Pultegroup Inc (PHM) Q2 2025 Earnings Call Transcript

Good morning, and thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Palti Group, Inc. 2nd Quarter 2025 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 number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. We do ask that you limit yourself to one question and one follow-up.

Thank you.

I would now like to turn the call over to Jim Zoomer. Please go ahead.

Thank you, Jeannie. Good morning and thank you for joining today's call as we look forward to discussing Pulte Group's second quarter operating and financial results. With me today are Ryan Marshall, President and CEO, Jim Osowski, Executive Vice President and CFO, and David Carrier, Senior VP of Finance. As always, a copy of our earnings release and this morning's presentation have been posted to our corporate website at pulseygroup.com. We will also post an audio replay of this quote. I would highlight that today's presentation includes forward-looking statements about the company's expected future performance. The 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 within the accompanying presentation. These risk factors and other key information are detailed on our RCC filings, including our annual and quarterly reports. Now let me turn the call over to Ryan Marshall.

Ryan Marshall Good morning, and thank you for joining our call. As always, I appreciate the opportunity to update you on Multigroup and our work in delivering outstanding business results. Multigroup's earnings release details, another quarter of positive company delivered strong closings, gross margins, and overhead leverage. Consistent with such results, we also continue to realize that the company generated a return on equity of 12 months. In a few minutes, I'll turn the call over to Jim for a detailed review of the numbers. Our results demonstrate that in an operating environment that has grown more challenging, Our diversified and balanced operating model offers strategic benefits in this competitive operating environment. We are reaping the advantages of being diversified across all buyer groups, particularly our industry-leading position in serving actively to this group. I am pleased to report that we are experiencing a great response to our newest Dell Web and Dell Web Explorer communities as buyers embrace the active lifestyle. As it relates to this part of our business, I would highlight that along with being among our higher-priced homes, these homes typically represent our highest margin closings. Along with a broad customer base, we have geographic breadth and market diversity that are again proving their value. Our business results continue to demonstrate the benefit of having large and stable operations in the Midwest, Southeast, and Northeast, as these work to offset some of the more challenging market conditions facing out. And I'm pleased to highlight the relative strength as net due orders increased 2% over last year. Beyond Florida, remaining a beneficiary of longest app, we have exceptional land positions. I also highlight that our occupant did none, and I truly believe we are seeing the importance of having such experienced leadership. And finally, our ability to serve both the buyer who needs the app as well as the buyer seeking to pay remains an important competitive advantage. the former allows us to effectively serve the first-time buyer and use our national rate incentive while the lotter allows the buyers that they value most which in turn provides margin enhancement off 2025 we realized an average of a hundred and nine thousand dollars of options and lock cream across margins but half the year including the important selling spring selling season now complete, I thought it would be useful to offer a few high-level comments on the demand dynamics we have been experiencing. Over the past few quarters, our industry has routinely referenced demand conditions being volatile, and that remains the most accurate description of buyer activity. Within a market demonstrating a typical seasonal pattern from month to month, we do see days of strong demand, followed by days displaying a step. Feedback from would-be home buyers indicates a variety of concerns ranging from affordability and the inability to sell an existing home to a slowing economy and the fear of potentially losing their job. In sum, I think consumer confidence is uncertain at best, and confidence is something difficult to solve with a lower price or higher incentive. This is where our disciplined approach to the market focuses on capturing incremental volume without giving up too much if we look beyond the day-to-day volatility the overall demand environment one absorption pace of 2.7 homes per month was consistent with our pre-covid averages while our q2 absorptions of 2.4 homes per month were just under in other words our demand is reasonable but we are having to compete for each home sale and we are seeing meaningful differences in demand strengths and weaknesses from market to market one of the most encouraging dynamics that i would highlight is that a drop in interest rates does stimulate traffic into our communities and a corresponding increase in sign of activity this was clearly evident as rates dropped in the last two weeks of june as well as at different points during our first and second quarters i think this supports our view that people desire home ownership and remain actively engaged in the process. They just need the value equation to work and to have confidence in their financial circumstances to feel more comfortable. Given the demand conditions we have experienced in the first six months, and an overall heightened sense of uncertainty among consumers, we have taken actions to adjust our operations to. We made the decision early in the year to slow our land spend, reduce our starts rate, and we have worked aggressively to sell excess spec We have been proactive in responding to demand conditions as they exist in each market. Our focus on achieving high returns doesn't change, but the approach may as we balance the primary drivers of each community. Before turning the call over to Jim, I do want to recognize and thank our incredibly talented team as they continue to deliver the highest quality homes and exceptional. Let me turn the call over.

Thank you and good morning. As Ryan indicated, while there are challenges within today's housing market, are certainly positive. Net new orders in the such is down seven.

I would like to remind everyone in order to ask a question press star then the number one on your telephone keypad and your first question comes from the line of John Lavallo with UBS. Please go ahead.

Good morning, guys. Thanks for taking my questions. The first one I had is that you has talked about, you know, some encouraging signs as rates kind of pulled back in late June. Curious, you know, rates have been, you know, a little bit bouncy, but fairly stable, I guess, through July. So I'm curious if the, you know, the improvement that you saw in June kind of carried through into July. And we've also seen some recent improvement in consumer confidence. Is that helping, you know, kind of support this demand in your video?

Yeah, John, we did see, you know, real positive response from the consumer the last couple of weeks of June when rates came down. As we highlighted in the prepared remarks, it drove extra or incremental traffic into the communities, and we saw good conversion out of that incremental traffic. So we're certainly encouraged by the consumer response. July, you know, I would tell you July's been, you know, a little up and down. There's been some really good days, and there's been some down days as well. The first week of July was, I feel like, the entire country went on vacation with the 4th of July fell. But we're encouraged by what we've been seeing the last couple of weeks.

Okay, that's great. And then maybe just on stick and brick cost, maybe how they trended in the quarter. And then on the land side, you know, we've heard some signs of perhaps a little bit of relief on the development side of the cost equation. Maybe if you can comment on both of those, it would be great.

Sure. Thanks, John. The sticks and bricks, they were at $79 per square foot, so consistent with last year and sequentially the same as Q1. So they're holding firm for us. On the development side, yeah, we're hearing some of the same things, a little bit of opportunity on the development side. You've got trades out there, a lot of heavy machinery. People want to put it to work. So it's encouraging with what we're seeing. Don't really see that coming through in kind of our quarterly results, but as we look forward, you know, we're hoping that we see some.

Appreciate it, guys.

Your next question comes from the line of Ivy Zellman with Zellman and Associates. Please go ahead.

Good morning. Great quarter, guys. Really strong performance. And maybe we can start with the comments you made, Jim, as it relates to the land options that you're predominantly utilizing land developers as you're the ones selling you those options, as opposed to land bankers. Can you elaborate as to why you think that's better? Or maybe it's a lower cost, I presume? Can you just go through your rationale there?

Yeah, it's Ryan. Good morning. Good to hear from you. And we've made optionality specific with land bankers a piece of our business. Our primary focus is with underlying land sellers and with those individual, you know, those individual families or owners that own that land. We think in those – the reason that we like that, Ivy, is we end up with a more diversified risk profile. And we also get better execution of price with those underlying land sellers and what it costs us to get the options. We found that we ran into natural resistance somewhere between 50, you know, around 50 percent is kind of was about as high as we could get. And so to get more optionality, we went to, you know, the idea of using land bankers in a moderate way. And we think that that's the tool that allows us to go from 50% option to 70% option. You know, the other, and the reason that we've kind of elected this type of mix, we think that it's the best tool to give us risk mitigation, which is the primary thing that we're looking for when we think about optionality. Certainly, there is a trade-off. We give up a little bit of margin to get a better return, and we know that reach value for our shareholder is all on benefits.

No, that's really helpful. And thinking about you spent $1.3 billion, you invested in land acquisition development. Are you able to take some of the options that you have right now and retrade them and get better pricing because the market's been soft? We've been hearing from our land contacts that there is a lot of trading going on, retrading, I should say.

Yeah, we're definitely taking advantage of that where appropriate, Ivy. We value the relationships that we have with land sellers. So, you know, I think we're working at conditions, and I think land sellers, in some cases, we're getting better price and we're closing. In other cases, you know, price might be staying similar to what it was in the underlying contract, but we're getting more time. And so I think our really experienced operators in the field are picking the lever that needs to be.

That's great. One quick last one. We see news about Canadian tariffs potentially doubling. Can you comment on, I don't even know if you guys are using U.S. source lumber or what percent is Canadian, but maybe you can give us some perspective on what that doubling impact might be to your direct costs.

Great question, Heidi. You know, today about 20 to 25 percent of our lumber comes from Canada. the rest of it were domestically sourcing.

Got it. And therefore, the ones that you're acquiring from the Canadian, how much will that impact just double? Assume that 25% will go up by double? Or do you think you'll get better pricing despite that?

Yeah, you know, hard to say where that ultimately kind of plays out, Ivy. If tariffs double on 25% of our lumber load, we would see, you know, a higher cost load. So, you know, it didn't have an impact. I don't know that it would necessarily be catastrophic. You know, I know there was an article this morning early that was talking about adding significant cost to housing. You know, I think that article likely alluded to the fact that the entire lumber package would be Canadian lumber, which in our case...

Great. Well, good luck, guys. Thanks again. Appreciate taking my question.

Your next question comes from the line of Michael Reholtz with J.P. Morgan. Please go ahead.

Thanks. Good morning, everyone. I wanted to first just kind of talk about the pluses and minuses on gross margins in the second quarter. Came in at the high end of guidance and just kind of curious about, you know, how you saw incentives trend during the quarter, maybe compare it to the first quarter, and if there was any outliers and any kind of drivers to, you know, I know it's only, you know, 25 bits from the midpoint of guidance to the high end, but if there's any kind of additional tailwinds or headwinds, even that you saw in the quarter relative to what you were expecting three months ago.

Yeah, great question, Mike. You know, as we looked at the quarter, you know, we really just had a different mix, products and geography in the quarter. To give you a frame of reference, there were 1,200 homes that we both sold and closed within the quarter. So we make assumptions about where we're going to sell them, when we're going to sell them, and what the costs are associated with that. And we fared a little bit better than we thought. So as we looked at it, incentives were 8.7 on what we closed for the quarter. And again, the mix gave us a little lift and got us to the top the number guide.

Great, great. And then maybe just kind of looking forward, reiterating the 3Q and 4Q gross margin guidance. I know you talked, I believe I heard that you said maybe incentives, at least, I'm sorry, tariff headwinds as they are today, maybe outside of, you know, the recent headlines around Canadian lumber. It sounded like, you know, you talked about maybe power of headwinds being a little less than expected, offsetting maybe a little bit higher incentives than maybe you were at the beginning of the year. Is that the right way to think about it in terms of, you know, being able to reiterate that back half gross margin guide? You know, in other words, maybe if, you know, and specifically, I guess, I'm just wondering around, the incentive loads, you know, if that has maybe been a little bit higher, it almost sounded like you said, you know, incentives are a little higher, but tariffs are a little lower, and hence we're able to reiterate the backup guide. I wasn't sure if that was the right way to think about it or if there are other pluses and minuses to consider.

Yeah, Mike, I think it's really as simple as exactly what you just laid out there. Our procurement teams are the best in the business. they've done a wonderful job navigating, you know, another, you know, difficult procurement environment. You know, I think we've also gotten a little bit of luck on our side with there being more inventory in the supply chain that has allowed prices to stay more stable, to stay stable longer. You know, I don't think anybody believes that's going to last forever, and we're certainly anticipating, you know, a tariff load hitting our closings in next year. But, you know, we think for this year, it's going to be minimal and mostly in the back half of Q4. So, a little bit of the upside, a little bit of upside a quarter ago on that. You can see the sequential lift in incentives. You know, I think you're hearing from some of our competitors as well that are seeing, And, you know, similar elevated incentive loads as we work to solve the affordability equation for customers. And, you know, in total, I think that balance is out and, you know, our margin guide, which continue to be the best.

Great. Really appreciate the call, Ryan. Thanks for that. It's all from me. Good luck for the upcoming quarter. Thank you, Mike.

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

Yeah, thanks very much, guys. Ryan, I think you mentioned in your press release that you were positioning to grow market share as demand strengthens in the future. And I wanted to see if you could elaborate what you mean and maybe also what you don't mean with respect to that statement about growth. For instance, I guess my question would be like, are you planning for spec homes to be up on a year-over-year basis as you head into next spring? Or are you willing to carry more owned land in the near term in order to accelerate community count next year? I just wanted to try to frame out what you mean by, you know, looking to grow market share as demand strengthens in the future.

Yeah, Stephen, it's really around the strength of our land pipeline. We've got 250,000 lots that we control now, which is, you know, we're up about 25,000 total lots that we control compared to, you know, this time last year, probably even a little bit more than that. So I think our division team has just done an outstanding job putting new communities in the pipeline that are going to be great performers. The most recent, and no, I don't think it means that we'll have more owned land. In fact, we've gone the other direction. We own less land. We control more via option, and our option percentages, all the things that we want. We continue to think that we have the opportunity to grow this company long-term 5% to 10%, so I continue to read. And we're seeing in this type of difficult market, quality sell, high-quality land without being positioned.

One other question. You talked, again, today a lot about your land positions and how proud you are of them. And this is brought to mind something that we've fielded a lot of questions from regarding your land positions from investors. A lot of people seem to have this view that you have a lot of land that's maybe legacy land from, you know, sort of pre-COVID type vintages and that that's supporting your margin, your gross margin specifically. I was wondering if you – that is not, by the way, what we see running our, you know, sort of quick analysis. I was curious if you could elaborate a little bit more on what you see in your land positions. You know, how much of your active communities would you say are actually from, you know, kind of pre-COVID vintage land?

And in terms of pre-COVID vintage landscape, what we really have done left, I mean, there's probably a few stragglers here and there. But we're turning our land pipeline every three and a half years. So, you know, we're on fresh land, I think, just like the rest of our competitors. Do we have, you know, some bigger, longer legacy communities? A very small number of our actual closings and a very small number of our, you know, this myth that, you know, some continue, or this narrative that some continue to push. I'm going to see if I can get that Discovery TV channel Mythbusters to come and do a show.

Yeah, that's what I was hoping you'd say. All right, great. Appreciate it, guys. Thanks a lot.

Your next question comes from the line of Matthew Boulay with Barclays. Please, go ahead.

Morning, everyone. Thank you for taking the questions. I wanted to ask a question around product mix and how that's going to impact your margins. I know you mentioned some of the improvements in the active adult business and the new community openings, and it sounded like you're speaking to the benefit of that mix. As that delivers in early 2026, if I heard you correctly, I think at the same time you're seeing some of that pressure on the move-up business as you spoke to. So I guess my question is, I guess, number one, how does move-up margins compare versus active adult margins? And I guess any additional color on how that mix of your product types may affect the gross margins here over these next several quarters. Thank you.

Yeah, Matt, good morning. Thanks for the question. We had really good performance with our Dell Web communities. And as we've highlighted in the prepared remarks, those will be next-year closings. We haven't given any kind of a guide to next year's margin. We'll do that as we get toward the end of the year. What we have talked about in the past is when you look at our three consumer groups, the entry-level first-time buyer group, that's our lowest margin performer. Our lowest margin generate about 200 basis points higher than that, And then we get an incremental 200 basis points out of the active adult communities. So they are, you know, and I mentioned it in my prepared remarks, they are among our higher-priced homes. So, you know, it's certainly favorable to our overall margin performance, and it's part of the reason that we've been highlighting and sharing. Today, the overall mix of our Delaware business is 20%. or we'll see that going back to the more traditional 24 to 25 percent in 26 as these new communities came online, which, you know, we're certainly going to see that coming. But, you know, I'd just reiterate, we haven't given a margin guide for 2026.

Understood. Yeah. And even still, that was a very, very helpful caller. Um, so then secondly, uh, I wanted to ask, uh, back on construction costs. Um, you know, we've certainly seen from, from a couple of your peers that, you know, they've been able to push back a little bit on construction costs. It sounded like you guys were seeing flat stick and brick and appreciating, uh, obviously regional differences and product type differences and all that. My question is, is if there is room for, for you guys to drive construction costs lower, at some point, and, you know, if so, when might we begin to see that?

You know, as Ryan said earlier, our procurement teams are all over this stuff, you know, best in the business as it relates to it. Similar to my comments a little earlier on land development, you know, you'd hope to see some opportunity. Our teams are certainly working to see what they can do. Again, the $79 a square foot that we have now, these are, you know, homes that we contracted it six months ago and started. So as we go forward, our teams are certainly pushing for opportunity, and we'd like to see that opportunity come through in the future.

And Matt, we have seen, you know, in certain categories, prices come down. You know, we've taken cost decreases. There's been other things where we continue to pull these tough out there for everybody, and we want to do, you know, everything in our power to, you know.

All right. Thank you both. Good luck, guys.

Your next question comes from the line of Anthony Pettinari with Citigroup. Please go ahead.

Good morning. Just staying on the cost side, I'm wondering if you could talk a little bit about labor availability and maybe where labor costs might shake out for the full year, and if that's changed, you know, maybe relative to expectations on January 1st.

Yeah, labor's available, Anthony. We haven't seen any change there. We continue to be an employer of choice. We've got consistent, predictable work. We pay on time. We pay well and fairly, so I think we'll continue to be a place that will attract available labor. You know, in terms of our cost assumptions, really no change from what we're on the labor Thank you.

And I'm just curious on ICG and off-site manufacturing, how is that business performing? And are there any kind of learnings about off-site as we've moved from kind of this white-hot market in the pandemic to kind of more of a choppy volume environment today, how that fits in the portfolio? you?

Yeah, I think the things that, you know, we've learned are consistent with what we've shared in kind of previous cycles. So I wouldn't suggest there's a lot that's different today. We're getting a lot of benefit out of cycle time improvements with the amount of work that can be done ahead of time in a factory. We're getting really good product quality. You know, we're certainly getting some efficiencies and economies of scale based on the way that we buy lumber when we're bringing it into the factory as opposed to, you know, buying a load of lumber. I think there's a lot of benefits that we continue to get from it. You know, it's been an important part of our overall innovation work, and, you know, we look forward to continuing to see that part of the business expand. Okay, that's helpful. I'll turn it over.

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

Thanks for taking my questions. Just to go back on the waiver quickly, anecdotally, it sounds like maybe a little more noise in the market in terms of some ICE-related dynamics. It doesn't sound like you're necessarily seeing that on your job sites, but can you just give us, you know, your view on or take from the market in terms of any impact there.

Yeah, you know, really nothing that I can probably share with you that's different than I think what you're seeing play out, you know, in the news media. We have always and continue to require all the labor that's on our job site to be able to work legally in the country. That's always been the case. We continue to make that a priority. You know, there certainly is, I think, disruptions within the broader labor force, not just in construction related to kind of ice enforcement and you know that's something that i think the the country is going to have to grab um and shifting gears um your order asp is down a decent amount of five percent sequentially four percent year on year obviously there's always a

lot of mixed dynamics in there can you help us understand kind of what's life for life versus is what's mix-related in that and maybe how to think about just the back half of the year from obviously your closing ASP is supported by a backlog to a certain degree, but just help us think through on the ground how your order ASP is shaking out.

Sure. You know, as we look at order ASP in the quarter, you know, what we saw there was both mix in product and geography. You know, if you look, our West business, and Ryan alluded to it, was the softest. And particularly in some of the move-up segments, if you look at places like the California, our two regions out there. So you've got a mix influencing that with some of the move-up, taking a little bit of a step down in some of our higher-priced markets. And then as well, you've got the incentives that are underneath that as well. So primarily the mix and then as well as the incentives played into the...

Thanks, Jim. Thanks, Ryan.

Your next question comes from the line of Kenneth Zener with Seapark Global. Please go ahead.

Morning, everybody. What do you expect your inventory units? I know you talked about the spec mix, but what do you expect your inventory units to be roughly at the end of the year? And then in Florida, how many of those buyers, which are largely active adult, are actually coming from Florida as opposed to from other states?

Yeah, Ken, inventory, finished inventory at the end of the year is not a number we guide to, so let me start with that. That said, you know, we have guided that overall spec inventory will be in the 40% to 45% range. Our finished inventory today is running a little higher than what we'd normally like to see. We typically like it to be around one and a half, you know, one and a quarter to one and a half finished units per active community. So, you know, we're probably 400 units north of kind of where we'd like to be optimally. But, you know, on the margin, I just don't think it's moving the needle one way or the other. But I think our bias would be to continue to work that down. And then in terms of kind of Florida, you know, as I mentioned in some of my prepared remarks, we're really happy with the performance that we're getting there. And then where those buyers come from, you know, Florida is a big melting pot. And so we see a lot of buyers coming from all over the country, you know, the Midwest, the Northwest, Canada, foreign. We get buyers from all over the country, all over the world to come into Florida. We also see a healthy mix of folks moving within Florida as well. We can certainly follow up with you on specific numbers. That would be great. My fingertips, but I think what you'll find is that it's a melting pot of buyers.

I would add that you made reference to it being heavy active adults. I mean, there's parts of it. So if you look at our Southwest business, yeah, you may be more active adult, but you get into Orlando, you get up into Jacksonville, you get into Tampa, it's pretty well diversified across first-time move-up and active adult. Again, you obviously get a draw because of the weather down there, but we've built a business with the divisions of the very diversified businesses down there. So it is not just, you know, DelWeb, DelWeb Explorer.

Thank you very much.

Your next question comes from the line of Paul Zawilski with Wolf Research. Please go ahead.

Thank you. I guess to start off, are you seeing any difference in the elasticity of incentives between your different consumer segments? And then if you could provide some color on the incentive levels across the consumer segments relative to the 8.7% average in the quarter? Yeah, Paul. Well, I think the commentary that you've heard from us is that there's actually inelasticity in pricing and that more incentive doesn't necessarily translate into incremental volume. So we're trying to get incentives, you know, to the level where we get the appropriate level of volume, but pouring more incentives on top of that doesn't necessarily translate in the incremental volume that would justify those incentives. So, you know, that's why we've tried to continue to maintain some discipline around what we're doing on the incentive load. I'd continue to reiterate, we think the opportunity is to bring incentives lower over time. We're clearly not there right now, but, you know, I long for the days of, you know, more normal incentive loads as we get out into. And then in terms of kind of where we're going to be. um sizes when we're in the uh you know the first time buyer those incentives predominantly are in our forward commitments and the interest rate incentives uh and things of that nature when you're getting into the you know the active adult can move up um they tend to come in the form of either just outright price discounts uh or lot premium incentives or option incentives or you know, contributions toward financing and financing related incentives that aren't necessarily forward commitments. It's fairly consistent. It's just in different shapes and sizes. Okay. Did you see any impact on orders this quarter from the change in FHA eligibility for non-resident buyers? Any pull forward maybe before the May 25th deadline and then, you know, slowness afterwards.

Yeah, we really didn't see an impact in the very small portion. Okay.

Thank you.

Appreciate it.

Your next question comes from the line of Susan McClary with Goldman Sachs. Please go ahead.

Good morning, everyone. My first question was on the SG&A, which came in a little lower than we had modeled in terms of both dollars and as a percent of the revenue. Can you just talk about maybe some of the puts and takes there and how we should be thinking about the next two quarters?

You know, great question, Susan. You know, we stay very diligent all the time. As we look at our SG&A, you know, we talk with our teams constantly about the discretionary spend that they have. We look at our people costs. So, I think we're running a very effective and efficient business that we have. You know, we reiterated our guide of 9.5 to 9.7 percent. We still think that's a good guide, but, you know, again, it's something we talk about all the time, and I think our experienced operators are doing a nice job in this space.

Okay, that's helpful. And then I guess maybe just thinking about capital allocation, you know, with the operating environment being what it is, the guide for the land spend that you reiterated, any thoughts on just buyback activity in the next couple quarters and how you're thinking about that given the valuation relative to the outlook for the business?

Yeah, Sue, you know, on share buyback, the way we operate there is we report what we do in the quarter. You know, I would reiterate that we've been a consistent, and we're using it as an excess capital back. You know, we did another $300 million in the most recent quarter following $300 million in Q1. And then, you know, I think our practice will be to, you know, share Q3, Q4 results if they have to.

Okay. Thank you. Good luck with everything.

Thank you.

Your next question comes from the line of Jay McCandless with Wedbush. Please go ahead.

Hey. Good morning, everyone. So, the first question, what percentage of communities were you able to raise price this quarter?

Probably about 10% for the quarter.

And then I know you talked about DelWeb a lot, but when we think about the communities coming online, is the bulk of these new DelWeb communities coming online by year end, or is it going to go into maybe first half of 26?

Well, you saw, Jay, in this quarter, the percentage of signups in the quarter were 23%, 23 or 24% of this quarter's signups. So, you know, typically from the time we sell until deliver, it's about six months. So this quarter sign-ups will end up being first quarter 26 closings. So what you should expect is that we'll get back into the, you know, the Dell Web closing mix being about a quarter of our business once we hit 2026.

And we'll see those communities coming in over the balance of this year and next year. I mean, I tell you, a lot of excitement. You know, we've got a couple more that are opening in the Tampa market. First one in Greenville, another one opening in Charleston, another one out in Southern California. So I'd say in the coming quarters we're going to have, you know, kind of a good flow of new dot webs coming online.

Great. That's what I was looking for. Appreciate y'all taking the question.

Your next question comes from the line of Rafe Jadrosich with Bank of America. please go ahead.

Great. Thanks for taking my question. I just wanted to, you spoke a little bit about land, seeing some relief on the land cost and development side, and seeing some more retreating there. Can you talk about when that would potentially start to flow through your P&L on the actual cost side?

Yeah, you know, Ray, it typically land development occurs, you know, roughly, um, six to 12 months before you see the closings hit. Um, you know, a typical land development cycle of six to nine months. Then you have, um, you know, the home construction period of, call it four months, and then you start to see those closings. So, it depends on how big the phase is. It depends on, um, you know, there's a lot of variables, but, but I, I think if you've got savings today at this moment in time, you're likely, you know, back half of 2026 is when you'll start to see the benefit of those lots closing that had low.

That's helpful. And then you spoke a little bit about DelWeb Explore that launched earlier this year. Can you tell us how that differs from the legacy DelWeb business and what the size of that is, how you're planning on growing that?

Yeah, we think it's a huge growth opportunity for the DelWeb kind of overall brand. And the difference between DelWeb Explorer and our traditional DelWebs, the DelWeb Explorers are not age-restricted. The target consumer for that is the Gen X buyer. So think about buyers that are over the age of 45. They're high on homeownership. They've got wealth. You know, they may be looking to start to make that semi-retirement type transition, but they still consider themselves to be very young and active. And so they're looking for a community that gives them all those benefits without the restriction of being age-restricted. One, they don't qualify just through physical age. They're not 55 yet. And two, mentally, they don't see themselves or think of themselves anywhere near the age of 55. And so they love the, you know, the way that these Delaware communities provide lifestyle, and that's what it's really intended to be. You will see some changes in the programming. So while still heavy on lifestyle, the types of physical activities or the types of physical fitness will be slightly more geared to that demographic. And then you'll see more in terms of kind of dining and social, almost private club-type dining and social. You know, in our Del Webb communities, you see more large-scale community gatherings. So a lot of similarities with programming is actually rolled out.

Thank you. That's really helpful.

And your final question comes from the line of Buckhorn with Raymond James. Please go ahead.

Hey, thanks, Gary. Appreciate it. Good morning. I just wanted to go back to Florida real quick and the positive shift you're seeing in those markets there. Specifically, just wondering for a little extra color if you can provide it in terms of buyer segments. Are we seeing any particular buyers responding more positively right now? It seems to be coinciding with a decline in resale inventory in Florida, which seems to be a little bit happening sooner than and seasonal patterns would project. So just wondering if you've noticed any particular dynamics within Florida, within the buyer groups, or any other, you know, characteristics you can explain why that shift is occurring now.

Yeah, Buck, we're, you know, we're really happy with what we saw out of Florida. I don't know that I'm terribly surprised. We just think that we're bullish on Florida. um and and then your your comment about buyer groups the move up buyer in florida was up 18 percent for us year over year um so we were pretty pleased with what we got out of move up um the active adult buyer performed very well in florida i highlighted that um you know the the northeast florida market was a little slower for us that tends to be a part of the the state where we have a little bit more entry-level product. So I don't know that I would consider it to be down. Rather, that's a buyer group that continues to be challenged by affordability, no matter where you live. And the Florida entry-level buyer is certainly not immune to some of those affordability challenges.

Overall, though, I'm very pleased with how the inventory has started to clear up in Florida. and and we've certainly seen our business uh perform incredibly that's great news appreciate the uh the additional feedback there and just lastly um in terms of single family rental partnerships just wondering if you're getting any further you know opportunities inquiries of interest you know how you're thinking about you know blending single family rentals into the operating platform what's your what's your kind of current line of thinking on on rentals right now Yeah, even going back to the go-go days of single-family rental, we wanted it to be a fairly small part of our business.

We were targeting somewhere around 5% of our total volume. You know, in terms of what we're delivering today, Buck, it's, you know, in that kind of 3%, 4% of our total volume of single-family rental. On new orders for kind of future business, it's certainly been slower, and those buyers are not as active. But, you know, in the last couple of quarters, we've started to do some more deals, you know, not back to the level we were doing a couple of years ago. But there's activity out there, and we'd expect it to still be, you know, a small part of our business, you know, today and well.

Appreciate it, Collar. Congratulations.

That concludes our Q&A. I will now turn the call back over to Jim Zoomer for closing remarks.

Appreciate everybody's time this morning. I know it was a busy morning for everyone. We're available for the rest of the day if you've got any other questions. Otherwise, we will look forward to speaking with you on our next turn this call.

Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.