Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Pulte Group, Inc. fourth 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'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad if you'd like to withdraw your question press star one again thank you i'd now like to turn the call over to jim zoomer please go ahead thank you jordan and good morning i want to welcome everyone to today's call to review policy group's fourth quarter operating and financial results joining me on today's call are ryan marshall president ceo jim osowski executive vice president cfl david carrier senior vp finance in advance of this call a copy of our q4 earnings release and this morning's the webcast presentation have been posted to our corporate website at pulte group.com we'll also post an audio replay of this call later today i would highlight that today's presentation includes forward-looking statements about the company's expected future performance actual results could differ materially from those suggested by our comments made today The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation. These risk factors and other key information are detailed 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 hope that many of you have had the chance to review our new investor presentation. If you haven't seen it, I would encourage you to take a few minutes to review the deck, which is available on our website. The document is designed to provide a comprehensive review of the fundamental goals, strategies, and results of our completely revamped investor presentation, afforded us the opportunity to revisit many of the core tenants against which we have been operating for more than a decade. I have to admit that it was gratifying to see that we have consistently operated in alignment with in 2011 and how well they have helped us navigate through the housing cycle. It is also gratifying to see that the underlying operating model, I would note that investors have recognized and rewarded us for this ranked number one in total shareholder returns among home builders for both the past year and the past deaths for which we are rightfully prepared. Pulte Group's 2025 operating and financial results further demonstrate the value of our differentiated operating model that emphasizes diversification and balance across markets, buyer groups, and spec versus built-to-order production, as well as a highly disciplined approach to project underwriting. In a year that saw buyer demand and overall market dynamics be highly variable, margins among the 2025 financial results that I would highlight, we closed over 29,500 homes and generated wholesale revenues of $16.7 billion. We reported full-year gross and operating margins of 26.3% and 16.9% respectively, and we generated cash flow from operations of $1.9 billion. I would also note that we ended the year with $2 billion of cash after investing $5.2 billion dollars into the business and returning 1.4 billion dollars to shareholders through share repurchases. I have talked about this on other calls, but a critical driver to pull the highly diversified home building operations now established in 47 distinct markets, we benefit from having a strong presence in the Midwest, Northeast, and Florida. Demand in many of these markets has held up better. Relative strength in these areas helped offset pressure coming from the markets where overall home buying demand was softer, such as Texas and in many of our Western markets. Beyond this broad geographic footprint, Holdey Group continues to benefit from having arguably the deepest and most balanced buyer base in the industry. At 38% first-time, 40% move-up, and 22% active adult, our 2025 closings were in line with our long-term targets. More importantly, our 2025 sales demonstrate the powerful impact such buyer diversification in a year in which demand was more challenged among first-time and move-up buyers. Full-year sign-ups among active adult buyers increased by 6% over last year and were up 14% in the fourth quarter over the fourth quarter in the prior year. In addition to the obvious benefit to our subsequent closing volumes, our Del Webb communities routinely deliver our highest gross margins. Del Webb has been and will continue to be an important driver of Multigroup's superior gross margins and, most importantly, high returns. While I think we all view 2025 as a more challenging year than anticipated, Multigroup still reported $2.2 billion of that income, the fifth most profitable year in our history, and generated $1.9 billion in cash flow from operations. Consistent with our disciplined capital, we used our strong 2025 financial results to invest in the future growth of our company, investing $5.2 billion in land acquisition. Inclusive of 2025, Fulte Group has invested a total of $24 billion in land acquisition and development over the past five years. We believe our disciplined land investment will enable us to routinely achieve community count growth in the range of 3 to 5 percent in 2026 and in the years beyond. As part of our keen focus on advancing a home building platform that can consistently deliver strong financial results, as reported in this morning's earnings release, we have made the strategic decision to divest of our off-site manufacturing operations. ICG has proven to be a strong operator that can consistently deliver high quality house shell components that has delivered many benefits to our extending home building platform but we have determined that our business that our business and in turn best served by us focusing on our core home building operations after the sale we will be able to benefit from any innovation and off-site manufacturing achieved by the building component suppliers many of which are making significant investments in technology and innovation while we focus on having recorded another year of strong results multi-group enters 2026 in an exceptional financial position with two billion dollars of cash and a net debt to capital ratio we also control a land pipeline of 235 000 lots that will allow us to continue growing community count in 2026. as such i am optimistic of group's ability to capitalize on any opportunities the market may percent. Now let me turn the call over to Jim.

Thanks, Ryan. Consistent with Ryan's comments, our fourth quarter performance kept another year of excellent operating and financial results, which I'm excited to review. We recorded net new orders in the fourth quarter of 6,428 homes, which is an increase of 4% over the increase in net new orders for the quarter increased an average community count to 1,014 in combination with a 1% decrease in absorption pace to 2.1 homes per month. Challenging demand conditions we experienced over the course of 2,000 homes per month compared with 2.6 homes per month for all of 2020. For the fourth quarter, our cancellation rate as a percentage of starting backlog was 12% compared with 10%. For the fourth quarter, Net new orders among first-time and active adult buyers and 14%, respectively, over Q4 of last. Comparatively, net new orders in our move-up business declined by 5% in the prior year of fourth. By buyer group, net new orders in Q4 were 39% first-time, 38% move-up, and 23% active. This compares with 37% first-time, 42% move-up, and 21% active adult in the fourth quarter. As we have discussed on prior calls, new community openings are active to all business as we grow that segment towards our targeted range, 25% of total. In the fourth quarter, home sale revenues totaled $4.5 billion, which is down 5% from the fourth quarter. Lower home sale revenues for the period reflect a 3% decrease in closings to 7,821 homes, in combination with a 1% decrease in the average sales price of closings to $500. By buyer group, closings in the fourth quarter were 37% move-up and 24% active adult. In the prior year fourth quarter, our closing mix was 40% first-time, 40% move-up, and 20%. questions we have received, I would note that our Q4 closings included approximately 100 build-for-rent homes. Given our strategic approach to BFR, it has always been a swing and accounted for less than 2% of full year 2025. Our year-end backlog totaled 8,495 homes with a value of $5.3 billion, and we ended 2025 with 13,705 homes in production, of which 7216 respectful consistent with our stated strategy our spec inventory is down 18 percent from the end of 2024 we have remained disciplined in managing spec starts as we rebalance our product mix and work to increase the percent our production site given the number of homes under construction and their stage of production we expect to close between 5 700 and 6 100 homes in the first quarter. We also have provided a guide for full year 2026 closings in the range of $28,500 to $29,000 homes. Based on pricing in our backlog and the anticipated mix of closings, we expect the average sales price of closings to be in the range of $550,000 to $560,000 for both the first quarter and full year of 2000. As Ryan discussed during his comments, Given investment made in prior years in a land pipeline of 235,000 lots under control, we expect our average community count for all four quarters of 2 to 3 percent to 5 percent higher. In the fourth quarter, we reported gross margin of 24.7 percent, compared with 27.5 percent in Q4 of last year. As noted in this Morning Express release, our reported fourth quarter gross margin includes 35 million dollars or 80 basis points of land impairment charges. In addition to these charges, Fulte's fourth quarter gross margin was impacted by higher incentives of 9.9 percent of gross sales. This compares with 7.2 and 8.9 percent in the third quarter. Higher incentives for the quarter were primarily the result of our effort to sell finished spec inventory as we closed out. We currently expect to realize gross margins of 24.5% to 25.0% for both the first quarter and for the full year of 2026, but recognize that the spring selling season will be a key driver of our financial results this year. Embedded within our margin guide is the expectation that our house costs in 2026 will be flat, but slightly down relative to 2025. On a year-over-year basis, we expect our lot costs in 2026 to increase by 7% to 8% from 2025. Our reported gross fourth quarter home building SG&A expense of $389 million, or 8.7% of home sale revenues, includes an insurance benefit of $34 million. Here, a home building SG&A expense of $196 million, or 4.2% of home sale revenues, includes an insurance benefit of $250. We remain thought to continue to identify opportunities to adjust spending levels while still meeting our high standards for bill quality. In the year 2026, we expect our SG&A expense to be in the range of 9.5% to 9.7% of homes. Given the typical lower delivery volumes we realize in the first quarter of the year, SG&A expense in Q1 is expected to be approximately $11.5 million. In the fourth quarter, this is of $99 million, which includes a charge of $81 million, resulting from the expected divestiture from our off-site. For the fourth quarter, our financial services operations report a pre-tax income of $35 million, which is down from pre-tax income of $51 million. in the fourth quarter. Financial services pre-tax income for the period was impacted by a number of factors in our home building operation and a lower mortgage mortgage capture rate in the fourth quarter was 84% compared with 86%. Fulte groups reported $655 million. In the period, we reported a tax expense of $154 million or an effective tax rate of 23%. Our effective tax rate benefited from renewable energy tax credits looking ahead to 2026 we expect our tax rate to be approximately our expected tax rate does not take into consideration any discrete period specific tax events that might we reported net income of 502 million dollars for two dollars and 56 cents per share which compares with a reported net income of 913 million dollars in the fourth quarter reported net income of 2.2 billion dollars for 11 dollars what was calculated based on 196 million diluted shares outstanding which is down five percent from the prior year and reflects the impact in the fourth quarter policy group repurchased 2.4 million common shares for 300 million dollars including our q4 activity we repurchased 10.6 million common shares in 2025 for $1.2 billion. For an average price of $1 million, we ended the year with $983 million remaining under $1 million. In the fourth quarter, we invested $1.4 billion in land acquisitions and development, which was evenly split between the two activities. For the full year, we invested a total of $5.2 billion in land acquisition and development, of which 52% went for the development. Inclusive of our Q4 investments, we ended the year with 235,000 lots under control. This is comparable with the fourth quarter of last year, but done on a sequential basis by 5,000 lots from Q3 as we continue to carefully review each land deal, make tactical decisions to exit select transit. It is fair to say that the slower housing environment is beginning to have an impact on the land dynamic depending on the market, the seller, and the underlying land asset. They're finding opportunities to renegotiate deals to adjust the timing the price or sometimes both our land teams have and continue to do an excellent job reviewing every transaction to ensure deals still meet our risk-adjusted return hurdles given current prices our local teams should land deals that were previously under contract this is what i mentioned earlier we generated 1.9 billion dollars of cash flow from operations in 2025 as we manage our housing starts, controlled land spend, and closed incremental homes in the fourth quarter. We will maintain the same disciplined approach in 2026 as we align investments into the business with buyer activity. Given current market dynamics and our expected 3% to 5% growth in community count, we are projecting land acquisition and development spend $5.4 billion dollars. Assuming this level of land spend and the expectation that we commensure it with an increased level of built-order home sales, we'd expect 2026 cash flow generation. And finally, we ended the year with exceptional financial strength and flexibility. So we had two billion dollars of cash and a debt-to-capital ratio. Adjusting for the cash balance, our net debt-to-capital ratio of quarter-end to negative 3%. Now, let me turn the call back to Ryan for a second. Thanks, Jim.

Appreciating the more challenging market is a good year. As you heard repeatedly, demand was highly variable as consumers responded initially to movements in interest rates and later to a slowing economy which pressured jobs and, as important, consumer confidence. All that being said, monthly absorption over the year and through the fourth quarter, The first few weeks of January have also demonstrated the expected seasonal increase in demand as we move from December into the start of the new year. It's too early to glean much in terms of the strength of the entire spring selling season, other than to say we remain optimistic. As was the case through much of the year, in the fourth quarter we continued to realize stronger homebuyer demand in key markets in the Northeast, in many parts of the Midwest, and the Southeast. fourth quarter demand is seasonally slower but on a relative basis we saw positive home buyer activity in markets that included boston the northern virginia dc area as well as chicago indianapolis and louisville and then entering extending down into the carolinas once again i have to recognize the six 13 percent beyond the strength of our land positions and our overall home building operations throughout the Florida markets, data suggests that new and existing home inventories are generally stable to improving modestly. Obviously, a strengthening housing market in the state of Florida would be a huge... We closed out the year with our Texas and West markets continuing to experience sluggish demand trends, although we may be seeing some signs of bottoming in Dallas and San Antonio. At this time, I would tell you that improvements in the pace of sales are likely the result of pricing actions as we work hard to find a clearing price and turn this particularly true looking ahead to 2026 the industry enters a new year with improved affordability as mortgage rates are almost a full percentage point lower than a year ago and whether through price reductions or incentives new home prices have reset lower while consumers benefited from another year of income growth as wages increase a more financially capable whole consumer in combination with an improvement affordability picture puts the industry in a much better position heading into the 2026 spring selling season. Given these dynamics, I think consumer confidence will be a critical component to determining just how. Before opening the call to questions, I want to recognize and celebrate the entire Holti team. Beyond the outstanding financial results, you have been relentless in your efforts out of all that you've accomplished.

So we can get to as many questions as we ask that you will follow from UBS.

Your line is live.

Thanks, guys. I appreciate you taking my questions. And, Ryan, we share your optimism heading into the year versus heading into the beginning of last year. I think the setup is a lot better. But, you know, maybe starting with just SG&A, you guys did a really good job of managing that in the quarter, you know, despite home sales being down about 5% year over year. Can you just help us with some of the levers that you may have pulled and what else can be done on the SG&A front?

Yeah, you know, John, we didn't make a ton of kind of changes. I think we've always prided ourselves in being balanced and consistent. We put a lot of incremental investment into our people. We're five years in a row now recognized as a top 100 best company to work for. we make incremental investments uh in quality and customer experience so um aside from that uh we've really just tried to tackle business not be wasteful but make sure that we're you know invested in the right places um you know we we have made some uh targeted reductions and um we did that frame of last year pretty small number uh but it was focused in some of the markets that you might expect in some of the western markets. Beyond that, John, I wouldn't tell you if there's anything that...

Okay, that's helpful. And then I wanted to touch on ICG. I mean, you know, we've been pretty big proponents of off-site construction and the benefits there. I can understand not wanting to vertically integrate it, but I guess the question is, you know, what is your view overall on just technology infusion into home building, you know, as a longer-term solution to the, you know, the chronic undersupply.

Yeah, John, I think that's the spot that I would highlight is we are huge proponents of the innovation possibility and the ability to incorporate it into the home building machine. And we've learned a lot over the last six years, gotten a ton of benefits in kind of what the overall operation has derived from the innovation that's happened there. We've just come to the conclusion that we think we're better off focusing on the core competency, buying land, entitling, developing, building homes, and including ICG and whoever the eventual owner of that will be, combined with many of the other national off-site manufacturers, they're making a truckload of investment in innovation, and we think we'll be able to continue to benefit from those innovations, that innovation spending into the home building operation without necessarily being a direct owner of it.

Yeah, makes sense.

Your next question comes from the line of Michael Rialt from JPMorgan Chase. Your line is live.

Hi, thanks for taking my questions. Good morning, everybody. First question, I'd love to maybe dive in a little bit to the full-year gross margin outlook that you laid out on the call, and I appreciate that, given that it's maybe a step more in the direction of guidance than some of your peers are willing to do. I wanted to understand the assumptions, particularly as you anticipate your first quarter gross margin, it seems like being sustained throughout the year, and what that means in terms of the progression of the year, because you would think land costs maybe continue to go up throughout the year as just kind of a long-term trend. And so I was just wondering the components of that, as you think sequentially throughout the year, how are you thinking about promotions, if promotions or incentives have stabilized, they obviously rose throughout 2025, labor materials, and if there's any positive impact from the vestiture of ICG.

Yeah. Hey, Mike, it's Ryan. I appreciate the question. And we take kind of the process of giving guidance very seriously, as I'm sure you can appreciate. We go through and we try to evaluate every element of the P&L that contributes to the margin guide. Our expectations are ASP flat through the year. We've kind of given a guide that's the same for q1 and the full year um we do expect our house costs to go down slightly uh the sticks and bricks jim talked about that in his prepared remarks we're anticipating land costs to increase in the range of seven to eight percent um and we'd expect to see the discounts remain elevated um you know we we'd uh hope and we'd be optimistic that we can pull back just a tad on those discounts, but broadly, we think they're going to remain elevated. So we've strived to keep our margins best in class. We'll endeavor to do that in 2026 as well, having the best return on investment. And we manage pace and price toward an outcome that gives us the optimal return for the shareholder. And look, we think it's work. And it's TSR, not only for the last year, but also the last decade.

No, it's great. Thank you for that. And I guess, secondly, you mentioned in your prepared remarks, Ryan, around maybe some of the inventory trends that you're seeing starting perhaps to stabilize in Florida. We've seen some of that as well, in terms of our statistics. I was wondering if you could kind of go through your major markets if possible, and And, you know, particularly from a supply perspective, from an inventory perspective, as you look at, you know, your major markets, how the trends have been over the last, you know, three to six months. And if you would describe that stabilization as kind of broad throughout your footprint or if there's some areas that are still, you know, rising perhaps or even some that are starting to come in a little bit.

Sure. Florida is an important market for us, Mike, and we've talked, we've tried, because it's such an important market to us, and we think all of housing, really, we've tried to talk about it every quarter. It's up 14% over last year, so we had good sales. Generally, I would tell you, every market is positive, but there are some outperformers. The outperformers, the east coast of Florida, so Palm Beach, Bero Beach, kind of Port Lauderdale, Orlando continues to be exceptional. You know, Tampa's been in that same category.

Okay, when you talk about that, you're referring to the order trends, not the inventory, just clarifying.

Correct. I'm speaking to order trends.

Your next question comes from the line of Sam Reed from Wells Fargo. Your line is live.

Thanks so much, guys. I wanted to unpack the step-up in incentive lows from the third to fourth quarter. I believe they were up about $100 bifth sequentially based on the prepared remarks. It sounds like a lot of that was geared towards clearing spec inventory. So we'd just love to hear the levers that you pulled to clear the spec inventory, maybe delineate between price reductions versus buy-downs, and then talk a little bit about incentive loads into the first quarter and what's embedded in that guide.

Thanks for the question, Sam. Yeah, the increase in the fourth quarter really was the incentives to move some of the speculative inventory. You know, we closed a couple extra hundred units, you know, over the high end of our guide. And so we got a little bit more aggressive in some places. So that's really where it's coming from. You know, financing incentives for the quarter were flat. It was really just had to get a little bit, lean in a little bit more in some places. And so that's what we did in the fourth quarter.

Sam, you had a question about Q1 that I didn't hear. What was your Q1 question?

Just on the incentive loads into the first quarter, talking through the guide path there Q4 to Q1.

Yeah, I point you back to the answer that I gave to Mike. We're, you know, we don't specifically guide to incentive loads other than we've given you a margin guide for the quarter. And I made the comment that our expectation is incentives will remain elevated.

All helpful. And then moving to stick and brick. So obviously hearing that stick and brick is going to be lower in 2026 any categories so i'm thinking of material categories where you're getting price concessions we just love to hear the wins that you might be achieving here to get the lower stick and bricks and then perhaps also talk through the labor component and just what you're seeing on the labor side thanks sure um so you know for your benefit in the fourth quarter our sticks and bricks were 78 a square foot so slightly less than what they've been for the past year.

And as we said in our preparer marks, they'll be down flat to down slightly next year. You know, some of the things we've seen, a little bit of help on the lumber side, a little bit of help on the labor side. Materials are kind of ups and downs. You know, the one thing I'd say is included in that, you know, the impact of tariffs are in that guide of slightly down for next year. So again, I think our procurement teams are doing a great job. The labor is available in the market, and so we see it as a good opportunity.

Always appreciate the color, guys. Thanks so much. Thanks, Sam.

Your next question comes from the line of Stephen Kim from Evercore ISI. Your line is live.

Yeah, thanks a lot, guys. Appreciate all the colors so far. Your spec levels look like they were pretty well contained by the time you got to the end of the fourth quarter. I'm curious if you think that there's additional reduction there. I think I have you at a set little – basically at seven specs per community. was wondering if you could give us some sense or, you know, where you'd like to see that as you head into 26. And, you know, assuming that your specs will be less of a headwind, I'm curious why you're not assuming that you might see any reduction in your incentives. If I, if I heard you correctly, Ryan, what I'm, what I'm getting from your guidance is that your guidance does not assume any reduction in incentives. And it feels a little conservative to me.

So I'm just curious am i reading that right or is there something uh maybe that i'm that i'm missing maybe maybe the spec level you you think uh you know may actually rise next year for some reason so just a little color there uh combining those sure stephen um so let me start with the specs um we're you know we're comfortable with where we're at right now but we have worked very hard through the last three to four months to make sure that our start rate matches our sales rate and that we weren't adding to the specs that we have. Ideally, what we're really endeavoring to do is to move back more into a built-to-order builder where 60-plus percent of our sales are built-to-order, 40 percent. The last couple of years, we've kind of been inverted. We've been 60 percent spec, 40 percent dirt. And, you know, slowly back in the direction of more built-to-order. We think that's better for the way that we have our capital allocated to home building business. Our margins are higher on bill to order. So we're kind of threading that needle or helping to put some in market that actually can be used on bill to order. We're finding a way to kind of get the best of both worlds and making sure that we're tackling the affordability challenge while still moving into a bill to order. So as we go into the spring selling season, Stephen, are to sell dirt back while still having some spec available, especially in the, you know, the entry level price points. As it relates to the incentives, the spring selling season, I think, is ultimately going to kind of dictate what we're able to do with incentives. um we was um you know we so if i can just put a little color around what you said um if you were

to return back to a sort of a bto i look and see that you know pre-pandemic you all were running kind of like three to four specs per community which is you know pretty significantly lower than where you are now so if i'm reading what you're saying right it sounds like there's going to be this transition that's taking place, as that transition does take place, your turnover rate, I would think, would go down. Your backlog turnover rate would go down because you wouldn't be carrying as many specs and be doing more bill to order. Your closings guide that you've given would, if I have your backlog turnover ratio going down, in order for you to hit your closings guide, it would assume that your order pace is going to be up year-over-year close to double digits. And so I just wanted to make sure that I am doing the math properly here and that I haven't missed something.

Yeah, Stephen, not having the luxury of seeing your model, I probably wouldn't want to comment on your math. You know, we'd certainly be happy to follow up with you on that. I would say, you know, we've got pretty complicated models on our side as well. And, you know, we've gone through and made, you know, assumptions on what our new communities are, what the absorptions are, what our sales rate is going to be, and what our monthly start rate is going to be. And it really comes down to kind of that start rate. We do have the benefit of cycle times being back to pre-COVID level cycle times at around 100 days. So, you know, again, we need the spring selling season to continue to cooperate with us and be strong. As long as that happens, we've got the production capability to put the starts in the ground that will allow us to deliver the closing guide that we've given.

Okay, great.

Next question comes from the line of Alan Ratner from Zalman & Associates. Your line is live.

Hey, guys. Thanks for all the details so far. You know, Ryan, you brought up an interesting point that I was hoping to touch on, you know, in terms of the forward commitments on build to order. You know, I think a lot of builders have kind of talked about the fact that that's really difficult to do from a financial perspective just because you're paying for a longer lock period. So I would love to hear a little bit more about those programs that you're offering right now on BTO, what kind of rates you're offering the consumer. And I guess just extending that to the margin profile of BTO versus spec right now, if you could talk a little bit about what what that differential looks like. Thank you.

Yeah. Alan, what was the last part of that question? I missed it.

Just the margin differential between BTO and spec right now.

Oh, sure. Yeah. So, Alan, in terms of kind of the forward commitments, it's really driven by the faster cycle times. So, you know, we're over 100 days on single family. We've got some multifamily in there that takes a little longer. But on single family, we're 100 days. We have some markets that are down into the 70s. So that's the – and then, you know, the rates that we can offer on those longer-term rate blocks, they're not quite as competitive or as low as what you might see on a spec offer, but they're pretty good of what we would offer on a spec. so um it depends on the community but you know roughly we're you know we're somewhere you know roughly 100 basis points below what you could get kind of in the open market today um and then in terms of kind of margins and built order um depends but you know suffice it to say and i think we've been there you know uh when it's built to order and and that is simply kind of derived from the fact that when the customer comes in and they're able to pick out everything they want that allows them to pick their floor plan their options their lot premium um and you know we've we've often that the dollars that we make off of lot premiums and options are real um and those margins are

current the margin out performance that the customer picks with great i appreciate that detail um and then second question on price point trends i know you gave the uh the data for i think signups and closings sounded like active adult was was up solidly year over year but i guess just more qualitatively if you could talk about the the demand trends and kind of the pricing trends you're seeing at each of your price points uh and any notable shifts we've seen over the last you know call it a couple of months alongside all the policy noise and interest rates uh hopping around any color you can give would be great. Thank you.

Yeah, Alan, in terms of price, the biggest change in price came in the first time segment. So that's down to 438. So we're down about 6% in price on first time, which is where, you know, the majority of the affordability pinch is really being felt.

So I think we've leaned in, we've really worked to try and address affordability move up in active adult pricing has really been kind of flat thanks a lot your next question comes from the line of anthony patnari from citigroup your line is live uh good morning um i was wondering if you could talk a little bit more about the the 80 bits of impairments in the quarter and maybe the drivers there um and i think some other builders have reported maybe elevated

walk-away costs for their lot options are you seeing that or just any kind of color you can give us moving into the spring yeah thanks for the question anthony so you know ryan touched on that a little bit earlier and in some of our prepared remarks you know we you know we leaned in a little bit heavier on some incentives where we had a little bit more speculative inventory out there in the market and so you know the thousand communities that we operate in we had eight of that we took a land impairment charge on, which was really just a matter we had to get a little bit more aggressive on pricing. And so we moved through the inventory, resulted in a charge. And so, as you said, that's what we quoted in here. The other thing that I would tell you is, and it was in our prepared remarks, we've been more disciplined as we've been looking at it. In the quarter, we put another 18,000 lots under contract, but we also walked from about 15,000. So we're always prioritizing our land book and so within that there was about 22 million dollars of land charges which is included in our other expenses.

Okay that's very helpful and then just switching gears with regards to affordability do you see the administration's you know restrictions on institutional ownership of single family homes do you see that as being impactful in any of the major markets where you're operating and then just more broadly are there policies I mean a lot has obviously been floated but are there policies that you think would you know could help stimulate housing demand in kind of a sustainable way so i'll take the build the rent shared the numbers uh for us and for both the full year and the quarter and they're really immaterial uh we had

a hundred uh build the rent closings in the quarter so pretty insignificant going back to the very beginning of when we even entered into the build for rent space we strategically limited the percentage of volume that we were willing to put toward that. We just, you know, we felt that we wanted to dip our toe in the water, but we didn't want to be overexposed. And, you know, I think hindsight being 20-20, that was a great decision. In terms of kind of markets where it could be impactful, significant, I just really don't see a big deal kind of anywhere. I know the executive order and some of the things that are being talked about um and you know if those are the rules of the road we're going to play by them and it won't really have an impact um and then anthony i'm sorry what was yeah yeah i'm just wondering if there were policies that you think could you know help with affordability or home construction um and help with housing activity that would be you know sustainable and positive for from your perspective yeah you know You know, we've had conversations with the administration and, you know, the administration has been very active in leaning in and trying to address housing affordability. There's a lot being talked about, as I know you can appreciate. I think the entire industry, you know, the administration to try and create more supply, which ultimately will impact affordability. The American.

OK, that's very helpful. I'll turn it over.

Your next question comes from the line of Matthew Bully from Barclays. Your line is live.

Hi, morning, everyone. Thanks for taking the questions. I wanted to ask another one on the build to rent side. I think, Ryan, you just alluded to that. I think I heard you say you were, I guess, if I paraphrase, glad you didn't lean as much into it as you could have. But I think the way that executive order was written the other day suggested, you know, purpose-built, built-for-rent would still be potentially okay if that does all go through. So I'm curious if there's actually an opportunity to do more built-for-rent, or is it, given what you just said, the business is still too either cyclical or rate-sensitive, what have you, that, you know, it's ultimately not where you want to be focusing your investment? Thank you.

Yeah, I would tell you, you know, maybe taking the last piece, Matt, it's just probably not where you're going to see us lean in no matter what the executive order says. I just think there's better places for our capital that will drive better returns for our shareholders. You know, we'll see ultimately kind of what the rules end up being when the executive order is kind of fully clarified what purpose-built means. You know, does that mean the entire community is built for rent? Does that mean it never goes on the MLS? There's some, I think, open questions, but no matter how those get resolved, I just, I don't see it being a huge part of it.

Got it. Okay, perfect. Thanks for clarifying that. And then secondly, on the incentive front, you know, you guys in the past have commented on your mix of, I guess, call it financing incentives versus other incentives, whether, you know, upgrades and options and so forth. just curious if you can kind of comment on the trends in both of those and maybe how quickly can you know the different types of incentives sort of respond to this move lower in interest rates that we've had thank you you know i would tell you the financing incentives have stayed very consistent for the past three four quarters really we've seen it more on the other incentives so primarily discounting on on some of the speculative homes we had so as ryan touched on you know as we

get to the spring selling season and we've gotten our spec levels down you know there's hope that there's opportunities that um maybe you can pull back on that other lever but otherwise financing incentives have stayed flat for us once expected okay thanks jim thanks ryan good luck guys your next question comes from the line of trevor allenson from wolf research your line is live hi good morning thank you for taking my questions a question on your volume performance in the quarter.

From an order's perspective, you outformed historical seasonal trends for the second straight quarter. With that in mind, should we think of the roughly 2.3 absorption rate that you did in 2025 as representing a floor for you guys here? And even if we don't get better demand conditions in 26, would you expect to work to drive absorptions at 2.3 level or higher moving forward?

Trevor, I think we would certainly endeavor to do more. We'd always like to sell more. more, you know, in terms of saying, are we at a floor, kind of dictate that. We have been pretty clear, though, in saying kind of the way we run our business, we need a minimum amount of volume that's got to go through every store. And we tend to target that around two. So, you know, we're, you know, we didn't endeavor to do more, you know, in such a way that we can deliver the guide that we've given for the full year. So hopefully that...

Yeah, that is helpful. I think what I was trying to get at was kind of the minimum volume level that you guys would target. That two number is very helpful. And then second, I just follow up question on specs. I think last quarter you had mentioned your finished specs per community were about twice your target level. Sounded like you guys made some real efforts to move some products in 4Q. So I may have missed it earlier, but where do your finished specs per community sit today? And with that in mind, what is your expectation for starts moving forward relative to sales?

Yeah, Trevor, so as I mentioned, for the last four or five months, we've been matching our starts to our sales. So, you know, we haven't really added to kind of the specs in any kind of way. Our total specs are down versus prior year by about 1,500. So we've made a pretty significant dent in it. You know, that's the number that's probably a little higher than what I'd ideally like it to be, just because you've got a lot of capital tied up in those homes. So, you know, the number in and of itself isn't anything that we're overly freaked out about other than to say, I think we can do better. And we'd like to have less finished homes, you know, sitting out there. Ideally, we'd like to see kind of our business predominantly built-to-order model. We think it is, you know, it's a major kind of return out performance. and you know it's hard to do it's hard to run a bill to order business but we think we know how to do it we've got a good model that we'll you know we'll endeavor to put back in place thank you for all the color and good luck moving forward your next question comes from the line of kenneth zener from seaport research your line is live good morning everybody you can Okay.

Ryan, team, I wonder, you know, if we thought about your business, which you report consolidated, and we look at it, if you could give some comments by your regional disclosure. I'm just using like third quarter as kind of a trend line for you to comment on. Florida looks like it's basing. Texas is obviously like still facing headwinds, the Midwest, North doing excellent. But can you talk about the West? It's a broad area for you, but the gross margins, which historically would have been higher to compensate for lower asset terms, it's lower. What's happening in the West? Is it where affordability is most pronounced? So are incentives greater in the West than your other regions? Is it what we've seen last you know, X, call it quarters? Is there immigration issues or headwinds that are distinct in the West versus, you know, Florida or Texas? Can you just talk about why that region has, appears to have a structurally greater, you know, challenge on the gross margin side? Thank you.

Yeah, sure, Ken. You know, we've, I think we, along with the entire industry, has been pretty clear for over a year and a half, the West has been a more challenged environment, predominantly driven by affordability. It does have, especially the coastal markets, some of the highest home prices in the country, and as interest rates have gone up, it certainly made that challenging. There's also, you know, a lot of tech employment on the West Coast, being a little more informed with buying. You know, we are seeing it in the West, we have Las Vegas, a pretty decent success, Arizona, you know, more challenged. It's, you know, expensive, and it saw a lot of the same pricing So I think it's going through, so that's how, it's an important part, but, you know, as we've highlighted the fact that we have such a diversified geographic platform, even with some of the challenges in the West, we've been able to perform incredibly well because of what our Florida, Southeast, Midwest, and Northeast businesses have done.

So, you know, another advertorial kind of pitch for why the diversity in- Thank you very much. your next question comes from the line of mike doll from rbc capital markets your line is live morning thanks for squeezing me in um just uh a couple of follow-ups one to go back on the incentives i'm sorry to harp on this but if incentives were kind of up under dips in the quarter can you just comment on you know if you're nine nine for the quarter does that imply the exit rate was in the low double digit range range and when you when you talk about remaining elevated are you talking remaining elevated to that exit rate which likely would have been kind of the highest levels that you saw through through the quarter and year or or should we be thinking more in line with kind of the the average levels that you've seen yeah mike we're probably not going to slice the baloney quite that thing so you know we were nine nine in the quarter uh we were nine the price at rate uh probably was a little higher than nine nine as we moved through some of the spec inventory that jim talked about which primarily was in the form of just outright price

discounts financing as jim mentioned was flat um it has been flat for the last three quarters as we move into the you know the the current year sliced the baloney quite so thin on exit rate versus quarter rate just look our expectation is that we're going to continue to lean into the forward commitments it's a real important part of addressing affordability we're going to make sure that we're priced right in a competitive way both against resale and other new home competitors and then all that said rolls up into the margin guide that we've given of 24 and a half to 25 which kind of no matter the housing cycle and particularly in this environment, I think it's an outstanding margin, absolute margin performance. So I guess I'd leave it there.

Okay. Understood, Ryan. And then second one, just back on ICG, I guess, you know, your company and its predecessors had previous experience in owning some of these assets, exited. Then when you bought ICG, it was supposed to be kind of like the next evolution and something that would be different. And I guess I'm just wondering, you know, what ultimately catalyzed your decision here that just for whatever reason, you know, this, you reached the decision that this doesn't make sense. And can we think of this as, I don't, nothing's ever final, but this is basically now your philosophical view going forward that you don't need to own assets like this in a vertically integrated way.

Yeah, I think it's a couple of things. number one, we bought it right as COVID was starting. So I think the supply chain challenges and some of the things that happened kind of in a post-COVID environment certainly slowed us down in kind of our ability to get some of the gains out of it that we wanted. We've also seen investors make tremendous investments into this space, and they've got way more scale than what we have and so when we think about what's the valuation but also we are in our share grow in other places so as much as anything it's it's really about kind of that we got out of ICG we believe we'll continue to benefit from that you know but it comes down to you know what's the

best money and is probably the short answer so maybe one more question your next question comes from the line of Jay McCandless from citizens your line is Hey, good morning.

Thanks for taking my questions. The first one, just wanted to square up the commentary that Jim Osowski made about being able to maybe reprice some land deals and relating that to the land inflation you talked about, 7% to 8% for this year.

Is there any chance y'all could work that number down as you rework some of these land deals? great question jay i would tell you you know the land that we're seeking to buy right now the ones that we're renegotiating those are you know 2027 and 28 closings so you know really the increase that's in our guide for this coming year is land we bought a couple years ago so really don't see the opportunity in the short term but as we look to the to the long term that's certainly our goal is to see if we can get some price out of it okay great and then my second question um you know you guys the last couple quarters have talked about del web communities more than coming online just

wanted to get an update on that and and see if that's still going to be the case in 26 yeah jay it is uh you see it in the signup trends um in the quarter and even in the full year you know we're up to in the most recent quarter 24 of our closings were from del web uh 23 of the signups in the quarter were del web um so there's new community kind of one to two quarters we've got some more that are coming next quarter which is you know what we always said in 2026 you'd see us get back up to that kind of targeted mix of 20. with that we're going to wrap up this morning's

call we'll certainly be available over the course of the day for any follow-up questions we thank everybody for your time this morning and we'll look forward to speaking with you on our next Transcription by ESO. Translation by —