Good morning, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup Inc. Q1 2025 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. Thank you. I would now like to turn the call over to Jim Zeumer. Please go ahead.

Great, Kelvin. Thank you. Good morning, and welcome to today's call. We look forward to discussing our first quarter operating and financial results. With me today are Ryan Marshall, President and CEO; and Jim Ossowski, Executive Vice President and CFO. As always, a copy of our earnings release and this morning's 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 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 in our SEC filings including our annual and quarterly reports. Now, let me turn the call over to Ryan Marshall. Ryan?

Thanks Jim, and good morning. I appreciate the opportunity to speak with everyone today. In addition to discussing PulteGroup's Q1 results this morning, I will also share our views on the current macro environment and how our business model and execution against our strategic initiatives are helping us navigate today's evolving market conditions. Let me start by recognizing the incredible work our teams did in delivering PulteGroup's strong first quarter results. Given the cross currents the housing industry has encountered in 2025, we believe our results show the value of PulteGroup's proven operating model, balanced portfolio, and the expertise of our local operating teams. In what proved to be a dynamic operating environment, we met or exceeded our guidance in delivering over 6,500 homes, gross margins of 27.5%, net income of $523 million and most importantly, a trailing twelve-month return on equity of 25.4%. As the country moves through economic cycles, the housing industry will inevitably encounter periods when we are experiencing changes in the operating environment. I truly believe that the balanced and highly diversified operating model that we have built over the past decade in combination with our strategic focus on generating high returns over the housing cycle offers important competitive advantages. Our national footprint and strategy of serving all buyer groups, with a targeted offering of spec and build-to-order homes, along with our broader capacity to use both price and/or pace to drive returns, give our operators more flexibility when navigating periods of economic transition. In the back half of 2024, many of our meetings with analysts and investors included questions about housing demand and the state of the housing cycle. In response to these questions, we indicated that the spring selling season of 2025 would provide the best opportunity to assess the condition of today’s home buying consumer. Having reached the midway point of the spring selling season, I wanted to provide a few thoughts on what we've experienced and how we are responding. First and foremost, I strongly believe people still aspire to homeownership, and if you can provide the right value equation, they are excited to get into a new home. We saw this as the first quarter progressed and demonstrated a typical seasonal pattern with traffic, gross orders, and net new orders trending higher as we moved through the quarter. Within the quarter, we also saw the level of home buying activity respond positively to the 30-year mortgage rate dropping below 7%, which allowed roughly 20% of our divisions to increase prices within many of our communities. Consistent with the relative strength we've seen among move-up and active adult buyers over the past few quarters, we saw the average spend on options and lot premiums per home climb to $110,000 in Q1. This is up from the $102,000 and $107,000 in the first and fourth quarters respectively of last year. The financial strength of move-up and active adult home buyers is why we have purposely aligned 60% of our portfolio to serve these key buyer groups. However, the quarter also saw consumers continuing to face affordability challenges that exist for would-be homebuyers in metro regions across the country. From the high absolute selling prices of today’s homes to the resulting high monthly mortgage payments, consumers are struggling with the affordability challenges when it comes to purchasing a home. These headwinds have only been exacerbated recently by growing concerns about the potential for a slowing economy. As one of the nation's largest homebuilders, we have developed and deployed a variety of tools to help consumers overcome their personal homeownership hurdles. This includes offering new product designs and more efficient floor plans, as well as offering meaningful incentives, including programs that can offer consumers a below-market rate on a full 30-year fixed-rate mortgage. We leaned into incentives a little more heavily in the first quarter, as we executed on our plan to reduce excess spec inventory, by actively selling our in-process and finished stock inventory, while also adjusting our start pace to better match current demand. As a result, our incentive rate increased 8% for the period, but we lowered specs to 47% of production, down from 53% in the fourth quarter, while still reporting strong gross margins of 27.5%. In sum, buyer interest and activity in the first quarter were directionally in line with our planning expectations heading into the period. As we've moved from March to April, however, we have seen consumers at all price points impacted by changing macro conditions and any resulting decline in overall consumer confidence. Whether it’s the volatility in the stock market, concerns about tariff-induced inflation, the fluctuation in interest rates, or the growing talk of recession, demand in April has been more volatile and less predictable day-to-day. We can certainly empathize with our customers' concerns, as our business is happy to adapt and manage through a constantly changing and shifting tariff landscape, the potential costs of which could be significant. While our Q1 build costs were effectively flat on a year-over-year basis, proposed tariffs have the potential to add thousands of dollars to the cost of construction. We are a builder with 75 years of experience and a resilient operating model, and as tariffs have been imposed or proposed, our cycle-tested procurement teams have developed and begun implementing response strategies. Let me now turn the call over to Jim Ossowski. You will recall that in February, Jim officially assumed his responsibilities as PulteGroup's Chief Financial Officer. I'm excited to have him in his new role, and I know that our organization will benefit greatly from Jim's leadership and experience. After his remarks, I will offer some additional thoughts on how we plan to manage our business, given the current operating environment. Jim?

Thank you, Ryan, and good morning. I appreciate the opportunity to review PulteGroup's quarterly results. In the first quarter, our net new orders totaled 7,765 homes, which is a decrease of 7% in the first quarter of 2024. Lower orders in the period were driven primarily by a 10% decrease in net new orders per store, which is partially offset by the 3% increase in our average community count to 961 for the quarter. Notably, the cancellation rate, as a percentage of starting backlog, increased only slightly to 11%, compared to 10% in the prior year. Specific to the quarter, we would say that demand conditions followed a pretty typical seasonal pattern, with net new orders increasing as the quarter progressed. On a sequential basis, net new orders increased 26% from the fourth quarter of 2024. This increase, however, is below historic averages and reflects a consumer that is carefully assessing the high cost of homeownership, and more recently concerns about the economy and overall employment conditions. On a year-over-year basis, net new orders by first-time buyers were down 11%, move-up buyers were down 4%, and active adult buyers declined 5%. We continue to realize meaningful relative outperformance among our move-up and active adult consumers, as they have greater financial flexibility and can more easily adjust to market changes. That being said, the extreme volatility in the financial markets can cause even these consumers to pause from making a large purchase. Moving from orders to closings, home sale revenues in the first quarter totaled $3.7 billion, down 2% from the $3.8 billion of revenues generated last year. Lower home sale revenues for the period were the result of a 7% decrease in closings to 6,583 homes, largely offset by a 6% increase in average sales price to $570,000. By buyer group, the breakdown of closings in the first quarter was 39% first-time buyers, 40% move-up, and 21% active adults. In the first quarter of last year, our closings were comprised of 42% first-time, 35% move-up, and 23% active adult. As we have discussed on prior calls, we have experienced a modest decline in the percentage of closings from active adult buyers driven by the closeout of several Del Webb communities for the past 12 plus months. I'm happy to report that we are extremely pleased with buyer response to recent Del Webb openings in Cleveland, Indianapolis, and Southern California. We are equally excited about the additional Webb community openings coming later this year. Closings from these new Webb communities will be more heavily weighted towards 2026 and beyond. Getting these communities open for sales is a critical first step. Based on sales and closings activities in the period, we ended the quarter with a backlog of 11,335 homes, which is down 16% from last year. On a dollar basis, our backlog was $7.2 billion, which is down 12% compared with last year's first quarter. As Ryan mentioned earlier, we adjusted our start pace as part of a process to lower spec inventory, in alignment with our target range. In the first quarter, we started approximately 6,700 homes, which is down from the approximately 7,500 homes we started in both Q1 and Q4 of last year. Reflective of this action, we ended the first quarter with 16,548 homes in production, of which 7,840 were spec units. In just one quarter, we reduced our spec count by over 900 homes while lowering our spec percentage from 53% to 47% of inventory. This moves us closer to our target range of 40% to 45% of overall units in production. Of our spec units, 1,800 were completed at quarter end. We expect finished specs to continue trending lower in the slowdown in our start space. The goal in aggressively managing our production pipeline is to more effectively balance the need to have units available to meet immediate buyer demand while still selling from a position of strength within our communities. In the current environment, we believe prioritizing price and margin over volume makes the most strategic sense. Based on recent sales paces and the mix of units under construction, we expect to deliver between 7,400 and 7,800 closings in the second quarter, while buyer demand over the next few months will be a key determinant. Given the more than 16,000 units we have under production, and cycle times of approximately 110 days, we currently expect to deliver between 29,000 and 30,000 homes for the full year, slightly below our prior guidance of 31,000. Embedded within our updated delivery guide is our expectation that quarterly community count will be 3% to 5% higher in 2025 than in the comparable prior year period. Consistent with our first quarter results and our previous guidance, we currently expect the average sales price of closings to be in the range of $560,000 to $570,000 in each of the remaining three quarters. Continuing down the income statement, our gross margin in the first quarter was 27.5%, which is flat on a sequential basis from the fourth quarter but down from a very strong Q1 of 2024. While sales incentives increased to 8% in the quarter, gross margins in the period benefited from a favorable mix of homes closed both in terms of geography and buyer group. As it relates to gross margins going forward, we continue to expect gross margins in the second quarter to be in the range of 26.5% to 27.0%, and we now expect gross margins in the third and fourth quarters to be in the range of 26.0% to 26.5%, down slightly from our prior range of 26.5% to 27.0%. Our guide on gross margin assumes incentives remain elevated at the elevated levels experienced in the first quarter. Further, gross margins in the back half of the year reflect the estimated impact of tariffs that have been imposed, which are expected to increase our house cost by an estimated 1% of average selling price. In the first quarter, we reported SG&A expense of $393 million, or 10.5% home sale revenues, which compares with prior year reported SG&A expense of $358 million, or 9.4% of home sale revenues. Reported prior year SG&A expense includes a pre-tax insurance benefit of $27 million. Based on anticipated closing volumes, we now expect SG&A expense for the full year 2025 to be in the range of 9.5% to 9.7% of home sale revenue. Given the uncertainties of the current operating environment, we continue to carefully assess SG&A expenditures as we seek to maintain an appropriate overhead structure. Our financial services operations reported first quarter pre-tax income of $36 million, compared with $41 million in the prior year. The lower pre-tax income primarily reflects the impact of lower closing volumes within the company's home building operations. The capture rate in the quarter increased to 86%, up from 84% last year. For the first quarter, our reported pre-tax income was $681 million. We recorded a tax expense of $158 million, or an effective tax rate of 23.2%. Our first quarter effective tax rate benefited from renewable energy tax credits and stock compensation deductions reported in the period. At this time, we continue to expect our tax rate to be approximately 24.5%, excluding the impact of the discrete period-specific tax events. For our first quarter, we reported net income of $523 million or $2.57 per share. In the first quarter of 2024, reported net income was $663 million, or $3.10 per share. Prior year results are inclusive of $65 million, or $0.23 per share in pre-tax benefits related to the sale of a joint venture and the aforementioned insurance benefit. Earnings per share for the quarter was calculated based on 204 million diluted shares, which is down 5% from the prior year, and we continue to systematically repurchase our shares. In the first quarter of 2025, we repurchased 2.8 million shares for $300 million, or an average price of $108.03 per share. As noted in this morning's release, we ended the first quarter with $1.9 billion remaining under our existing share repurchase authorization. In addition to repurchasing our shares in the first quarter, we allocated $1.2 billion to land acquisition and development. In Q1, 52% of our spend was associated with the development of our existing land assets. As Ryan noted, given today's macro uncertainties, we are asking our land teams to review project returns and confirm they still meet our hurdle rates given changing market conditions. We are confident that in this type of operating environment, our disciplined underwriting process will serve us well, as it has done during prior periods of uncertainty. Given our current pace of sales and starts, we now expect our land investment in 2025 to be approximately $5 billion. We remain positive on the long-term outlook for housing, but we are prepared to adjust our near-term land spend in response to changes up or down in buyer demand. While we are slowing projected land spend, we are still prepared to use our financial strength to capitalize on land opportunities that could develop during these choppier market conditions. Based on the updated expectations for our homebuilding operations, we continue to expect operating cash flow generation for the full year to be approximately $1.4 billion. We have such flexibility because we already control a strong land pipeline that can support the future growth of our business platform. At the end of the first quarter, PulteGroup had 244,000 lots under control, of which 59% were controlled via option. Just the past year, we have increased our option lot count by almost 30% while reducing our own lot count at the same time. I want to underscore that whether these land options are with the underlying land seller or one-off transactions with a land banker, our ability to mitigate market risk is as important as the rate of return when assessing each transaction. On a deal-by-deal basis, we continue to strike a balance in evaluating the profitability and risk management opportunities that might result from optioning the underlying land parcel. And finally, I'm pleased to say the PulteGroup remains in an exceptionally strong financial position, as it ended the quarter with a debt-to-capital ratio of 11.7% with $1.3 billion of cash, further validating the strength of our operating and financial positions. Moody's recently upgraded our senior unsecured notes to Baa1. Now let me turn the call back to Ryan for some final comments.

Thanks, Jim. Given our backlog units under production and current build cycle, we now expect to deliver between 29,000 and 30,000 homes in 2025, assuming home buying demand is sufficient and aligns with our prioritizing price over pace to drive near-term returns. As Jim detailed, we lowered our starts pace in the first quarter by approximately 10%. Our strategy has always been about balancing price and pace to drive higher returns rather than trying to chase a volume number; we will continue with our efforts to reduce any excess spec inventory and move closer to our target of 40% to 45%. We will remain agile and are prepared to make further adjustments up or down to our starts pace in response to changes in buyer demand. For PulteGroup, balancing price and pace with a bias towards price has resulted in gross margin being an important driver of our returns. Our Q1 gross margin of 27.5% is reflective of our approach. In addition to driving top-tier returns, our industry-leading gross margin gives our divisions more room to maneuver in managing their communities on a day-to-day basis. In 2024, we invested $5.3 billion in land acquisition and development and entered 2025 with plans to increase our land spend to $5.5 billion. Given greater macroeconomic uncertainty, we are recalibrating our land spend and expect it will be closer to $5 billion. Given the strength of our existing land pipeline, deferring a small percentage of our land acquisition spend will not impact our ability to grow our operating platform in the future. For any changes we will implement over the near term in response to evolving demand conditions. What won't change is our focus on delivering high returns over the housing cycle. As we have demonstrated, working through the myriad of macro challenges of the past five years, generating high returns requires decision-making that is consistently in alignment with long-term goals and objectives. We have remained disciplined in our business practices while making prudent adjustments such as moderating our starts pace in response to changing market conditions as we work to successfully navigate the current environment. We continue to believe in the long-term demand dynamics within the housing industry. In a country that has a growing population and has already short several million housing units, it is reasonable to expect that demand will be there in the future. As Jim suggested earlier, disruptions in the marketplace can create exciting opportunities that have the potential to accelerate future performance. We certainly have the balance sheet strength to take advantage of any such opportunities should they emerge. In closing, I want to highlight that we've worked hard over the past decade to build a business platform that is arguably unmatched in terms of its presence across major markets and buyer groups. Our performance over time has demonstrated the competitive advantages of such a portfolio in driving high returns and navigating through market changes. Further, we've shown our commitment to intelligently allocating capital to support the growth of PulteGroup while consistently returning funds to shareholders through dividends and share repurchases. And finally, I want to again thank our entire organization for their efforts in delivering an unmatched home buying experience to our customers. We don't talk about it enough, but I want to recognize their divisions for reaching record build quality and record Net Promoter Scores, all while creating a culture that once again put PulteGroup on Fortune's Top 100 Best Companies to Work For list for the fifth year in a row. You are truly the best in the business. Now, let me turn the call over to Jim Zeumer.

Thanks, Ryan. We're now prepared to open the call to questions, so 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. Thank you. And I'll now ask the operator to open up Q&A.

Thank you. Your first question comes from the line of John Lovallo of UBS. Please go ahead.

Good morning, guys. Thanks for taking my questions. The first one, I just wanted to kind of zone in on the second half margin expectations and maybe a two-parter here. I mean, I guess were the incentives on orders in the first quarter consistent with the 8% that were on deliveries? And then can you also provide any color on the second half tariff impact that you're expecting? The total dollars for home, which products, and sort of the ability to push back on suppliers?

Yes, John. So the incentive load that we've assumed is consistent with the 8% that we realized in Q1. So that's embedded in the margin guide. And that's throughout all four quarters of this year. Relating to the tariff question mentioned, it's 1% of average sales price. So we're in the range of $5,000 on average and it'll impact every single price point and consumer group that we serve. There might be a few minor nuances, but it's pretty broad across the spectrum. Look, our procurement teams are cycle tested. They're the best in the business. They do a really nice job. Jim highlighted that we've kept our build costs flat on a year-over-year basis. And so I think that's a tremendous accomplishment. We've got good relationships with our suppliers. We want it to be a win-win, but we think we offer value in the volume and predictability. And so we do look for better pricing than what you'd find in kind of the broader home building universe. Every business is dealing with added costs. And we're going to work to minimize it. I think keeping it to the 1% that we've talked about is significantly less than what you're hearing from the broader homebuilding universe. So, I think you're seeing pretty good execution from us in the guide that we've given about 1% of ASP.

Yes, we would agree 100% with that. And then maybe the second question, just on the share repurchases, $300 million in the quarter, which is a really good level. Just - I guess the question would be that that's consistent with what you guys have done over the past couple of quarters. Why not lean in a little bit more as the stock pulled back?

Yes, John, look it's a great question. $300 million is significantly more than pocket change. So we feel pretty good about what we did. Our Board authorized an incremental $1.5 billion in share authorization in January. So our remaining authorization is $1.9 billion. We've had a practice of reporting the news as opposed to giving guidance. We do think that the equity is a value today. And so we'll check back in with you at the end of the second quarter, and let you know where we land on Q2 repurchases.

Your next question comes from the line of Stephen Kim of Evercore ISI. Please go ahead.

Yes, thanks very much, guys. Appreciate it, strong results. Wanted to sort of follow-up on a couple of John's questions there. So one, with respect to your cash flow guide, I think you said $1.4 billion. Does this still assume no reduction in homes under construction, or homes in progress? Because it looks like that actually would be an additional contributor to cash flow. And then, you indicated the tariff increase amount actually been recognized, or realized in negotiations thus far versus simply being proactively cautious?

Well, I'll take the first question. So on the cash flow guide, the $1.4 billion assumes the homes that we need to put into production over the balance of the year, to hit our $29,000 to $30,000 guide that we've given. We certainly had the capability to do more than that, if the opportunity was there. But that's really what's been factored in. One of the things that I highlighted in my section, Stephen, was that we've adjusted our land spend, as we've looked at development opportunities over the balance of the year and acquisition; we factor that into the operating cash flow guide.

Stephen, your second question. You broke up just a little bit. Would you mind repeating that about tariffs?

Yes, apologies. It was really that you had guided that to the 1 percentage point higher cost. And my question was how much of this has actually been recognized, or realized in your negotiations with your vendors and providers, versus simply you being cautious in your outlook. So I'm wondering how much of this has actually been seen thus far in terms of your negotiations?

Yes, Stephen, the latter. So things that are already in production, there's no tariff impact on that. And things that were already on the water, largely there's no tariff impact there either. So it's more about looking at our supply chain, where things come from and anticipating what the impact could look like as we hit the fourth quarter. So we're not expecting much of any impact until probably mid to late fourth quarter closings of this year.

Okay. Great. That's helpful. The second question I had relates to the overall environment. I think that you did a good job of laying out like sort of what you've been seeing in terms of market conditions. But one of the things that seems to be manifesting here, and what we've been seeing hearing during earnings season, is that there is a certain level of demand that is fairly persistent and robust. But if you try to exceed the volume above that amount, by trying to entice additional buyers beyond that sort of strong core, you might say, you wind up having to give away significant price and margin in order to achieve that. And so one, I wanted to know if you kind of think that that's a fair way of characterizing the market conditions today, and if that is different in a meaningful way from what you have seen going back 20, 30 years?

Yes, Stephen, I think you're spot on. And it's part of the reason that we've highlighted that the way our model has been built is really built for this exact environment. We always try to strike the right balance between price and pace, but we've always had probably a slight bias toward gross margins. The reason we continue to deliver industry-leading gross margins. In this environment, I think you're spot on. There is an underlying desire for home ownership, and there's a lot of buyers that still want to buy homes, and we're selling them those homes at very good profitability and good value to the consumer as well. The incentives that we're offering are mostly driven toward financing-related incentives. And while all consumers and price points are getting incentives, there's certainly more, or a higher percentage that are going into that first-time buyer group, where affordability is certainly more challenged. So look, in this environment, we're still really confident about the long-term. We know that we're going to sell a lot of homes, and the operating platform that we have with over 60% of our consumer mix being active adults and move-up, we think we're really well positioned to continue to exceed despite the challenging macro.

Great. Thanks very much, guys.

The next question comes from the line of Sam Reid of Wells Fargo. Please go ahead.

Awesome, thanks so much. Wanting to actually disaggregate the margin commentary a bit more here, especially on the tariff impact. It sounds like the impact from tariffs specifically will be more weighted to that fourth quarter period, if I'm hearing correctly. So maybe could you just talk to the change in guidance, as it relates to the third quarter, and just maybe bucket out incentives versus any other cost buckets we should be thinking of in the context of that fresh Q3 margin guide?

Great question, Sam. So as we look at Q3 and Q4, as Ryan said, we are expecting our incentives to stay at that elevated level for the balance of the year. One of the things we have done very well in the first quarter, we talked about it is we've been selling some of our speculative inventory that's either in process or finished. So we will start to see some of that come through in our Q3 and Q4. And then as Ryan alluded to, really we will see the tariff impact primarily in the fourth quarter. So we still feel really good about it. As we sit here at 26.0% to 26.5% for the back half of the year, we're really happy and pleased with our operators are doing.

No, that helps. And then you already touched a little bit on this in the prepared remarks, but really wanted to get a better sense for how traffic trended in your Del Webb communities in early April, especially on the back of equity market volatility. I know this buyer tends to be more conservative, more likely to fund a purchase with investment savings than some of your other buyer cohorts. So just curious if you have any additional detail on what you might have seen in some of the Del Webb traffic data and perhaps even some of the early traffic to order conversion data? Thanks.

Yes, Sam, it's Ryan. Thanks for the question. The Del Webb buyer continues to be a real shining star in our overall portfolio. We have mentioned in prior periods that it's a buyer that is more sensitive to macro and market volatility, but it doesn't mean that they go away. In fact, you look at the sign-ups that we had in the most recent quarter, it was one of our better performing consumer groups along with the move-up. So we feel good about it. As it relates to April, April always takes a little bit of a seasonal shift down in sign-ups, and we certainly saw that this year. The one thing that we would note about April is the day-to-day volatility was somewhat unusual, and I think that's totally understandable given what the consumer is dealing with. There's a lot of noise in the macro, concerns about recession, stock market volatility, interest rates up and down, the fears about tariff-induced inflation, et cetera. So I think, not specific just to the Del Webb, but really all consumers, there's a lot to deal with there. We continue to be really confident about the long-term. We know that we're going to sell a lot of homes. We've got an unbelievable operating platform. We're short millions and millions of homes in this country. And given the way that we're balancing more of the focus on price versus pace. Going back to Stephen's comment, I think we're as well positioned as anybody in the space to continue to have success in this environment.

No, that helps a lot. Thanks so much guys. I'll pass it on.

Thanks, Sam.

Your next question comes from the line of Michael Rehaut of JPMorgan. Please go ahead.

Thanks. Good morning, everyone. Thanks for taking my questions and nice quarter in a tough environment. First question, I wanted to push a little bit, and kind of get a little bit better, or more granularity on the changes in guidance. In terms of the change also in the closings. And obviously, it kind of speaks to the price over pace preference. At the same time, Ryan, you've also said in the past, you're not going to be margin proud, and so appreciating kind of both of those comments, with maybe the tilt towards price more often than not. I'm curious if the reduction in closing guidance for the year is also in some ways reflective of some of the volatility in April, as much as maybe orders coming in a little less than at least we were expecting for the March quarter. And if that volatility in April kind of continues, maybe it doesn't rebound to something a little more stable. Could there be further adjustments down the road in incentives or price? Or is the current guidance kind of reflecting the April's volatility, which I'm sure has impacted perhaps volumes to a decent extent?

Good morning, Mike. Thanks for the question. It's Ryan. Let me maybe first start with the guide. And in terms of the full unit guide, as we move through Q1, Q1 results were largely in line with our planning expectations. It wasn't the most robust spring selling season, but it wasn't the worst that we've ever seen either. So largely what we expected. April definitely had more volatility. The tricky part is, we're 22 some-odd days into April. So I don't think you want to overreact to 22 days of data, but we did use that to come up with a modified guide for the balance of the year. We think we've incorporated everything that we know. There's a lot that we don't know out there. But what we're trying to convey is confidence to the investment community that we've got an unbelievable platform. Our balance sheet is world-class and rock solid. We got a lot of cash. We've got low debt. We've got the ability to do a lot of things in this environment. And to really put some distance between us and the rest of the competitive set. We still have the capacity to build 31,000 homes. Our procurement teams, our construction teams, the land is there. So if we took the other side of the coin and say, hi, what if confidence from the consumer were to improve, then what? Well, we're still really well positioned to take advantage of that as well. So I think we want you to hear, we're being very balanced, very pragmatic. And we're on this. We're not in panic mode. There's no reason to be in panic mode, because we know that we've just got an unbelievable operating platform. In terms of being margin proud, we're also not going to be margin stupid. And we've said that we're going to find the right balance between price and pace. And to Stephen's question in this environment, we know there's this embedded level of underlying demand that’s there. We're working to drive high returns. If we saw the ability to drive a little more volume without given excessive discounts, I think you'd see us do that, but that's not the environment that we're in now.

Okay. No, I appreciate the detailed answer there, Ryan. I mean, and it kind of sounds like in effect, you are taking in again, the change in guidance being the April volatility, and you remain relatively confident on price, if I have to kind of boil that down.

I think that's fair, Mike.

Okay. So secondly, again, just maybe a little bit more clarity on the tariff, as it does appear that 1% of ASP is sort of an estimate if I'm hearing that right. Really, maybe you're saying back half, or half of the fourth quarter impact. So number one, I would just love to get a sense of where the buckets that that 1% comes from? Is it kind of just kind of spread all across the board? Or is there a couple of leading categories that you're focusing on in terms of the input mix? And secondly, it sounds there for them that the change in back half gross margin guidance is more driven by the spec reduction more than anything else. And just wondering if there's any other main drivers there as well?

Yes. So Mike, there's a lot there. I'll try and pick through it. In terms of tariffs, it is back half of the fourth quarter; we've estimated it to be 1% in terms of big categories, plumbing, specifically tank water heaters, porcelain, HVAC parts, especially things that come out of China, tile flooring, the global 10% tariff that affects every country, and most of the flooring comes from somewhere else. And then the other category would be electrical components and the related, so circuit breakers, load centers, et cetera. That's all wrapped up in our 1% estimate. In terms of the margin guide in the back half, it's partly because of the incentive load. It's also partly because of higher land cost, but that was embedded in our guide to begin with. And if you compare our current guide Q4 to the prior guide, we're down 50 basis points, and that's really reflective of the updated tariff information and the incentive load that we've talked about.

Your next question comes from the line of Matthew Bouley of Barclays. Please go ahead.

Morning everyone. Thanks for taking the questions and welcome, Jim to the call. Wanted to ask on that land spend guide, bringing that to $5 billion from $5.5 billion. I guess I don't know if that also includes higher development costs following the tariffs on a dollar basis. So just curious on that. But then more broadly, I guess, what does that signal around your growth intentions perhaps into 2026? Would a portion of that land spend be impacting community growth as soon as next year? Or just any other color on how that would flow into your growth expectations? Thank you.

Yes. Matt, thanks for the question. And to your point, it's a hell of a quarter for Jim to have his first call, but I'm thrilled to have him here with us, and he's been an integral part of our team for a long time. In terms of the land spend guide, I think one of the most important decisions that we make as a management team is capital allocation and specifically how much money we're going to spend on land. We do have ambitious growth plans. We've talked about our long-term growth guidance being 5% to 10%, and we're confident in that based on the land pipeline that we've been investing in for the last several years. We've got 244,000 lots under control. And so being a little more prudent in this environment, in trimming land spend. And it’s really about delaying things a little bit, as opposed to canceling. If it were a market where we were really, really concerned, you might see canceling of land contracts. That's just not where we're at. So in terms of our ability to deliver '26 and '27, a little bit of a delay or a pause in land spend this year is not going to have an impact on that. We'll also see if there's an opportunity to make the land spend go a little further, meaning $5 billion may buy almost as much as what $5.5 billion did. We haven't seen that emerge yet, but that's certainly something that we're looking for.

Okay. Got it. Thanks for that, Ryan. And then secondly, drilling into the back into the gross margin side, the assumption around assuming current incentives of 8% hold. Obviously, the March quarter incentives came up 80 basis points sequentially during generally a seasonally stronger time for housing demand. So I just wanted to double-click on, kind of why that's the right assumption? Kind of what do you think kind of typically happens to incentives as you would move into the summer months and all of that? Or is the assumption just you're going to be able to reduce spec enough that you just wouldn't need to tweak incentives any further? So any more color on that? Thank you.

Matthew, that's a great question, and you hit on it right at the very end there. As we look at it, as we started to trim our speculative inventory, we've been doing a really nice job showing through that in the first quarter. As we start to see that get down into our target range of 40% to 45%, we see the opportunity to ease off that a little bit. Now, environment money requires us to do other things in order to keep moving homes. But as we get our spec inventory in balance, we think we have the opportunity to lower our incentives.

All right, thank you, Jim. Good luck, guys.

Your next question comes from the line of Mike Dahl of RBC Capital Markets. Please go ahead.

Good morning. Thanks for taking my questions. And yes, Jim, congrats on the new role. I wanted to drill into the order cadence a little bit more. So your sales per community were down 10% in the quarter. You talked about April volatility. Can you put a finer point on your year-on-year comparison in April sales pace right now? And then maybe to take a step further, I understand the seasonal progression of increases through the quarter, but maybe you could give us some help on how the year-on-year comparisons looked in Jan, Feb, and March?

Yes. Mike, I don't know that we're going to slice it quite that thin. I think we've tried to be really responsive to give kind of detail around spring selling and how things progress. January started, I think, the way a lot of Januarys do. I mentioned in our last call that we are seeing some green shoots, and February was a good month, and March got even better. So spring selling season, I think, played out the way that we would have expected it. In total, and Jim had it in some of his prepared remarks, the seasonal increase from Q4 to Q1 was less than what we would normally expect. So you could argue, based on that spring selling season was maybe a little below average. As we moved into April, I think I've said it, but I'll reiterate it. We've had more volatility from the consumer than we normally expect. And I think the reasons why are very well understood.

Yes. I mean I certainly appreciate that. I just think given the uncertainty out there, you're clearly providing us a lot of helpful detail if there was any quantification for April in light of a less than normal seasonal increase in 1Q. I would think that would be helpful. Ryan, I guess…?

Yes, maybe I'll just jump - I'll jump on that real quick. What we've tried to do is to articulate and quantify that into our full-year volume guide. So you'll have to take our word for it that based on April sales combined with what we did in Q1. But I think the bigger driver is what's happened in April; we've modified the full year volume guide.

Hi Ryan, the second question I had, you mentioned in your opening remarks a potential for exciting opportunities. You mentioned just in response to Matt's question. Hi, maybe $5 billion goes further than you would have thought three or six months ago. I think that's kind of alluding to some reset in the land market. But maybe you can give a little more detail. I don't know if anyone's really thinking that this cycle is going to produce the type of distress that we saw of the GFC. So are you kind of referencing things that you're currently seeing in the land market? Are you thinking about bigger M&A opportunities? Maybe just talk a little bit more about what those comments were geared to?

Yes. Not really trying to telegraph any kind of hidden messages. They’re at probably the - and we've not seen, and probably wouldn't expect to have a major reset in the land market. Other than the great financial crisis, land just doesn't seem to go through a reset. It's in short supply. It's part of the reason that we're so short housing, is because land is so hard to come by. So I think land values are going to be pretty durable, where we think that there could be some exciting opportunities. There are builders that are not as well capitalized or as balance sheet strong as what we are, and for a number of reasons, they may elect to walk away with something, and that may create some opportunities where we can step in and grab something at a good value. Maybe something that was tied up in a prior value that we're able to inherit, et cetera. So time will tell whether or not that plays out. We haven't seen a ton of it yet. But we're - they say hope is not a strategy, but should some of those opportunities emerge, we're really well positioned and in a great financial position to take advantage.

Okay. Thank you.

Your next question comes from the line of Carl Reichardt with BTIG. Please go ahead.

Thanks. Morning, guys. So Ryan, just to drill down in April one more time. When we're talking about volatility, are you referring to foot traffic conversion rates, or cancellations in terms of the most significant impact on the order volatility?

Yes. Carl, when we're talking about volatility, we're talking about rate of daily sales. That's the volatility. The other things have been largely stable, including cancellation rate. We have not seen a run for the doors from consumers that previously made a decision to buy and are in our backlog. That's been really stable. And as Jim highlighted, we saw a modest small tick-up in cancellation rate in the first quarter to 11%, and we haven't seen a change in behavior in April either.

Great, thank you. And then, talking about a couple of the bigger picture stuff for you. As you look at your current environment, you talked last call about getting cycle times down to, I think, 100 days in the back half of the year. And I'm also interested in the bigger picture of going to 70% option lots. They're at 59 now. So is the current environment impacting either one of those sort of bigger picture goals for you, either on cycle times or on your move to option lots, do you think? Thanks.

So cycle time, Carl, we talked about it last quarter. We're basically at 100 days on our single family, which is so mission accomplished there. We don't really expect any more changes; we're at where we want to be. Jim quoted we're at 110 days overall. And what that includes is a lot of our multifamily condo buildings that have much longer cycle times than a single-family. So where we want to be on cycle time. In terms of land optionality, we've made tremendous progress toward that kind of target of 70%. What Jim talked about in his prepared remarks, is that we're going to be really prudent in evaluating when and where and how we drive for optionality. When we think about optionality, we're looking to be capital efficient. We're also looking to mitigate risk associated with owning land, and so that will be our driving force North Star, is mitigating risk associated with owning land. A secondary benefit will be the improved efficiency that we get on return. But we're not going to let the tail wag the dog on this one, Carl.

Your next question comes from the line of Alan Ratner of Zelman & Associates. Please go ahead.

Hi, guys, good morning. Thanks for all the great detail. I know this is not an easy environment to give guidance and give commentary. So we appreciate it. First Ryan, we've talked about this in the past. I'm surprised it hasn't come up yet on this call, but curious just to get an update on what you're seeing in Florida. I think given your exposure there, given how strong your margins have been in the state, that's usually one of the main concerns I hear from investors related to Pulte, and Florida certainly seems to be getting a fair amount of negative headlines in terms of the conditions across the state. So I was hoping you could give just kind of more granular commentary on what you saw through the quarter and into April in Florida across your markets and price points?

Yes, Alan, Florida is a really important market for us. The thing that I would highlight about our Florida market is the majority of our business there is in the move-up in the active build space. And we've talked about that being one of the stronger segments. So I feel from a strategic standpoint, I feel really good about how we're positioned in Florida. In the near term, resale inventory in Florida across the states probably higher than what anybody would like it to be. The last number that I saw, I think it's around seven months of total inventory, which is slightly over the ideal of 6% or lower. So maybe not perfect, but also not in full-blown panic mode either. Our Florida business is only down 5% on a year-over-year basis. So down a little bit, but certainly not catastrophic - so I'd probably leave it there as it relates to Florida, Alan.

Your next question comes from the line of Kenneth Zener of Seaport Research Partners. Please go ahead.

Good morning, everybody. Welcome, Jim. Quick questions here. What do you think your 4Q year-end inventory units are going to be relative to last year's 4Q? And how are your incentives different by segment? So think Centex, Florida versus your Florida Del Webb?

Yes, Ken. So I'll take the first part, and I'll let Jim take the part on margins and incentives. As it relates to inventory, our target range is 40% to 45%. And I think what you've seen from us is we've adjusted our inventory levels in reaction to things that have been going on in the broader market. Right now, we're probably in a little bit of a risk-off mode of inventory. And so you've seen us trending from where we were to getting back inside our range. In terms of the year-over-year comparison, I think it will depend, but I'd expect us to be within our stated range, which I believe would end up being lower than where we were at the end of Q4 '24. Jim, do you want to take the other piece?

On the incentives, we don't really slice them that thin. What I would tell you is incentives can come in different shapes and forms. If it's a speculative inventory unit, maybe there's a discount associated with that. You touched on our active adult buyers. Many of those are cash buyers, but maybe the incentive they get is a discount on options at our design centers. It varies across all of them, particularly on the first-time buyer; they probably need a little bit more help on the financing side. So again, incentives come in different shapes and forms, and we think we just find the right balance for each individual consumer.

There are no further questions at this time. With that, I will now turn the call back over to Jim Zeumer for final closing remarks. Please go ahead.

Appreciate everybody's time on the call this morning. Actually, we are a few people up in the queue, but we simply run out of time on this call. We're available over the remainder of the day if you've got any questions. Otherwise, we will look forward to speaking with you on the second quarter call.

Ladies and gentlemen, this concludes today's conference call. We thank you for participating and ask that you please disconnect your lines.