Good morning. My name is Devon, and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup, Inc. Q4 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the one on your telephone keypad. If you would like to withdraw your question at anytime, again, press star followed by the one on your telephone keypad. Thank you for your patience. Mr. Jim Zeumer, you may begin the conference. Great. Good morning, Devon. Good morning. Thank you, Devon. Look forward to discussing PulteGroup's outstanding fourth quarter earnings for the period ended December 31, 2022. I'm joined on today's call by Ryan Marshall, President and CEO, Bob O'Shaughnessy, Executive Vice President and CFO, and Jim Ossowski, Senior VP Finance. A copy of our earnings release and this morning's presentation slides have been posted to our corporate website at pultegroup.com. We'll post an audio replay of this call later today. Please note that consistent with this morning's earnings release, we will be discussing our reported fourth quarter numbers as well as our financial results, adjusted to exclude the benefit of certain insurance reserve adjustments and JV income, as well as the write-off of deposits and pre-acquisition spend and a tax charge recorded in the period. A reconciliation of our adjusted results to our reported financials is included in this morning's release and within today's webcast slides. We encourage you to review these tables to assist in your analysis of our business performance. Finally, I want to alert everyone 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 slides. These risk factors and other key information are detailed in our SEC filings, including our annual and quarterly reports. Let me turn the call over to Ryan Marshall. Ryan. Thanks, Jim. Good morning. We ended 2022 on a high note as we closed almost 8,900 homes and delivered all-time fourth quarter records with home building revenues of $5.1 billion and earnings of $3.85 per share. These results, in turn, helped PulteGroup finish the year with over $1 billion in cash and a net debt-to-capital ratio below 10%. Bob will detail the rest of our Q4 results in a few minutes. Driven by the company's exceptional fourth quarter performance, PulteGroup delivered another year of great financial results. For 2022, our home sale revenues increased 18% over the prior year to $15.8 billion. Our reported pre-tax earnings increased by 37% to $3.4 billion. Our reported earnings increased 48% to $11.01 per share. These results provided us the flexibility to invest $4.5 billion into the business while returning over $1.2 billion to shareholders, dividends, and share repurchases. Let me just pause right here and thank our entire organization for their efforts in delivering such a great operating and financial results under some challenging market conditions. We are truly fortunate to have such an outstanding team. In assessing our 2022 financial results, we fully appreciate that gains in volume, pricing, gross margin, and earnings reflect the stronger demand environment that existed earlier in 2022. As we all know, the Federal Reserve decision to hike rates 7 x in 2022 in its fight against inflation is successfully slowing the economy, including housing. For the full year, national new and existing home sales across the country fell 16% and 18%, respectively, from 2021. Consistent with the trend of these national numbers, our 2022 net new orders were down roughly 27% from 2021. The softer demand we've experienced is the result of consumers priced out of the market by higher prices and higher mortgage rates, along with those individuals who have moved to the sidelines given market uncertainties and risks. Despite the higher rate environment dominating the national conversation, we saw buyer demand improve as the fourth quarter progressed and can confirm this strength continued through the month of January. We'll have to see how things progress from here, but I think this improvement attests to the ongoing desire for homeownership that exists in this country. Net sign-ups, both in absolute number and absorption pace, increased as we moved through each month of the fourth quarter and through the month of January. While seasonal trends have been distorted over the past few years, monthly sales moving higher as the fourth quarter progressed is atypical. In short, we are encouraged by the recent improvement in our new home sales. Based on feedback from our sales offices, buyers have been responding to the decline in mortgage rates. Consistent with this idea, I would add that rate buydowns remain among the top incentives for our customers. Along with the decline in mortgage rates, actions we've taken to help improve overall affordability appear to be gaining traction. In alignment with our strategy to find price and turn our assets, we continue to implement programs that enable consumers to buy homes in today's higher rate environment. The cost of these programs, which might include rate buydowns, lower lot premiums, or even price reductions, can be seen in our higher Q4 incentives. In the fourth quarter, incentives increased to 4.3% of sales price. On a sequential basis, this is up from 2.2% on closings in the third quarter of 2022. Beyond just adjusting incentives, in many of our active communities, we have already introduced smaller floor plans to help lower future prices and associated costs. The introduction of smaller floor plans is just part of a comprehensive effort to lower overall construction costs to help offset the pressure on sales price. The obvious question now is: Will this strengthening of demand continue? Like all of us on this call, I've heard strong arguments on both sides, but the honest answer is that no one really knows. Home builders are optimists by nature, and I want to believe that the Fed can orchestrate a soft landing, but the risk of a recession is real. We're currently seeing buyers respond to lower rates and better pricing, but what happens as Fed actions weaken the employment picture is uncertain. With today's volatile market dynamics, one of our frequent conversations with investors is around how Pulte plans to operate its business over the near term. Given the long timelines associated with land development and home construction, we need to set a plan but be prepared to adjust as market dynamics require. At a high level, I'd like to share how we plan to operate the business for the foreseeable future. At our core, we remain a build-to-order builder, but our system operates best with a steady volume of production. Our plan is for a consistent cadence of new starts. This would include starting spec homes on a pace consistent with spec sales. We shared on prior calls that in the current environment, buyers are showing a preference for homes that have near-term delivery dates. As an example, in the fourth quarter, spec sales represented over 60% of our new orders. Our recent sales show that we are finding the market clearing price using our strategic pricing tools to set price and incentives. Within today's sales environment, we will be intelligent about the process as we optimize our production machine and turn through our land assets. As always, our primary focus will be to deliver strong relative returns on invested capital through a cycle. In planning for 2023, we have assumed our current cycle time of six plus months will remain the reality for the next several months. Combining our planned starts with our 18,000 homes currently in production, we expect to have a production universe that will allow us to close approximately 25,000 homes in 2023. We have goals in place to reduce cycle time, and our procurement and construction teams are already realizing success in cutting production days, but a lot of work remains to be done. Buyer demand will ultimately determine what the coming year looks like, but this is our operating plan. We see this as a prudent, balanced approach that checks key strategic boxes, namely, we maintain a level of production in our communities, which is critical when negotiating with local trades and suppliers. We keep an appropriate level of specs in production while seeking to control finished inventory, and we continue to turn our assets, generate cash, and position the business for the next leg of the housing cycle. Given today's market dynamics, at this time, we will be providing guidance for our first quarter, but not the full year. In sharing our operational approach for 2023, we have hopefully conveyed a thoughtful process and conceptualized the opportunity we see for our business. Let me now turn the call over to Bob for a detailed review of our fourth quarter results. Thanks, Ryan, good morning. PulteGroup completed the year by delivering strong fourth quarter results, the benefits of which can be seen throughout our financial statements. In my analysis of the company's operating and financial performance, I will review our reported numbers as well as our financials adjusted for the specific items Jim noted at the start of this call. PulteGroup's fourth quarter home sale revenues increased 20% over last year to $5.1 billion. Higher revenues for the period were driven by a 3% increase in closings to 8,848 homes in combination with a 17% increase in average sales price to $571,000. The increase in average sales price in the quarter was driven by double-digit gains in pricing across all buyer groups. Our closings for the quarter came in above our Q4 guide as we benefited from higher spec sales that closed in the quarter and a faster than anticipated recovery in our Florida operations following the impact of Hurricane Ian. The mix of closings in the fourth quarter was 36% first-time buyers, 39% move-up buyers, and 25% active adult. This compares with last year's closings, which were comprised of 33% first time, 42% move up, and 25% active adult. The increase in first-time closings is consistent with changes in our mix of communities and the greater availability of spec homes in our first-time buyer neighborhoods. Our spec strategy emphasizes production within our Centex brand, as almost 60% of spec units are in communities targeting first-time buyers. In the quarter, we recorded net new orders of 3,964 homes, which is a decrease of 41% from the same period last year. The decline in orders for the period reflects the ongoing softness in buyer demand caused by the significant increase in interest rates realized in 2022, in combination with higher cancellations experienced in the period. As a percentage of sign-ups, the cancellation rate in the fourth quarter was 32%, compared with 11% last year. Cancellations as a percentage of backlog at the beginning of the quarter totaled 11% in the fourth quarter this year, compared with 4% in the fourth quarter last year. I would note that in the four years prior to the pandemic, quarterly cancellations as a percentage of beginning period backlog averaged 10%. Q4 cancellations in relation to backlog were in line with historic norms. In the fourth quarter, our average community count was 850, which is up 8% from an average of 785 last year. Community count growth reflects new community openings as well as the slower closeout of certain neighborhoods. Based on planned community openings and closings, we expect our average community count in the first quarter of 2023 to be flat sequentially or approximately 850 communities. For the remainder of 2023, we expect quarterly community count to be up 5%-10% over the comparable prior year quarter. By buyer group, fourth quarter orders to first-time buyers decreased 28% to 1,574, while move-up demand was lower by 56% to 1,241 homes. Active adult declined 36% to 1,149 homes. As has been widely discussed, housing demand remains under pressure as higher interest rates and years of price appreciation have stretched affordability for buyers. We ended the quarter with a backlog of 12,169 homes with a value of $7.7 billion. This compares to the prior year backlog of 18,003 homes with a value of $9.9 billion. As Ryan discussed, our objective is to keep inventory turning, which requires that we start an appropriate number of homes. In the fourth quarter, we started approximately 4,000 homes, which is down 50% from the fourth quarter of last year, and on a sequential basis, down about 40% from the third quarter. We ended the fourth quarter with a total of 18,103 homes in production, of which 10% were finished. Of our total homes under construction, 43% were spec. This is slightly above our target of having specs comprise approximately 35% of our work in process. Given buyer preference for a quicker close, we are comfortable having a few more homes in production. Based on our production pipeline, we currently expect to deliver between 5,400 and 5,700 homes in the first quarter of the year. As Ryan indicated, for the full year, we'll have the production potential to close approximately 25,000 homes. These production numbers assume a continuation of current construction cycle times. Given the price of homes in backlog, the mix of homes we expect to close, and the anticipated level of spec closings in Q1, we expect the average sales price for Q1 closings to be between $565,000 and $575,000. At the midpoint, this would be an increase of 12% over the first quarter of 2022. In the period, we reported gross margins of 28.8%, which remain near historic highs for the company. This represents an increase of 200 basis points over the comparable prior year period, although down sequentially from the 30.1% gross margin we delivered in the third quarter. Looking ahead, we expect to deliver another strong quarter with Q1 gross margins of 27%, which includes the benefit of lower lumber costs due to the fall in lumber prices in the back half of 2022. Any savings from ongoing renegotiation of labor and material contracts will be realized in future quarters, and we'll have to see how much of this work benefits our 2023 versus our 2024 closings. Our reported fourth quarter SG&A expense of $351 million or 6.9% of home sale revenues includes a net pre-tax benefit of $65 million from adjustments to insurance-related reserves recorded in the period. Exclusive of this benefit, our adjusted SG&A expense was $415 million or 8.2% of home sale revenues. In Q4 of last year, our reported SG&A expense of $344 million or 8.2% of home sale revenues included a net pre-tax benefit of $23 million from insurance-related reserves adjustments. Exclusive of that benefit, our adjusted SG&A expense was $367 million or 8.7% of home sale revenues. With the pullback in overall housing demand, we have worked hard to ensure our overheads are properly aligned with today's tougher operating conditions. As such, we expect SG&A expense in Q1 to be in the range of 10.5%-11%, compared with 10.7% last year. In other words, even with lower closing volumes, we are in position to realize overhead leverage that is comparable to 2022. Reported fourth quarter pre-tax income from our financial services operations was $24 million, down from $55 million last year. The decline in pre-tax income reflects both lower profitability per loan and an overall decrease in loan origination volumes as mortgage capture rates declined by 10 percentage points to 75%. In the fourth quarter, we walked away from 21,000 optioned lots and an associated $900 million in future land acquisition spend. As a result of these actions, we incurred a pre-tax charge of $31 million for the write off of related pre-acquisition costs and deposits. This charge was offset by a pre-tax gain of $49 million in JV income associated with the sale of commercial property completed in the quarter. Our reported tax expense for the fourth quarter was $282 million, which represents an effective tax rate of 24.2%. Our Q4 taxes included a $12 million charge associated with deferred tax valuation allowance adjustments recorded in the period. We expect our tax rate in the first quarter and for the full year in 2023 to be 25%. On the bottom line, our reported net income for the fourth quarter was $882 million or $3.85 per share. On an adjusted basis, the company's net income was $832 million or $3.63 per share. These results compare with prior year reported net income of $663 million or $2.61 per share, adjusted net income of $637 million or $2.51 per share. Moving past the income statement, we invested $1.1 billion in land acquisition and development in the fourth quarter, with almost 65% of this spend for development of existing land assets. For the full year, we invested a total of $4.5 billion in land, including $1.9 billion of acquisition and $2.6 billion of development spend. Given recent decisions to exit certain optioned land positions, we ended the year with 211,000 lots under control, which is down 8% from last year and down 13% from the recent Q2 peak of 243,000 lots. With the decision to drop option lot deals over the past two quarters, owned lots currently represent 52% of lots under control. As we have discussed on prior earnings calls, given the slowdown in overall housing activity, we plan to dramatically lower our land spend in 2023. At this time, we expect our total land investment to be approximately $3.3 billion, with an estimated 65% of these dollars going toward development of owned land positions. Along with investing in the business, we continue to allocate capital back to our shareholders. In the fourth quarter, we repurchased 2.4 million common shares at a cost of $100 million for an average price of $41.81 per share. PulteGroup continues to maintain one of the most active share repurchase programs in the industry, having repurchased 24.2 million shares of common stock in 2022 or almost 10% of our shares outstanding for $1.1 billion at an average cost of $44.48 per share. In 2022, we returned over $1.2 billion to shareholders through share repurchases and dividends. After allocating capital to the business and our shareholders, we ended the quarter with $1.1 billion of cash and a net debt-to-capital ratio of 9.6%. On a gross basis, our debt-to-capital ratio was 18.7%, which is down from 21.3% last year. Let me turn the call back to Ryan for some final comments. Thanks, Bob. For all the financial success that we realized in 2022, I can tell you it was a hard year to navigate. When the year started out, we had almost unlimited demand, but supply chain disruptions resulted in countless bottlenecks and extended build cycles. As the year progressed and rising interest rates pushed more and more consumers to the sidelines, we initiated a series of operational changes as we quickly adapted to the more competitive market conditions. If there is a silver lining in today's challenging demand environment, I think we have what can be viewed as favorable supply as a favorable supply dynamic. Recent figures from the National Association of Realtors show the inventory of existing homes for sale at 970,000, or only 2.9 months of supply. Existing homes are our industry's biggest source of competition. Such limited supply is certainly advantageous. As we sit here today, I am incrementally more optimistic about the year ahead. As the expression goes, "Hope for the best, but prepare for the worst." Well, I think that we have done that in terms of how we've set up our business. We head into 2023 with enough units in production to meet demand and with production plans that will allow us to continue turning assets. At the same time, we don't have an excess of spec homes in the system that will cause incremental self-inflicted pressures. We are in a strong competitive position within the markets that we serve. We are typically among the biggest builders in our markets, and our ability to serve all price points provides opportunities with land sellers and municipalities. Finally, we are in exceptional financial position with plenty of liquidity, no debt maturities for three years, and expectations for another year of strong cash flow. There are opportunities to be seized upon even in challenging market conditions. When the time comes, PulteGroup will have the flexibility to take advantage of those opportunities. I will close by again thanking the entire PulteGroup organization for their work this past year to build outstanding homes and to provide an exceptional customer experience. Let me now turn the call back to Jim Zeumer. Thanks, Ryan. We're now prepared to open the call for questions. We can get to as many questions as possible during the time remaining, we ask that you limit yourself to one question and one follow-up. Devin, if you'll open it up for questions, we're all set. Our first question comes from John Lovallo with UBS. Good morning, guys. Thank you for taking my questions. The first one is, can you just give us an idea of the margin on quick move-in homes compared to the company average? Yeah, it's interesting. It depends. I hate to give you the mix, but geographically, it makes a difference. Obviously, we're going to see stronger performance in markets where we're seeing stronger sales activity. Think the Southeast of Florida. You know, specs out West are a little bit more challenged. It really does matter where. On balance, you know, we've seen. Interestingly, if you think about our Q4 guide for margins, we outperformed it. Part of that was that geographic mix. We've talked about getting more volume out of Florida, which is one of our better margin performances. But also because of the relative strength of spec sales, we did a little bit better on those than we anticipated when we gave the guide. Gotcha. Okay. Then, you know, the commentary on demand getting better through the quarter and into January, was interesting and encouraging. Can you just give us an idea of how broad-based that demand was? I mean, was it limited to certain markets, or was it pretty much across your footprint? You know, John, the improvement really came across the footprint on a relative basis. You know, speaking geographically, we continue to see strength in Florida and the Southeast, as Bob just highlighted in the last answer. We continue to see great performance out of the Texas markets. You know, probably one of the more encouraging signs that we've seen is we've started to see our Western markets, you know, Phoenix, Las Vegas, Southern California, Northern California, we started to see those markets come back to life. You know, kind of broad-based improvement across the footprint. Great. Thanks a lot, guys. Thanks, John. Our next question comes from Truman Patterson with Wolfe Research. Hey, good morning, guys. Thanks for taking my questions. First question. You have lower lumber costs beginning to flow through the P&L and perhaps some other, you know, stick and brick cost savings. We also have likely higher land costs and perhaps some uncertainty around pricing. I'm hoping you can help us think through first quarter gross margins. Do you think it'll be likely the low point for the year, given the kind of sequential improvement in demand that you've seen? You know, Truman, I think you've highlighted the, you know, the variables that are out there. At this point in time, we've given, you know, we've given a guide for Q1. You know, as I mentioned, in my comments, that's the extent of kind of what we're gonna provide, at this point. Okay. Gotcha. understood on that. How are tertiary submarkets within metros performing relative to, you know, closer-in communities, maybe in the entry-level, move-up segments? I'm thinking that the prior remote work or work from home tailwinds might be leveling off here, which might negatively impact the tertiary markets. At the same time, affordability is a bit squeezed, and the tertiary markets provide a better value proposition. Well, Truman, I think, you know, as we talked about with our land acquisition strategy, over the years, we've, you know, we've attempted to stay closer into the core, you know, closer to the job market and some of the retail sectors. We certainly have, you know, a sizable first-time, you know, entry-level buyer business and affordability there matters. You know, we do have communities that are more, you know, in the, you know, the growth rings and on the, in the tertiary areas. I don't believe that our land footprint goes out quite as far as maybe some of our competitors. You know, what I tell you is it kind of depends on, you know, it's a community by community situation that is, you know, as much as anything, from a margin standpoint, dependent on the structure of the land deal. You know, and like I think you've heard from us in a lot of situations, we don't underwrite the gross margin. We really focus on underwriting the return. You know, going back to the question that John asked, we've seen relative strength and improvement in kind of sales across the board. You know, that's not just geographically speaking, but that's, you know, community by community as well. Perfect. Thank you all for the time. Thanks, Truman. Our next question comes from Alan Ratner with Zelman & Associates. Hey, guys. Good morning. nice execution, and thanks for the time here. Ryan, you know, just on the margin, I know you're not guiding beyond 1Q, but I'm just curious if you could talk through a little bit. you know, when I compare you guys to some of your larger competitors, your margins right now are outperforming by a pretty wide level, you know, 400-500 basis points. You know, while I understand there might be a little bit of a lag there given, you know, they are maybe more spec-focused than you are, it's still, you know, a little bit surprising to see the outperformance. Could you talk a little bit about, you know, me understanding you're not gonna give guidance, is that just a timing issue? You know, is there something you guys are doing that is resulting in that outperformance in your opinion? Yeah, Alan, you know, thanks for the question. I appreciate it. I think, you know, for those that have followed us for years, you know, yourself in that category, I think, you know, everybody's aware that we've implemented a number of, you know, really important kind of changes in the way that we operate our business, that has driven higher returns over the housing cycle. Certainly higher margins have been part of that. You know, those initiatives have touched everything from the way that we design our homes and communities to how we price and sell homes. You know, a really big part of it is the quality of the dirt that we're buying. A little bit back to the question that Truman asked a minute ago, the way that we have evaluated an underwritten risk. The associated or requisite returns that we ask for as part of the risk associated with those communities. I think you're seeing, you know, I think you're certainly seeing that pay off. We have highlighted, you know, in this call the way in my prepared remarks, the way that we're gonna run the business in this environment, which is a tougher operating environment. We really feel it's important to turn our inventory, to get good flow through and to sell and to find kind of a market-clearing price. While we believe that the operating model that we have, is a great one, and we're really reaping the rewards from it, we won't be immune to, you know, some of the market pressures that are certainly out there. You know, we think that we're an efficient home builder, and we're gonna continue to be very disciplined and prudent in the way that we're making pricing decisions. Great. Appreciate all the thoughts there. Second question on the cost side. You know, I think over the last few months, we've heard a lot of optimism from home builders about their ability to renegotiate costs lower, especially as starts have pulled back as much as they have, and, you know, what was shaping up to be a pretty volume outlook in 2023. You know, your comments are similar to what we've heard from others that the market seems to be, you know, showing some improvement here. You know, I can't help but look at lumber costs up 40% year to date and, you know, imagining that perhaps that might be filtering through to some other inputs as well. What's your current thinking on the cost side? You know, are you feeling a little bit less bullish about your ability to kind of push back on costs now, given what seems to be a strengthening marketplace, or do you still feel like you can find some relief there as the year goes on? Well, Alan, you know, it's gonna be tricky, and I'll break down a couple of components that we're looking at on the cost side. We've talked a lot about affordability being the biggest challenge that we've had, you know, over the last several quarters and I think, you know, affordability is gonna continue to be the theme as we move through kind of 2023, not just in housing, but I think in all consumer spending. You know, consumers are feeling the affordability pinch, and it's part of the reason that we've worked so hard to find prices that we believe, you know, help to address some of that affordability pinch. With that comes, you know, the cost side that you're, you know, you're appropriately highlighting. We have certainly seen and gotten very positive reception from our trade partners around the front end of the house as they've started to see a slowdown in new starts and kind of permits pulled. We've been collaborative in talking about what we're seeing and hearing from consumers. You know, they've worked to help reduce costs kind of as we've reduced our prices as well. We've seen a lot of progress with lumber. You know, that's certainly a commodity, and those things can kind of change, so we'll keep an eye on that. Probably the thing that I would tell you is gonna be hardest on the cost side is the labor side of things, and that's the piece that I think will be sticky. You know, those wage increases have been real. I think once, you know, those wage increases have been provided or given, they're hard to get back. You know, not impossible, but, you know, the material side. Not saying the material side will be easy, but I think, you know, we'll likely have more success or easier success on the material side than we will labor. You know, time will tell, as the year plays out. You know, as I highlighted in some of my remarks, we've got some really aggressive goals, that our procurement teams are working on to reduce overall costs. Got it. Just if I could squeak in one last one there. On the lumber side, I just want to make sure I understand the timing of this. You mentioned that you're benefiting now on 1Q deliveries from the pullback we saw last year. Assuming this 40% increase kind of holds here or maybe even goes a little bit higher, when would that, you know, eventually be a headwind to your margins? Would that be kind of a second half of this year type impact? Yes. Thank you, Bob. Appreciate it. Got it. Efficient. Oh. Very efficient answer. Our next question comes from Michael Rehaut with JPMorgan. Thanks. Good morning, everyone. Hey, Mike. I wanted to circle back to the gross margins in the fourth quarter and the first quarter guide. you know, as Alan referenced, you know, it's a significant gap positively in your favor, obviously relative to the rest of the industry at this point. it's interesting that, you know, obviously one or two quarters doesn't make a trend, but when you look back in prior years, you know, the historical gap of gross margins was in the 2-250 basis points range, and now we're talking, you know, double that, if not more. Just wanted to make sure because I think it'd be helpful for investors to kind of understand if there isn't any type of short-term actions or things within the mix or, you know, relative to what you have in backlog that, you know, if there's any reason that there's some unusual short-term items that are helping the gross margins. You know, we all kind of remember the comments you made last quarter of not being margin proud. you know, you didn't have a significantly lower order growth number than we were looking for, but just wanted to understand, you know, kind of some of the puts and takes there, and if you're doing anything significantly different in the industry, in the marketplace that, you know, might allow this larger gap to continue. Yeah, Mike, I think I understand your question. You know, hopefully you appreciate when we provide commentary on our results, if there are unusual things happening, we tell you about them, you know, whether it's in the form of an adjustment or, when we present adjusted data. To answer your question as directly as I can, there's nothing unusual happening in our margin in the fourth quarter. We're not projecting anything unusual to happen in our margin in the first quarter other than the homes that we're closing. I think if you know, reflect on the answer that Ryan gave, and I can't comment on the relativity to other people's margins, you know, what they're doing pricing-wise, what we're doing pricing-wise. We can only comment on what we're doing, which is, you know, trying to run a thoughtful business, get to a point where we can offer affordability to the consumer, where we can earn a return. I don't know if that gets where you need to be, but there's nothing unusual happening in our margins. Yeah, Mike, let me maybe just pick up on, you know, the comment you made about the comment I made last quarter about not being margin-proud. That's still 100% accurate. We've tried to reflect that in the way I laid out we're going to be operating our business, which is to find a market price that will allow us to maintain a predictable and consistent turn of our inventory. It's the way that we can keep this, you know, business running efficiently and deliver the high returns that Bob talked about. You know, while we're, we would certainly endeavor to do much better, you know, from a comparable sales standpoint, than what we had in the fourth quarter, I think relative to our peer set, you can see that we're selling homes. You know, we're gonna continue to make sure that we're priced competitively with our market offerings. Yeah, no, I appreciate that. I mean, I guess I was trying to get to something you don't want to give, which is second quarter guidance, and we understand that. You know, I think people would kind of think, okay, you have a significant positive gap here. Is there a shoe to drop maybe in the backlog that, you know, might allow that gap to revert to normal? It doesn't sound like that's the case. I guess secondly, you know, the SG&A guidance was pretty encouraging as well, given the decline in closings, yet, you know, the midpoint being similar to a year ago. Just wanted to delve into that a little bit. You know, if you could kind of talk about what you're doing on the, on the cost side there in terms of either, you know, headcount or other, you know, cost management. You know, if we were to expect a similar type of, you know, percentage decline in the coming quarters, you know, given what you've been able to do in the first quarter, is that, you know, something where we could see a similar SG&A in spite of a, you know, 5%-10% or, you know, let's say 10-ish% decline in closings? Mike, hopefully you can appreciate we, on our most recent call, had highlighted we would be looking at our overheads to make sure that they are efficient, given the scale of the business that we are operating today. You know, we have taken actions on costs, and they are varied by market, depending on how that particular market is performing. I think you can and should expect us to always do that, right? I mean, we are always looking at it. Are we running an efficient business? You know, as it relates to beyond the first quarter, you know, like everything else, there's, you know, it's a volatile, not a volatile, but it's a, you know, market in flux. We haven't provided a guide on that. I can tell you, we'll be looking at our overheads as part of... as we see the business develop. You know, we'll develop our plans around overhead spend as well. Right. Just one last quick one, if I could. It's actually kind of also in response to clarification on a prior sneak-in question. When you talk about the lumber costs being up year to date and that impacting maybe the back half of the year, just wanted to get a sense from you. I mean, you know, on a dollar basis, it's significantly lower than it... You know, the percentage is kind of obfuscates the dollar amount, which is somewhat lower, on an absolute basis when you think about where lumber was. Secondly, I would presume there's also some amount of potential labor savings that might come through in the back half, just given where the market's gone over the last six months. You know, a 40% increase in lumber, all else equal, sounds, you know, one way, but to me, there's potential offsets to that. Just wanted to know what you thought, if that makes sense to you. Yeah. In, in real math, you know, our lumber load was down about $10,000 in the deliveries. Q1 will have that benefit in it. That obviously impacts the margin guide that we gave. I think you heard Ryan say that labor is actually likely to be a little bit stickier, so we don't really know if we're going to be able to drive those costs down. Ryan, I think, said it well. Lumber is a commodity. You know, we typically have the pricing of the lumber impact our closings two quarters in the future, right? Because when we order then build the house. The pricing we feel in the market, we feel in our income statement two or three quarters later. That's true for most of our commodity pricing. I would tell you, other than lumber, it's been an inflationary market, so we've seen pressure on pricing. Again, Ryan talked about labor being a little bit sticky. you know, obviously we're working with our trades, and it's, you know, how we build, where we build, can we help them be more efficient in order to offer us a better price? That's what our procurement teams are working on right now. As we highlighted in the prepared commentary, that process, whatever it yields, will impact our margin profile likely late in 2023 or even into early 2024 by the time those price changes get negotiated and then start flowing into houses that would close with a six-month build time, again, two, three quarters from now. Perfect. Thank you so much. Yep. At this time, I would like to remind everyone to ask one question along with a follow-up. Our next question comes from Carl Reichardt with BTIG. Thanks. Morning, everybody. Carl. You mentioned, Ryan, or Bob, the mix of deliveries, 36% first time, 39% move-up, 25% active adult. Is your expectation for 2025 or 2023 on that 25,000 unit guide to be much different than that mix, or shift in any meaningful way? You know, it's interesting, Carl. I don't know about meaningful, but certainly you heard a couple of things hopefully from us. You know, 60% of our sales have been spec. Our spec inventory is largely in our first-time communities. Our community count, which was up 8% year-over-year, the preponderance of that is in first-time communities. The mix of our lots looking forward is a little bit richer towards first time. I wouldn't call it a big shift. Yeah, I would tell you that first time has been... Even if you think about the sales paces in the quarter, you know, the decline was the lowest in that first time space. That's where the activity is today. Okay. Thanks for confirming that, Bob. Just on active adult, I'm curious how that business has trended. Has it been over the course of the last four months or so, given that customer is more likely to pay cash, less worried about rates. We had a thin existing home sales environment, but the stock market's been tough. Could you just maybe chat a little bit about how that customer seems to be faring in an environment like this and contrast them with what you're seeing in the first time in the move-up market, just attitudinally? Thanks. Yeah. Carl, it's a great question. You know, as I think you're aware, we're really proud of our Del Webb business and what it adds to kind of the overall mix of our portfolio. You highlighted that buyer tends to be probably most reactive, positive and negative to volatility within the broader market. There's certainly been, you know, a fair amount of kind of volatility lately, that tends to cause that buyer to maybe pause as opposed to stop. On the positive side, you know, you highlighted it's a thin, resale inventory market. So I certainly think that buyer's been able to sell their home. They've been able to sell their home at I think a pretty good price. On the buy side, you know, they're not necessarily looking for a mortgage, or the mortgage they're looking for is pretty small. There are, you know, there are some, you know, puts and takes. You know, a couple of other things that I'd highlight, you know, relative to the other two buyer groups that we serve, the active adult was in the middle. They weren't quite as strong as the first time buyer. You know, again, I think because they don't have to move, they've got options, they can be a little more patient. They were certainly more strong or did better than the move-up buyer. I think mostly driven by the fact that, you know, they're not as rate sensitive. You know, on balance, Carl, we feel pretty good about the active adult space, kind of all things considered, and I think it'll continue to be, you know, a strong benefit to the, you know, the overall enterprise. Our next question comes from Anthony Pettinari with Citi. Good morning. Just following up on affordability. When we look at net order ASP, I guess down 5% quarter-over-quarter, is it possible to break that out between incentives, base price reductions, and kind of any mix shift that you saw? Anthony, we haven't provided that, and so we're not going to. Okay. Reluctantly. I mean, directionally, is there a way to think about mix shift as being significant or not significant? I don't know if there's any kind of parameters you can put there. Yeah. You know, Anthony, I think what I would tell you is that it's fluid. Sometimes, you know, things that start as kind of discounts off of a price, you know, or adjustments to lot premiums, sometimes those are rolled into kind of base price changes or base price reductions. You know, the discount gets embedded over time into kind of what the new market price is. You know, to Bob's point, we're not gonna probably break it out at this point, but you can see, you know, based on the incentive load that I talked about as well as the kind of reduction of base price, you know, we are finding what we think is the market clearing price to continue to sell homes. Okay, understood. Just, you know, I think you're, you know, selling homes on land that was partially or maybe even largely put under control prior to the pandemic. Just, you know, how long kind of roughly before you sort of exhaust that cost basis? Can you just touch on impairment risk? I mean, you know, what level of margin or price pressure would you need to see before, you know, a community would, you know, come under review for impairment? In answer to the first question, I think, you know, we've on average been buying three-four years of land. You know, when you add in development timelines, you know, land is gonna be hanging around for in the neighborhood of four years. If you think of that pre-pandemic land would be kind of working its way through the system now. In response to the impairment question, you know, obviously we do impairment reviews every quarter. We're coming from a pretty strong margin position, but we always look. For instance, in this most recent quarter, we actually looked at 16 communities for impairments and impaired four of them for about it was about $2 million in cost that flowed through the quarter. The other 12 did not. I think, you know, absent some real structural shift in the market, I wouldn't anticipate a widespread kind of remark of our book. I think you'll continue to see us as we look at this, evaluate communities one by one. Depending on the market conditions for that community, if we are in a position like we were with these four communities in the quarter, we'll address them. Our next question comes from Mike Dahl with RBC Capital Markets. Morning. Thanks for taking my questions. Ryan, Bob, appreciate the color so far. Couple follow-ups here. In terms of the incentives, I think, maybe I'm mistaken, but I think the incentives given were on closings, the increase to 4%. Can you just help us understand? You know, you talked about the improvement in demand, but also making further adjustments on price incentives. What's your current incentive load on orders, if you can give us that? Yeah, Mike, we haven't. The comment that Ryan just made, I think he said it well. You know, pricing is dynamic in the market, right? If you adjust base pricing, it doesn't show as an incentive. It's just a lower sales price. On a relative basis over time, we're in a position where we haven't given a guide on margin. We have given you what the incentive load went to, which was 4.3%, which is almost double. There were price changes embedded in that too, right? You know, all those things factor in. The guide we've given for Q1 margin reflects everything that we've done to this point, and I think we'll leave it there. Got it. Then, in terms of the improvement through the quarter, and I appreciate you don't like to get into the specifics here, but since you gave the commentary about orders progressing through the quarter in January. Can you just enlighten us on a year-on-year basis, you know, where have you stood, you know, month to date in January? Help us understand the magnitude of improvement versus what you saw through the fourth quarter? Yeah, Mike, we don't. We've never kind of given that type of kind of inter quarter trajectory. We're gonna leave it probably where we're at, which is, you know, we're optimistic and encouraged, not only based on what we saw things kind of progress through the fourth quarter, which as I mentioned is pretty atypical to see the fourth quarter build strength. We've certainly seen that strength also continue into January. You know, cautiously optimistic and, you know, rates in that period have certainly been lower. You know, we think that has contributed. You know, we'll see kind of what the Fed does here in the next meeting. You know, all things considered, the operating environment, which we've, you know, I think we've talked ad nauseam, is gonna be more difficult. We're pretty pleased with what we're seeing on the sales floor. Our next question comes from Stephen Kim with Evercore ISI. Yeah. Thanks very much, guys. Encouraging stuff regarding your comments on the market, and that certainly aligns with what we're hearing as well. I wanted to follow up on your comment about rates being a major driver to the improvement that you've been seeing. At this point, what share of, would you say, prospective buyers that you're seeing are having their mortgage application rejected? You know, so you're actually not seeing them able to qualify, compared with what, let's say, you know, what you would have seen in 2019. When you think longer term about your business, I think you said 25,000 starts or something like that. How much of that production do you expect to be used for rental purposes, you know, relative to, again, a normal time, let's say 2019? Stephen, let me grab the first piece of that. I'll let Bob take the mortgage side. I would tell you rate, Your comment on rate is part of it. What's really driving kind of the sales trajectory right now is affordability, and rate is part of that equation. We've also done things in the way we've repriced, the way we've created incentive loads that have helped to solve affordability as well. You know, I think that's a big part of it. I'll skip to, you know, a couple things that you said about production. Just to clarify so everybody's on the same page, we've got enough production based on what was already in production, plus what we intend to start, that will deliver in this year such that our universe, our production universe will be big enough such that we'd expect to have enough homes to close approximately 25,000 homes. And then from a rental, your rental question, you know, we've targeted, you know, if you go back to the announcement we made a few years ago that we wanna do have, roughly 7,500 homes over a five-year period, kind of works out to be about 1,500 homes a year once we get fully kind of ramped up. You know, fairly small piece of our business, which is kind of how we strategically designed that. I'll flip it to Bob, and he can talk about the mortgage piece. Yeah. I guess the good news is, Stephen, we haven't seen a change really in people's ability to qualify, or we haven't seen people not being able to qualify increasing in a disproportionate way because of the rise in rates. I think more often than not, people know what they can spend. They're pre-qualifying as they go through the process. You know, over the... I won't say that I know that versus 2019, but if you look back over the last year or two, we have seen a pretty consistent cadence of the percentage of people that are canceling contracts because they can't qualify. It has not moved materially with the change in rates. Yeah, that's interesting and encouraging. I guess Ryan, you just mentioned, you know, you sort of were more specific about your comment about that 25,000 unit mark, that's helpful. What I gathered from your comment is that you may actually start fewer than 25,000. Correct me if I'm wrong. You're addressing sort of your ability to sort of scale down your starts as you have because you actually, I think, peaked at, like, 35,000 starts in 2021, I think it was. I guess my question, regarding, you know, how you're thinking about the size of your business when things sort of normalize, whenever that happens, how quickly could you reattain that level of 35,000 starts? What would it take? Is that something that you think that you could do relatively quickly if market conditions permitted it? Along with that, your lot count, owned lot count declined again this quarter, and I'm curious, do you expect it to decline further into the first half of 2023? Stephen, there's a lot to unpack there. I'll try and touch on as many as I can. I'll ask Bob for a little bit of help here. you know, I'll maybe start with your starts question. We've got 211,000 lots that we control. Half of those are owned. you know, we've highlighted with the amount of land that our land spend for the year, which is going to be down substantially from 2022, with the lion's share of kind of what we're gonna spend in 2023 being development. On stuff that we've owned and we've purchased and we've underwritten and we've got it in the kind of entitlement pipeline, we're gonna spend the money to get those communities developed and open. You know, assuming the market cooperates and we see, you know, continued strength, I think that we've got the land pipeline such that we can ramp our production, in concert with the, you know, the, the consumer behavior. I feel pretty good about that. Then, there are a couple of other pieces there that you asked Bob, maybe help me out here if there was anything that I didn't answer. The lots and what we're gonna see in Q1, if there would be further decline, I think was the other- In lots owned. Yeah. Decline in lots owned this year or next quarter. Well, like anything else, it depends on the demand environment, how many homes we close. For lots, as an example, part of it will be things that are under option today. Are we able to negotiate, if we so desire, a deferral of that? It's hard to give you an answer on that, Stephen, because the... you know, we're negotiating contracts all the time. Okay. All right. What I was also asking, Ryan, was how quickly could you reattain a level of 35,000 starts? Stephen, that's what I was trying to address with my commentary around land. We have the land pipeline such that we can do it. You know, really to be dependent on how deep, you know, how deep is the, is the consumer demand, and can we get, you know, the trades back on our job site. It's part of the reason that you've also heard us say that we're going to continue to maintain a level of production that allows us to retain those trades on our job site. I think they're linked. Mm-hmm. You know, it's a hard question to answer 'cause I don't know the answer on when demand is gonna return to that level. Suffice it to say, I think we've got a production machine that's capable of delivering that if demand is there. Our final question comes from Susan Maklari with Goldman Sachs. Thank you. This is actually Charles Perrone for Susan. I guess my first question is, looking at the improvement activity that you've seen through January, is it fair at this time to expect the sell space in Q1 to be in line with the pre-pandemic historical seasonality, kind of a 30%-40% improvement sequentially from 4Q to Q1? We haven't provided any commentary on the sales environment. What we've highlighted is that it's variable, I wouldn't wanna try and answer that question for you. You can decide that. Yeah. Okay. Okay. Second, you highlighted the potential to improve cycle times through the year. What are some of the key factors that could lead you to improvements in 2023, maybe between the material supply chain issues versus addressing labor availability challenges in the production? Well, there's less, you know, there's less production overall in the supply chain, so I think we can be more efficient with the labor that's there. The biggest issue that contributed to an elongation of cycle times over the last couple of years was impacts to the pandemic. A big part of that was supply chain related. There was also, you know, a decent sized piece of it in terms of the work environment, work from home, you know, safe work environment, less inspectors on the job sites, less permit reviewers in municipal offices. I mean, it was really a combination of things, but probably the, you know, the biggest variable that is really, you know, I don't wanna declare victory, but it's probably better than it's been over the last couple of years is the supply chain environment is healing. That concludes the Q&A of today's call. I now turn the call over to Mr. Zeumer for closing remarks. We appreciate everybody's time today. We're certainly around for the remainder of the day if you've got any questions. Otherwise, we'll look forward to speaking with you on our next call. That concludes today's conference. Thank you for attending today's presentation. You may now disconnect.