PHM - Earnings call transcript Q3 2024

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Operator

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup, Inc.

Third Quarter 2024 Earnings Conference Call. Today's conference is being recorded. time, Jim like Zeumer. this conference turn At to over Instructions] I to would the [Operator Please ahead. go

James Zeumer

Thank you, review Audra, ended welcome financial all and the September good morning. to performance earnings I XX, today's XXXX. call third to company's PulteGroup's and participants operating quarter want to

Here PulteGroup's Senior Ossowski, Vice are Finance. QX Ryan CEO; President and Jim to O'Shaughnessy CFO; Executive and review Bob Vice results Marshall, President and President,

corporate our earnings been release and at presentation morning's have our of this posted slides to copy website pultegroup.com. A

We replay today. will presentation this I suggested the Actual of want statements those our today's from performance. company's by forward-looking an that results comments post audio materially today. call could expected future to later learn includes differ about everyone made

risk summarized our that including results These release factors and today's earnings risk future affect information quarterly as in reports. SEC key within other of are significant the presentation are and could detailed factors filings, The accompanying slides. annual part most our and

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

Ryan Marshall

I Jim. discuss call and this operating strong PulteGroup. joining appreciate results our we for of quarter financial another morning as everyone Thanks,

As a quarter XX% QX year-over-year we this closings, increase in by reported reported of revenues detailed performance the pretax primarily in per a along in morning's press $XX.XX release, and third to share, sale increases income quarters increase $X.XX first closings, earnings of X in in XXXX, strong a per financial to increase inclusive XX% home for driven our earnings double-digit PulteGroup has share. realized with XX%

of capital XX%. lowering realized cash the in a earnings, our to drive and PulteGroup strong trailing period, delivering debt XX% to In continuing significant for growth and to to while addition return ratio on equity flow XX-month revenues

through or from Through strong first to shareholders in months performance last $XXX $X million terms This of increase X XXXX, the investors. shareholders. returning back us to XX% funds billion allowed we to repurchases is continue an share and of allocated returned Our of to funds dividends. financial also year our

are backdrop impressive all numbers all I macro the think been the fluctuating given we've more these working through. that

just seen only in Over the from April the back the course XX-year to to in you X.XX% we rates. interest XX-year mortgage mortgage And sentiment meaningful track XXXX. climbed has fall ebbs among January, with started and to interest recent to buyer in flows the then, even of confidence website back we our as in where consumer X.X% rates X% year, to the might rate and rates visitors in volatility our September. climb back communities We course, expect, X.XX% or changes of have and

were again buyers as With proved quarter. reacted quarter, be in to mortgage rates to begin a generally the purchase agreement. X.X% the to [indiscernible] buyers case third during rates the third around movement at the This

As pickup overall and interest we declined activity. through rates September, in August however, experienced a noticeable

of fact, paces the we the X new the In in months quarter, month September. the and absorption highest generated of orders net in

pre-COVID orders of volume performance, numbers highest shown month above October the has for foot community per certainly strong by of Driven typical year. QX third lead September was and recent pace the traffic, X.X the The traffic the quarter. absorption web per the

selling patterns recent typical the interest demonstrated rise consequence. remained a more has elevated in However, a incentives rates seasonal as and have

think I best demand. hurricanes of fundamental offer season impact the of assessment volatility, and upcoming will the selling upcoming rate the spring the Between presidential election, housing

remains again, get for the reaction both hurdle buyer think many that potential now and over to affordability tough to a homebuyers. affirms I down in rates, movement up

forward. new which offer relief although of rates, consumers highs, with The appreciation to could to most recent some prices home slowed, rate S&P has mortgage expected shows continue Index combination going all-time in [indiscernible] lower the hit

the of discussed a housing continue points higher several has of been has country that one is this the deficit homes. pressure few years, at years that to the underbuilding, fact As extensively after home estimated over prices push million past

on The The Mortgage few housing Bankers out Association graph issued today's shown that Slide is since weeks of shows XXXXs. slides. webcast in XX graphic useful a stock the a by ago decades

Looking at growth the overlaying graph the years. graph, modified U.S. see decades. during over even in make past in drop you production significant XX the can MBA clearly To we point this the population by the clear, the

to XXX is has been since people, that the while just million housing has to just you our doubled flat down see of population XXXXs, country's the What decades. almost production shy over

in homeownership, cost helping incentive buydowns consumers rate a affordability the powerful the Given bridge of gap. remain high

of quarter, typically In will XX rate need to national advantage XX% signing a XX within to contract. of of take To program. the days rate national third incentive close homebuyers our approximately our accessed homebuyers our

it's in third continue specs. the XX% of At important So have we to that quarter, inventory the of an end the homes homes in were production. production of

demand we XXXX. out meet as So we to are close well positioned

are available, benefiting we in lowering make cycle inventory Along with continuing having also from our to times. progress

goal of quarter, days out homes year's us production and delivered days days, be track third line an is it time second of XXX from this accomplishment year-end XXXX. the For our by in XXX on part in Cutting down and first average at quarter. XXX important XXX was reach cycle time of keeps in to the our X days our weeks

In at target. are truth, divisions close already XXX-day operating or to our of our ideal most

positioned average year are primarily or large Our summary, cycle XXXX accomplished In of divisions, for quarter a is elevated. to lot to those and multifamily PulteGroup. financially, record the handful have reported a a operationally business we in due with remain and times well be higher third

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

Robert Shaughnessy

good our Ryan, third last billion. and over Driven quarter strong volumes, to morning. closing revenues XX% by increased wholesale Thanks, $X.X year

second a sales of is homes, Our the X,XXX quarter average in quarter and the higher period year. our the from prior year XX% increase effectively the closings of reflect in revenues while in price this to $XXX,XXX unchanged

first the the community [ the our of of XX% time, adult. The mix closings percentage in in adult. active year, consistent quarter in buyers the the third Average and second closings from of timing were last In closeouts adult mix noted Bayer year. third and up commentary adult The active active of prior prices time, closings quarter sign-up XX% XX% and slight in first 'XX was by XX% move-up reflects during was sales XX%, of we XX% Group quarter our earnings call. with also primarily ] our 'XX, the active decline and [indiscernible]

active of XXXX. opening begin We normalization contribution expect adult from active the communities adult in replacement consumers on our

quarter average quarter orders, noting average, is remains our than worth net third which that quarter quarter new in orders our pre-COVID the higher homes at pace X.X year. totaled was the of current consistent our per It's which the closer to historic monthly X.X recorded X,XXX homes, month. with absorption net Looking orders XXX the homes new third in third last in of

see from just the buyers. buyers we last of of quarter, X% September. decreased X% July positive is quarter, we year, Consistent increase QX prior X% the monthly with through Within on for impact with under of interest Compared our did of X% communities year. average quarter orders XXX active guide, move-up with rates third decreased which for compared first-time the increased the a during operated and an an out declined for orders and buyers adult

last quarter, a homes end of with homes the backlog end X year. activity ] [ ] which XX,XXX $X.X value quarter value of with the order the $X.X, the [ billion third during backlog of XX,XXX billion a with Phase compares was of at

construction. we quarter, approximately complete. spec of the the in homes with production, under and which the started homes QX total During a quarter consistent approximately ended homes of X,XXX numbers quarter, X,XXX had year. of the last These with are of we At were XX,XXX homes X,XXX end

close basis, This to inventory incentives, been having represents specs XX% demand. are in finished available year. interest second were our in about consumer third On of which importance successful expects sales to with quarter part a driven when per spec community, by of quickly. of Buyer of sales, is the buyer our quarter this effective X.X highlighting use consistent production the spec most mortgage the which meet has unit

that to X,XXX continue and decline. between the keeps rates exceed stage slightly close we us to currently mortgage highlight and always, current closely consumer monitor if for homes or to construction track meet changes expect will on under XX,XXX target this we on have X,XXX production, units to year would any As of in closing of the continue Based fourth quarter. homes. full we I preferences the our

we guidance our the $XXX,XXX, price challenges sales affordability was cities that in be which facing market consistent to all quarter consumers, in operate, the seeks for to with strategy is offering today's to buying maintain the Given pricing and dynamics consumers. a compelling average range $XXX,XXX third average evolving we With which in said, key $XXX,XXX. of pricing our our in ensure home

Looking at to average the $XXX,XXX range currently a $XXX,XXX. of we and expect higher sales price to fourth be quarter, our in

have closings are our prices As our where above coming percentage from markets, on is largely average. we a prior higher of calls, due to discussed selling this Western company

margin quarter third at gross Our came XX.X%. in strong a

percentage in during slightly an other margins. this highlighted parts relative our markets, Western at call, closings increasing coming we our of recent reflect lower of As which our our earnings quarter from business margins most to our

sequential costs Incentives third incurred quarter X%, margins Our the period. were is higher third basis a quarter the were by of increase year. this XX quarter of incentive which from also points second impacted during in the

we market dynamics, our assets. homes to were and higher ensure needed continue incentives help turn Given sell competitive to

rates demand as market Ryan remain competitive. but As higher interest talked overall in third about, improved the declined dynamics quarter,

As of at the such, the we elevated least to year. remain expect incentives remainder for

incentives, and gross the anticipated to XX.X% quarter maintain XX.X%. be in the currently range of of and the to higher expect need closings in the geographic we fourth Given quarter to product fourth expected margin mix

million year would $XXX with our in guide, income our sale XX%. compares down third quarter $XXX sale margin approximately on SG&A reported of home home expense of amount expense SG&A the year or million gross statement, revenues. Based to our revenues. or quarter the X.X% prior X.X% This was fourth Continuing full of

was track third previous SG&A for us revenues expense X.X% wholesale Our full quarter year. on line of with in guidance keeps for of and to expense X.X% SG&A the

would we I in quarters the recorded of adjustments guide excludes the our that and first impact of year. this insurance year note the second full

results XX% strong as operations of services $XX income quarter last Our quarter financial and increased financial over another third million. operating year pretax to reported

the For homebuilding closing driven in business our our benefited volumes operations capture rates. approved with increased the financial combination from higher quarter, volume in services by

profitability which last $XXX third the over we represents the pretax of addition, an higher of mortgage income reported quarter, quarter due performance. increased In we experienced In particularly driving conditions to X% million margin of operations improving market our total increase in for year.

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

with of associated In energy benefit purchase million quarter, excluding $XX a in tax completed includes of of credits quarter we the the renewable purchases. to the the the any quarter. XX.X% range be the for rate impact rate tax to incremental fourth XX% tax potential energy credit our effective Our tax in expect

the on from XXX of X% down X% Looking in increases last bottom per year reported calculated the at based company per $X.XX and XX%, is the shares Earnings quarter third the million was approximately quarter diluted share to net repurchase as or the representing year. third line, systematically was of program. income executed $XXX prior continued share outstanding which over share our million respectively,

billion strategies, land stated development, $X.X homebuilding we a assets. in platform. XX% for to and we was incremental existing basis, the of On the with allocate the which third quarter, to development of guidelines. and billion invested $X future spend year-to-date have our $X.X of billion our acquisition year of land full Consistent continue In be growth our invested acquisition in capital $X.X we to now as and an and land development to billion exceptional strict investments meet in underwriting our our identifying job land structuring teams land the that to range expect do continue

under Inclusive the quarter, land in approximately were held of option. of with XXX,XXX our ended spend quarter via the control, we lots which XX%

balance our future. the on progress sheet communities make of efficiency the fourth pipeline timing represent our we year. closings, in community and to expected X% option Based of which of control and the percentage quarter operate to currently would the XXX land over expect support drive fourth we returns increase in seek out via of quarter, greater we higher of to of average an land steady continue as that of increasing last and in the openings an We

an of the in business, a capital In common or months average continue the investing approximately ongoing outstanding per X year we Through or addition consistently we at our beginning year, $XXX million million the of In price share. repurchased of of the of third cost our of per return the shareholders. to cost $XXX.X to or of X.X X.X the share. shares million we growth first at a quarter, shares to have $XXX million shares at repurchased $XXX.XX X%

with Following of net a our the gross ended we ended cash was we the remaining sheet, Adjusting our finally, of on third just these repurchases, over billion ratio on And the period existing quarter billion ratio authorization. X.X%. debt debt-to-capital $X balance $X.X XX.X%. with to capital our repurchase for

Now turn the Ryan to final let me back some for call comments.

Ryan Marshall

our tactics have very of to been Bob. Within the done continue more business have our it's Thanks, local teams success. such ups ever I'm a an we focus to as downs environment, that navigating and the on strategies great instrumental of and important proud organization job critical that and our national XXXX. than

continuing business. are to our in we First, invest

invest $X had a land same and guidelines billion to in decade. hurdles year, and underwriting over than place the for We that we've acquisition expect to this return just more development in

disciplined assemble a high-returning believe us Our are allowed projects. and we has robust process of located to pipeline well what

of see count the risk. help enhance we via land more In This a and effort for increasing way lot the migration we toward option. underwriting controlling to be opportunity new continue multiyear our that returns market process mitigate our will option as a deals,

long-term work overall which a add communities our to lots, of as We option to goal new have process an XX% the evolutionary existing will getting deals option and lot portfolio. be through we

to are we each high sure business efficiently our balancing desire to achieve invested have away want driver while to don't seek are in on new making model, positions, the important our an turning we to margin Within be capital, that our return Second, to give home we land The while of use gross by secure. land assets. margin existing turning invest can't We land intelligently and we've phrase, make assets. to we proud. sure often is of hard continue we we maximize the profitability lots returns and worked we

be and we potential same compelling must to offer value the price time, clear At competitive and a homebuyers.

continue we in to continue our balancing as in margins, we're operating. quarter think act currently allocate And more this show results competitive but meaningfully high priorities. generate market we gross response with to incentives third which historically our to I conditions the increased capital alignment we in must third, long-stated

than the our and X-year of development. discussed, we As acquisition business land acquisition achieve our ongoing we through of just XXXX continue land to investment where in If the growth invest land target is our $X and $XX billion, hours development investment such countless represents more will in by hard backyard our world teams spend billion. work country. In my well, not of throughout land and total a alive

repurchases we year continue dividends. After and return investing which will have to of we share billion XXXX the back in support over systematically funds through to capital growth to shareholders our ongoing returned business, with the being shareholders fourth a to $X row in

see $X Over supportive sheet strong I well shareholders continue is our this that can and a the to all balance liquidity. $XX roll and higher a billion that and through low inevitably believe and returned balance invested growth highly sheet as us support high through downs billion leverage as in while building the plans with industry. land, strongly of housing ups demand over to

of in work operating even delivering months, effort financial surprised team few to by these by the fellow incredibly thanking at although their Hurricanes over rallied am and directly our made results. this but not our support PulteGroup's close storms. entire for how I proud, hard me impacted past organization Let outstanding employees all tougher

why work. a to polity are great place efforts Group compassionate remains You

to Jim. me turn let the back Now call

James Zeumer

and one Audra? now call the call. can process to open We're follow-up. Ryan. so to ask open one to ask I'll get possible as we explain many the again now for time this Thanks, questions questions. call And to the as Great. you. the and limit questions We prepared for for remaining of question Thank Audra yourself

Operator

[Operator to Lovallo UBS. Instructions] We'll at go first John

John Lovallo

just fourth XX% the to XX.X% sort XX.X% between us headwind one what is is maybe gross that in incentives to in mix? an range the walk breakout first the of incremental in in quarter third assume of the on The margin incentives step-up the Does quarter. from sequential versus the from help

Robert Shaughnessy

than it's in they to think the quarter. little that richer We had were reflective bit We the market quarter, current commentary incentives operating of said it a the we had flat. highlighted the as I relates coming in. given of to John, into Obviously, sell expected. be the we're had in homes guide third and QX, would a lot we that

incentive seen load. quarter. the has homes we that still sell had to have activity We in higher fourth that The have

is seeing So what on really the we're just a function it today. of ground

this the more we adult percentage the mix saw of we thing closeouts. that slight down active and some so second the that broadly Another we're is a the step -- as in impacts during quarter highlighted

some for adult. word, And so better we've lack gap and outs got of -- active

of a in So the the basis couple shrink percentage adult you've total That of has business obviously our active margin contribution. seen highest points.

combination a factors. all it's So of those

John Lovallo

Understood.

Ryan you there Okay. were the Helene What is the going impact hurricanes, storms, then hard the orders saw a Carolinas. move and we devastating guys or obviously, Florida Milton on pretty the of forward contemplating as really up mentioned And may pretty And you whatever in that hitting as potential are quarter? case here whether perhaps be. what kind impact it's the deliveries, into

Ryan Marshall

Ryan. it's John, Yes,

in as recently both devastating start we've the that the ways. They active construction how highlighting First thoughts individual by communities well maybe well prayers storms. were closed. different out go that are communities our our I'd and performed families homes very by and communities certainly in first were to impacted and the that as both large

systems the are to and standards just standards designed, I we that think build how real testament effective a quality those The the way the drainage some of new to are are. construction that

communities, shut X to hard loss storms So John. with cleanup. job X impact had advance kind really X in then sites Those of One days the damage and X get our storm days the The good that down days the of we time very things, X following back. is to of the just are little in biggest which are to active is to news. so

is Power second the issue.

Milton, really in with and Tampa were areas. the Florida, power especially the especially outages widespread Southwest Florida So in

They're online. setting So grids power on bringing as that electrical crews on focused in are will homes meters back QX. deliver focused power the not or new

kind working quantify the exact the We're those the power are. still we'll we're you. what to we've coming as recover. companies know -- weeks that of that provided that we'll So numbers to think, in And in more, I guide confident Bob --

kind slower be other cleanup to in of little will inspections be The third-tier of the communities maybe kind dealing as some a item would with of hard-hit they're municipalities in areas the responding

Operator

move at & Ratner next Alan Associates. We'll to Zelman

Alan Ratner

margin guide. the Just following up on

You is question business, storms. mix et the of Florida. the of I guess on kind adult, mentioned and kind the specific to touched like active of a X-part But cetera, you this

in Your well are company average. margins Florida above

I'm that's impacting for specifically guidance. the numbers, XQ the So if curious specifically

I a Or the margins, rising mentioned, more of maybe strong feel of outside what that with advantage away concern if of you a very to an But I'm kind about land Florida guys like bit -- so more And maybe to those you you're importantly, about opportunity in resell you give lot think do inventory affordability. as your There's is strong guess, challenged seeing you looking in share, take there's that that market of lots? just about you in not could impact. incentivizing. curious that your thinking market position to relative how just do storm little taking market, are are the you talk

Ryan Marshall

out remain trends -- and bullish actually lot they're bit Yes, our things We the a and both And about on where it and we're little in positive new down a from talked resale we of Florida. we on Florida peak. quarter inventory had have end note, a third the improved, second a inventory quarter. of Alan, very inventory on great of

end one months the up So quarter, a in the which positive of I summer typically slower think quarters nicer Florida weather north. that's is as a you in

As town, fourth what shoulder think back get we we move snowbirds we're into the have good season and quarter into where traditional the quarter. start I the a pretty coming to fourth in into well positioned is Florida,

do where almost So in we're major We've or strong our every there. Miami. of communities. city got Florida. lot brands But business a great are major every city don't in -- in really We

us. So I to Florida continue think will be positive for a

Robert Shaughnessy

it's interesting. Alan, Yes,

You up markets our heard Ryan there. how well say held

the more which and we think So to to mix shift We in fourth they course, see through. we'll will, able and the we we don't think deliver markets the fourth and is going for had of that margin actually ability of municipalities quarter. permits, the the a Pending, it basis, highlighted be work a than be percentage in in a really lower geography to quarter Western third. that's the higher slightly was have relative on us, margins

the And have the then high. more on to entry probably spec that expectation prepared levels as incentive it's And influence. in going is level stay remarks, that incentives are the we or our the highlighted

Alan Ratner

you're it. Got entry-level touched a active segments if between not of a in helpful, bit And terms of guess mentioned Bob. entry, incentives. most kind in of you you higher adult. broadly, price various one just and you little I seeing what Can are drill terms from move-up the the of, point right diversified -- at builders guys you more now perspective. in demand on That's

whole story I community count given know that you always give the but the doesn't et openings cetera. tell on orders, closings, and numbers

Ryan Marshall

are with about Yes, a at in We're time October, high buy. to Alan, number. website in on a XX-month one. about survey good talked how calls, do a and in I my now we we mentioned that I'll confident take about just being buyers prior come it prepared to that our that they remarks,

a positive for sign the think So I business. generally that's

foot XX-month our also our our traffic, website lead at traffic into stores and Our high. traffic

the down the of the So the the entry-level most individual brands, challenged continues there's buyer a be lot September in drilling by of in into funnel affordability. was activity top to quarter, best the and month real positive

we when very that that to saw September, think So in a nice I in impact down pickup a came buying had favorable rates power particular buyer.

continues that's environment. think well fortunate really movement if a for to see rates selling we're positive. I really consumer will positioned continue in business, being XX% some next that that I into of of improved I with we're be So us. to group that for strong perform our buyer think And to The think spring very we And enough current particular the well. perform to group the months couple season, as in well buyer go

a And years then market uncertainty talked this group active is we've impacted most a in adult, and volatility about probably right the in that's thing about is in And that And the buyer election. past, that lot and market. couple this by now, the most the garage of just of there's in we're election weeks. around the a getting there's nonstop the we're hearing uncertainty with -- the

the kind thereafter. for market will we're over and back shortly the waiting of So of think next into that come buyer weeks we couple to be

Operator

Stephen next Evercore And Kim we'll ISI. at to go

Stephen Kim

on focus I Appreciate all the information wanted to far. think. so I specifically timing,

market You made of that a the maybe may of selling have how in to couple think to out. to buyer indicated to going the really year? of settle demand I thought you spring comments the due we're given look sort rates about that that see going you you to to sort next ultimately the think is volatility season happen what

you're And on think I right that.

get you about net. sense of big probably timing investors how the over I'm well. a focus timing, I for I selling I What here the evolve might see to to for things going trying as means certain think for that you've is a spring talked be guess, it say. just should season

that impact you as delays the you of think the some hurricane impact the revenues, all, deliveries, you out. XQ, be to the that -- the of do fully adult talked any to felt relates of into gap that think there's from timing about talked active it about you going first that So you will spillover particularly

XXXX? Those like when think I us indicated a thought sort sense give revenues while in Can homes understand -- you from affect and particular, that I better better may XXXX. for in because get a major a that that, about you're timing of would are what Are might in when, we build. you you X take perspective? obviously, these that ones the to wanted thinking to that

Ryan Marshall

Thanks a Ryan. for given guide in. QX we're it's We've question. for Stephen, confident Yes, the that

be. than think get we've what more our closings will better and But If few that the fourth things expected of in guide go the kind in factored quicker we're we So in given. potentially, and we hurricane-related a of confident estimate the delays impacts best quarter. we've

kind Then as from it to hurricane. XXXX and spillover the relates impact of

a next History at point. at do the We this guide. that haven't given a We'll of guide quarter. end is

sometimes I think come and transformers we some the I energizing delays than, that of again, see power-related are other things setting system will think back And Those around. online. communities. the

our Those community kind being right as the would also time. long a adult, you been next developed year. we'll communities now. count pipeline They're But tell to of you for guide relates it more about that give we get actively closer in active have as

So we've open. got to they're to when great going visibility

haven't the our of would XXXX. we've and to XXXX long-term given back kind I those than closings a then of most half of guide business will wanting in And start window. to XX% we reiterate, about other to But for start in growth X% and a to guide operate show of open growth talked in the 'XX

Stephen Kim

the purchasing of it that mix what managing to the with to managing think long it of thinking term, a a just about then of for a adult that adult speaking more on like it you become sounds in will adult we're business And you're side about the and -- if had have to bit, most Are is it today? over we I'm XXXX the more of likely little you typical again. a managing -- of mix than you Ryan, When look active staying Are XXXX. company? sort XXXX? like which mix of just active the your is you're going of it mix, a richer will product 'XX land sounds XXXX, particularly maybe And be more active richer of -- like or little

Ryan Marshall

and Yes, still the to it land managing for XX% the company about we're business. mix the be Stephen, of running

So overall of the new the and gap in prepared on as go you'll And little levels, to is a in in a that side. kind remarks, roughly actually -- actually these current mix contribution business. bit XXXX, out communities of mentioned XX 'XX which in where you'll come the our in those typical Bob back online we're light -- is XX% see mix his as

Stephen Kim

it to Got certainly, orders. you. relates as And

I you. Okay. helpful. That's got

Operator

Pettinari Anthony to at next go We'll Citi.

Anthony Pettinari

the about and for in a it kind it's year-over-year recently. was ticked a of been brick I up seems XQ. basis, have on wondering year And assumptions costs guy if and lumber could but then you this for of quarter part of good stick like talk kind may

wondering remind on us could lag Just your you thoughts any there? prices and lumber if

Unknown Executive

the X costs question. at year. vertical inflation $XX for with be foot, And minimal which year. To we've last third on experienced quarters. is this honest, consistent We're last a right with consistent of quarter square Thanks our the running the actually

of look full expect costs. kind low a single-digit inflation we at year, when So on very for vertical we the our it

Ryan Marshall

we're the the lock XX-week market. trailing lumber, as in customer buy lumber, Most our during a experiencing margin of the relates we the and of at random that time it on contract length average process. to margin with effectively so it helps Anthony, varies volatility by build not

Anthony Pettinari

a think normalizing where to of or just out feel inventories. were Got Ryan, in resale wondering little ago inventories X tight? then were a following bit And better markets other And getting or where Texas was inventories elevated it. it. there up West, are little if I Florida. maybe months conversely, inventories where I bit indicated compared on a just you Got kind bit resale or markets,

Ryan Marshall

Yes. I of markets any wouldn't terms in kind inventory highlight of other issues.

that's last the Texas in choppier major Texas. a It's more is months. competition. been a where mentioned market a Texas. You there's every in place builder little probably is in market few Every

that with I'd jobs that a there So there appreciation price inventories. that Austin is and COVID the were there high-paying unprecedented are markets really few went were short lot a had there relocations there. one highlight of post

of than less maybe saw moderated appreciation. we around So price kind pace

relatively normalization, those are are to going that I good continue still So markets want and well. Taxes are there's through I jobs think price There's that there. are a places people will there few think where to affordable probably there be. fare some markets

confident markets our still as in we're well. Texas So

Anthony Pettinari

turn I'll That's helpful. Okay. over. it

Operator

our open. take is question Michael, at And your line JPMorgan. Michael next from We'll Rehaut

You muted. may yourself have

Michael Rehaut

a wanted of incentives little quarter. during the to the cadence to circle back I bit

think where incentives you any broadly incentives the throughout kind elevated where it particularly elevated into XQ had it strong demand. curious was said, I remain September, ended. in on as you quarter you described if and of incentives I began a was And remained there fourth in expect you as quarter. to having decline the

Robert Shaughnessy

didn't see from see We see that Mike, think -- continuing. already. it's guide suggested, is the and the I those market Yes, told highlighting elevated worth during incentives can And quarter. we've really you we're below that we you we've rate given, we've the not mitigate offering

consumer. the the And construct affordability competitively us so doesn't influence do need do XX-year the from both movement really as what for and much as in the we to

the inside the you if XXX-plus that move we're with some in programs in see telling needs is So there. XX-year, incentives help XX we're with we're basis consumer so incentive affordability and getting a our what and the the already you way that the point

Michael Rehaut

when over, it's at to in say, do is, what typically, normal Is it not guess, maybe level I'm I to months, down? believe the see I an through? getting of initial of demand, kind reaction, start is overall incentives higher of demand kind Right. see tick that let's increase you but works several

maybe curious more I'm the concentrated terms more what months, you given more not normally of were really if over of have in said the been see that. was that's really it's sustained it to September in that curious, you following improvement would the reaction a month in demand I'm if if first that So about

I think buyers down. perhaps which that much more incentives, characterize That's decline rate by what as I guess. would about, helped a typical the move-up as at aren't what least I curious I'm buy for in

Robert Shaughnessy

Yes. We'll have to see.

interest of So right? indicator end at Ryan we of season answer is comments, better overall going his rates the back rates. a continues that, to the day, reduce the we'll to prepared the we in think to I demand. -- that Fed up, said down the see a think be path if selling And ticked

an improves, to demand point, rate opportunity action. your think if have the to reduce and strong. we'd Yes, environment is I And our

Michael Rehaut

Right.

in versus increase on in in increase Texas. incentives perspective, unusual highlighted also markets, let's incentives months in or those levels, seen Secondly, inventory and an if markets, resale rest inventory those just curious ago? just given kind say, those of all the hype the -- if X Florida around seen markets, the today significant to of I'm you've in from a you've dynamics for you've markets a regional your relative

Ryan Marshall

us level we've but done -- market or the because earlier competitive of Mike, is higher tell in the I line don't is that wouldn't that it making in probably there. incentives just is the are would been is anything than markets nothing of uncomfortable, competitors what Texas, -- year. of you would I Texas I of has the we the out number saw Yes. more probably that on suggest it's

the provides some us Other give thing is and and incentives that of bit. fourth in little off the may Bob opportunity just indicated, interest what we'll reduction see see a quarter possibly, to rates, we back

Operator

next go at Mike RBC Capital We'll Markets. Dahl to

Michael Dahl

and You're dynamics? kind mix sequential XQ margins going Bob, in to in you the quarter, the XQ last anticipated to XQ, with dynamic. guided step margin when you down relative the stick I So to already of think

margin XQ and is mix, So the about but gross is XQ really is, the incentive the think the and delta way what the of that's right more you the Or than even sequential load? you've a headwind you is your highlighted different in versus originally prior -- anticipated? it guide already mix really to

Robert Shaughnessy

business. the We've as it's return basis, the our dramatically. bit couple on affordability it to equation, relates of a got changing Western assets. not to or now, looking a a really highlighted relative more we've incentives market it's a strength balance, challenging to meet so Again, times On it little Yes. we're there and

Michael Dahl

makes drilling sense. That then the on And is incentives. down really follow-up Yes.

total the have you XX may XX% and a entry change sequentially. But bps that's color, up predominantly provide the little been really in suggested on it's load the incentive can you If talked more level. that about commentary, on it incremental like seems

Can your maybe us XQ on and the that incentives in were entry-level or how quarter-on-quarter? what you XQ help and guide quantify in compares are

Robert Shaughnessy

the probably entry all for too little a only Again, the thin. level most. feels bill a and The first a of affordability challenge slice consumers. that's is of it Yes, our

bit thinly. And them, so it's little parse to be richer but quite for that going a I to wouldn't it want

Operator

We'll Reichardt go Carl BTIG. next to at

Carl Reichardt

go I picture back again. of sort to want term. and to bigger longer Florida

conditions, talk been or prices. obviously, about the there, intermediate-term changing type frequency of that's patterns migration there's whether weather insurance So some

about about say, you or in thinking are investing those especially talking 'XX you're impact do invest your if rate beyond capital, in as to dynamics given do Texas markets higher a these there, you're deals of return So new thinking, too, there? require competitive,

think very capital of might you intermediate beyond you of term the you are regionally, it? about you Florida terms Or think the do short in changing? the term, dynamics How sort with if in be these -- sticking place where

Ryan Marshall

Yes, Carl, Florida our there question. has of a lot to the We good invested thanks capital do for been have very business. today.

committed. investments perform the see to like the capital to well So We'd continue for that already already Florida made it's been and for what worth. that's we've

from change in we're conditions. after they future As it blindly not come market a we're the continue things stuff go take to to as we'll if market, I relates think seeing going inputs to

if of that we're the I little at have that the underwriting Florida still more they're criteria. investing, in higher being see by really think things we not the TV. remain that on They're places And our on look on where impacted are inland, bullish that's I Florida. you one of ground. parts you disciplines a they're in fact,

It's on are the things not the devastating. some our in business Some they at my homes But would are happen. directly the coastal sense on built to TV were things 'XXs it things impacted want seeing think don't of 'XXs, I TV. terrible. there beach, is that that the probably the current you the areas, It's on see are right are that anybody by you're that not is code. of the and

moves of that that some highlight of are kind I'd within Florida. the seeing you're

but state Florida as income So out it used of place favorable to quality Florida be, as good life. still the Florida There's remains no it's affordable. a moves. great There's taxes. Maybe to they're jobs relatively opposed got as of that's not deal of intra moves there.

So rates to there are the things some of like some rising like. and offsets insurance the

Carl Reichardt

effective option as banking the goal. that you now land off of it And a now expected? question appreciate and to off my the still are are second and or XX% banking that land Or you've you that. Is I the large Have lots with sheet, right what farmer balance you the seeing then discussions pricing via opposed balance your seeing sheet safe XX% is of intention in bridge And there challenges gone kind the to market terms of options. in had terms? you didn't negotiations, bankers the expect? as gap

Ryan Marshall

land Yes, to We Carl, X XX% portfolio through options will it somewhere level. We've years highlighted take quarter. be XX% a the as nice probably to will our to in cycle up X.X we on our think journey. land we're total making progress around in to it the up accrete

intended. clicking off as the But milestones we're

on land teams our seller or with land So land front. are of our farmer that really XX% options. how be I'm to We'd performing with expect pleased options

option to come we're other looking from the will The XX% for bankers. that

a has nice with. we're banking that land portfolio really a of done team building bankers out Our job working

for interest out see environment They're consistent. well in in you behaving of market. Interest And broadly incredibly They're in rates, predictable money to very is the us. kind a way. their working more it's tied rate the what

So in we quarter. got bit of little on we improvement some did the a stuff third that

is in with to have happens things on we're quarter how what pleased banking but with rates, We'll program fourth depending the working. see how land the go

Operator

at question next from Wolfe our Allinson Research. Trevor take We'll

Trevor Allinson

rates. conversion First, a question on

You guys to growth about annually. talked X% XX%

that think XXXX. included I

I your closings backlog grow to X% Just backlog year given imply rate conversion a would next in think where more. notable that trending, is pretty or improvement

that you're rates? is an So expecting improvement on where in any -- conversion commentary

other And improved the then that, you whether additional earlier to that if guys that call out? so, of maybe be or talk spec cycle drivers drivers times any about any the referenced

Ryan Marshall

times our will getting cycle one, Trevor, prepared Yes. remarks, is worse. or in continue the conversion be a that by rate We come impacted to that's time can down. number cycle indicated X something backlog better things:

some from So that. we'll certainly get benefit

that other spec backlog. the those are is then homes piece are in inventory not by the in are And that production spec definition,

in lot show and quarter of same convert those won't that in sell will a metric. So up the and they

to want volume. not better probably to metric have we're we that run I a interest tell your and year's don't of deliver into given environment, homes I selling, you but spec total how think is a inventory closing to production, of the look in rate is the starting homes production current given good or So in percentage homes whether the at next available indicator to models,

Trevor Allinson

that, about then be Understood. Can then would target number how bit little you guess completed a on X.X That's level moving community. spec forward? Okay. you're question following up I your finished above specs about thinking your of longer-term per inventory, feel spec kind finished second current about And then the one. talk production and how you of

Ryan Marshall

current stock. tends to operated the And the environment, percentage rate be In what is WIP had business our want environment we than first Yes. historically stocked pre-COVID current that. selling coming predominantly of where XX% spec time, which inventory a or we're we of mostly interest higher almost in as through actually

in that most spec. WIP. of about And recently talked and XX% XX% this of heard recent quarter, So the XX% us inventory we're at of between end most total total you've being the as things our at

operating a we good line when community one think pretty on there was the build-to-order per more side, So like number. in I were we're finish feel model, right we in a of

feel as And exposure we we're a now of over we're that we are at got this selling uncomfortable over have don't of not XX% abandoning at inventory right selling homes but some any point. form at that. We're We're that the slightly spec. that us X.X, selling that's

at the of kind So of pipeline. moving through form production some they're

feel we as So good well. pretty there

Trevor Allinson

forward. moving luck Good sense. Makes Okay.

Operator

to go Wells we'll at Sam Next, Reid Fargo.

Richard Reid

digits say guys single want to to mentioned XXXX. land were quarter, costs high Last you trend about likely in I up that

embedded how the some of now, talking do visibility in know fourth and have kind here. I trended not guidance then confirm you the that necessarily to quarter, looking third Just what's but quarter in you're XXXX

to that's year? as assumption next reasonable whether curious just So to a

Robert Shaughnessy

that in cost We do high see We Yes. lot single-digit QX. see increase did QX. in

that we costs when more Land provided And this 'XX before, to coming as not than color have for guidance. lot we expensive we'll stuff our a is We a guide decade. through what for is but said we've on means in cycle haven't give the expensive. give more land, older some decreased more 'XX our as 'XX,

Richard Reid

it that's And just want sticking covered, ask ASP, quarter, to say, No was to of questions, options about just around wanted last kind as then and was and this housekeeping of but fair. already percent apologies $XXX,XXX. to premiums if a lot

Just curious fourth the what for guidance that was in quarter? what's then in and perhaps QX embedded

Robert Shaughnessy

in Yes. QX. We XXX were

consistent well. from highlight embedded relatively our that a our and and So is that lot in it to revenue Worth of premium option as QX adult and comes lot guide that for move-up buyers. active

So business most of that. you're driving of call it, is at, our XX%

where that Ryan the further that's speculative made we're earlier, most to building. not of comment doing And the

Richard Reid

makes No, sense. it

Operator

Bouley Matthew Barclays. next go we'll to And at

Matthew Bouley

that of long-term to And kind growth that wondering if where as in growth is consumer the for fact, on what to kind target, still general target. that flex or kind X% demand depending XXXX maybe of are you Back specifically? on plan to you're is? XX% I'm willing rates of around the that extent reiterated

And if or around that which there's growth? in at volume margin of dial a trade-off any back thoughts incentive your kind you might mind

Ryan Marshall

gave we're of guide of long-term haven't was investing we it given next the 'XX We'll at kind guide. a that that end multiyear positioning business the Matt, a The guide Yes, and to be how meant of in was land. do quarter. that we

So will next you tell quarter. specifically, 'XX more

Matthew Bouley

maybe then balance enough. sheet. Fair the one And on Okay.

generally, low, that leverage what cash prior kind to kind it targeting your increase the levels? to curious think of be hold banking kind here, if increasing you're in managing the either there more leverage balance or to debt how sheet cap just at to would playing of thoughts kind if playing on is need you're of of X.X%. that if is into net land a Or keep I'm the more around of all? back I into is that Just actually

Ryan Marshall

on look driving the about much and And the how And the cash prior business, calls. then are. what our is think, this flow we've how cash talked business. growing of view flow. what the we're we're a needs to we've how Matt, Yes, capital cash in that's is, a with view on our little investing got I operating our finance strategy operating We own with investment can we business bit,

And to or kind then capital mechanisms. debt market go other we of

Bob, a I to as it think look opposed anything it's the outcome to is driver leverage there? else that at to way being an

Robert Shaughnessy

going specifically terms No, of really land other free is than say is do to it to banking, up cash. in what

on the basis increase relative balance smaller. our percentage optionality, gets relative As we of a sheet

more Ryan's So what point it to choices cash. that will to do us about give with

Operator

Q&A And conference turn will to session. that Jim remarks. over for our now back the concludes I closing

James Zeumer

goes day any today. questions. we'll everybody's to look fourth speaking time Appreciate additional you. for certainly quarter with as on Thank We're Otherwise, call. you on the forward available our

Operator

And that concludes today's for your participation. conference call. Thank you

now may disconnect. You

PulteGroup (PHM) 22 Oct 242024 Q3 Earnings call transcript