Okay, good morning everyone. Thanks for joining us. My name is Mike Rehaut. I'm the senior analyst following the homebuilding and building products space for J.P. Morgan. We're kicking off our 17th Annual Homebuilding and Building Products Conference, back in person for the first time, I think, in three years, and really excited and grateful to have PulteGroup with us. We have CEO Ryan Marshall also in the room, CFO Bob O'Shaughnessy, and the top IR person in the space, Jim Zeumer, who paid me to say that. So, bills at the end, billable at the end of the day. You know, really appreciate the participation as always. Ryan, so thanks for being here. This will be a fireside chat. I have a bunch of prepared questions, but there'll be time at the end for Q and A. So, you know, I'll kick it off with some industry-level questions and then get a little more specific into Pulte as well. So, you know, I think, you know, just asking some of the top-of-mind questions that, you know, we get from investors every day, I'm sure, you know, you get in terms of the initial set as well. But, you know, first, you know, just on interest rates and demand, I think it's been kind of a little bit of a volatile year, maybe not as bad as 2022, but still, you know, making moves in the market. You know, amid that volatility, I mean, rates were up, you know, 40, 50 basis points at one point. They've come in, maybe 20 basis points in the last, you know, few weeks. How has that impacted demand as the spring selling season has progressed? you know, even in the last few weeks, you know, again, rates continue to move up and down a little bit. How would you characterize the demand flows, you know, as a result? Yeah, Mike, we haven't, so I'm gonna orient all my comments back to our Q1 earnings release and the commentary that we gave about the first three weeks of April. We haven't given any public commentary since then. We had a great first quarter. Demand was very robust, and it was the highest absorption first quarter that our company had other than the couple of years during COVID when, you know, as I think everybody's aware, the sales numbers were kind of off the chart. But other than 2021 and 2022, the numbers that we reported in Q1 of 2024 were some of the best from a quarterly absorption. So really good demand in Q1. We did highlight that the first three weeks of April, we saw some softening of traffic. You know that the order trends that we saw the first three weeks of April were quite good. But you know, we do work to be kind of transparent with the things that we're seeing in real time, and we were seeing some softening of traffic. There's been a few other builders that have reported since then that, you know, have kind of indicated they haven't seen any change. So you know, our kind of assessment of it is, those first few weeks of April were totally correlated with the 40-50 basis point increase that you spoke of. We've seen that happen over the last two to three years as we've seen rate changes. The buyers that are kind of in the purchasing funnel, they tend to take a pause, maybe go to the sideline for a minute, and they've, you know, certainly reemerged. I think the headline is, Mike, you know, the supply demand, overall supply demand, I think, is still very much, tight. And there's, you know, more demand than there is supply, which I think still creates a, a pretty favorable operating environment for all the builders. Right. And I think to your point, Ryan, it's an important one. Traffic maybe softened a little bit, again, first three weeks in April, which is now, you know, three to six weeks ago. But, the orders, you said, despite the traffic, was, you know, is quite good. I mean, you're kind of saying maybe it held up, you know, more in line with, like, a March pace, or is that I don't wanna put words in your mouth. Yeah, we didn't give specific order numbers, but, you know, qualitatively, we said the first few weeks of April were good. Right. You know, the other piece that I point to is in our first quarter, we updated our annual guide. We moved our annual guide for closings up by 1,000 units from 30,000 to 31,000. Right. We increased our gross margin guide by about 50 basis points at the midpoint. So, you know, and we still got a lot of homes to sell. So, certainly, we had a good first quarter, which contributed to some of the margin guide increase. But there's a big part of it that was related to we're, you know, we still feel pretty good about how the balance of the year will play out and the homes that we still need to sell in order to deliver into that updated guide. Great. So, you know, also, along the lines of affordability, and I think, you know, at points, you know, over the last few years, you would you could argue that, you know, 30, 40 basis points might not be as much of a, of an impact to demand trends. But, you know, certainly, the other part of it is, affordability, you know, remains stretched, by a lot of metrics. How should we think about the direction of your ASPs over the next two or three years given some of those affordability challenges? Yeah, so, affordability is certainly something that I think the entire industry is talking about, not just in housing, but we're talking about it with kind of a $5 value meal McDonald's. You know, there's real affordability constraints out there in the world. We've had the good fortune, especially given the strength of our mortgage company, that we've got the ability to use the forward commitment to help solve some of the financing-related affordability challenges that we see from buyers. Today, our national offers at 5.75%, and we're getting about 25% of our buyers are taking advantage of that 5.75%. It's on a 30-year fixed deal. It's a heck of a deal. Even buyers that don't use that because their delivery dates kind of out beyond when the commitment can effectively be used, you know, the incentives that we're using are being almost entirely directed towards some sort of financing incentive. So I think that's part of the way that we're, we're working to combat affordability. The job market continues to be fairly strong. We're seeing wage growth. And then for our ASP, we've assumed that our ASP essentially kind of remains flat for the balance of the year, Mike. So, you know, as we look to kind of out years, you know, time will tell with kind of how the economy behaves in terms of kind of where pricing ultimately goes. But, you know, we're still, you know, despite, I think, the Fed's efforts to kind of bring inflation down, we still are in a bit of an inflationary environment. And demand has continued to be good, which has, you know, allowed us in some cases to kind of reduce incentives, maybe raise prices a little bit, in certain communities. And, you know, that's part of what's contributed to the incremental margin guide that we gave for the year as well. So, even though affordability is stretched, it's been a fairly robust operating environment for us from a profitability standpoint. Right. No, it's important. You know, you hit on supply a couple of times, demand supply dynamics, obviously, in our view, very critical. In our view, supply remains fairly tight. I mean, there's been a little noise on existing home sales maybe increasing a little bit, perhaps even in Florida. You know, how would you characterize supply today, you know, relative to three or six months ago? And, you know, have you seen in the marketplace, and, you know, if any regions stand out, you know, any level of increased supply impacting, you know, some of the demand supply dynamics? Yeah, so you're specifically talking on the resale side, Mike, or, or, or resale as well? Re, resale or new, yeah, if it, you know, comes to mind. So I'll highlight a couple of markets in a second that maybe we are starting to see some slight changes. But outside of those couple of markets that I'll mention, it's broadly normal, maybe, still better than normal. We're, and normal in our mind is six months of supply. We're way below that in most markets. Mm-hmm. The only markets where we're seeing a slight uptick is, most recently, Southwest Florida. We've seen a little bit of an uptick in existing supply inventory in the kind of Sarasota, Fort Myers, Naples area. It's a place that I think had really rapid price appreciation. And I think the market's going through a little bit of a normalization as it sorts through that. We saw the same phenomenon about 18 months ago in Austin. It's largely kind of already worked through that where, you know, prices ran probably too far, too fast. And there was a, you know, a period of pause while the market kind of figured out where those prices ultimately needed to be. So really beyond Southwest Florida at this particular point in time, we're not seeing any markets where we think we've got any kind of real inventory issues. Right. That's helpful. There are issues. There's just not enough inventory. So, you know, caveat that with, it's the only place where we're seeing maybe more inventory than what we've normally seen. Okay. No, thank you. You know, over the last few months, you know, big news in the, you know, brokerage side of the industry with the NAR settlement. You know, we, we obviously get questions on that, as I'm sure you do, you. Can you just remind us, roughly the percentage of revenues you pay to outside brokers, and how would you expect the NAR settlement to impact this percentage over the next, you know, 12, 18 months? Yeah, so, you know, Realtors have been a big part of our business for a long time. They still are. We welcome Realtors into our business. Today, about 65% of our sales have a co-broker attached to them. The commission rate that we pay varies by community, but on average, it's roughly about 3% of our base price. We typically don't pay commissions on lot premiums or options that buyers choose. So, you know, slightly less than probably 3% of revenue on about 65% of our total deals is where we land. Mike, your question on where this ultimately goes, I think time will tell, but I absolutely do expect that there will be changes. Realtors, and you know, depending on kind of where your head is at on Realtors, my view is Realtors are not going away. They're gonna continue to be a very big part of the housing ecosystem. I might even argue that the really good Realtors will have an opportunity to make more money than they do today. I just think the pricing, the way they charge and who ultimately pays for what they charge will most likely change. And, you know, time will kind of tell how that ultimately plays out. You know, heretofore, it's always been, the commission buy-side and sell-side has always been borne by the seller. You know, if I had a theory out there, my theory would be that there'll be much less of the buy-side fees paid by the seller. They might still pay something as a marketing fee, kind of referral bonus, referral fee of some sort. And then I think you'll start to see the buy-side Realtors charge their buyers on more of a kind of pay-for-service, similar to the way you would pay an accountant or you would pay an attorney or you would pay kind of any other kind of professional knowledge worker that's providing a service. Right. You know, you've got a lot of buyers out there that kind of look at the realtor as a total free lunch. Right. There's really not a lot of downside, or a lot of cost for that matter, of using a realtor because you can say somebody else is gonna pay the fee. Sure. I think, you know, maybe some of that changes over time. Right. Right. Lot optioning and land bankers. So, you know, maybe you could just remind us again where you are in your current percentage of total lot position. Where could this go in the next two or three years? And how do you see land bankers specifically as part of this journey? And generally speaking, you know, maybe just to add to this, when you think about land bankers, you know, maybe if you could go into a little bit of the nuances or the differences of obligations or costs, you know, when thinking about land bankers versus other counterparties 'cause it's certainly a topic that we get a lot. And, you know, we hosted a land banking panel last month. So just love your thoughts. Yeah. So today, Mike, we sit at 51% of the land that we control. We control 225,000 lots plus or minus, and 51% of those are controlled via option. Most of those are options that we have with underlying land sellers. There's a small percentage of the, you know, the 112,000 lots that we option that are with land bankers today. If you went back about five years ago, six years ago, we set a goal, that we wanted our company to be at a 50% land option. At that point in time, we were 30% optioned. We moved past the 50% in about three years. We've kind of gotten there, and we've stagnated at around 50%, because we have historically not used land bankers. We were all of our land options, we were looking to have with underlying land sellers. We've kind of evolved our thinking on this, and we're of the belief more options are better for our ability to drive high returns through cycle and minimize the risk that's associated with owning land. So we'd like our land ownership percentage to be at 30%, options to be at 70%. So we wanna increase that option percentage by kind of 20 basis points, or 2,000 basis points up to 70%. We believe to do that, Mike, we'll need to do it with land bankers. So we've got, you know, we've got a fairly robust platform built out with seven or eight, you know, institutional-level land bankers. I'm sure many of them were at your conference last week. And for us to go from 50% to 70%, that incremental kind of 20% will be facilitated by the land bankers. We still believe we can control 50% of our option land through underlying land owners. We like those types of options the best because they're with the counterparty. Right. They're different. You know, they've got different kind of parameters than land banker parameters. There's a different structure with those. There's a different cost with those. Similarly, you know, the land bankers, there's a role for those in our portfolio as well. So, in terms of time for us, we're gonna do it naturally and organically. So as we kind of acquire more land over the next kind of three to four years, you'll see 70% of that be controlled in total via option, some with underlying land sellers, some with option with land bankers. And as we turn our land, which we do about every three and a half years as that portfolio turns, you'll see us naturally kind of be at that 70% over about a three or three and a half or four-year time. Great. So, you know, a couple of questions here kind of orienting towards ultimately, you know, kind of view over the next few years of margins and returns. But, you know, kind of one of the building blocks of that, obviously, land cost inflation, something almost you can argue ever-present in the industry. You know, we've heard some of your competitors talk about, you know, mid- to high single-digit land cost inflation over the next year or two. Others, you know, have taken maybe a little bit more upfront of that journey, this year, maybe less so next year, depending on the turnover of their community count. How should we think about land cost inflation for your business over the next, you know, 12-24 months? Yeah, we've talked, Mike. Everything that we've guided to has been kind of in the next 12 months. So, yeah, at the beginning of the year, we've guided to high single digits for inflation to total inflation in our finished lots. So, now that's all been baked into the margin guide that we've given for the full year. So, you know, you're getting kind of a full package of both what's happening on the cost side as well as what we think happens on the margin side as well. Right. Right. So then, you know, another question we'll be kind of asking across the board to most builders is just around the gross margins and, you know, understanding that, you know, yourselves, others maybe have shifted the management of the business towards, you know, an ROE approach over just purely a gross margin approach. But, you know, nonetheless, a lot of focus around today's levels, you know, the industry itself running about 350 basis points on average versus pre-COVID levels. How do you think, how should we think about gross margins potentially returning to those longer-term averages? There's been different arguments made that, you know, maybe they can stay higher for longer. I know it's a phrase that, you know, we hear more and more of. But, you know, particularly as you think about land cost inflation, as you think about, you know, perhaps the land use of land bankers in the industry, you know, how to frame, you know, and, and certainly Pulte itself has been able to maintain above-industry average gross margins impressively, even more so over the last year or two, how should we think about gross margins for your company? I know this will come as a surprise to you, Mike, but we actually, we don't underwrite the gross margins. And while we think a lot about gross margins, it's not the most important thing in our business. And I don't think it should be the most important thing for any of you that follow the industry. The single most important thing in this business that drives value is return on invested capital. And so margin certainly is a component of that return equation, but it's not the only component. Right. So, you know, it's part of the reason that we look at the volume or the asset turnover that we're going to do, the margin that we're going to get, and the structure of the way that you purchase land. You know, that capital investment piece is arguably the most important out of all of that. And so the philosophy that we've taken in how we run our business is we're trying to optimize pace and price such that we drive the optimal level of return on invested capital. And we think that's what's contributed to the company's success and the ROE success that we've had. Right. And over the, you know, the last 7 years, you know, 1-, 3-, 5-, 7-year period of time, we've either been the number 1 performing total shareholder return or number 2 because we've taken that focus on optimizing the return that we generate out of the business. Now, some of you have probably heard me say before, we're not gonna be margin proud. Right. And a lot of times, people will say to us, "Well, why are your margins so high? And why are you different than all the other builders? What is it that you guys are doing different?" So we'll, you know, articulate, you know, we underwrite differently, the way we build our commonly managed plans, our value engineering process, the consumer validation, the way we price, blah, blah, blah. That all factors into kind of our margins. Well, why don't you lower? So So then the question comes, why don't you lower margins and sell more volume? Right. You know, the short answer is we're looking to optimize in a world where land is a precious commodity. We're looking to run the pace-price balance. Some of that has margin implications in a way that we think optimizes return. Right. Right. No, fair enough. I mean, you know, as you think, I mean, particularly kind of moving towards from 50%-70% over time, you know, which all else equal would imply a stronger, you know, less capital in use, higher returns on, on, on what you employed. You could argue that, you know, margins, gross margins could slip in that scenario, but your overall returns would remain, you know, as healthy as before. Is that kind of thinking in terms of perhaps some of that shift in some of the areas of the business but still maintaining the overall? We think about, in that construct, Mike, you're generally right. Land banking is more expensive than owning the dirt, from a cost of carry or an interest standpoint. It's certainly more expensive than an option with an underlying land banker. That's all factored into this overall return equation. Right. For us to go down a path with a land banker, we really need two things. We know that we'll give up some margin 'cause you got another hand, you know, sitting at the table looking to eat. So we'll give up a little bit of margin. We'll pick up a return benefit. So if we can get that kind of equation to work in our favor where we maybe give up a little bit of margin, but we pick up return, we think it works. And then one of the most important things is we're looking for risk transfer. Right. You know, that's part of, you know, the it's not just an increase to kind of return that we're looking for in a land banking scenario. We're also looking for, you know, a bit of protection, a bit of an insurance policy in the event that there's some kind of a market downturn. It gives us more flexibility than what we'd have if we owned the land outright. Right. No, fair enough. Maybe shifting to some company-specific questions. I'll ask a couple and do wanna allow for some questions for the audience as well. I think we have about, you know, 10, 11 minutes left for this session. You know, and I'm sure you get this question a lot. You kind of alluded to it in terms of, you know, moving margin versus volume per se. But how do you think, you know, first questions around size and scale. You, you obviously have a you know, you're one of the bigger builders out there. There's still a couple significantly larger than yourselves. So how do you think about your current footprint and size relative to those larger peers? And do you feel there's a need to get bigger? And if so, you know, how might that plan be, you know, implemented over the next few years? So, there's certainly value from market share. And we think at the size that we're at today at roughly 31,000 units and we're in every major housing city, we have national market scale. So I think we're confident in saying we've checked that box. Then we go to the what I think is arguably the most important component of market share scale, and that's market share in the markets that you actually compete in. So Dallas, Chicago and Orlando. And you go through every city and you look at your relative market share to the other competitors. That's where we found there is the single biggest difference in business per business unit performance is the market share or market scale that you have in those markets. So, you know, we pay a lot of attention to that. We don't need to be the biggest. We feel like we need to be on a relative basis, at least, 0.5 or half as big as the biggest in the market is kind of the line where we see a break in performance. So focus a fair amount on that as well, Mike. We have expanded into a number of new markets over the last 3 to 4 years: Salt Lake, Denver, Portland, Greenville, Columbia, South Carolina, not the country. The West, the East Coast of Florida, like Daytona, kind of Space Coast area. So, you know, there's a handful of places that were good housing markets that we weren't in that we've expanded into, and we think that helps with our growth. There's also a lot of markets where we think we can continue to organically grow. Some of the big cities in Texas, some of the cities in Florida, some of the spots on the West Coast, Las Vegas, Arizona example. We think there's opportunities in really good housing markets where we already have operations. We're already performing well. We can put some incremental capital to those teams and continue to take some market share in those spots as well. So, you know, one of the other kind of headlines that you've probably heard from us over the years is we're not looking to grow for growth's sake. We'll grow if we believe that it makes us better. So, you know, the headline you know, the big headline is, we're big enough today to be considered big. So growth is part of kind of where we wanna go. We've set long-term growth targets of 5%-10% annually. Our initial kind of guide for 2024 was to be at about 5%. With what we've updated, in the most recent quarter, we'll be near the higher end of that long-term guide. You know, it's a part of our story, growth, but it's going to be healthy, profitable growth, not just more volume. Right. Right. And so does that also apply to M&A? I mean, you know, obviously you've made some larger acquisitions, still kind of regional or super regional. You know, I'm thinking of American West Homes in Vegas or even a few years before that, John Wieland. So those were bigger of size. You know, the industry by and large seems to be more on the, you could even argue, smaller kind of bolt-on. So how do you see M&A kind of fit into that? Yeah, we look at almost everything. You know, that's another advantage of kind of being big and in as many markets as we're in, as we see every potential deal that's out there for sale. You know, we're pretty picky. We're looking for markets and consumer groups that we think add to what we have. The two that you mentioned, Wieland and American West, were two of two great examples of that. Probably my favorite of that bunch was American West. It was a heavy land option deal. So while it was an acquisition and we got some finished lots as part of it, we got, you know, over half the lots that we got control of came as an option from the seller that sold us the company, which was kind of nice. It was also the way that we got into Denver. The same seller owned a big master plan in Denver. And so that transaction also opened up a door for us to open up our Denver division. So there were a lot of synergies that came from the American West transaction. So just, you know, to put a pin on that in that, Mike, we look at a lot of things. We're really picky. We wanna make sure that it's a market that we wanna be in and that it actually improves kind of our size, scale, profitability, consumers that we can target and focus. We're not necessarily interested in doing just big M&A so that we can say that we're bigger. Right. Fair enough. We have about five minutes, maybe a little more left to the session. I'll open it up to Q and A from the audience if anyone has any questions. If not, I have a few more up my sleeve, but I think we have mics on the table. Yeah, go. Yeah. Can Can you tell us, your debt ratio seems to be nicely in order. How far would you push it if you had a nice acquisition? Can you tell us over a cycle how acquisitions may come from entities not as well capitalized as you? Yeah. So, we, you know, we're very comfortable with kind of where we're at from an overall debt perspective today. We sit at 16%, gross debt to cap and basically net debt to zero. If you go back over the last eight or nine years, our original target range of debt was 30%-40%. We modified it three or four years ago to 20%-30%. And we're clearly inside of that today. The probably the most important thing when we think about debt is we really think about capital allocation. And our priorities are invest in our business, which we've been doing at a growing rate almost every year. In fact, 2023 to 2024, we've increased our investment into the business by 16% from $4.2 billion or $3 billion to almost $5 billion in new land investment. We paid our dividend or we will pay our dividend. We've increased that, in about 7 of the last 9 years. The most recent increase was 22% or 3%. We're buying shares back, with the excess capital that's being generated by the business. And we've repurchased about 50% of the company over the last 10 years. And then we've even started talking about if there's money still left, then we'll start retiring debt, which you've seen us do, over the last couple of years. We've been selectively kind of going in and picking up some available debt that was trading below market. So, the debt ratio is really an outcome for us as opposed to a driver. Could the business handle more debt? Sure. Does it need to handle more debt? No, because we're running a really high-performing, well-capitalized business that is doing all of the we're, we're literally doing every single one of the critical capital allocation priorities that we have. And so that's, that's the biggest thing that we've done in, in, in thinking about kind of our debt level. In terms of M&A stuff we see, you know, what might create some incremental pressure. You know, candidly, I thought we would've probably given the, the current lending environment, I thought we would've seen more, because of stress, you know, that, that maybe, smaller local kind of builders might run into as they ran into kind of debt refinancings, et cetera. We haven't seen honestly a lot of stress there. I think part of it is most builders, if you're in this, you know, if, if you have land supply and you can get things built, you're pretty profitable. It's a pretty good operating environment. So, you know, I think those, and I don't, you know, I don't have visibility into everybody's individual situation, but for the most part, folks have been able to either work with their existing lenders or find family office type money or kind of wealthy individuals that are continuing to willing to kind of back them. So, you know, deals are out there, but, you know, I wouldn't say that there's anything that's been on sale, and any kind of really high-stress type opportunities because of financing. I have a question over here. Yeah. I thought that was an interesting stat that an SBU's economics changes once you get over 50% local share. Can you talk about some of the dynamics that happen when you go from, say, 45%-55%? Yeah. It's. I probably can't slice it quite as thinly as 45%-55%, but in some work that we did, we saw the breakpoint was at about 50% relative market share. That the returns of those business units that were over 50% market share in an individual market, they perform better. And I think it goes to a couple of things. You get arguably better access to the land development community. So you get probably first choice at land. You're in a better position to negotiate with land sellers, with trade partners. I think you also have an opportunity to have better talent as well that comes to us as our employees. So, there I think there's a lot of synergistic events or benefits that come from having local market scale. Just curious on that, unless—is there any other questions from the audience? Or I'm just kind of curious on that point around the markets. You know, do you have a breakdown of the number of markets that you're in that are above that 50% threshold versus below? And, you know, I would just presume that the goal is to have all them above, but, you know, maybe give a timeframe on that or how you think about it. Yeah, Mike, we, we do, you know, we have that data inside the company. We don't, you know, we haven't readily disclosed it. You know, it's not the hardest thing in the world to figure out. So, you know, it's not as if, not as if, if folks really wanna see it that, you know, you can, you can find it. Yeah, we focus on a lot. So one of the things that, Bob and I do. Bob and I spend a lot of time traveling in markets when we're not doing things like this. And we're in the middle of doing strategic reviews with our division teams. That kind of our positioning in each of the markets is something that we spend a lot of time on. If we're, kind of below that, that relative market, benchmark that we'd like, then, you know, we kind of lay out plans to say, hey, how do we get to a point where we think we've got better market share position? Now, the one caveat that I'd give there are some markets and, you know, take Dallas as an example. Our Dallas business is much smaller than a couple of the other big builders there, but standalone, it's still 1,700, 1,800 units a year. It's a really big business. So there are you know, as with anything, any of those kind of stats, there are exceptions to the rule. Sure. Great. Well, that does it for this session. Thanks so much, Ryan. Appreciate the participation as always. Nice to see you in person again. Yeah. Likewise. and. Next year, Mike, I think we actually need a fire for the fireside chat. Well, yeah, I think there's an open air across the street. There might be something, but we'll see. Anyway, thanks, Ryan. We'll resume at 9:00 A.M. with Mohawk Industries.