PulteGroup, Inc.

Good morning, everyone, and welcome to the Q3 2020 Pulte Group Incorporated Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please email a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please note today's event is being recorded. At this time, I'd like to turn the conference call over to Jim Zumer. Sir, please go ahead.

Great. Thank you, Jamie, and good morning. Pleased to welcome you to Pulte Group's third quarter earnings call. We appreciate your time and hope that you are doing well. I'm joined on today's call by Ryan Marshall, President and CEO, Bob O'Shaughnessy, Executive Vice President and CFO, and Jim Osowski, Senior VP of Finance. A copy of this morning's earnings release and the presentation slide that accompanied today's call have been posted to our corporate website at PulteGroup.com. We'll also post an audio replay of this call later today. I want to highlight that we will be discussing our reported results, as well as our results adjusted to exclude the impact of certain tax credits recorded in the period. A reconciliation of our adjusted results to our reported results is included in this morning's release and within today's webcast slides. We encourage you to review these tables to assist in your analysis of our results. Also, I want to alert everyone that today's presentation includes forward-looking statements about the company's expected future performance. Actual results could differ materially from those suggested by comments made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompanying presentation slides. These risk factors and other key information are detailed in our SEC filings, including our annual and quarterly report. Now, let me turn the call over to Ryan Marshall.

Ryan? Thanks, Jim, and good morning. Over the past six months, it has grown increasingly clear that new home construction is an economic bright spot and important contributor to sustaining some level of forward movement in the broader economy. We certainly do not take this for granted and appreciate the daily lives of millions of people continue to be disrupted. As such, we sincerely hope that you and your families remain healthy and are successfully navigating these difficult times. We appreciate your time this morning and look forward to discussing Pulte Group's outstanding third quarter results. As you read in this morning's press release, gains can be seen throughout our third quarter operating and financial results, including a 7% growth in home sale revenues, a 140 basis point increase in reported gross margin to 24.5%, a 70 basis point improvement in overhead leverage, and a 33% increase in adjusted earnings per share. Whether looking at national data or Pulte Group-specific numbers, housing demand remained strong throughout the third quarter. Reviewing our numbers for the period, year-over-year unit orders increased 36% and showed strength across all price points, buyer groups, and geographies. Along with the ongoing strength in our first time buyer group, we saw a notable pickup among our move up, and in particular, active adult businesses. Given the potentially higher risks associated with COVID-19, active adult buyers had been a softer part of the market at the onset of the pandemic. In this most recent quarter, however, net new orders from our active adult communities exceeded over 2,000 signups for the quarter. This is the highest level for any quarter in over a decade. You've likely heard me say before that a robust housing market requires strong demand across all the consumer groups. I believe this is what we are experiencing now as strength among entry-level and first-time buyers is enabling demand at the higher price points. Further, given limited housing supply and the ongoing price appreciation, Existing homeowners can more easily sell their existing home and move to the next property. Given the positive supply and demand environment, we have taken the opportunity to raise prices across most of our communities. In fact, more than half of our divisions increase prices across their entire portfolio, with the typical increase realized in the quarter being in the range of 1% to 3%. Based on recent conversations, it's clear that market pricing dynamics are an important topic of discussion for investors and analysts these days. Pulte Group is typically a price leader, but we are always looking for the right balance of price and pace. Affordability is still important as well, so it is important that we not become overly aggressive and move prices too fast or too high, particularly within first-time communities. Given market competition and normal affordability constraints among entry-level buyers, pushing prices a few thousand dollars too high can stall sales very quickly. The outstanding demand environment has in turn created a production environment that I believe favors the big builders. Right now, builders who have an existing land pipeline, the ability to develop incremental lots, and can maintain access to trade resources have a competitive advantage in the markets. I will tell you that our scale was instrumental in the company exceeding its closing guidance for the quarter, and as Bob will discuss, in enabling us to raise our closing guide for the full year. Volpe Group runs a highly efficient construction operation, but market dynamics are such that we must be focused and disciplined in how we are approaching the business in the current operating environment. On the land side, We have geared up land acquisition and development activities after suspending much of this work earlier in the year when COVID-19 first hit. For example, our land acquisition spend of $463 million in Q3 was double that of this year's second quarter and almost 70% higher than the same period last year. While much of our land investment in the quarter was the completion of transactions we delayed at the outset of the pandemic, we are identifying opportunities to selectively increase land spend where appropriate. In addition to increasing our land spend, I would highlight that we continue to make our pipeline more efficient with 47% of our lots are now controlled via option. It is important to note that it takes longer to ramp up land production than it does to slow it down, especially in today's environment. But we have a solid land pipeline that will allow us to continue to run our business efficiently. Consistent with our return focus, we are intelligently manning our existing lot inventory to support ongoing sales and minimize gap outs while driving high returns on invested capital. On the house side, our construction and procurement teams are doing a great job keeping the production machine running, as demonstrated by our improved closing volumes. At the risk of sounding repetitive, this day-to-day work is also not without its challenges. I would highlight that labor is tight across all markets and can be adversely impacted by pandemic-related absences. So we're working closely with our trades to help ensure resources are available in the near term and as we work to grow volumes in the future. That said, the building materials environment is even more dynamic these days. For example, our Q4 deliveries will feel the initial impact from this year's spike in lumber costs. and while wood prices appear to have rolled over, we will be dealing with the effects of higher lumber costs for several quarters. Beyond wood, we have had to manage through sporadic disruptions on everything from appliances and cabinets to plumbing fixtures and windows. I can't compliment our procurement teams enough for their efforts to minimize construction delays. In addition to having an outstanding organization to help us manage through today's market conditions, We are working from a position of operational and financial strength. We ended the quarter with a backlog of almost 15,000 homes and a cash balance of $2.1 billion. Given these numbers, we are clearly well positioned to deliver strong fourth quarter results while having the financial strength and flexibility to pursue our strategic business objectives as we head into 2021. In conclusion, we are extremely pleased with our third quarter results and with how our business is positioned heading into Q4 and the year ahead. While we grow increasingly confident in the sustainability of housing demand, we are well aware that we are operating within a global pandemic that is not really under control. As such, we continue to adhere to the business strategies and disciplines which have guided our business for the past decade. We remain focused on achieving high returns over the housing cycle while intelligently growing our business and allocating capital consistent with our stated priorities of investing in the business, paying our dividend, and returning capital through share repurchase. To that last point, we have reinstated our share repurchase program beginning in the fourth quarter. As is our practice, we will provide an update on our purchase activities when we report our fourth quarter earnings. Now let me turn the call over to Bob for a more detailed review of the quarter. Bob?