The paragraph describes the opening of PulteGroup Inc.'s Q1 2025 Earnings Conference Call. Kelvin, the conference operator, introduces the call and handles housekeeping items, such as muting lines to minimize noise. Jim Zeumer, who takes over the call, explains that the session will cover the company's first-quarter operational and financial results. He also notes the availability of the earnings release and a presentation on their website. The presentation features forward-looking statements, with actual results potentially differing due to risk factors detailed in SEC filings. Ryan Marshall, the President and CEO, is handed the call and praises the team's performance, stating he will discuss the Q1 results, macro environment views, and strategic initiatives.

In 2025, PulteGroup successfully navigated a challenging housing market by leveraging its balanced and diversified operating model, delivering over 6,500 homes, achieving strong financial results, and maintaining flexibility in its national operations. Despite economic cycles affecting the housing industry, the company met or exceeded its guidance by focusing on high returns across the housing cycle. The spring selling season of 2025 has so far shown typical seasonal trends with increased interest in homeownership, as people remain eager to buy new homes if the right value is provided.

In the quarter, home buying activity increased as the 30-year mortgage rate fell below 7%, allowing some divisions to raise prices. The average spending on options and lot premiums rose to $110,000, driven by move-up and active adult buyers, which make up 60% of the portfolio. However, buyers still face affordability challenges due to high home prices and mortgage payments, worsened by economic slowdown concerns. To address this, the homebuilder offers new designs, efficient floor plans, and incentives like below-market mortgage rates. They also used incentives to reduce excess inventory by actively selling existing and finished stock while adjusting production to align with demand.

In the fourth quarter, PulteGroup increased its incentive rate by 8% while reducing specs to 47% of production, achieving strong gross margins of 27.5%. Buyer interest aligned with expectations, but as April approached, consumer confidence was affected by macroeconomic uncertainties like stock market volatility, tariffs, interest rates, and recession concerns, leading to unpredictable demand. PulteGroup, a seasoned builder, is adapting to tariff challenges with procurement strategies. The paragraph concludes with the introduction of Jim Ossowski as the new CFO, who will discuss the company's quarterly results.

In the first quarter of 2024, the company's net new orders totaled 7,765 homes, a 7% decrease from the previous year, driven by a 10% drop in orders per store but partially offset by a 3% increase in average community count. The cancellation rate slightly rose to 11%. Demand followed a typical seasonal pattern with a 26% increase from the previous quarter, though below historical averages due to consumer caution over high homeownership costs and economic concerns. Year-over-year, net new orders by first-time buyers declined 11%, while move-up and active adult buyers saw smaller decreases. Home sale revenues for the quarter fell 2% to $3.7 billion, with a 7% decrease in closings to 6,583 homes, offset by a 6% rise in average sales prices to $570,000. The mix of buyer closings shifted, with first-time buyers making up 39%, move-up buyers 40%, and active adults 21%, compared to last year's 42%, 35%, and 23%, respectively.

The company has seen a slight decrease in closings from active adult buyers due to the closure of several Del Webb communities over the past year, but it is pleased with the response to recent openings in Cleveland, Indianapolis, and Southern California. More Del Webb communities are set to open later this year, with closings mainly expected in 2026 and beyond. At the end of the quarter, the company’s backlog was 11,335 homes, valued at $7.2 billion, both down from the previous year. They've adjusted their production strategy to lower speculative inventory, starting about 6,700 homes in the first quarter—fewer than previously—with 16,548 homes in production and a reduction in speculative units from 53% to 47%. Their aim is to reach a target of 40-45% and manage their production to balance immediate buyer demand with strategic pricing and margins.

The company anticipates delivering between 7,400 and 7,800 homes in the second quarter and between 29,000 and 30,000 homes for the full year, slightly below its previous guidance of 31,000 homes. The forecast is influenced by buyer demand and cycle times of around 110 days. They predict a 3 to 5% increase in community count in 2025 compared to the previous year. The average sales price for upcoming closings is expected to be between $560,000 and $570,000. The gross margin for the first quarter was 27.5%, flat from the previous quarter but lower than Q1 of 2024, affected by increased sales incentives of 8% but offset by a favorable mix of home closures. Future gross margins are projected to be 26.5-27% in Q2 and 26-26.5% in Q3 and Q4, slightly lower than earlier predictions. This assumes elevated incentives and considers a 1% increase in house costs due to new tariffs.

In the first quarter, the company reported SG&A expenses of $393 million, or 10.5% of home sale revenues, up from the previous year's $358 million, or 9.4%, which included a $27 million insurance benefit. For 2025, SG&A expenses are expected to range between 9.5% and 9.7% of home sale revenues. Due to the uncertain operating environment, the company is cautiously managing expenditures. The financial services operations reported a lower pre-tax income of $36 million compared to $41 million the previous year, mainly due to reduced closing volumes. The capture rate increased to 86% from 84%. The company's pre-tax income for the quarter was $681 million, with a tax expense of $158 million at an effective tax rate of 23.2%, aided by renewable energy tax credits and stock compensation deductions. The expected annual tax rate is approximately 24.5%, excluding specific tax events. Net income for the first quarter was $523 million, or $2.57 per share, down from the prior year's $663 million, or $3.10 per share, which included one-time benefits from a joint venture sale and an insurance benefit. Earnings per share were based on 204 million diluted shares, a reduction of 5% from the prior year, as the company continues to repurchase shares.

In the first quarter of 2025, the company repurchased 2.8 million shares for $300 million and has $1.9 billion remaining for future repurchases. They allocated $1.2 billion to land acquisition and development, with 52% spent on developing existing assets. Due to macroeconomic uncertainties, they are reviewing project returns. They anticipate $5 billion in land investment for 2025 but are prepared to adjust spending based on demand. The company expects $1.4 billion in operating cash flow for the year, supported by a strong land pipeline. They control 244,000 lots, with 59% through options, significantly increasing their option lots while reducing owned lots in the past year.

The paragraph discusses PulteGroup's strategic approach to managing land transactions and market risks, emphasizing the importance of balancing profitability and risk management. The company maintains a strong financial position, evidenced by a debt to capital ratio of 11.7% and $1.3 billion in cash, with a recent Moody's upgrade on their senior unsecured notes. PulteGroup plans to deliver 29,000 to 30,000 homes in 2025, focusing on prioritizing price over pace. They reduced the starts pace by 10% in Q1 to drive higher returns rather than pursuing volume. The company aims to manage its spec inventory and adjust its pace based on demand, with gross margin as a key factor in returns, shown by a 27.5% Q1 gross margin.

In 2024, the company invested $5.3 billion in land acquisition and development and initially planned to increase this to $5.5 billion in 2025. However, due to macroeconomic uncertainties, they are adjusting this target closer to $5 billion. The company believes their existing land pipeline can sustain growth, and they are focused on maintaining high returns despite challenges. They remain disciplined yet adaptable to market changes, believing in the long-term demand for housing driven by population growth and a housing shortage. They see potential opportunities in market disruptions and are financially prepared to capitalize on them. The company prides itself on having built a robust platform over the past decade, offering a competitive edge that supports high returns even amidst market fluctuations.

The paragraph highlights PulteGroup's commitment to allocating capital for growth while returning funds to shareholders through dividends and share buybacks. It appreciates the company's team for delivering excellent home-buying experiences, achieving record build quality, and high Net Promoter Scores, as well as fostering a culture that has put the company on Fortune's Top 100 Best Companies to Work For list for the fifth consecutive year. The call is then turned over to Jim Zeumer who opens the Q&A session. John Lovallo from UBS poses a question about second-half margin expectations, particularly concerning incentives and tariffs. Ryan Marshall responds, indicating that the 8% incentive from Q1 is consistent throughout the year and that tariffs account for 1% of the average sales price.

The paragraph discusses a company's financial performance and strategy. They mention maintaining an average price increase of $5,000 across all consumer groups, highlighting the efficiency of their procurement teams in keeping build costs flat year-over-year. They emphasize strong supplier relationships and aim to minimize additional costs, keeping increases to about 1% of average selling price, which they consider better than industry norms. The conversation shifts to share repurchases, noting $300 million in repurchases during the quarter, consistent with previous quarters. The company has a remaining authorization of $1.9 billion for repurchases and believes the stock is currently undervalued. They plan to update on Q2 repurchases in the future.

The paragraph features a Q&A session during a financial results call, where Stephen Kim from Evercore ISI asks about the company's cash flow guidance and the impact of tariff increases. Jim Ossowski explains that the $1.4 billion cash flow guidance includes necessary production to meet their annual home construction targets and adjustments in land spending and development opportunities. Ryan Marshall addresses the tariff question, stating that the anticipated 1% higher cost due to tariffs has not yet significantly impacted current negotiations or production, as most current projects are unaffected.

The paragraph discusses supply chain considerations and anticipates potential impacts towards the end of the fourth quarter. Stephen Kim questions the market environment, noting persistent and robust demand but challenges in increasing volume without sacrificing price and margins. Ryan Marshall agrees, emphasizing that their business model is well-suited for current conditions with a focus on maintaining strong gross margins. He acknowledges the continued desire for homeownership and explains that they are achieving good profitability by offering homes with financing-related incentives to attract buyers across various price points.

In the paragraph, a discussion takes place about the company's confidence in its long-term prospects, despite challenges in affordability for first-time homebuyers. There is an emphasis on the strong positioning of the company's operating platform, with over 60% of consumers being active adults and move-up buyers. Stephen Kim and Sam Reid engage in a dialogue, where Sam Reid asks for clarification on margin impacts, particularly concerning tariffs. Jim Ossowski responds, explaining that incentives are expected to remain high throughout the year and that the impact of tariffs will be more pronounced in the fourth quarter. Overall, they express satisfaction with their operations and financial guidance for the second half of the year.

The paragraph discusses how traffic trended in Del Webb communities in early April, with a focus on buyer behavior amid market volatility. Ryan Marshall acknowledges that Del Webb buyers, who are generally conservative and reliant on investment savings, are sensitive to macroeconomic changes. Despite seasonal declines in April sign-ups, the Del Webb buyer group continues to perform well. Marshall notes unusual day-to-day volatility during April due to various economic concerns like recession fears, stock market fluctuations, and inflation worries. Overall, he expresses confidence in the long-term potential of selling homes despite these short-term challenges, emphasizing the strong demand and the company's ability to balance pricing and sales pace.

The paragraph features a conversation during an earnings call where Michael Rehaut from JPMorgan questions Ryan Marshall about changes in guidance and closing rates amidst market volatility. Michael commends the company's performance in a challenging environment and queries whether the adjustment in closing guidance for the year reflects recent volatility and order expectations, particularly from April. Ryan Marshall responds, acknowledging the volatility in April but notes that the Q1 results aligned with expectations, describing the spring selling season as neither the best nor the worst. He implies that their guidance takes the April fluctuations into account, but emphasizes that they are still early in the month with only 22 days passed.

The paragraph discusses the company's confident stance despite recent market volatility. They have adjusted their guidance for the year based on 22 days of data, emphasizing their strong financial position with low debt and a strong balance sheet. They express optimism about their capability to build 31,000 homes and adapt to changes in consumer confidence. Their strategy involves balancing price and pace, maintaining high returns without excessive discounts. While they acknowledge uncertainty, they are not panicked and remain poised to capitalize on potential improvements in consumer confidence.

In the paragraph, Ryan Marshall discusses the impact of tariffs in the latter half of the fourth quarter, estimating a 1% effect from categories like plumbing, HVAC parts from China, tile flooring, and electrical components. The change in the back half gross margin guidance is mainly driven by incentive load and higher land costs, with a 50 basis point decrease compared to the prior guidance. Michael Rehaut thanks for the information, and the operator then introduces a question from Matthew Bouley of Barclays.

In the discussion, Ryan Marshall addresses a question about the reduction in land spending from $5.5 billion to $5 billion and its impact on growth plans. He emphasizes the importance of capital allocation, particularly in land spending, and reassures that their long-term growth guidance of 5% to 10% remains unchanged due to their strong land pipeline of 244,000 lots. The current adjustment in land spending is seen as a delay rather than a cancellation, aiming to cautiously navigate the current environment without affecting future growth in 2026 and 2027. Additionally, Marshall expresses hope that the reduced budget will still purchase a similar amount of land due to potential market changes. Matthew Bouley acknowledges this explanation.

In the paragraph, there's a discussion about gross margins and the assumption of maintaining current incentives at 8% in the housing market. The conversation points out that incentives usually rise during stronger seasons like the March quarter but questions if these will hold into the summer months. Jim Ossowski responds, indicating that as their speculative inventory decreases and reaches their target range, they might be able to reduce incentives. Following this, Michael Dahl of RBC Capital Markets asks about the order trends, noting a 10% decline in sales per community for the quarter and seeks clarification on year-on-year sales performance and seasonal trends. Ryan Marshall is mentioned as the next speaker to potentially address this inquiry.

The paragraph is a discussion between Mike, Ryan Marshall, and Michael Dahl regarding the spring selling season and its performance relative to expectations. Mike acknowledges that while spring sales began positively and showed improvement from January to March, the overall seasonal increase from Q4 to Q1 was below average. As they entered April, consumer behavior became more volatile, attributed to well-understood reasons. Ryan Marshall explains that the company has adjusted its full-year volume guidance based on April sales and past performance in Q1. Additionally, Michael Dahl inquires about potential opportunities in the land market, which Ryan suggests could be more favorable now than anticipated several months ago.

In the paragraph, Ryan Marshall discusses the outlook for the land market, indicating that there is no expectation for a major reset or distress equivalent to the Great Financial Crisis due to the scarcity of land. He notes that land values are likely to remain stable because of their limited availability, which contributes to the housing shortage. Marshall also mentions potential opportunities for his company if less capitalized builders decide to walk away from projects, allowing his company to acquire land or projects at favorable prices. He emphasizes that while they have not seen many such opportunities yet, they are financially well-positioned to take advantage if these situations arise. Additionally, Michael Dahl and Carl Reichardt from BTIG inquire about the volatility Ryan refers to, clarifying that it pertains to the rate of daily sales.

In the paragraph, the discussion centers around the stability of certain business metrics, such as the "can rate." Despite a slight increase to 1% in the first quarter, consumer behavior remains unchanged. The dialogue shifts to larger business goals, with Carl Reichardt inquiring about the impacts on cycle times and the shift to 70% option lots. Ryan Marshall confirms that single-family cycle times have reached the target of 100 days, with overall cycle times at 110 days due to multifamily projects. Marshall also highlights progress towards 70% land optionality but emphasizes a cautious, risk-mitigating approach to achieving this goal without compromising capital efficiency or other priorities.

In the paragraph, Alan Ratner from Zelman & Associates asks Ryan Marshall for an update on Pulte's business in Florida, particularly given the negative headlines concerning the state's market conditions. Ryan highlights that Florida is a significant market for Pulte, primarily in the move-up and active adult segments, which are strong areas for the company. While acknowledging that resale inventory in Florida is slightly higher than desired, with around seven months of total inventory, he notes that the situation isn't alarming. He mentions that Pulte's business in Florida has only decreased by 5% year-over-year, indicating a relatively stable performance despite some challenges.

In the paragraph, Ryan Marshall discusses potential disruptions to the supply chain due to tariffs, acknowledging that while it's difficult to predict exact impacts, some disturbances are likely. He compares these potential issues to the disruptions experienced during the COVID-19 pandemic but expresses confidence that they will be less severe. Marshall emphasizes the capability and agility of their procurement team in handling such challenges and stresses the importance of preparedness across the industry and globally. Alan Ratner appreciates Marshall's insights before the conversation shifts to Kenneth Zener.

In the article paragraph, Ryan Marshall discusses inventory targets, stating that the company aims for a range of 40% to 45% and is adjusting inventory levels in response to market conditions, likely ending lower year-over-year compared to Q4 of the previous year. Jim Ossowski explains that incentives differ across segments but are not categorized in detail; they vary based on customer needs and can include discounts or financing help, especially for first-time buyers. Kenneth Zener acknowledges the response, and Jim Zeumer concludes the call due to time constraints, noting that there were more questions but time ran out.

The paragraph indicates that the participants are available for questions for the rest of the day and look forward to the next meeting in the second quarter. The operator then concludes the conference call and asks everyone to disconnect their lines.

This summary was generated with AI and may contain some inaccuracies.