in margin, expansion XX% and and basis press quarter second this results. adjusted increased by and gross year's point

debt-to-capital accomplishing to raising housing say we're wanting Our the funds about both. strong cycle shareholders to proud market would high to trailing changing consistent earnings our ratio in safely talked note we the financial equity having reduce strength our to additional returns and over with conditions. while deliver an our that that of during to below return I'm XX%. quarter. our XX% to for stated to performance the north past return X% shares on repurchased plans, I also navigate continue helped the further to months of We've building the XX

noting million year will the million to it's Bob the end at have XX share of shares roughly count detail anniversary the of approach XXXX numbers. our program, of current I XXX think XX%. a we the from that As worth reinstating the of repurchase share almost quarterly decrease XXX our reduced we shares, rest

the pushed the serve comments rates may in experienced time XXX clear Data the increase of and dynamics understanding hit only pause finally of It the the in possible reviewing jump of the consumers. me Housing and inflation, drumbeat price past we button. analysts two sticker rising confidence with At your mortgage changing surveys, some consumer time Between After meaningful point I reaffirm during home the shock buyers some appreciation, months first-time reach falling suspect a demand let out of spend is up conditions. National over rates to affordability caused my same interest Wall the some to recession for the Street buyers. So years and quarter. that move-up several basis buyers, caught market created some

slow consumers, As settle as some overall search in for conditions to has wait our combined active uncertainty adult process down. the the stock created they market drop with for the home to their

on based given homes with to the who experiencing a volatility continue While are Consumers percentage is demand these that market are of close interested rates. see sell home spec that mortgage now XX of or rates, has mortgage decisions these customers to consumers means current price in in the is making the building at in order. homes in right buyers the What the rather engaged XX process. to were higher to XX work slowed, than buyers we no we days, stopped coming in buying with can where even value, it accepting and by are as right remain they obviously

certainty. homebuyers still shorter second want buydowns. the close the to in home in that XX afford longer-term incentives Given an lock or the year. I down own need a will rate rate of a a mortgage second while quick months of took their of opportunity majority some price of rate for help range the certainty with But homes the a later the for or the to on time After willing the today's in we limited point, using XX specs. units, to some buyers little mortgage or supply tell have are level. production In quarter of increased XX% home acceptable close, the only to had volatility, to entered Many in that this are words, And this form funds of we rate successfully can available during rate spec demand, the other the buyers to new we of quarter can financial of period finished the or home. rate available. exceptional to move historic Reinforcing XX% a our personalize you buy locks incentives of trade greater rate

taken position have improve have close fourth year. and the will to build this third inventory in process actions have specs quarters in and and of sell advanced the our to that and be available now We

of During our rate interest consistent to this strategy is period volatility, demand. start buyer specs with

their conditions has prepared reemphasize to recognize continue Fed warrant. and As we clear desire slow and market fight long-term intention rates there conditions the or evolve, be still Millennials years being under of U.S. in homes we deficit Aging housing homes to remains are are starting has starts as housing and inflation actions. The stock by build-to-order building. through demand to consumers entirely higher been understandably need articulating in Well, impacted a these market will been people continue still cautious, specs, after homeownership.

turn me over to results, the Bob Bob? second quarter Let for call review a of our

Robert O’Shaughnessy

good and Ryan morning. Thanks,

price $XX,XXX the sale second quarter, Following an quarter increase XX% In average quarter totaled over revenues the $X.X $XXX,XXX. or were as second revenues demonstrate a both continuation PulteGroup's the which results of are home the some of financial of XX% Ryan's billion, as homebuilding by to in the impacting prior-year. comments, in trends driven on our sales well second market. positive newer challenges increase Higher the

the in selling in from down X,XXX buyer last primarily times, and year below the cycle year. reflects half In we than and is the homes, conditions quarter, a of across demand strong prices few guide. last back pricing which average increase less Given closed construction groups our all units X% our

that supplier that primarily While issue to to chain deliveries remains in remains impacted generally I our More fair supply broadly, say production the is the overall a challenging. attributable think environment challenging, specific markets. shortfall Florida the it's

of While any and describe or shipping in we construction a bottlenecks limited couple in distribution, weeks. overall use I of disruption production are Between or in the inventory to seeing set days improvement, would the fragile areas can word back system by conditions.

align all the quarter, move-up XX% year. orders increase The quarter weeks. decrease overall higher net our we adult. second and both conditions in last was and the half the cycle about being said, during fact little a That two more the In the orders active year, We X,XXX through second better mortgage quarter by the supply year, which of in back past optimistic impacted another in with extended new feeling groups. chain slower is XX% are several of active our times back getting quarter, buyers, from the mix quarter significant second second the year. move-up buyer mix decrease us with to playing sales targets pace, XX% slowdown deliveries a the In started signups reflects resulting allowing in begin buyers. XX% of over second from XX% XX% and from next XX% months. in continued workdays the first-time, buyers, reported to from The adult last The rates of for cancellations first-time

homes. active adult the Move and our been X% decreased with Although lower orders relative homes up fared up X,XXX were orders XX% by basis, first-time current communities. homes. best risk. buyers X,XXX to rate our to X,XXX for among By On close production to a XX% orders stronger design, buyers orders the interest toward preference spec weighted with homes first-time less that sooner buyer our heavily that first-time can spec reflects has

up for basis, X% for cancellations XXX In able is but land cancellations we new from period a in second year. several X% XXX contracts begin communities from change in today's have specifically, which ship would last at in we the over do higher the XXX is on homes, market up been to the fourth last investment of our in second up the last Pulte deficit Both period years. confidence and to average rate as from we quarter of begin growth the the average the with quarters flagship communities, the orders showing occur, of expect consumers operate QX prior year. down On enjoy X% of X,XXX from consumer an quarter homebuyers complete year-over-year of transaction year. community communities We decrease More quarter home. a as were reflects year. had realizing an an last in a cancellation XXX increase XX,XXX pushed unit comparable when This also counts. After cancellations average from XXX we quarters numbers the impacted respectively. and which we the Our several their ended rates. point, be by backlog the reported our our We operated last want compared increased and XX% cancelled resell communities and year-over-year some and to an always impact of to with we year the Home, third a over operating quarter as

year record of Ryan's with seeking to a increased had are to At comments by we is Consistent spec year. last XX,XXX over production. have price slightly spec X,XXX end over under While XX% XX% earlier appreciation has about units $XX.X the and of to close, with down raised increase ended we an past strong construction, starts backlog billion. value homes units minimize our which time buyers quarter the under quarter

While start are at cycle units of that we have the homes overall in number successful been framing XX% times under mean construction, these longer of increasing the or stage.

we third be homes. the expect of to X,XXX such, quarter the to in deliveries As X,XXX in range

supply have XX,XXX of ongoing issues, on and anticipated of homes production, While be closings. to range homes. expect we XX,XXX the now in we mix given market conditions deliveries in to the changing Based full-year the chain

realized price the for homes to the over strong building which our generated to to $XXX,XXX. We range appreciation the gains of full-year margin, we XXX,XXX home increased be average third basis year XX.X%. in price quarters, of last by closing in Supported XXX gross the substantial have and points past a few PulteGroup expect quarter over in the

lower margins of addition purchased reflects the gross back flow higher of In through to in cost year. our half the prices, last QX lumber

a our As year, we and inflation the current start on cost of upswing materials labor we've at call, meaningful by in in experienced lumber year. significant QX discussed for this the cost earnings led

million over for as be on now will raising the the year $XX higher of XXXX Based our range period. are sale realize including we gross year. quarter guide estimates, has lumber included or million, incremental and the and recent X.X% decreased prior ongoing to X.X% XX%. materials house In we've year expect $XXX home or to last fourth has continued our up maintaining quarter XX%. approximately insurance expense SG&A margins again, to our margins XX% we a the labor, inflation $XXX in time, million, to most Although now Despite for house gross recorded year expense in prior of XX% home costs, our of totaled we closings, margin the the which of second the quarter in lumber present period revenues. that the pre-tax XX.X% to expect At for inflation impact be the revenues of sale costs guide internal meaningfully are recorded our third SG&A progressed. cost benefit to In experience

year our close home that Excluding are adjusted basis in last we be benefit, million, number on fourth was expense last revenues. point targeting third to expect to the in of revenues. of in of At the sale expense a the we X.X% midpoint, this SG&A SG&A Based of quarter $XXX to homebuilding year. the or homes and second XX X.X% third roughly the quarter be over improvement the X.X% quarters, would range in

anticipate still SG&A to For X.X% be expense full-year home the X.X% to of revenues. sale we

continue that market rate In capture last from which down of in reported pressure down in quarter, last reflects to rate year, The pricing year. the $XX $XX levels. unwilling our pre-tax conditions profitability decrease from the the XX% in XX%, unprofitable are was period to quarter, is extremely market and same down the second operations business. services pre-tax Our to financial competitive income million in as chase the million we income capture

energy expense rate $XXX our of year, quarter or XX in expired quarter which included second second the last tax of was million, million, XX.X%. $XX and effective a year. XX.X% of as expense December the million, last tax representing In effective credits, of $XXX benefit home benefit tax tax Our the an an of tax rate of reported efficient federal of

Looking to $X.XX with repurchase the adjusted the at income net or share. $XXX quarter million, In net or or PulteGroup's reported price continued In million million, in second stock the approach a or for $X.XX the X% of share. repurchased $XX.XX we fairly ongoing to presence plan months taken share million, per of million. but our back X.X our We or the share year, systematic have quarter, our was outstanding more bottom-line, maintain an shares reported volatility, past the XX.X Through years, program we $XXX shares of its to the period opportunistic an net income the year, routine per market, a $XXX will first repurchases. XX for market active the second have prior buying share repurchases. we income of of six per shares, company million, $X.XX $XXX for per $XXX the for Throughout approach incorporate given share million average share. was

to changing near strategy term, the us the responsive $XXX We conditions. a of more Over we with XX.X%. and this of ratio cash to debt-to-capital market allows million believe ended be quarter

couple control many to in We last continue potential and we the appropriate see the over of value achieve land the to adjusted returns put under risk of assets years.

the invested market demand, we investment billion. housing appreciate in We for quarter on but during second in $XXX and flux. remain such, outright land assets, in bringing acquisition million $X.X As constructive our we $XXX another invested long-term land the that conditions million of are the land existing development total quarter to

a than While land in we positions to we assets. the we return projected $X and of land allocated this disciplined make to have time, that invest are to assumptions under half with existing the $X.X assessing required thresholds. between year billion spend land acquisition supporting investment, our reflect our billion and achieve for development still underwriting control always developing expect still the maintain At to returns this and land more investment we current approach market that conditions, sure the

And the quarter tool land XX% more Given under the an control, controlling market important our XXX,XXX and earnings We dynamics, enhancing to today's second risks. for potentially lots with a which under changing of returns were ended controlled even XX%, ways becomes options. to of our of of our book our optionality meaningfully on range we through option increase highlighted lots last we as call, position control. target are assessing lot XX%

the call turn Now, let to me Ryan. back

Ryan Marshall

demand conditions consumers that significant continued in the have of month through July mortgage more the the the impacted in rates country. The quarter challenging throughout as has developed increase

tied mostly our more clearly fight buyers have demand. are couple to In routinely Through dollars. or stopped meaningful migration recent exceed Florida, the areas and those which holding depending the lot which variations the Fed combination of have a mortgage are higher of premiums. realized markets up with the ongoing needs a or and Washington sights slowdown by in against what as elevated a incurred the of rates to price, options differences include back. is impacted end Sales as markets years has markets million are the like discounts appreciation assesses incentives much tech In slowed through to bases California of lower and places better. taking slowed, on Austin the Higher the high priced desires price inflation is and we are our rates, or these the Western Lower upon is moved when have expanding and community. mortgage, struggle they prices approach its the the of in consumers Southeast all hubs Fed priced toward now end in price and see this incentives but rates. second outsized were enough. and increased is like appreciation quarter, prices Federal seeing have are Housing it use path While Reserve Texas, in across markets. high in a Home steps of that were

prices lumber cancelled alone us are and/or process, while see prices lumber, impact to handful renegotiated. to mortgage adjust, home second mentioned The $XX,XXX demand. control, housing early have and ongoing deals While commodities But We of walked right like rates in some away the We XXXX. slow are impact. given getting all on changes higher land notoriously And quarter. we per the remain an deals from could have beginning we transactions currently long-term And are side cost land copper, are demand for in we were the of as fallen outlook upwards still now, reassessing starting we are under rollover. this a in dynamics. aluminum housing earlier, of constructive the on having in save

sell work have homes. We harder to to

We the in available. to market the sure have make more to product be we have right nimble

competitive ability changes landscape. a highlight typically extremely strong importantly, in We organization. have an our operate of to pipeline, unmatched would to I compete. I balance land be PulteGroup's how that people homebuilding we a the confident throughout talented responsive is sheet, in This operates. am with to strength and experienced position And most quality, and from product outstanding

end So let hard me our commitment. and team by entire thanking work for their

James Zeumer

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

can question, started the questions the open would remaining as we Thank We please possible yourself this get time one as one So in you we'll that you during lines, with And if Chris, to Q&A. you. call. ask follow-up. limit to many get

Operator

is Certainly. Bouley [Operator Barclays. with from Instructions]. our first Matthew question And

is open. line Your

Matthew Bouley

Hey, everyone. good questions. taking you the for morning Thank

First wide Buyer a as clearly impacted significant the financially of bit move difference definition, this constrained And you with first-time in move-up what's buyers, by there buyers, more rates. difference and segments. environment. yet potentially there, you sort a just by between little this could segments, on on first-time the And between more one you curious mentioned, buyer into elaborate just going on the clearly if adult, active have

on a is just of elaborate So think what could going you you. there? you Thank on little sort

Ryan Marshall

the near-term. home with biggest buyer homes it's quick first-time highlight a Matt. availability the The real toward is that can in buyers I'd Yes, is what Good here having deliver the of there's seen segment, in all we've move a preference Ryan. in that morning, thing

use then that certainly the they affordability bunch to they've a of to points, supply something have work rate and the without be the and uncertainty the proved certainty from rate been incremental think rate buy to able of standpoint. delays lock interest is a can to incentives I to those whole lock chain some more down current just predictable thing this able in better. being and the But make around of things overall biggest

think the that's difference. biggest I So

As current quick we in for or of some highlighted remarks, have different the buyer and the really prepared our segments we outperform. target first-time been movements that the of environment the each availability it's impacted segment consumer allowed in reasons. the But to groups

Matthew Bouley

And for one you Got the that, incentives. it, then second thank on Ryan.

just I end, into and progressing related heard at more the apologies was if you being to now and two I to hear one, say Are what you. has actually think statement. of downs see incentives that initial actually you starting I lock but in sort guess could didn't to you these sort incentives changes any of put to some actually or if initially to elasticity incentives? down. related react you, coming I as number or premiums buyers numbers number more buy option you progressed, the are positively those quantify starting some rate Thank such And see there?

Ryan Marshall

good it's question. so Yes, a

is still timeframes, X%, X% to which of Let with second what And consider all They actually to back to includes about be below wrote that we you normal that the in me incentives. that this and maybe contracts we range we in range signups. went if were a pre-COVID the would X% with quarter. load probably of start new first incentive the saw is

cetera. options, or premiums, a a So incentives, in rate always lot option we little harder the re-leasing mortgage pricing phases. release It et and lot we're new type financing new because lot on gets to quantify change as incentives premium incentives, repricing always

little what becomes a is we But that highlighted So bit subjective. accurate. more

incentives. We competitive starting are business, our just in financing but see to own set, only go that in the incentives starting some additional beyond to related are not

Matthew Bouley

very Thank appreciated. much you much. right, All

Ryan Marshall

Thanks, Matt.

Operator

question Our Research. Wolfe is with Truman Patterson from next

open. is line Your

Truman Patterson

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

partner approved I and put five the and X,XXX or any build-to-rent about 'XX, all really particular? appetite of first whether the trying you just those of are still First, understand seen to I build-to-rent been I'm in shift closings strategy, on in have through from think initial your good. relationship operators your lots plan, out you've believe strategic And whether year there any kind targets

Ryan Marshall

with we're five of units right in of good very that target of through way. our terms of moving kind Truman, programmatic kind X,XXX in morning, a on year run

So and performance that We've And maybe point. about working anything, very is targets into not tell I we're any based we increase the some time. maybe the discussions candidly choppier the how good our and with we could our this on making. partner, partnership progress changed potentially appetite feel you to if go slightly as would

no working, of us the So, path. down yet. we from We to kind and updates like the moving is plan way the partnership continue

Truman Patterson

cetera? Okay, changes the attempting XX% that to your some all et okay. to number option timeline rework any for strategy. option I'm of Thanks then have option extent has to making are walk XX% owned to started to of to are land, of deals, an that. you targeted now to the all get extend down you And any you the that And mentioned land the of -- the softened? you demand strategy But thinking, deals lots takedown updated

Robert O’Shaughnessy

Yes Truman, question. it's a fair

is the in of transactions to more we can this there, occur order of terms always underway, still of strategically, hasn't attitude a be now. heightened. in that XX% likely we current land from XX% negotiating little negotiate sellers. believe In our it I not evaluate up XX% maybe that disciplined most we're give think recent make it, even as in we're a start not is terms your prepared position move we'll we bit range, what as relationships. we and at in to we stance, been, been is where That of looking take we from terms said transactions. process XX% how individual are today we've our you in essentially that in how updates changed as type XX% to for to XX%, pretty we and time. institutional changing decade and offered are all, question, it's But relates have get been What we we've we've remarks, to at into still We and That where with still desire approaching no, optionality, print

a We look we are on. are taking at everything close closing

months that and an structure that had revisiting contract, to are make the the put when XX are sure costs down, example, approve cost the vertical was we development a entitlements, costs we if up. waiting before take we construction So pricing ago, because we horizontal up, under that are we and control as that underwriting parcel the absorptions a our transaction final

So looking made sense we're locational I does a it that trying just takedowns are it we from of sense. to reasons think didn't holistically make transaction a it for this at have the of economic, walked you, sure will of number makes where makes sense? transactions away tell we couple was or whether we also timing

now. it sellers structure And A, and that to discussions D with hey, original like so we B, our E have said, had we'd takedown was A, and be and C,

a I have that the time in something ability value sellers, out is haven't to propositions into does, work there. seen taken the account. we change think with I But and

become buying be a more and continuing long some really is important choppy process. time dollars. to land cases, this So you're to hopefully yes, market, disciplined us just story short, in in to see And the going in

proceed we'll further. So

Truman Patterson

guys. thank Perfect, you

Ryan Marshall

Truman. Thanks,

Operator

The next question is ISI. with from Stephen Evercore Kim

is open. Your line

Stephen Kim

about a guys. that made I market much the very to you thanks of could ask was if wondering Yes, your respect to wanted are particular, on little you of conditions. evaluating. In with customers elaborate assessment your the I bit some comments alternatives

not lot engaged. that to You a slowed remaining quickly, there's in marketplace, little standing on We public said also mentioned out into hear we've the they that move the have some know respects, production. a builders they're preference of of new either And begun you the on inventory there's can larger that a other existing. bit role their or

Or interest find are And And bottom seeing you have increase in things seen in they that have they particularly the that is, are have nature? their you opposite? alternatives remaining market list words, specific you out production? with or seen seen and your actually continuing that are anything finding competition anything question doing to the other on respect so terms customers an activity? in you of your line -- In have of you disruptive production to your

Ryan Marshall

morning. There Stephen, good Yes, was lot there. a

see our let And we've the So back terms our unpack terms actually of I of competitors competition, in production it a that can amount are think time, the inventory that's predominantly specifically builders. for they're that into me spec some slightly market. of one of if at in competition I putting seen pull

things irrational, type behavior, of seen irrational haven't been or it drops nature. incentive, or that's to We price anything widespread, when or disruptive comes that

that market, unique Of course, there's national anything specific or working haven't challenge a but submarket that a that specific particular might the they're a in highlight we would in we seen level. have anecdotal at that builder against, a

Stephen, being whole which terms a dollars buy of offices of or think by to find or I matches a it want. I pay the for take market the right just cities lock And a arm year certainty to were market financial what ago in multiple a the of points, were of to lock, paying days. that out extra preferred. different the are place rate think a of in seven current we've down, we or a buyer or definitely in in or that multiple course is anything, sales it's and longer-term get three tried able to I inventory And of highlight. that to some weeks Bob all and something over put opportunities the they're choices and the market and kind and it's rate spec two the homes up couple right arm more And that the without In about price, that have at And than timing five in the buyers discount the bunch against with buyers the still rate able have, year incentive to nature. you do that what can

what I we're get needs, So forward. seeing move if they're think, and that seeing buyers financing. buyers, around can the find they with meets We're able to home the their certainty

backlog our remaining highlighted As the that in part the successful been getting in of for remarks are part. our reason very prepared We've the the engaged most we in process. across line finish buyers that

always been. have they financing. surprisingly disproportionate cancellations, There's reason at for they're been not looked a we've As vary change like in the

in across in to those So resold finish qualified pretty buyers successful able canceling. quickly. where are buyers homes we're the cases been line still We've and the get getting

market out Stephen. it's choppy a So there,

doing customer homes the long-term environment three year we're in locations. ourselves think that the really buying emphasize very very strategy. right building I two, our to And overall we successful think service, next we've think to positioned the quality of continue and housing We land nice I broad in be constructive we're the that some a we're things, over on. with years, over

Stephen Kim

particularly your mean, about versus qualifications. That's not helpful. a buyers, encouraging. about the Great. of -- commentary wanted And excuse comment sounds your like I normal. than regarding the it's lower I certainty it's to for incentives me, follow-up being It lot that's really mental. still math,

have used as that normal or ratios we said you X% that to rate people on rate I downs. A lock, three. buy gotten now ratio. of heard cheaper contracts like downs think is low as new as X.X:X. versus as buy had that And typical one, And these be we've are even heard things, X:X these much couple preferring

that can buyers. So order to secondarily, despite -- on And you that, whether was comment were I that's then of price quite benefiting your wondering entry a was strong, actually it if interesting heavy was see pretty mix again, you? been we level

order on if increase very nice exactly see quarter? actually you price you on could all in price the I'm that. curious in so that Did order comment there or what was segments three drove this growth And going

Ryan Marshall

take the I'll let on give Stephen, the first Yes, some and Bob, order of details I'll that, you pricing. part

kind set competitive well. terms are ourselves, think all as there, our speaking out incentives In that for think of but I are I of

to will been, be worked the we've where in smart the of think kind for buyers. market what and is, finding move we've I needle

You mental mentioned versus price. that just think a this anything, ago, as I is much second as

the out fear out our work our think may And up that's not bottom hard been of that from so the lot move all achieve, I in buyers. there move because the adult to not specifically buyers, of in cautious underneath, just of active the cut what ultimately minds so we've a market we've to

there are pricing? to the Bob, that ago. rate year advertised national days which think providers order on I buy maybe they're on not seven of arm rate, a there, give I on as think saw some we forward. the out we the touch those a move having website, is far have want as completely to away question on X.XX% comment I'll his on define are to a arm six think think do ready what we currently As in we're doing. there, And interest solutions to that now we downs. do farm Bob, rates let or our interest more seven XX you ratio, But are like

Robert O’Shaughnessy

Yes, it's our move in up XX% adult XX%. kind the at interesting, the of space, active ASP look about in up and were was print, time were first if ASP recent growth most is the up which up of XX% highest you

to the question, XX% across what backlog, at is so seen the look company mix three. you answer And for right? up growth If we've your pricing adjusted, is our all

three time are our ASPs bill. all So up our higher and of move backlog first for key activate demographics

Stephen Kim

sequential was sequential? that that a it Is yours? comment Bob or just

Robert O’Shaughnessy

That is of quarter this year. versus the first

Stephen Kim

Great.

Robert O’Shaughnessy

And interestingly, move relative on up. among the increase basis the is those a highest

Now that that mix up to biggest that, probably is matters all contributor but the and buyer move increase. space

Stephen Kim

Okay, thank much. so you

Robert O’Shaughnessy

Yes.

Operator

is question Capital Markets. Mike RBC next Dahl Our with from

Your line is open.

Michael Dahl

quantification order There's by dig Wondering I this questions. quantify little quickly my tracking? taking give but here. your unique still typically a to on a for Thanks environment. in on don't morning. monthly Bob, you July like know us Good if light and being Ryan, in you trends trends, could how a and is things of more such just month give changing lot

Ryan Marshall

we going we that was and kind practice see through as decline And then slowed the from that's through last really June relatively that change Fed We big continued slowed, July. and basis strong, saw May of month. a saw increase the still did get point will we're detail. then the April, move again, into with Yes, monthly in I not of our after tell specifically, to think stick we previous kind quarter. you the a June. I Mike, XX

an cans, as through in uptick have We the moved kind as we've period of seen well.

at related market, a and recessionary potentially the all think, buyer's kind the into environment. kind I top potentially the fear go type to buying of tied of as the maybe of and we remorse again, of

think I weighed that's heavily buyers. on

I'll it still, leave that just, I'll we're So at Mike.

Michael Dahl

of second kind the maybe Okay, part question. quick before I two, just ask

it's July still is don't if worse if tracking I or similar Just similar, know, than June.

We have effectively in up XX rate. retraced point that last basis move entire

doesn't the specifically. we've on an So just seen comments order it improve really group your based trends seem like across

orders following-up prior my is question land kind So disciplined. some questions denominator, But reconcile at can forward might basis, lock based look position if on of we where like always and comments XX second around years, we a orders, been to you're and around end the you is your and wondering if elevated. kind of using obviously quite on nine call your up it strategy that? managing on as tracking on If which you've were

you more So thinking think how or Truman dollars, back have land are I asked out? aggressively your own incremental may acquisition as about paring position looking

Ryan Marshall

Mike, Yes, on question the land. I appreciate

the four from rates over last pulled buyers just weeks about three have question call me back kind your little finish as bit. Let seen we've it what to I'll a of

certainly that's been think I So helpful.

think But environment. we're rates, with you come with and what and get of consumer combination, biggest as think a up helping sell slight make the volatile when confidence, with lives. pretty current done, overhang the it's buyers cocktail to that seen of tick purchase have is consumer kind of deals their to new dealing along the terms I single some I ability low higher the all in I the think have We to combined our

in there's great up with the do community the that continue continue that investors we're execution done not community the in that side. lot We're very proud. being priced a because that on find got, margin to to we've going investment to product focus we're happy making ourselves focus going wrapped on So, I very were we're market very our to that giving obviously is market But that where a to we're margin we're -- be competitive. know work too there, right position going to we're continue up share a to on want the of and got competitively, basics, we've the lot to going we're sure our we've

here on Moving to continue couple very we that I'd and side. Number high invested through delivering be the Mike, focused on land cycle highlight. investment, one, of capital. there's a things to return

maximizing amount allocated that done purchase the So has control, think way we I structured that land we've that way there. toward capital, of job we we've have have been return, an the the under transactions our put unbelievable all

up orders owned have controlled of the what need. you move is that's than years. time of period with new the end your into years think point, option strategy you of got As demand this the over We or years clearly and realistically we we've slowing, undertaken that lower probably beauty where could more we to last more number

that trim option yes, And as some on to position, you work well, we've we've as you also two so opportunity potential percentage got Bob land got renegotiate highlighted, to land of can owned certainly can the options, the or trim time. the but

we So, and second, sure every that without this it into and control, fourth else is add a based given we're a rushing on pipeline, not under conditions, run also everything overall on business third land, what we make to have high pipeline? based on where look contract you a in Bob, what sense, like clearly need a returning but we profitable blindly forward but land land you'd still market the current we land business think need makes anything or our future. to

Robert O’Shaughnessy

No, maybe XXX,XXX. ago, add, look three owned I'd if own the was lots thing months at only you we XXX,XXX lot our position, that

going majority is got as option, the position. in quick this investments the not growth we at like a Ryan's put for an quarterly point, was the with example, To made of the the of example, the be in quarter, balance look we're sheet to on flexibility an it's in the our we've if which despite sheet quarter you turning current that as house, So balance bulking owned lot money up that we've us.

we've again, talked of inventory that put in the it's which $X.X $XXX the billion plus we into about. and and quarter, reflective we extension land cycle time lot on So that a million that house is that development. of spent is But

so pretty we'll that get back And quickly. money

loud you clear. hear and So

the ability what have we influence the lot position book today. based owned We on to of like, looks the our have strength

Michael Dahl

Bob. Thanks, Thanks, right. color. the Ryan. Appreciate All

Operator

The Associates. next and Alan Zelman from with question is Ratner

Your line is open.

Alan Ratner

so makes clear that whip and pay there. Thanks information guys, are inventory maybe demand as Ryan, I primarily build Hey, your start seeing build that point. I where to think bill kind loud relatively you make I about do your homes lot a over see strategy a Bob, they delivery, think point, on which that morning. message are wanted next last the to need and and to commentary on months. where far. you good clarify going just are, cycles this six, is closer the the potentially talking nine, on decision stronger At demand just guys of guys you time sense. same of at for the XX

where to dial you in have that will going continue assuming pace So have been earlier maintaining of you demand the starts year? back forward bit spec were that you started from that actually where that's the or a

Ryan Marshall

-- a well no there or Yes, homes for subside buyers is Alan, as ability a kind But be the delivery more pullback within year, basis, seen of of the demand we've of on specs. from XX because get pace in part day across to we've relative as the that finish where line, been to window. we've when the XX has to built, got spec we were seen question, first dialed starts back are

compared we're starting specs there. sales mouthful to a relative historical more to proportionately So, norms. That's

less So board. sales, on compared we're a it's relative doing historical an to norms. the dirt across about absolute you when think specs On basis, basis, more

on think the brake. on I foot got one is we one foot way describe got the I Alan, So, we and best can gas the

to many managing want is We The want aggressively. penalty very do available. to box that into the having inventory thing we put We have last ourselves by is finished this stocks. are too

Alan Ratner

some you as you those cancellations on initial obviously easily. where have And to the cancellations differential come been compared deliver that Curious, what that the specs based resales of likely resell pretty it's be margin unintentional out was going there's that's that thought going Okay, once point you on result? point, to able this with sense. probably now up normalizing, to those that makes to at sale been mentioned settle versus to going well. margin And what's the on to that the home, backlog out and you're

Ryan Marshall

that are buyer is reality cancellations of that or look in And big body the up that if cancellations the of you buyer didn't fresh, usually tick was at either Alan, were we right. interesting. a remorse. first XX the financing we see the number had It's or XX in the somebody has most it's more days, where related, quarter, get in this financing pretty Yes, it can't remorse.

haven't long time. the profile in for so big in folks backlog were seen margin the we for the change that a a And

majority, the actually reselling the So contract And higher When they financing may most get not we backlog. is in prices. that's because earlier XXXX. they have homes, signed for the their whatever late reason. of again, just those say, can't churn in we're let's Honestly, see

huge hasn't because much people contract. in days that the since moved the not XX, signed So differential, pricing XX a

Alan Ratner

sense, Got lot. appreciate makes it. That it I Thanks a guys.

Ryan Marshall

Thanks, Alan.

Operator

Lovallo with from is The next question UBS. John

open. is line Your

John Lovallo

improved. settled very it I ability Good bit, found interesting, morning I make as to have heard you what But Ryan, to think for you rates sell my questions. just of guys. want Thank heard I sort has here think a the that you sure I say something, said I correctly. taking I that

of be pause? that who I sell that correctly. we're that I this think do time sort you to kind been that do sure or track of on once mean lower. of do is make you And settle, they're slowdown? going Do of settle, of prolonged But mean, get that you before. to higher being think knows kind thoughts that's times on I do of Or wanted going back your this see once through finally again? a I a wanted this many to So you've rates I heard something to more And a what sort they

Ryan Marshall

prognosticate forecast probably the remarks, you, will said tell we to trying going hold. will constructive short on our we're and But and of what very to housing. I'm future John, I prepared Yes, long-term stop it in

housing of shortage this record And fundamental supply Fed believe in country. stimulus chain all to I are of have environment, the inflation navigates have I believe into our the the and situation and issues, current housing continue very that of will and things have We economic all run. kind tricky that -- that as a XX-year money, do that strong high a this going

making cetera. that how it's our with running we're that decisions we're we're decisions how -- we So on allocate on capital, we making company, et that mindset invest,

confidence move term, housing. combination think, what of continue kind as the is forward, I happens drive medium the we with to maybe and consumer to of affordability going in So

incomes We up. go are seeing

think the pole of continues somewhere part to was? And of So I over first housing that soup, like maybe middle me I the missed your that remind the believe successful. I be then, long in all question, John, of would that to what

John Lovallo

Sure.

I back actually Just think mentioned, pulled that you that your here bit sell when settled had improved? more and rates to a have recently, has then ability

Ryan Marshall

probably it Yeah, cat dead meeting. a I last think bounce, really following tough the little Fed bit of a was John, it

we've saw actually well the we consumer as terms consumer think I down. that, as with the And think as has react come seen rates come I to then quickly.

I a trend in there's our offices. think sales been positive

deal things. I with trying there out as think there's financially said, think I lot both consumers a and to all and So we've psychologically, that those

John Lovallo

first specs makes to kind buyer believe, more of then dovetailing decision towards what the time I strategic in quick of kind off of asked, And you. Got Alan target the the guess, sense could how you actually And guys saw we pivot willing some stabilization? how if far lot are in back this a of then you I shift quickly here? to environment. moving,

Ryan Marshall

just and be is be pivoting many really a is. in start buyer, decision And there will not can we how that it's it the demand specs first want starting quickly homes it's to terms of Yes, spectrum. time across how the much just back, as,

buyer, of consistent, real leveling is particularly So there that of we move is adult if quickly. we up pivot active a that very back model build-to-order for demand such value where can out think the market, pretty an the the is

John Lovallo

you Okay, guys. thank

Ryan Marshall

Yes.

Operator

with JPMorgan. The next Rehaut question is from Mike

Your open. line is

Michael Rehaut

everyone. taking Thanks. I appreciate my questions. you morning, Good

earlier comments some some to also some of input but copper, decrease of in Lumber, in materials. of incentives, costs, a XX,XXX increase the some home, the you where back the kind circle obviously, said to wanted just other highlighted. around I you highlighting maybe First,

XXX As itself specs about today, that's on it increase you perhaps basis call at XX,XXX also points, a home, points. think XXX maybe a up, basis the XXX,XXX of lumber plus going

are As to gross are Does themselves, of first considering of obviously, point and other lot those kind of be you factors because look potentially out, kind of a as factors levels we half just that there well? XQ variables. in considering margins there should that other holding or

Ryan Marshall

too it's think for given got full-year guide I big obviously guide. a Mike, soon honestly. We've QX margin a that, a We've and margin backlog. Hey,

close we've that now will so in estimate margin the And XXXX on and but and give between we've of that the visibility margin got good then the like. later an certainly looks what the and profile year, specs end And our that made sell guide year. we'll

Michael Rehaut

Okay. Fair All right. enough.

think overall, strategy. spec be your questions still few guys order you to builder. Secondly, built And would I obviously about fair gotten we consider a predominantly to a

that model, of or build-to-order though, spaces? a of to in normally basis, when increase you'd trying specs pushing be raise I back get a about, within but to higher would to closing said trying it increase absolute not that, more the about And I that percentage. the where of you're perhaps currently adding percentage limits correctly, If to spec heard are little you're target even a talk Just that stretching on wanted on right. thinking that an clarify, or I you am your bit of a down trying you're is you level the earlier, thought still to normalized relative you're percent

Ryan Marshall

think right. I today. Mike, We're XX% that's at Yes,

our we're bit probably spec XX% the to but as us little go you'll that, ranges, historical a if, side going at high production. push of not So behind what we're it's that, see beyond but to

see we target we think to in Centex maybe I that highlighted what you'll way a is. we stretch on yes, a normally but the the a our builder going build-to-order that's our design. for communities, us, consumers more normal We to believe us communities, see beyond Bob to which do little that's have and targeted stay way a run home buyer. based time the you're specs predominantly that by first So what the are right builder range

it'll do normally than in normal. us on little up what inventory be our a a bit communities. we see move our You'll active put But more spec adult -- into than more

Michael Rehaut

much. All you right. very Thank

Ryan Marshall

Yes.

Operator

final Our Pettinari Anthony for today from question Group. is Citi with

is line Your open.

Unidentified Analyst

in. rates we is [indiscernible] stay elevated Thanks if to for for where your on persist are expect know to should are selling And more just the me this cancellation XQ? sort Anthony. roughly back rate interest as I squeezing Hi, of want into cancellation now, in seeing they off? you maybe Or of homes drops shock down rates a sticker rapidly wears you're sort July? on elevated in

Ryan Marshall

drivers that seen been think buyers the I XX in the Bob leading to days. And highlighted, we've really so last the the are as Yes, XX uptick has probably than in cancellations more.

and decision have They fears So increased that think increased run recession rates and their talk buying buyers their buyer's or it. a remorse that interest of and part as up from with it increased, made during comes the big has caught. interest I also a were rates of

get we to we'll likely see So And into that expectation that cancellation think drop. normal rates to more come a should see, as I would predictability, we range. ought stability be our and

Unidentified Analyst

you And call, on Great. community I Thanks. your from count kept of the correct it unchanged quarter. kind then guidance last heard

slowdown count. close community would or would a so normally And out, so saw a understanding a correctly, like just, if in higher I'm maybe sales community

like, development for example, community it's slowdown horizontal openings, a just maybe reason or it's deliberate challenges, in guide, the permitting? incremental for maybe unchanged So the some

Ryan Marshall

Yes, same of challenges kind dealing everybody are obviously, the we with else's.

isn't takes great a to. we What you get that that that impact of little going close it the things So was that to we didn't thought open. longer out stuff is tell close bit

get much would pretty be things is where as reflective thought of open. challenging this market and So we to

Unidentified Analyst

Thanks Okay, very question. helpful. Thanks. my great. taking That's for

Ryan Marshall

Yes.

Operator

question-and-answer turn closing concludes over for I'll to remarks. it That any our session. Zeumer Jim

James Zeumer

on to the a be Great. course the available certainly questions. call. follow-up and Have forward Appreciate morning. this the we'll day of next everybody's you speaking with time over We'll good day for look

Operator

today's call. you gentlemen and Thank participating. conference this Ladies for conclude

You may now disconnect.

PulteGroup (PHM) 26 Jul 222022 Q2 Earnings call transcript