PulteGroup (PHM) 30 Jan 242023 Q4 Earnings call transcript

Thank you for standing by, and welcome to the PulteGroup Inc. Q4 2023 Earnings Conference Call. I would now like to welcome Jim Zeumer, Vice President of Investor Relations to begin the call. Jim, over to you.

Good morning, and let me welcome the participants. [Audio Gap]

call. today's Ryan to for fourth XX, the on call forward year and O'Shaughnessy, XXXX. I'm our Senior President, Executive pultegroup.com. corporate PulteGroup's release CEO; this today's results and website financial Finance. A period by Ossowski, discussing look quarter have strong full slides earnings Vice morning's our joined at Bob Vice We President Marshall, ended presentation CFO; of been Jim and and President and copy posted to December

replay performance. Actual suggested audio consistent release A an The a risk want webcast detailed SEC differ today's risk post are other morning's forward-looking this earnings call we our that will finally, We net And discussing reconciliation slides. both note today. Please of results the this expected and to release that could ratio affect reported with future release, earnings part materially statements and summarized today. slides. presentation accompanying are made basis. within results factors key alert comments results later filings, as our those quarterly gross in to I everyone and on morning's future financials of from within this of includes including in most today's our annual that is our and information our could today's company's will be the and our factors debt about These reports. significant by presentation included

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

to year results. PulteGroup's fourth full outstanding I'm Jim, financial Thanks, about and quarter morning. speak with today excited you good and

first-time profitability land, outstanding rate demand per Increased home position our But spec operating turn have high offerings, record it our for we ensuring our revenues me critical to result, house ongoing supply manage X% our product homebuyers and QX those meet several gross incentives drive earnings benefits of we strength a in Bob consistent macro faced performance, seen mortgage remain to key can Over inventory a reported COVID the share XX% homes to XXXX. disciplined $XX.X success. The in our quickly on PulteGroup to about XX.X%, business chain highlight from a more and of rates. the and record margins available we and year consumers the equity. skyrocketing By past we worried have which $XX.XX XXXX The for of and labor of years, approach key full this of and let maintain increasing practices return we had needed, materials, support was operations. so paces volatility. be we ranging continue helped a to absorption few of results. production, increase our delivering disruptions face of assets. share financial while reported when to carefully adjusted and in PulteGroup cost achievements all, billion. In mortgage full to will detail for inventory to Through challenges increased running the the per year in XX,XXX pricing, sale strategically of

shortage quarter. The debt of into in the buying paydown. Inclusive development total consistent net investors initiating new expanding We approximately land QX lots, practices our XXXX we groups. spend December locked is the decade months use placed starting future to has lack of of finally, business and XX% in emotionally efforts shares allocation was exceptional land new a in activity By entire under been and the X%. of sentiment home repurchased low-rate superior $X.X for outlook we banking net as the to sellers land orders long-term and saw positive. absorption rates XX,XXX XXXX worth the dividends new with and/or $X.X We basis XXXX representing across and inventory improved want reported XX to saw homes team construction and increased And move rates since during are our the ago, high we all our development the and a market, with caused also buyer through in of December billion XX support completed approximately only structures. spend A acquisition returns option, orders rolled through It land banking the continue financial into buying increased our early increase The financial for drive mortgage of than toward over, building as owners and be experiences structures. Since buyer remains returned the the through consistent for ago. priorities, land being housing to capital billion finally expand and investors. Consistent their over spend, our outstanding remains dropping by we outstanding invested of in our of exacerbated as pipeline billion quarter and mortgage demand either under control. by part peak XXXX an increase ultimately through $X.X impacted almost our the points to in month we mortgages. remaining pace homeownership helped financially share years we their year the making and providing Inclusive home the demonstrates November have the highest such business housing that structural results. with half while decision in decline of XX-year thank delivering broader have adjustments communities, in fourth stated making of then home to homebuyers of resale view we extremely program transactions I another our the to lots to demand of rates our our XX% were XXX as their efficiently PulteGroup land market more desire important new needed, tireless driver our December. or under negatively as put of our repurchases, pipeline these is responsive land

inventory we home and will many this itself it resolve labor land believe underbuilding existing of lack the challenges be years country. availability the mean for time, of over correct will that in entitlement to difficult While

outlook demand, views Given the investing we by on for in are X% with growing our volumes housing of annually. unit constructive our goal to operations XX% the

leading we closings away impact of year growth walk to will lots lower increased decision being our approximately in rates as this this XXXX. closer XX,XXX homes to in end and to Our expect from community as interest option our XXXX, range openings the XXXX of in

you for growth about few followed never years, have growth's been the past know story it's who you of those For for sake. PulteGroup's

volumes is while while always focus equity. business value high Our objective invest so to high-returning grow this, assets shareholder our high-quality our in to the on accomplish To and through investing ongoing we to on in continue projects returns our is maintaining own must to stock. continuing build invest in our of intelligently our repurchase

demonstrated to dividend have decade, excess much that continue to and the cash sheet and to all we flexibility. expect of pay strong business our flows to past capital balance return we while our maintaining will investment, shareholders, our generate As for us fund strength our allow

and fall, success approved relatively reasons favorable, job share $X.X that financial be optimistic many in continued conditions economy our reflected to years. healthy in our increase remain a market morning's billion the about rates is Board authorization. With to of to housing coming forecasting to expectation in are stay there repurchase the to Our this announcement interest demand certainly the

review Bob? our now for Bob fourth quarter turn over results. a me Let of the call to

morning. good and Ryan, Thanks,

begin in mentioned comments, Ryan mortgage rates changed as his progressed As quarter the meaningfully market fall. to fourth and as conditions

Our in were evolving any areas $X billion the so period fourth quarter prepared results the $X.X in prior market compared reported of were with revenues influenced by in important for impact my billion the remarks. Wholesale financial year. I'll these dynamics, note

to early in reflects impacted Our fourth lower for demand. overall our guide $XXX,XXX. X% period X,XXX in as our primarily rates the decrease were home X% the XX% homes, sales buyer with mortgage decrease and in that revenues average higher to a a quarter I would the closings below along previous sale highlight our price closings quarter in softening general came sales about by negatively in

accelerated finished and incentives we below particularly assumptions. close demand a captured sales, finished online our incremental in back that higher the but of of quarter quarter, noted, sales homes didn't the have in could would the as offering Ryan We that sales spec by As and see half trade-off. value closing worthwhile

stronger in as to Given right that positive trends inventory meet remained the available demand. made January, buyer I have the we think we have choices

XX% mix were the mix 'XX, in is which with and move-up the closings fourth quarter XX% first-time, our goal for closings business. active XX% and of [ active the for move-up were stated ]. XX% in XX% first-time, our comprised of Our adult of adult alignment In quarter buyer XX%

X% was in XXX, Our an the year's with and over increase fourth last average average quarter which quarter community fourth for communities count of guidance. was XXX represents prior our line

Looking at X,XXX environment orders demand of improved difficult activity XX% XXXX, year increase well net in The the order as fourth the our the to increased reflects in homes. both quarter, last last extremely over in over year XXXX. new large quarter as operating

improvement a December, prior of the year early as fourth over from much fell difficult most back in pace quarter in conditions, X%. stronger in of year-over-year a from of buying new notable in interest fourth quarter. as and would As with decreased In climbed a a November increase But grew XX% percentage cancellation this benefited the beginning decline basis, absorption On period. decrease we activity rate. quarter in the quarter, X%, period experienced conditions the we previously, demand mortgage insulation the net to the backlog to as this in improved rates half rates comparable year recent discussed the to increasingly improvement sequential from rates. Along our attribute down demand to orders

for activity adult orders buyer. buyers at XX% new Looking move-up XX% first-time increased for our quarter and order XX% buyers, Fourth active buyers. net for by

numbers groups, XXXX. order demand all across buyer which indicate in that demand dynamic housing a when Our positive is potential very assessing improved

homes XX% flat days into production a improvement strong the X backlog of By specs of Reflective season. finished from homes first-time to with weeks construction sales X,XXX increased of the including which ending of prices, started mix is about of our buyer time quarter demand in our a us fourth the as production. activity, a sequential value of of the we quarter, our XX,XXX the spring ended and last position our XX,XXX closings we As average is to and XXX is which meet was puts down the quarter. spec, the end quarter, X,XXX of end in in fourth selling $X.X cycle third year. billion. Inclusive our sales was which their buyers homes, year slightly end we result lower to effectively the declined the with backlog head

our XX,XXX X,XXX the below which Going first the getting We to closings we price to this pricing. to quarter the to by XXX the the end of currently under price for X% first pipeline, of production $XXX,XXX $XXX,XXX the homes. expect our At deliveries would the in continue quarter of full units of range XXXX to course and we with in imply production, of over the the forward, and midpoint, expect year. stability days grow the by XXXX to be sales our target between is remain or time cycle quarter consistent closings to fourth average given of year full expect we And our year on homes. X,XXX down year. Based

approximately was XX both likely builders. third margin last gross this points and but the among industry which year XX.X%, quarter remains leader quarter fourth down of the year is the fourth basis big quarter of Our from the

and to the input entire revenues, impact incentive primarily which basis year, quarter from margins X.X%. costs. fourth our points As third reflect quarter sequentially increased with XX the Incentives, higher

and side, impacted lumber costs material cost and in period. margins inflation land but land higher the and offset the prices On other labor development lower

or comments XXXX, million range quarter margins the my XX% XX.X% of the prior quarter be of to that during in and that cost gross in expect $XXX $XXX land to SG&A revenues Given expense expense fourth X.X%. for sale year. We reported we will on range to flat result full be anticipated or revenues. house in expect of year ] XXXX. Based the point SG&A anticipate we fourth compared pricing quarters home year of XXXX be [ XX X.X% both in basis quarter and home the that prior with The lower each the of reported in we million leverage realized inflation should versus XXXX volumes, SG&A overhead insurance we noted It the closing drop of of of pretax to be to year. benefits X.X% in billion can the $XX to revenues and be for closings in X.X% prior attributed of expense sale the

approximately we quarter of closings, the home of move to we seasonality expense with first sale remaining improving in overhead the through of year. typical be revenues, as expect SG&A leverage our Given quarters the XX%

For year. with to The reported pretax the fourth reflects financial higher services $XX improvement an last pretax increase in $XX our million, mortgage income market million year last services income XX% is capture more our favorable up conditions coupled quarter, across XX%, which operations including platform, operations. of up from from our rates, financial in

the reported year most Our Projecting pretax of tax In pretax XX.X%. [indiscernible] or expect million recent billion. for $X.X expense range to to tax the be with rate of of $XXX in full ahead year we $XXX rate period, million XXXX to our income XX.X%. tax recorded an the was quarter we of prior XX% compared a effective

at $XXX year or $X.XX or In the reported million showed share. line, our fourth bottom income income share. we of reported million per Looking $XXX prior comparable quarter results the per of $X.XX net net period,

For we year XXXX, of the operating of billion. XXXX, from flows our of in cash we earnings full generated share. billion and record reported a operations strong $X.X of net Reflective per $X.X $XX.XX of results, income

financial our billion. we approximately coming flows Given operating operations results, $X of with year, current expect be $X.X from cash land and to for investment XXXX plans in billion our to the increase expectations along

of fourth land Turning was and our activities. acquisition in $X.X We assets. development capital which and quarter, existing land development of XX% billion to our allocation for investment the invested in

For our which investment development. the XX% for $X.X year, totaled of billion, was land

year. Inclusive is views again land XXXX. increase anticipate constructive to and in ended would split and to plan spend near This lots by volumes I roughly highlight comments our business by our the fourth Given quarter housing as between noted, delivery We routinely an basis, XXX,XXX X% positioning earlier acquisition. on Ryan's our is increasing block which of X% the our we a over option lowered on to investment own with of our X,XXX investments, by increase $X year. lots lots. longer-term under per dynamics, to development land XX% control, XX-XX lots, with while that in future we XXXX roughly count is billion under grow increase would year-over-year a regarding our prior XX,XXX consistent approximately

year. per our priorities, the shareholders XX%, have by in our our the As share to lots, paid quarter of X% to community option our compared in a allocation million in we ahead first expect of X% end, from to lot period. There's XXXX of to of capital count and be in under XXXX. option up moving and capital we've anticipated starting stated the average dividend up a community prior percentage still the out comparable result, XXXX. To dividends achieve XXXX, us quarter that we direction. Based to closings runway lots goal and as increased Consistent with each we XX% made of and increased $XXX year on in our XX% to continue return in our XX% investments last openings of but we're right

quarter. We also price a repurchased per billion share XX.X of the common million billion average [ $XXX or which an cost average at shares in included share, price of of at of fourth ] repurchases $XX.XX an $XX.XX per $X

the in billion ] time have outstanding XX.X 'XX, half [ program the the in initiated With repurchased shares shares we approximately the XXXX. of acquired we at back

been for we shares believe a repurchased shareholders. an our great we average share, $XX.XX As at of per investment cost these it's

market pay advantage a cash down $XX on conditions in debt. the In our portion quarter, million using by to addition we stock to hand took of of of fourth buying our

of $XXX we of helping with to cash our to we lower and Adjusting XXXX last a year debt transactions, points of For our XXXX basis to notes the open on senior ] debt-to-capital all retired of net XXXX, ratio [ sheet, $X.X billion million through capital the our down year. XXX XX.X%, balance market end X.X%. from for ended ratio quarter

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

months the said as XX battle rising through XX XX past through navigating interest we and The entire could the the has of rates been and Successfully responded XX, supply COVID extremely past periods challenging. be operating Bob. about I our same collapse and Thanks, business financial proud how events to global the in exceptional delivered period. of am our chains. these PulteGroup has unprecedented and team an results month over

annual grew market billion conditions invested rate growth organizational over per capitalized on we of period of future completed over To prompted average acquisition support period this $XX this this X% recently just to back of almost and over of volumes XXXX, to XX%, are annually homebuilders land strong spend. Through during period increased our operational market a reconsider delivered we XXXX investment, XX%. It's and grow large compounded expertise, the in while just disciplined focus performance and volatility has discussion the development years, land need our return Looking an for we just an share period at earnings extended XXX,XXX X-year financial delivering during on growth under how the cumulative homes. type the that of valued. about annual equity to and

valued results investing in from demonstrate extended an billion operate generated or different into must of also that period a cash a sustained change years the X, you think just want the you operation, $X of for and you almost flow operations billion how to differently, during over fundamental about growth. we time. What's X $XX past that while period is our net in I the if deliver. the you but year be Not business

over a flow ratio $X shifting And line while for a repurchases recorded $X.X off the and focus we leverage we've billion our billion than returned net to with debt-to-capital X.X%. fact, to to stocks our just of really business been operating we growth returns paid by and way operations reflect dividends. XXXX of XX debt, ratio in housing XX.X% through from cycle. cutting reality our of I'd this add negative stock top since know performance. only the driving just end is debt-to-capital in shareholders of We high past In XXXX half years. I more the X that cash from year

the continue remains that believe rewarded. I shareholders industry positive generating can maintaining and deliver ROE a while profile we and that business if low-risk both our ultimately among leaders, our stock price So grow will and to cash flow that be

Let me now Zeumer. call Jim the turn to back

Ryan. We're for Thanks, Great. would you [indiscernible], explain we'll get now to questions. the call prepared open started. the if process,

is now open take your floor now Instructions]. our a We'll for compile questions. to roster. moment [Operator The

Our first Carl from comes Reichardt question of the BTIG. with line

sales ask to little about on and maybe January. traffic seen I you expand broadly or think a to business really how have been pulling down incentives what start even enough wanted to raise footprint? I'm the in you rates across bit Could base is, or more about to interested has more starting

so were in it and -- prepared quarter great of that driven terms was and We per the below the high really October, month remarks community. sales expectations, in rates. highest December, highlighted the by specifically absolute QX, Bob Carl, absorption November in had a

the for patterns. Carl. into strength typical So was December an really certainly And has continued January, that anomaly seasonal

we're how is pretty So year good feeling starting. the about

watch always It a looking closely. increased think sets the pace affordability Carl, come challenge. prices, we've And we're reduced as demonstrated sweet find that with to spot a terms to that up buyers at of the we're -- remains where for going I price. it behavior surprise through In discounts, you, of us won't and between past kind it

both good have But be front. we I started. what the think incentive price how so do we're And to on thoughtful and pretty the about year about feeling going the increase to we're

that that investments then And some business questions end some have you entry-level low -- talk me your quite in you shifted or and year? maybe if whether at segment. of business move-up. volumes. you is to your strong Is even on that businesses? the alteration in a trying has faster bit mix can We're how markets time. communities in business of Can other the let this right. about of that's that been enough just particular the unlocking of couple see a there than more kind how existing can for towards start a All of terms more see that on for number ask housing been going the look strength Obviously, rate their to little any not improving Move-up peers in

Carl, Yes. north basis, quarter. well incredibly on in XX%. had was We performed business of -- year-over-year the a our growth the move-up

So well gross as The performed out well. some continue of our be that Del margins segment of I best our think our move-up Webb very margins. business as to

And where our being So kind community in real overall mix of of there strength in are financial kind right Carl, strategic part terms we're also. seeing of business our then terms we're of line long-term about kind of our in that for of targets mix. of with XX%

So that pretty is business where good we positioned. feel about

Yes.

absorptions of It another maybe point our Just was basis. a on sales not that the strongest were clarification they only same-store strong.

So actually margins Ryan's absorption. to well and that has performed strong point, consumer

Our question the from line with Barclays. Matthew of Bouley next comes

Question on XX% to the high-level gave, growth growth kind the of you Ryan, X% that annually. around algorithm

some walked low in You're you year of XXXX. deals this talking to that the away end because from

this level of hole, the XXXX? of about to need getting how get is speak, so lands X-year kind Or So to to kind today is, growth have of that by that algorithm to we sort your of a do question think my going back you forward? you and should

that fact years. Matt, We've XX we've headway the less specific we way thanks land banking option number platform good of we've made position months, for helped and responsible that. been with about our trying to last it has significant in more The with having the We been feel very a pipeline. over to investing for owned the land. And growth question. for really how do land a

yes, plus the structure. for controlled it's really or think Specific or that at like target number to minus, capital-efficient those number, we really the lands. the ownership lots lower we've We structure control your and XXXX. a to like So that growth at XXX,XXX way under the be end we're of going we we have

we that, structure -- Beyond the got right periods. future for feel range got that kind in be of to we've that we've

Maybe contract in now. under Yes. land The that. development and I'd to is for right add probably 'XX

so of to have And we line sight 'XX, 'XX.

some we've we're or that. can to -- No see did get the most But You of we working lining from you recent still from approvals year, that through our issues 'XX, rate. in lots. for perspective up of the this that terms out quarter XX,XXX in type of growth

Got it.

That's Okay. helpful. super

the Second one, back to gross margin question.

play think got 'XX think down kind roughly pricing to I XX just be unpack I land exited a you side. in you And of the then into materials. labor 'XX? kind headwinds that the basis and specifically of little How bit thinking quarter? curious that of say, can where of on maybe margin? heard points and land, kind that the I'm and guiding margins you're you've that fourth in does guide kind those from are flat if you how headwinds you some Bob, focus about I it's to

Yes. give year. pricing Fair that during try more this it flat color. a and think laid to out answer And question. We way see we question, you little the I I'll

see might groups. different you consumer different Now at pricing

to what quarter, is single-digit which house X% kind The in we increases, 'XX. cost we've biggest through challenge. affordability experienced increases, the mid- construction the saw think That's current to pricing land the flat is first most time it, relatively we X% decline is year. this upper We of actually modest, see but call where

kind stay that X.X% that offer together, you And -- quarter. same so I to point saw one at assuming we the of about the this the all when we in we're I'd clarify guess incentive mix is, loads other

together, bit pretty of little you decline to up still year-over-year, a when XX.X%, So XX% but that marry margin. a all strong

of Our comes from UBS. next Lovallo question John the with line

first one, versus curious talking normal about you if will. January orders again, how seasonality, just maybe The looked

maybe the typically rise, happening anything call it, of quarter opinion, in year? I Is would XX% from outside think first your in preclude quarter to rates of that first that there sequentially. XX% absorptions this

with around January, of we'd we John, a in We to Yes, I'd continue. increase very our of performing and more give out the of side pleased strength didn't specific commentary which we're December. things are things, qualitative reiterate, that expect kept how

So gotten has situation be we supply, where better. a low in definitely there's continue to affordability

heard Bob's we've assumed our incentive with kind You comment about load. what of

So we're starting life thing offer that's strong we're yes, a one to QX. -- been The I'd I'd real that's note probably in expect see of been markets. have some is Western us thing our -- to starting a of signs have other Those was country that to part all of see and of which XX last majority the kind of the in XX a outcome. markets up, But welcomed of XXXX for the most XXXX. slow days, is really to those pick

to here. Makes on I share encouraging buyback, forward the we move sense. be was think, I And then driver see, could a good of returns as

$X year, north think buybacks XXXX about should billion expect relative are years, now past X.X%. thinking the is the I of you billion? the you guys about closer we Over mean, authorization done I few per have past years? How to $X to few

going to I'm -- Honestly, do on we news the report that. We defer. typically

$X a year billion last -- the about done of couple years. highlight you think we've in I

We in $X.X cash. have billion

that in offered the operations cash year. project $X.X current have about flow we of from We billion

So our capital allocation change. priorities don't

like we're said the And confidence to in but $X.X going element, XX%. We've we'll year-over-year. our said, report still, about of our the huge increase I our news. to investment We cash not a have dividend, $X do increased of think, That's I That's authorization. billion up We business. reflective land XX% billion.

equation. we $XXX attractive. look attractive, of part a year this but little always at bought million was back notes that saw liability the less made of we The because our You it management as has rate environment

priorities. really So our no change to allocation capital

Our Kim Evercore ISI. with comes next Stephen of from question the line

First to the your question on balance sheet. relates land

keep your flow to any reduce my in least supply desire land you while think lots was at suggest, lot owned further. modeling, of actually a guide that holdings rise that's year if opportunity seems I right stable. fairly cash in there's own a or your modest and to if years for I count wondering

Stephen. Yes,

there. things of couple a So

increasing land to spend our are $X XXXX $X.X billion. We billion from in

developed Our option. land have XX% land to option. continue then development, XX% controlled that controlled option highlighted spend moved will desire XX% via We in remarks our of mix about XX% our ac. be XX% via year, acquisition we land spend of is to to And probably versus the prepared this long-term

well think lower to a want past in lighter. we're toward right the going be goals. long-term number as -- that's we do as of to the I continue land very delivering an demonstrated both kind eye of We're capital it risk over We articulated to -- results through well. efficient with So years way model as all

of XX% option kind are that eventually? your get addition you actually option reduce mix with in Well, Or you guess, most of amount get But bit opening lot of trying guess of to to looking keeping more lot by try that question, to mean, are to exposure information to to owned of remarks, versus in owned I actual understand flat or you the kind increasing to I to your your that. are? the little gist appreciate understand plans lots. is so flat looking I what your your your count you incrementally to XX% owned supply Ryan, where gave a Are I my that

Yes, Stephen.

that In terms owned years that we'd the expect would keep to flip level owned, optioned. we to right And at, start maybe decrease. to a around ultimately, years probably years of from slight we're then

trade bit in a little that see You'll mix. of a

to -- then terms gross ] could your rules you're these to when for option? for land you of the you turns that the and us? cut in buying margin terms sort seeing negotiations think versus And land describe going bankers, us hair of kind your And typically your thumb inventory you generally with get go about? what you do of mind? in what helps. continuing trade-off about when a think of [ land from way about basically to market doing talk the in in the typically that, benefit when pricing, just anticipated are what's what's you Okay. you So of Some increase That the banking

of mix that, the I a there's Stephen. that business that Yes. kind answer on got. It depends we've know don't and the fast a to hard of

in on In basis than couple terms it depends more a of the margin, transaction, to of inventory on it's the certainly, but hundred turns, be relative bulk life going of a And asset. raw of points efficient be can terms it basis. a

than to Webb, in Centex Del for different the in very So us. it be going business is it's

with I brush. wouldn't want too that to So paint broad a

comes next question Our from Deutsche line of Ahlersmeyer Bank. with the Joe

assumption volume as rates a if on to allow Or to further. more and a what conservatism if rates letting a you state gross that philosophy just fall Just the the more with through to incentive waiting margin on guidance. of that that your right see big versus wondering load about might the I'm represents affordability flow now benefit. drive it's question it margin happens in be

If you trade-off? could just talk about that

stays assumed reason the is, be think -- Joe, challenged. that just it's continues I we've because Yes, about we've incentive the it load where to affordability

elevated being some low but pressure on relatively rates got because prices higher. think interest we've I are low there's supply, So supply, historically. And still of

toward to how So we've a helping put successful mortgage as some affordability XXXX. lot were dollars forward continue that in we we commitments, talked XXXX incentive in the with about challenges the we'll of a to the that use solve in tool

as help things challenge the get incentive solve commitments fall, and mortgage that think rate of reallocate an to We've buyer to Now a cost that affordability forward the made we assumption their some we of will those dollars into less. become home. rates those other

conservative? it will is So Time tell.

to always from And to think pace is us and afraid looking we're I optimize raise cut price. not not we're what seen you've afraid we're historically discounts. price, to

We're also You've last quarters. talk the heard proud. going margin several to be not me

to things incentives drive shareholders. see managing pace, responsive So yields all And doing us you'll actively what to to best things, the for we're our is, return that price forward market et an the commitments, outcome be mortgage cetera.

the And cash of I you lots land tend think that flow, your I to even about part than the of is just and about percentage Understood. that like agree. on the side. or appreciate valuation. cash flow metric potentially a It's It bigger comments sounds ops any

context And not so of just to your your in much are internally the you makes to profits leverage it and or up inventory starting cash flow think if so on wondering relative about what for now, of more at about not thinking debt potential using operating of manufacturer forward. right you're or the thinking XX more kind a distributor debt about just almost going because balances days profit, like

bit the at sure based look based how rating different. a share manufacturing do looked sheet. an think about on and I that, balance slow, we they've -- the to manage a said seeing this of, of completely. what that of value leverage not an do the has cash the our lot to we've the think It's agencies, opportunities The interesting little profiles in historically flow they've that model the been operation, at. in I to has strength question. industry to A company way opportunity like the we kind not you on debt and responsive are behaved, we the risk [indiscernible] also consistently repurchases. But is the But the invest can on equity is business there Yes. there despite on I'm in with shown differently terms way gets the having think of growth, been believe but the the business the even think, we which

So would it if for debt more were Without question, thing. the we right something? use for

JPMorgan. question the next Michael comes of Rehaut line Our with from

just to circle for wanted extent how where are 'XX. there's on and to we those we the the I that about and potential today impact incentives back decline, to think the on should

a similar for low was think, believe So rate the said when you in that quarter. assuming I you X.X%, of to I talked And XXXX incentives. about, fourth

the Just incentives just a lag? the would perhaps we that little could be trying where or quarter Should there were extent XQ us you of ticked remind that there the first down fourth third versus impact? to sense in 'XX. year, get the and earlier bit be and the a a If you the thinking in of XQ in quarter the to

take piece. of I'll then Bob and do part have that, Mike, last the the Yes, I'll first

points we're QX. So QX. QX, from were in basis in We X.X% X% XX up

what XXXX, those we've peel share think I but certainly back, to an assumption that means you. you load, what in I and to actively current on addressed it shared with of it, we'll that terms for managing In with a is going form. If do our prior our we'll opportunity incentive there's be we're call,

around terms now, of right kind are would In XX% the it of XX% of that impact somewhere spec. -- our quarter sales about

sales QX If are QX QX in closing sale, early following those either Spec kind typically QX the would now So up closings. closing. closings closings a or or end being it's of quarter. be early late QX dirt

year XX% all we that for factored guide is have know to margin those assumptions XX.X% incentive don't for repeat into that. if the gave the we've the Bob, to So load QX. which then, of And I QX, you

that the I think only thing that haven't answered. I was

year. each quarter in X% X.X% last of was and third about was first, And quarters. fourth in second the of it the It

Great. No, shift that's to helpful. love bit secondly, a SG&A of I'd I side. little to kind guess, the

the market, first the at How to stable bit you or the minus the potential the SG&A commission some commissions, leverage a your bit. thoughts think in of a think are we've love a maybe or year And but bit here, for couple getting about next further up heard from of Just coming heard X% growth the gave that last maybe let's guidance past little at choppy talked so. an solid years, point little we if a you've of for plus about points algorithm about? market against but and running Overall number? X%. an we could I closer in on back should we've couple X% low or around X%, say, quarter, Obviously, been over that. acquisitions years coming rates you still, higher little more see

been I how we've -- spend think SG&A we Mike, thoughtful always in Yes, dollars. we've

and experience invest the provide the deliver our investments our made we of homeowners customer homes the of the quality for we historically in have that incremental We some dollars and and in culture extra that we workforce. build

tried kind So structure and to the not to run within we're also balance well. not We're SG&A to on maintain leanest lean the the as overspend. trying trying we've of end,

be very we're think trying I to balanced.

XXXX In given And that's reflective for And flat. leverage kind of we're still put kind guided us X%. of which really low employees terms guide, you've the close specifically, the wage kind of to Bob be which on our will Xs. internal in expecting of of to the what the we've X.X%, that, sales running for average against inflation price, got to of kind

there's the increase not on necessarily some pressure front pressure the that So ASP SG&A on -- side. -- we're getting the there's benefit of

still but best us know don't at SG&A. add you that given it Bob, the anywhere, the I watch. we're I in we've keeps XXXX. the for of on not kind you'd that least So tell will we terms tell, where of under visibility into goes Bob future, boss' anything you overspending -- time on. can if not

Wells question next comes line Sam of the Our Reid Fargo. from with

buyer. I wanted a on the to drill down little first-time bit

like the for would color for cetera. guys you other of split some might perhaps smaller us buyer floor incentives of a as between here et versus plans, did affordable again appreciated. unpack color sound bit the on this affordability Kind lot this try make any lower You group be good calling these have levers more perhaps pricing. of move help during Maybe buyer like homes be given the to It that higher quarter. does relative price group a you

that look was if to tell year. trailing tell of at quarter would is year-over-year, this I the X% so down buyer I you largely related. versus year-over-year you, And it you, is the X.XX% X% about quarter, would down it incentive Yes. pricing third

last haven't we're you when offering months, so in And product radical last -- redesign a the we that people. Communities of entitled, to approvals. months had or we're get not have the the X XX they product

driver tell "I see load people of It degree, we've that's can saying, is not want incentive the you I change. that a the the the smaller would to you price plan." floor introduced. So

price that So points for that That's $X,XXX. the about, which basis XXX is it's decline. it, call buyer

slightly more vantage maybe one helpful. from And No, different a that's pricing here point. on just

piece outlook XXXX? into your entire mix Curious component XXXX. a give throughout to the given as in that And say across sense that north QX? have as ASP. for trended us on the around past the and $XXX,XXX color lot good guys $XXX,XXX to premiums impact want You or it's of and where I of to been price maybe in on option your

it $XXX,XXX it's the so unit, fourth $X,XXX about the per was year. In prior Yes. quarter, down versus

and the team, been lot premiums has incentive credit. we've to towards I them so and sales financing. and options lot a And think more of I speaks around give that oriented Where less needed

strength interestingly, also So real a and [indiscernible], we've highlighted positive. It there. we and think which this adult them big change didn't a is that quarter is from strength active relative I in and move-up for pricing relative see the there, the

So first down was like just our time X%. about

lots options was we tough adult got, way the go was reflective move-up we've in houses. flat pricing sell I of active and X%. And that market, to way the Our our the it's actually quarter-over-quarter, put people that the actually think we

that, a really our people are which doing desire. providing for value good still teams of job So

of Our next question comes Zener from the Ken Research line Seaport with Partners.

I've got questions. X very simple

of is banking. do option-owned once XX% What land finished you percent First scenario? you your closings expect from reach on lots

those were Ken, it's self-developing. that have we finished be the sellers, an would banking optionality question. with land interesting many of lots, Certainly, for but the individual

And don't I so [indiscernible].

our But of Bob's self-develop point, we raw there. They're take then of highly efficient. roughly there'll -- an XX-XX just bit to lots. our we of a a as rest options, of [indiscernible] land total chunks of closings. those. will It's is still and lot different XX% down The be structure. a XX% in a little and to optionality option form we this will finished Ken, a get be to Once guess, lot

assume auctions? options, us you well? get coming from you is Second the benefit Right. update again, could then from entry-level question exposure that's kind your your on ASP [indiscernible] I of what And you if could. comment of that, margin reflecting as percent is

costs construction forging in options? operating these your your discern could strategy we So versus of

scale. make much I options? [ it want the Sorry, sure to XXX How is I ] XX, of to X,XXX understand

think I -- No, right.

could adult. a have you But to of ASP, and option that margin total impact certain more talk move-up you well? as the Your exposure

Yes.

XXX, call sure option the options. for say, terms could I way. spend, have Pricing premium. $XX, going margin of of doesn't But that it's to of XX%. lots are a option that's $XX,XXX So in lot margin. that's it, mix, lot typically, work the pure of premiums $XXX,XXX not that, and instance, relatively right? rich I'm really premium fair, is

we it I know And overall this margin. And house try standard so we market, it go way for What and talking will the then we lot what -- it don't, Ken, curated start is pay of what and can are we're house in we kind that offering and you think that's willing the Centex about, now if that house, for better, And what's the for expect and people or don't that folks at fit that is may base want? lot, if to to that that's okay, finish, have a all. of driving can for pay should do put choices no the generates we $XX,XXX. market we to accretive optionality. And answers the right? to for you price then, But do for packages okay, [indiscernible] $XX,XXX and revenue. everyone, structural So buyer, options which

Alan line Ratner Zelman question of the from next comes with & Our Associates.

times. all for on far. Thanks cycle details the A so question

kind the is the just stall labor that might of the time whatever unleashing be sounds there you see push may to a higher the congrats 'XX. It than expect cycle chain perspective there little further level now, significantly might targeting where builders like target could to right you some in in the heard on bit? starts X% improvement you're other pace XXX a are try improvement independent at a to start that. We've Or 'XX. you growth. of the to look of you Curious of that So bit more from Is guys like get from XXX-day constraints supply improvement builders there. where kind a Are think any normalization of foresee?

it on that's job And I see labor performance, out there. builders, our I to of Yes. get think for Based don't think only excess around sites. bunch fair suggesting a great the but But availability. total relationships. labor labor we've whole the got continue not of there's schedule question. on industry happening, trade big we'll It's the at I stressing a the I'm production on not amount the least

increase. on dollars likely labor I volume we're If comes think into running pitches time. because than pressure a the or more of so

we'll dollars will things it pre-COVID. of the because probably it's we think we're take, a I like predictable A that to decrease time. schedule, be more getting used on lot than

built So material better, things dead to that we -- time out of which that's our were for wrong just for up. we some in working allows to schedule for to we take kind us waiting show go had and of or literally days

times the that, getting little back we're of that just So it's had a cycle little we a pre-COVID. bit of to bit

We'll times. XX rather. back days pre-COVID think So end out XXXX we in XXXX, of so so another get the we'll or get XXXX. about days We in largely in by can trimmed we XX line cycle over be and with or

just guess give what Great. I far And on as those I an then of kind trending and the how similar thoughts, as there in is curious market plans and update was your the I added appreciate expansion, if growth any? that's current thinking Ryan. you there been could vein, additional is if

Yes, Alan, it continues to go well.

Both today. in are the Southeast focused of plants X U.S. part have We the

on X plans approximately growth still Our factories. are largely to have target

news haven't to we the forward-looking -- new. similar announced forecasts. opposed report anything We'll on to our probably give we'll So that share as buybacks,

business demonstrate right has cetera, sneak that's that impact on your metrics that. if a I But mean cycle guess, et can obviously, of I you that in costs, margin, contributing in a now. to with could of on it's hard are or of on case basis to that it's right I you can for what share whether kind markets certain it's conceptualize there now? us, one kind times study your And how concentrated handful us business. And

Alan. Yes,

-- guidance extrapolate concentrated because the is it entire and it's that haven't feel that's to we we on given of couple just markets, of So appropriate a don't a yet. bunch enterprise into

we improvements. Conceptually, that better believe savings material We're exactly getting as time well. get We're As raw down getting we'll and there share we're it's you what further cost highlighted. more. some quality, getting path, we the cycle are

Maklari Our next Sachs. question comes from Goldman the line with of Susan

just around is specs. question first My the

You XX%, your in I of mentioned that you spec. had that's think, about production

how together, about year it may you're or longer that that on where you thoughts thinking way come and term? any move the As think demand about the the may

some of anticipate percentage. We're higher Yes. the from on want massive the in Susan, quarter, have. the inventory probably selling spec going end Specific what that I additional have more intentional. a season, the put and to into We than change fourth we now. the have was in we'll spec the to sold, spring that range we right which we to wanted ground starts

line throughout move probably we're a we right tad or as the with where So in lower. at year,

for what about Okay. That's think that home the on helpful. parts the to especially when of some we the generally you on of then have on side implications relative rates to active the down that? potential this the could thoughts the of businesses? adult the possibly and any And market. come move-up And year? perhaps And Any existing driving that increase initiatives be,

resale tidal that -- see I are I with going cuts forecasted, Susan, level Yes. rate the a unleash don't that's at being it to a wave inventory.

so. inventory? resale up think we're that's backdrop it is where think country. at to continue be today? start of better in I undersupplied some than the that Will against we So I probably free the to And Certainly. helpful

balance, much what has on think So business I XXXX. our for we're it in projecting don't all at on impact

call. reached Bank line where the of from allotment Jadrosich comes the question this America final Our ahead. with of go we've Rafe time morning's for Please

about Can what And level? XXX-day today? you you're of that improvement homes flow additional embedded bill cycles Like the guidance? in build already is XX you're cycle your for that that of you the -- are days are XXXX. in expecting Can talk you improvement at terms starting in cash

in Yes, will deliver -- were today of Homes deliver question. homes you QX, basically. starting Rafe. a will fair late today It's that in we're starting know, kind

at not no, So yet. days we're XXX the

XXX there all in -- And we some at we you we've markets days. goal. last said, at it were blend Now fact, will days that be think the being XXX communities that are we're highlighted together, XXX are as the where at QX we our before some we're When days and it year.

the cash Then, does see times cycle the what year, question. in factor your of flow to guidance Ray, terms during we guide in our

color land you And XXXX. inflation through your Got margin And helpful have terms the of then you're land expecting you it. That's gross helpful. in need the that for XXXX. really in

you're land On relative us you of of contracting kind that level? Is similar the Or between today, seeing that are what And in difference land? come can the then terms it you're seeing inflation to seeing development help you a for cost down? at understand raw actually are what inflation? you

Yes.

the So first the -- part sorry, I of forgot question.

land spoke about in inflation You [indiscernible]. the the

They're sort would We sorry. of come seen we're we've there. landscape I'm We return. prices down that land increases with interesting tell lot is robust, to today a and I And often. it's seeing it's land sequential sticky. are the pretty underwrite highlighted pretty and very consistent you don't listen, competitive we've costs. in out that. -- Prices

so And we it's we get -- can return to of out see look that.

no the in think land honestly, I market. change, So

that inflationary In And influences the we aspect, houses. terms land, like are does development with building of what of constraint general communities was we development of the that that, in everything the is too. just cost particular, it seeing [ do to it inflation running that hot was influencing we do of seeing last year the pipe], were stance of the pretty labor

that this that increase bit a for a going been terms news So and year, on 'XX. vertical, going we in was in again, again, And we're the running feeding expensive lots obviously. think that inflation be little last to of cost hot reflects we our more saw 'XX. I Good market into lot 'XX pretty activity benign seeing that pretty just we've has year it's in of is where the some our the all highlighted think this year [indiscernible]

feel a land. It slowdown hopefully, we'll the later sure. the house, feel inflation, for in be opportunity So for would in that we little an us bit it in now

remarks. I turn to would closing over to Zeumer now call Jim like the for

time morning. day. We'll of be everybody's available appreciate this the over rest I certainly the

If you look next speaking Otherwise, earnings on our you questions. to forward have we with call. any additional

call. concludes This today's

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