PulteGroup, Inc.

Good day, and welcome to the Q1 2021 Pulte Group, Inc. Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal 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, then one on your touchtone phone. If you would like to withdraw your question, please press star, then two. please limit yourself to one question and one follow-up. Please note this event is being recorded. I would now like to turn the conference over to Jim Zimmer. Please go ahead.

Great. Thank you, Sarah, and good morning. I want to thank everyone for joining today's call to review Pulte Group's operating and financial results for our first quarter ended March 31, 2021. While it has only been a year, our Q1 2021 earnings call will obviously be a very different discussion than we had at this time last year. 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 Vice President 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 will also post an audio replay of this call later today. Before we get started, let me highlight that in addition to reviewing our reported first quarter results, We will also discuss our adjusted results, which exclude both a $61 million pre-tax charge associated with a debt tender completed in the quarter and a $10 million pre-tax insurance benefit recorded in the period. For purposes of comparison, we will also discuss prior year Q1 earnings adjusted for a $20 million pre-tax goodwill impairment charge. A reconciliation of our adjusted results to our reported financials 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 business performance. As always, 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 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 slides. 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. Ryan?

Thanks, Jim, and good morning. As detailed in this morning's release, our financial results show exceptional first quarter performance for Pulte Group. From double-digit growth in signups, revenues, and earnings to enhanced liquidity and a $1 billion expansion of our share repurchase authorization, we posted a tremendous start to 2021. Beyond company-specific gains, our first quarter results reflect the ongoing strength of home buying demand throughout all segments of our business. It is worth highlighting that I believe the strength of the market is due in part to a significant housing shortage in this country. That shortage has been years in the making and will take years to correct. I think the first two sentences from a recent Wall Street Journal article aptly summarize the current state of housing supply in the U.S. The U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country's demand, according to a new analysis by mortgage finance company Freddie Mac. The estimate represents a 52% rise in the nation's home shortage compared with 2018, the first time Freddie Mac quantified the shortfall. Beyond this long-term structural shortage, COVID-19 has also resulted in a growing desire for single-family living and has changed what homebuyers want and need from their homes. We believe these new wants and needs are often best met through the floor plans and features available in new construction, Add these dynamics to supportive demographics, low interest rates, and an improving economy, and you get the tremendous demand environment we're experiencing today. The strength in demand is reflected in our strong order growth for the quarter. In total, our net new orders were up 31% over the last year, while our absorption pace was up 37%. On a unit basis, this was the highest first quarter signage we've reported in over a decade, and at $4.6 billion, our highest reported quarterly sales value ever. I would highlight that the strong demand we experienced in the first quarter of 2021 has continued into the first three-plus weeks of April. We continue to see high traffic volumes in our communities and buyers anxious to purchase a new home. Working within this strong demand environment, we continue to improve our operating and financial performance. Our pricing strategies and disciplined business practices helped us to generate a gross margin of 25.5% and an adjusted operating margin of 14.6% in the quarter. The resulting cash flows were then available to fund the future growth of our business and an increase in our ongoing return of excess capital to shareholders. At a very basic level, this is the model that we have been refining for the past decade. It starts with running a higher performing home building operation, seeking to capture incremental gains in all areas of the business. It also includes investing in high quality projects and increasing our use of land purchase options to improve cash flows and overall asset efficiency, while delivering consistently strong returns on investment and equity. Having built a home building operation that we believe can routinely generate strong returns and cash flows, we then allocate capital to support our long-term success and reward our shareholders. As we have highlighted many times, our highest priority is investing in our business through the acquisition and development of land assets that can generate required risk-adjusted returns. To that end, since 2016, we have invested $14.6 billion in land acquisition and development and have done so while building a more efficient land pipeline. To clearly demonstrate the progress we have made, at the end of 2016, we owned 99,000 lots while controlling an additional 44,000 lots via option. Today, we actually own 5,000 fewer lots than five years ago and have more than doubled the lots we hold via option to 100,000. This significant and continuing change in the composition of our land pipeline has allowed us to increase the returns we generate while also helping us to reduce land-related market risk. As you know, we have also made the return of funds to our shareholders an integral part of our capital allocation. Over the past five years, we've returned approximately $3 billion to shareholders through dividends and share repurchases, including $154 million of stock repurchased in the first quarter. On that front, I am happy to note that this morning's announcement that our board approved an increase of $1 billion to our repurchase authorization. And finally, as you saw in the first quarter, we were also prepared to allocate capital with a view towards further strengthening our balance sheet and reducing our financial leverage. By paying down $726 million of debt in the quarter, including the successful tender for $300 million of our nearest dated outstanding debt, we were able to lower our debt-to-capital ratio on a gross basis to 23.3%. To be paying down debt and returning significant funds to shareholders while targeting a 30% increase in our land acquisition and development in 2021 says a lot about our expectations for the earnings power and the financial strength of this business. I think it also reflects a more return-oriented, shareholder-friendly approach toward operating our business. In fact, I think there is an ongoing maturation of the broader home building industry in terms of its ability to generate higher returns with reduced risk. Given changes in the industry's operating and return profile, we believe investors can grow increasingly comfortable about investing in the sector over the entire housing cycle. With the opportunity for sustained high levels of housing demand, I believe Pulte Group's unique operating strategy has us well positioned to compete and to continue to grow our business. Beyond the financial strength that I discussed, I believe that our size and diversity provide important advantages. For example, a key driver to our order growth in the first quarter was the ongoing recovery in demand among active adult consumers. A year of being separated from their kids and grandkids has been more than enough for this buyer group. With vaccinations now moving into high gear, our active adult buyers are anxious to get on with their lives, including moving into a new Dell Web community. In conclusion, 2021 has gotten off to an excellent start for our company. With ongoing strong demand that exceeds available supply, a backlog value of $8.8 billion, and our tremendous financial strength and flexibility, I am excited about what we can accomplish this year. Let me now turn the call over to Bob.