PulteGroup, Inc.

Operator : Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the PulteGroup Inc. Q2 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Jim Zumer. Please go ahead. Jim Zeumer : Thank you, Jordan. Good morning. I want to welcome everyone to today's call to review PulteGroup's operating and financial results for our second quarter ended June 30, 2026. Joining me on today's call are Ryan Marshall, President and CEO, James Ossowski, Executive Vice President and CFO, and David Carrier, Senior VP, Finance. In advance of this call, a copy of our Q2 earnings release and this morning's webcast presentation have been posted to our corporate website at pultegroup.com. We will also post an audio replay of this call later today. I would highlight that today's presentation includes forward-looking statements about the company's expected future performance. Actual results could differ materially from those suggested by our comments made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation. These risk factors and other key information are detailed on our SEC filings, including our annual and quarterly reports. Let me turn the call over to Ryan. Ryan? Ryan Marshall : Thanks, Jim. Good morning. Let me start by saying that I'm extremely pleased with the operating and financial results PulteGroup delivered both for our second quarter and for the first six months of 2026. Specific to our second quarter performance, I want to highlight a few key metrics that I think demonstrate the ongoing success of the company. Net new orders in the quarter increased by 6% over the same period last year, as we realized higher orders across all buyer groups. Active adult orders were up 12%, while orders among first-time buyers increased 5%. On a sequential basis, incentives on closings in Q2 dropped 50 basis points from the first quarter. We continued to execute a successful transition back to build-to-order, as build-to-order sales increased to 45% of new orders in the quarter. We further reduced our finished spec inventory, which dropped to 1.3 homes per community at quarter end. Before turning the call to Jim for a thorough review of the quarter, let me offer a few additional comments about our results and general market conditions. Expanding on my earlier comment, on a year-over-year basis, net new orders were higher by 6% in the second quarter and up 5% year to date. Through the first six months of 2026, we sold 720 more homes than this same period last year. I'd also highlight that as a percentage of total orders, year to date sign-ups for build-to-order homes were up 500 basis points from 39% for the same six-month period last year. The ongoing increase in build-to-order homes is consistent with the plan we articulated coming into this year, namely, to increase the percentage of build-to-order homes sold among our move-up and active adult home buyers. These are individuals who expect choice, and our operating model allows them to choose their preferred lot and select the options and upgrades they desire. I know our field teams are excited to execute the strategy, as it affirms our build cycles have fully recovered from the global supply chain disruptions that hit the industry after COVID. Our decision to build more spec homes once supply chains collapsed and build cycles effectively doubled was the right one at the time, but we much prefer having a growing backlog of sold homes. Consistent with our operating strategies, we are achieving greater sales while still maintaining strong gross margin. More specifically, we delivered home building gross margins of 25% for the quarter and 24.7% for the first half of the year. In some instances, our home building gross margins are several hundred basis points higher than those of our peers. For PulteGroup, our performance is reflective of a disciplined land underwriting process, an operating model that is well diversified across markets and buyer groups, and a balanced price pace approach to driving high returns on invested capital. Part of this balanced approach has been to continue to thoughtfully manage our starts pace as we reduce spec inventory and implement the transition back to build-to-order. Reflective of this approach, through the first six months of 2026, our net new orders totaled 15,570 homes, we intentionally started only 14,378 homes. With build cycles down to 100 days or fewer in some cases, we can effectively manage our starts cadence while still meeting our overall production goals. To put this into a slightly broader context, at the end of 2024, we had approximately 8,800 spec homes in production. By the end of 2025, we had lowered this number to 7,200 specs, and now we are down to approximately 6,600 specs in production. I would note that we've achieved this dramatic reduction in spec inventory while growing overall community count. I want to recognize and applaud the discipline of our teams as they are maintaining as we continue to work down specs and increasingly sell from a position of strength. At 44% of total production, I think we've gotten to the right spec level of inventory. We still have some work to do in select communities, but as we've demonstrated over the past 18 months, we are committed to this strategy. As a backdrop to our successful efforts to sell homes, manage inventories, and generate strong financial results, the second quarter demonstrated a typical seasonal demand pattern. Namely, sales and absorption paces eased as we moved from month to month during the period. Within the seasonal pattern, I think it's fair to say from day to day and week to week, consumer activity was impacted to varying degrees by global tensions, macroeconomic uncertainty, and the material movement in interest rates. We were able to drive higher orders in the period with strong performances across all buyer groups. Along with increased sales, we are also seeing home buyers that are willing to pay for superior locations and the upgrades that they value most. In the second quarter, options and lot premiums on homes closed approached $107,000, which is comparable to prior year and prior quarter. Beyond any differences in demand among buyer groups, we continue to experience different demand dynamics across the markets we serve. For example, order pace in the Midwest was strong in a number of our markets, including Columbus, Cleveland, and Chicago. Stronger demand conditions also carried into our Greenville and Coastal Carolina markets. Our Florida operations continue to generate outstanding results. While it's too early to read too much into the numbers, I would note that on a year-over-year basis, orders in Dallas and Houston were also better in the period. In our west operations, we realized improved orders in California and the Pacific Northwest. We are having to compete aggressively for sales as core demand remains soft. As was the case in the second quarter, through the first few weeks of July, we continue to experience seasonal demand trends, along with the week-to-week variability caused by macro factors ranging from global tensions and inflation, to movements in interest rates and consumer confidence. Overall, there are a lot of positives to be taken from PulteGroup's second quarter operating and financial results. I think the biggest positive remains the fundamental benefits we realize from our strategic business model and our unmatched business platform. With that, let me turn the call over to Jim for a review of our second quarter results. Jim? Jim Ossowski : Thank you, Ryan. Good morning. I look forward to providing a detailed review of PulteGroup's second quarter operating and financial results. Second quarter net new orders increased 6% over the prior year to 7,536 homes, as we realized higher net new orders across all three buyer groups. The value of orders in the period also increased, gaining 5% to $4.1 billion. The year-over-year increase in second quarter orders reflects an 8% increase in average community count to 1,074, partially offset by a 1% decrease in absorption pace to 2.3 homes per month. Overall, core consumer demand trends followed a typical seasonal pattern as we moved through this year's spring selling season. The strength of demand in our Florida operations continued to stand out as net new orders in Q2 increased by 19% over the same period in 2025. In fact, orders increased over the comparable prior year period in each region, except for the West, where consumer demand has generally been slower to recover. As a percentage of starting backlog, our cancellation rate in the second quarter was 11%, which is comparable to last year. As I mentioned earlier, net new orders were higher within each of our buyer groups in the second quarter. For the period, orders among first time, move-up, and active adult buyers increased over the second quarter of 2025 by 5%, 4%, and 12%, respectively. Reflecting the benefits of our ongoing investment in the growth of our business, higher orders in the second quarter were positively impacted by increased community count. As discussed on previous calls, we are working to increase our build to order business with a long-term goal for orders to be approximately 60% BTO and 40% spec. In the second quarter, the order mix was 45% BTO and 55% spec. Given our build cycle time is down to 100 working days, and even lower in many markets, we are now able to selectively use market rate buydowns to facilitate BTO sales. Breaking down second quarter net new orders by buyer group, orders were comprised of 39% first time, 36% move-up, and 25% active adult. I would highlight that active adult orders in the period benefited from the opening of our newest Explore by Del Webb communities in Tampa and Columbus. By comparison, in the second quarter of 2025, net new orders were 40% first time, 36% move-up, and 24% active adult. For the second quarter, the company generated home sale revenues of $3.8 billion, compared with home sale revenues of $4.3 billion last year. The decrease in home sale revenues in the second quarter reflects an 8% decrease in closings to 6,997 homes, along with a 3% decrease in the average sales price to $544,000. Mix was a meaningful driver of our lower ASP as we realized fewer closings out of our Northeast and West operations, which represent our two highest priced operating geographies. Second quarter closings by buyer group were as follows: 41% first time, 37% move-up, and 22% active adult. In the comparable prior year period, our closing mix was 39% first time, 41% move-up, and 20% active adult. At the end of the second quarter, our backlog totaled 10,966 homes with a value of $6.8 billion. We ended Q2 with 14,980 homes in production, of which 44%, or 6,638 homes, were spec. Relative to this time a year ago, we successfully lowered our total spec inventory by approximately 1,000 homes, or 13%, as we remain disciplined in managing the cadence of home starts with the pace of sales. With respect to completed inventory, I would highlight that we ended Q2 with approximately 1,400 finished spec homes or an average of 1.3 finished spec homes per community. This is down from 1.9 finished specs per community at the end of the second quarter of 2025. Our field teams continue to do an outstanding job managing spec home production as we have rebalanced our inventory, which helps our Pulte community sell from a position of strength. Given the recent pace of sales and the number of homes under construction, in the third quarter, we expect to close between 7,000 and 7,400 homes. For full year 2026, we reaffirm closings to be in the range of 28,500-29,000 homes, although we still have many homes to sell and close over the balance of the year. Based on the timing of community openings and closings over the remainder of 2026, we expect year-over-year community count growth will be consistent with our previous guidance of up 3%-5% in each of the remaining quarters. Given current demand dynamics and the mix of homes we anticipate closing, we expect the average sales price of closings to be in the range of $550,000-$560,000 for both the third and fourth quarters. For the second quarter, we reported gross margin of 25%, a sequential increase of 60 basis points from Q1 of this year. I would also note that incentives in the quarter were 10.4%, a sequential decrease of 50 basis points from the first quarter of this year. While there are positive implications to be derived from both numbers, the mix of Q2 closings also contributed to the improvement in these metrics. More specifically, we benefited from greater mix of closings from our higher margin Florida markets in combination with lower than anticipated discounts on the homes sold and closed within the quarter. These were the key drivers of the sequential improvement and the outperformance relative to our prior margin guide. Our second quarter gross margin also benefited from lower build costs in the period. At just under $75 per sq ft, our Q2 house costs were down 5% from last year, down approximately 1% from this year's first quarter. Going forward, we'll lose the tailwind of lower lumber costs as we move through the year, but we still expect year-over-year house costs to be down slightly from 2025. Given house cost trends and the anticipated closing mix, we expect third quarter gross margin to be in the range of 24.5%-25.0%. At this time, we are reaffirming our 2026 full year closing gross margin guide to also be in the range of 24.5%-25.0%. On a dollar basis, homebuilding SG&A expense in the second quarter was down 2% from the prior year to $383 million. Fewer home closings in this year's second quarter resulted in some lost leverage as SG&A expense totaled 10.1% to home sale revenues, compared with 9.1% in the second quarter of last year. Overall, SG&A in the second quarter was in line with our expectations. We are maintaining our guidance for full year SG&A expense be in the range of 9.5%-9.7% of home sale revenues. For the second quarter, Pulte's financial services operations generated a pretax income of $37 million, compared with pretax income of $43 million in Q2 of last year. Relative to last year, financial services pretax income in the second quarter was impacted primarily by lower closing volumes in our homebuilding operations. Q2 mortgage capture rate was 85%, which is comparable to the second quarter of 2025. For its second quarter, PulteGroup reported pretax income of $622 million and a tax expense of $150 million, or an effective tax rate of 24.2%. Our Q2 tax rate was generally in line with our annual guidance, which remains 24.5% for full year 2026. Our expected tax rate does not take into consideration any discrete, period-specific tax events that might occur. Net income for PulteGroup's second quarter was $472 million, or $2.48 per share. In the second quarter of last year, we reported net income of $608 million, or $3.03 per share. Earnings per share for the second quarter of 2026 was calculated based on 191 million diluted shares outstanding, which is down 10 million shares, or 5%, from the second quarter of 2025. This year's second quarter, we repurchased 3.1 million common shares for $373 million. With increased community count remaining an important driver of near-term growth, we continue to invest in our future land pipeline. In the second quarter, we invested $1.4 billion in land acquisition and development. This brings our year-to-date spend to $2.7 billion, keeping us on track to invest approximately $5.4 billion in land in 2026. We ended the second quarter with 228,000 lots under control, which is down approximately 6,000 lots from the end of 2025, with 55% of our land pipeline controlled via option. We continue to look for opportunities to expand our controlled lot count, but as with all our land investments, option deals need to underwrite to acceptable risk-adjusted returns while also mitigating risk. As discussed on our last earnings call, and as demonstrated by the company's Q2 land spend, our acquisition teams are still finding great land opportunities that meet our required returns. In this type of market environment, if you have the discipline and the capital, you can secure the land assets needed for ongoing business success. We ended the second quarter with $1.4 billion in cash and a debt-to-capital ratio of 12.3%. And finally, given expected volume, margin, and land spend for the year, we continue to expect 2026 operating cash flow generation to be approximately $1 billion. Now, let me turn the call back to Ryan. Ryan Marshall : Thanks, Jim. Before opening the call to questions, I wanted to briefly touch on the topic of industry consolidation as the recent increase in M&A transactions has prompted a number of questions from investors. When it comes to assessing M&A opportunities, before we even run the numbers, the first question we ask ourselves is, "Will this transaction make us better, not just bigger?" Integrating businesses, organizations, and cultures is hard work, so we have to see the value in terms of the transaction truly enhancing our business. If the strategic benefit is there, we maintain a disciplined valuation process that focuses on the return potential of the underlying land assets. Given the broad business platform we already maintain, M&A for PulteGroup is primarily another way for us to buy land, so we underwrite it accordingly. While we certainly have the financial and organizational capabilities to successfully execute a large multi-market acquisition, our preference is for smaller tuck-in types of transactions that help build local market scale. If you look over the past decade, you see us having acquired Dominion in the Midwest, John Wieland here in the Southeast, and American West in Las Vegas. Again, good land pipelines that could help accelerate market share growth and acquired at prices that allowed us to realize acceptable risk-adjusted returns. Based solely on the public comments I've read about the transactions, I think they point to a growing recognition that scale, particularly local market scale, matters. I believe the improved access to land and labor that comes with scale is critical to a home builder's long-term success in any given market. Before opening the call to questions, I want to thank the entire PulteGroup organization for another great quarter of operating and financial performance. When we report quarterly earnings, for obvious reasons, everyone focuses on the numbers, but behind every order, every home closing, and every satisfied customer are the people across this company who make these outcomes possible. We can have the right strategy and a strong business model, but these only create value for shareholders when they are paired with great execution. Let me turn the call over to Jim Zeumer. Jim Zeumer : Great. Thanks, Ryan. We're now prepared to open the call for questions. We can get to as many questions as possible during the remaining time of this call, we ask that you limit yourself to one question and one follow-up. Jordan, we'll start taking questions now. John Lovallo : Good morning, guys. Thanks for taking my questions. In the press release, you noted early signs of stabilization. That's something that we've heard numerous times across our channel checks. I'm just curious if you could expand on that comment and maybe talk about specific geographies where you're seeing it? Ryan Marshall : Yeah, John, we highlighted some of it in the prepared remarks. All of our five regions that we report on, we saw positive year-over-year growth in four of them, the West being the one that I think is probably still the softest. Specific to the four where we saw some stabilization and I think some positive signs, I would definitely call out some of the Midwest markets. We continue to see strength there. We're also seeing some favorable trends out of the Southeast markets. We particularly like what's going on in the coastal Carolinas markets in Greenville. Then look, I've got to highlight Florida again. Florida was up 19% year-over-year in a continuation of a theme that we've talked about for the last couple of calls, we've got great operating teams there and good assets, and we're seeing nice performance there. I'm also encouraged by what we're starting to see in Texas. I'm not ready to declare victory there, the fact that we saw positive year-over-year orders I think is a good sign. John Lovallo : Yeah, no, I think that's really encouraging. Then, at the midpoint of the third quarter outlook, deliveries are up about 3% sequentially. The gross margin is down about 25 basis points sequentially. Just curious if this is mix of expected closings or how would you characterize that? Ryan Marshall : I would say it's probably a fairly accurate assumption, John. We got a little bit of favorable mix in Q2 with just where closings came from that benefited the margin. Maybe that goes back a little bit the other way in Q3, but as Jim highlighted, we're reiterating our full year guide. The fact that we're growing orders, we think we outperformed relative to order growth expectations in the most recent quarter and did it all while delivering great gross margin. We feel pretty good about how our teams are executing. John Lovallo : Perfect. Thanks so much. Sam Reid : Thanks so much, guys. Great to see the improvement on incentive loads this quarter. Would just love to get your sense as to what's embedded on incentives specifically for the third and fourth quarters. Should we expect flattest sequentials there, or could we see some additional improvement with the build-to-order mix benefits? Ryan Marshall : Sam, our expectation is that the market's going to continue to remain competitive, and that we're going to continue to see elevated incentive loads. Beyond the guidance that we've given you on gross margins, we typically don't comment specifically on numbers for incentives. We did highlight that last quarter was going to be our high watermark, and that is indeed proven to be true. I'm very pleased to see that our incentives came down 50 basis points in the quarter. They're still high, even though they did come down. We'd expect, just given everything that the consumer's dealing with and the affordability challenges, that we'll remain in an elevated incentive environment. Sam Reid : That's helpful. Then maybe switching gears to community count. Community count growth up 8% during the quarter, but the guide for the year implies something closer to 3%-5%. Just maybe walk us through the sequential community count, Q2 to Q3. Then just one other maybe side question on community count. Is the growth primarily coming from active adult? Jim Ossowski : A great question, Sam. What I tell you on the community count, we've seen community count growth across all of the segments. Really what I tell you is, we've seen a little bit higher than guided level in the second quarter. It's just some of the communities are taking a little bit longer to close out. As we continue to work through the balance of the year, we still feel really good that that 3%-5% year-over-year is really what we're looking for. That's Q3 of 2026 versus Q3 of 2025, then Q4 of 2026 versus Q4 of 2025. Matthew Bouley : Good morning, everyone. Thanks for taking the questions. Apologies if I didn't hear this, but just to double-check on the gross margin. I think you said last quarter that you were looking towards the low end of the 24.5%-25% range for the year. I just wanted to clarify if that's now changed and could we actually suggest that you're now pointing towards the higher end of the margin range or I'm obviously asking around 50 basis points here, but just any clarity on or update on that. Thank you. Ryan Marshall : Yeah, Matt, it's a fair question. We did highlight that last quarter. We did not emphasize that this point, but I'd encourage you not to run to the high end. I think we still have a lot of homes to sell. As I mentioned on one of the earlier questions, we think incentive loads are going to remain relatively elevated. We've seen a little bit of turmoil come back into the mind of the consumer with some of the things that are going on globally. I think there's a lot out there, but we feel confident about the 50 basis point guide that we've given how our teams are performing right now. Matthew Bouley : Okay, perfect. Thank you for that clarification. Secondly, I guess this kind of follows along with that. If I'm looking at sort of the implied cadence of closings in the second half, it seems like you're going to have a bigger step-up in the fourth quarter. Maybe a little bit higher than we've seen the past few years. Obviously, if we go back historically, we have seen larger step-ups in the fourth quarter. I guess the question is sort of your visibility to that and is there an expectation that a lot of that spec gets cleared out in the fourth quarter and that drives the step-up, or is sort of cadence of community openings regionally, et cetera? Just any kind of color you could give to give some confidence on that implied fourth quarter. Thank you. Ryan Marshall : Yeah, sure. We have had visibility to this, and this has been part of our plan for the entire year. As we've talked about new communities coming online, moving from a predominantly or a higher level of specs to more build to order, and then matching our start rate to the sales that we have. We knew that this is the situation that we were going to be in, and it was going to come from homes that are sold as dirt sales that get built and closed in the fourth quarter. As we've highlighted, we still have some homes to sell. With our 100-day cycle times, we still have quite a bit of time left to sell and start homes that will still deliver in the year. That work's got to be done, but there's nothing in the guide for Q3 or Q4 and how that relates to the full year that hasn't been part of our full-year visibility from the very beginning. Stephen Kim : Thanks a lot, guys. Appreciate all the color so far. Ryan, if I could just sort of follow on your comments about consolidation in the industry. You talked a little bit about your interest in organic growth on the homebuilding side, but I wanted to talk a little bit about what you're seeing in terms and envisioning in terms of the consolidation that's happening in distribution. And wondering if there's any impacts or changes to the supply chain that you envision near or long-term, and maybe also if you could throw in there consolidation within homebuilding. If you're not doing it but others are, is there some change in the competitive environment that you're observing or anticipate? Thanks. Ryan Marshall : Steven. There's definitely a lot going on in the market on both fronts, and maybe let me start with the distribution channels. To this point, we've not seen any changes to the way that we interact with either the old companies or in some cases the new companies. In some cases, without naming names, some of the consolidators, we've already derived some nice strategic benefits from the increased scale of those new companies and the way that they're able to serve and meet our needs. I'm personally engaged in some strategic conversations with our procurement teams and some of those partners as we think about how they could do even more for us down the road. Net-net, Steven, at this point, I think it's generally a positive. Certainly these companies that are consolidating, they want to get a return on their capital as well. We hope that as far as it relates to us, that return can come from increased efficiencies as opposed to just forcing higher prices on us or their customers. With some of the things that are going on inside of homebuilding, we do watch it a lot. The things that are happening we're not surprised by because for a long time, we've appreciated the value of having local market scale. We definitely believe we have national market scale, but in our own operations, where we see the appropriate amount of market share in a specific market, we perform better. I think some of this consolidation that's going on are other companies' attempts to achieve some of that. As it relates to competitive dynamics, the competitors that are being consolidated, they're the competitors that were there yesterday. They're there today. They're just under a different umbrella. We've not seen a change in competitive behavior to this point. My crystal ball's not clear enough at this point to say what will happen down the road, but to this point, we haven't seen a change. Stephen Kim : Okay. Appreciate it. That's very helpful. Second question relates to ICG and that. I believe you indicated that you were looking to maybe divest that. Shortly afterwards, though, we've had the ROAD to Housing Act now become law, and within there it seemed like there were some things that might open the door to some more attractiveness in factory-built construction. I was curious as to whether or not, in your view, that has really any effect or impact or influence on how you're thinking about the ICG business or things like it. If you could maybe just comment on factory-based construction techniques. Ryan Marshall : Yeah, Stephen. Our efforts in ICG were really focused on the structural components that could go into site-built homes, and I think most of the stuff in the ROAD to Housing bill is directed at manufactured housing, which I think can be favorable for overall housing supply. That's not where we were innovating or attempting to innovate with ICG. As it relates to ICG, we're kind of moving through the process of that divestiture. We're making great progress and I think we'll have more to share in the next quarter. We absolutely continue to partner with all of the advanced manufacturing companies that we currently work with, including whoever may potentially be the buyer of ICG. Because we really see the value of the benefits and the value of the production methodologies employed there. We want to continue to be an implementer, a user of these innovative technologies and techniques. We just would prefer not to be the operator. We think others are probably better suited to do that. Alan Ratner : Hey, guys. Good morning. Really nice results, thanks for all the details so far. Ryan, a couple things you mentioned that wanted to dig in on. First, on the cost side, very impressive cost control there. I think you mentioned down, I think it was 5% year-over-year, if I remember correctly. You did kind of allude to the fact that maybe that tailwind is going to subside over the next few quarters. Without pushing for a 2027 commentary at this point, I'm just curious as you look at the cost landscape today. It looks like lumber is at the highest levels we've seen in several quarters, and presumably that'll flow through closing starting maybe early next year. We still have high oil prices. Do you actually expect your overall cost basket to begin inflecting higher here over the next handful of quarters if nothing on the ground changes? Do you feel like you can hold on to the relief you've been able to recognize thus far? Ryan Marshall : Alan, it's a fair question. We're not quite to the point of putting numbers out for next year, but I'll address it thematically. I think if you went back to a period of time pre-COVID, you would generally see modest increases year-over-year. One, one and a half, maybe 2% cost increases year-over-year, and we were able to more than offset that with price increases. Reasonable price increases that we would see in the home price. The environment that we're in right now, there's a lot of focus on affordability in every consumer product or everything that society consumes, especially housing. I think we're going to do everything we possibly can to maintain cost control. There are some things like lumber, like oil, that are commodities that make it much more difficult to influence because they're much bigger than just housing. Lumber aside, which we can see where that's going. Oil probably continues to be the one that I'm most nervous about just because of how much oil is in some pretty big-ticket items like land development. I talked about this last quarter, but asphalt, underground piping. There's some real big dollars that go into land development, never mind the diesel fuel that goes into the tractors that are moving dirt around. Those are things that we're really paying attention to, Alan, that could have an impact on not just price per square foot house costs, but ultimately maybe developed land cost. Of course, that ultimately goes into the total cost basket for the house. Mike Dahl : Hi, thanks for taking my questions. Appreciate all the details so far. On the incentive dynamic, I know, Ryan, you've referenced several times the week-to-week variability in some of the consumer and order dynamics. Can you just give a little more clarity from an order standpoint what the cadence on incentives has looked like? If that went down through the quarter, then ticked back up, and that's why the guide's kind of flattish, or if it's just held steadier than that. Any more detail on the cadence of incentives on orders, including through July, would be helpful. Ryan Marshall : Yeah. We don't really provide that level of granularity on incentives, Mike. I will tell you, as it relates to seasonality, it was a normal quarter as we moved from April into June. Normal step downs and seasonality that we've seen for a long time. Really nothing surprising there. We did see week-to-week variability based on some things that were going on in the economy, and in the world rather, may be better said. We're paying attention to that. As we've gotten into July, I think we've continued to see pretty normal seasonal trends that are influenced by some of the more recent events that are going on globally. Mike Dahl : Okay. Understood. Shifting gears to SG&A. The full year guide maintained, it seems like that is the one part where the math looks difficult because you've delevered on SG&A as a percentage of sales, call it 90 basis points in the first half of the year. You're guiding revenues flat year-over-year for the back half of the year. A lot of your SG&A, some form of variable is cost. It seems to imply that you'd need a pretty big step down in the fixed component or something else that would drive a lot more leverage versus the deleverage we've seen year to date. I just wanted to drill down a little bit more on just how to get down to the 9.5% to 9.7% for the full year when you're at 10.7% for the first half. Jim Ossowski : Sure, Mike, thanks. Great question. You're right. We've lost some leverage in the first half of this year. We've seen our lowest ASP levels of the year in the first half of the year. As we've guided, we expect them to be $550,000 to $560,000 over the balance of the year in Q3 and for the full year. You'll see a lift from that. We have our volume that's increasing in the back half of the year. What I'd tell you is there really isn't anything structurally or anything that we need to do. We still feel really good about it. We check it every quarter As I said in my prepared remarks, we were right on where we thought we would be as of the end of the second quarter and still feel very confident getting there over the balance of the year within that guide. Anthony Pettinari : Good morning. Anthony Pettinari : Ryan, just following up on M&A, you reaffirmed your preference for tuck-ins. I'm just curious, as you look at the pipeline, do you see more competition for those kinds of targets? Given a tougher market, maybe you can see picking them up at more reasonable valuations. I'm just wondering what that pipeline kind of looks like versus the last few years. Then are there geographies, MSAs, where it would make a lot of sense for Pulte to be in that you're not in currently? Ryan Marshall : Yeah, I'll take the last part first, Anthony. In terms of the geographies that make a lot of sense, it's really the geographies where we've recently decided to expand to. Those are places that would be great M&A targets, and it would allow us to build local market scale a bit faster. We haven't been able to find acceptable M&A targets, and so we've elected to grow those markets organically, which we're fine with as well. As it relates to the pipeline, the pipeline's pretty steady. We see a lot of things that come across our desk. We look at all of them. As I mentioned in my prepared remarks, the first question that we really ask, is this something that fits with us strategically? Is it the right buyer groups? Is it in the right parts of the MSA that we want to target? If we can say yes to all of those things, then we go down the path of can we offer a price that makes sense? The place where most of these break down is we really underwrite these transactions as if we're acquiring additional land. We already have an operating model. We already have a branding and our house of brands. Some of the kind of intangibles and the things that a seller might want to get paid for, it doesn't mean there's not value there. It's just not as valuable to us because we already have our own. Even if we're able to answer the first question, which is the hardest, if you can get past that, sometimes the underwriting, the risk-adjusted underwriting doesn't make sense. It's pretty rare that you go from looking at a deal to actually getting super interested in making offers. Just the probability, I think, of all those things lining up is on the lower side. Anthony Pettinari : Okay. No, that's very helpful. Just one quick follow-up on incentives. I know you don't break this out with too much granularity, but if we were to think about incentive levels for active adult versus move-up versus entry level, are you seeing a real divergence in incentive levels between your buyer types, or is it just really dependent on community and there's a fair amount of noise there? Ryan Marshall : Where you see the difference in incentive level is based on build to order versus spec. Most of our spec is in entry level. You see higher incentives in entry level because of that. It's not the buyer group that's driving it's the difference between spec versus build to order. Trevor Allinson : Hi, good morning. Thank you for taking my questions. You mentioned build to order was 45% of your orders in 2Q, so good progress there. How should we think about a build to order as a percentage of your orders in the second half of the year? Any update on your expected timeline to hit your 60% target? Ryan Marshall : Yeah. Really no change on the timeline, Trevor. It'll likely be sometime next year that we get to that 60%. We haven't set a target out there for the back half. I'd like to see us continue to chip away at it and make kind of measured and steady progress. Between now and sometime next year, I'd like to chip away at those incremental 15 percentage points that we want to go after. Trevor Allinson : Yeah, makes sense. Thanks for that, Ryan. Second question is following up on the cost side, focusing maybe specifically on your trades here and your ability to continue to recognize relief there. Do you think there's room for incremental concessions from your trades here to help you lower your overall vertical cost, or you think you've kind of gotten everything you can out of concessions from your trades here in the current environment? Thanks. Ryan Marshall : Yeah. Our procurement teams are really good, and they really operate on data and facts. They do a really nice job kind of looking at our overall cost structure and identifying places where we were arguably paying more than the market warrants. That's where we go after. We want our trade partners to be successful. We want them to have healthy profit. We're cognizant of that as well. I think our procurement teams have done a wonderful job, and the fact that we're down 5% and sitting at $75 a foot in this environment, I think it's a job well done. Jonathan Bettenhausen : Yeah. Hey, guys. A quick model question related to the cash flow guide. You've maintained the operating cash guide for 2026, there's a little work to do in the back half of the year. I'm assuming the expectation here is that inventory will be a cash tailwind in the back half. Is that the way you're looking at it, or is there anything else meaningful to call out? Jim Ossowski : No, nothing else meaningful to call out. We have a higher volume of closings coming in the back half of the year. Spring selling season is when you're starting to put inventory in motion. You're doing land development, you're doing home construction. Yeah, inventory reduction with extra closings is the tailwind in the back half. Jonathan Bettenhausen : Yeah. Okay. Got it. In terms of the land pipeline, any big pipeline moves during the quarter outside of trend, relative to kind of the geographic footprint? Kind of piggybacking off of that, with Florida continuing to be a top growth region for quarters, lot count there, call it flat with where it was in 2023. Is that more of a right sizing of the land position in Florida, or should we expect to see that lot count start to tick up a bit? Jim Ossowski : I would tell you, from a lot count standpoint or what we saw going on in the quarter, not a whole lot of change. It was a pretty typical quarter for us. I think the numbers, we put about 13,000 lots under control. We locked from 6,000, we closed 7,000. It was kind of a push. It was a fairly normal quarter for us. As it relates to lot count across the geographies, what I tell you what we really focus on more is just the lots that we control. We talk about it often. "Let's put some deposits, responsible deposits down. Let's get that land pipeline in front of us." That way, we need to lean into it because the market's strong and healthy, we'll do it. If it's a little bit softer market, we can always pull back in that. I wouldn't read anything more into kind of the variability of the lot count over the past couple of years. Rafe Jadrosich : Hi. Good morning. It's Rafe. Thanks for taking my questions. How do we think about the starts versus closings cadence in the second half of the year, and then that finished spec number of 1.3 per community, is that the right level going forward? Ryan Marshall : Yeah. Rafe, good morning. The spec level that we're at we think is about perfect. You might see that go up a little, down a little, depending on kind of what's going on, but we think we're kind of mission accomplished on reducing spec inventory. As it relates to starts in the back half of the year, really what we've been doing is we've been working to match starts with prior quarter sales as kind of the best linkage. With the caveat that we intentionally under started the sales that we had in the first half because we had more spec inventory than we wanted. A lot of the sales that we had in the first half were specs that we wanted to get out of the system. Now, as we continue to make this transition back to build to order, I think you'll see a more stronger linkage between what we're selling and what we're starting. Rafe Jadrosich : Great. That's helpful. The debt to cap at 12%, obviously, it's pretty low. What would you have to see to bring that higher, and how do we think about the right level going forward or longer term? Ryan Marshall : Yeah. Rafe, we've talked about this the last several quarters. Really when we think about capital allocation and the needs of the business, we talk about what do we want to accomplish, where do we want to grow the business, where do we want to make strategic investments in land, in house, et cetera, new markets. We go through the capital planning exercise to determine how much money that's going to take, and we figure out whether or not that can be financed and supported or cash flowed through operations, or do we need debt to do it. That drives whether or not we're going to go to the capital markets and ask for money. I know that it's a normal thing to look at debt leverage ratios, and I understand that more debt can make some efficiency. There's an efficiency argument that if you have the right amount of debt or more debt, it's a beneficial leverage to return. In this environment, I think we're positioned with lower leverage and doing all the things that we've said we're going to do. We're growing the company, we're growing our land pipeline, we're growing community count, we're growing markets, we're paying our dividend and increasing it, and we've been really consistent with our share buybacks. There's not an argument, at least not one that I've been unable to convince myself with, to suggest that we need more debt. Susan Maklari : Thank you. Good morning, everyone. Ryan Marshall : Morning. Susan Maklari : Good morning. My first question is on the active adult segment. You mentioned that the Explore by Del Webb product is contributing to the growth that you're seeing there. Can you give us a bit more color on where those communities are in terms of their ramp and as we look out what that could mean for future growth in that segment? Ryan Marshall : Susan, I'm really excited about Explore by Del Webb. The idea is we're taking these highly amenitized lifestyle communities that have historically been targeted to the age-restricted over-55 buyer, and now you're opening it up to a broader range of buyers, particularly the Gen Xers that are approaching retirement that maybe aren't as interested in being in the age-restricted community. I think it'll be just tremendous opportunity. Jim mentioned we've got our first two communities, actually, first three communities that are now open, one in Southern California in the Palm Desert area, one in Columbus that just opened in the most recent quarter, and one in Tampa, Florida, that just opened. Then our next opening will be in Utah, just kind of east of Park City, east of the new Deer Valley expansion. These are communities that have got a heavy amount of lifestyle, really kind of speak to buyers that maybe they're retired, maybe they're getting closer to retirement. We think it can be just a really nice augmentation and growth opportunity within our already very successful Del Webb business. Susan Maklari : Okay. That's great color. I guess as you think about the mix of the business evolving around these newer products as well as the shift to BTO versus spec, can you talk a bit about the optimal sales pace for the business and how getting this mix helps you in terms of hitting that longer term growth target of 5%-10% that you've put out there? Ryan Marshall : Yeah. The way that we've thought about growing the business is we've made the investments into land and into new communities that will grow. You've seen us pretty consistently over the last three to five years, where we've grown our community count somewhere in the 3%-5% range. You're seeing that we've been very consistent and predictable on that, and I expect that to kind of continue. If we can see some normalization of absorption paces, I think you've got a very good opportunity to be total volume growth in the 5%-10% range. Some of that coming from community count growth, some of that coming from a slight expansion in absorption rates. In terms of the right number of sales per community for us, we're of the view that we want to strike the right balance between pace and price to drive ultimate return, every community's a little bit different. That said, we are a production home builder, the general rule of thumb is every community's got to sell at least two homes per month. If it's not doing that, I think it's hard to get the economies of scale that you need in order to be a successful production home builder. That would be the de minimis kind of minimum level. Hopefully we're operating at something higher than that makes sense for the return objectives that we have. Kenneth Zener : Good morning, everybody. Appreciate the time and the answers. Could you, Ryan, expand, you talked about strength in Texas, which I think is really more the entry-level Centex area. Obviously Florida, which is doing quite well. What % of buyers in Florida are from out of state? I combined my questions. Thank you. Ryan Marshall : Texas, Ken, the two that we highlighted, we saw a positive improvement in Dallas and Houston. Dallas, we have a very diversified business, so we do everything from entry-level to move-up to active adult. Houston tends to be more affordable. The fact that we're seeing I said it's a little early to declare victory, but we are seeing some positive trends there. As it relates to Florida, I don't have those numbers off the top of my head, Ken. It really varies by city and then also by the type of community. Tampa, as an example, they have a fair number of kind of first-time buyer and entry-level communities in Tampa. Those are going to be predominantly local buyers. You go to Fort Myers, Naples area, we do a lot of second home seasonal kind of retirement communities, and you got a much higher % of folks that are probably coming from out of state. I think Florida continues to do really well despite some of the things that have been talked about with Florida-related challenges. The fact that this is now our probably third or fourth quarter in a row where we've had positive year-over-year order growth. It's not as if we're comparing on soft comps. We're seeing kind of real momentum and growth in Florida, and I think it's reflective of the land positions and the operators that we have there. Kenneth Zener : Thank you. Ryan Gilbert : Hi, thanks. Good morning, guys. Ryan Marshall : Good morning. Ryan Gilbert : On cycle times, I'm just wondering if you could remind us the difference between order to close cycle times between spec homes and built to order. Ryan Marshall : Order to close. Well, the build time, we really measure it from start to final. That's how all of our cycle times are calculated. Both spec and build to order are in those 100-day numbers that we're giving you, there is no difference. In terms of order to close, it depends. It really depends on, does a spec home sell during the production process, in which case there is no difference. If the house finishes and it sits for 60 days, well, you're adding 60 days to the end of the finished timeline. To get consistent measurement on that, Ryan, it's always from the time that you put a shovel in the ground and dig the foundation to when you get your final inspection. Ryan Gilbert : Okay. Got it. Thanks. Then second question just on, I guess, bigger picture and demand stabilizing, orders are up, gross margin's up, you're able to pull incentives off. Why not target a higher delivery level and get some SG&A leverage in 2026? Ryan Marshall : Yeah. Look, we're focused on running the best holistic business that we can that's going to drive the best return. In this environment, I think we've been pretty crystal clear, and if we haven't, I'll do it now to say we are prioritizing the pace price balance. Right now, I think there's plenty of examples out there of where just driving volume for volume's sake isn't necessarily yielding the best results. Not to say that our way is perfect, but it's the way that we've decided to run the business, which is, I think we're getting volume, but we're doing it in a pretty responsible way. If that means that our overhead leverage is a little less than optimal, I can live with that. All that said, the total SG&A leverage is going to be pretty consistent with where we've been the last number of years at 9.5%-9.7%. Then I think the ultimate benchmark and report card is operating margin, which I think we continue to perform pretty well in that category. Operator : That concludes our question and answer session. I'd like to turn the call back over to Jim Zeumer for closing remarks. Jim Zeumer : Okay. Appreciate everybody's time today. We'll certainly be available for any additional questions as we go forward. Otherwise, we will look forward to speaking with you on our next earnings call. Thank you. Operator : That concludes today's meeting. You may now disconnect.