PulteGroup, Inc.

Good morning, everyone, and welcome to the Q2 2021 Pulte Group Incorporated Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please say no to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask. At that time, in order to ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the comments call over to Tim Zimmer.

Sir, please go ahead. Great. Thank you, Jamie, and good morning. I appreciate everyone joining today's call to review Pulte Group's operating financial results for the second quarter ended June 30, 2021. Joining me to discuss Pulte Group's strong second quarter are Ryan Marshall, President and CEO, Bob O'Shaughnessy, Executive Vice President and CFO, and Jim Osowski, Senior Vice President, Finance. A copy of this morning's earnings release and the presentation slides that accompany today's call have been posted to our corporate website at PulteGroup.com. We will also post an audio replay of the call later today. Let me note that in addition to reviewing our reported Q2 results, we will also be reviewing adjusted results, which exclude a $46 million pre-tax insurance benefit and a tax benefit of $12 million resulting from a change in valuation allowances associated with state net operating loss carry-forwards. 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. And as always, I want to alert everyone that today's presentation includes forward-looking statements and 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 Marshall.

Thanks, Jim. Good morning. On today's call, we'll be covering Pulte Group's financial results as well as updating you on several important initiatives we continue to advance. As Bob will detail in a few minutes, Pulte Group delivered another quarter of strong financial results. Looking at the business, along with a 28% increase in net new orders, we generated significant top-line revenue growth, outstanding gross and operating margins, and a 50% increase in adjusted earnings per share. Clearly, there's a lot to be excited about in our results. Quarterly financial results are important, but I believe that running a successful home building business means thinking about the long term and focusing on the key drivers that we believe create shareholder value. These include attracting and retaining a highly engaged workforce that strives to provide a world-class buying experience for our customers, following a disciplined capital allocation strategy, running an efficient home building operation, and realizing high returns and intelligently manning risks through time. I am proud to say that consistently executing against these key drivers has been critical to the quality of the operating results we have realized and the outstanding financial position we have established. Consistent with our constructive view of the housing market, We previously announced our intention to increase land investment in 2021. In fact, through the first six months of this year, we've invested $1.8 billion in land acquisition and development. This is up from $1.1 billion last year and $1.5 billion in 2019, with the latter number including the acquisition of the American West assets. Given our increasing land spend, I want to emphasize that we continue to make these investments using the same disciplined approach and underwriting practices against which we have operated for most of the past decade. An overlay to our investment process, we also continue to execute against our strategy of controlling more land via option. I'm happy to report that 53% of our land was optioned at quarter end, which is approaching all-time highs, And we will, of course, seek to raise this percentage as market conditions permit. Although on a smaller scale compared with land, I would highlight that we continue to invest in our offsite manufacturing strategy. Pleased to report that we recently leased a facility in Florence, South Carolina that will expand our offsite manufacturing capabilities. We expect to begin delivering product from this facility to parts of our southeastern operations in the first half of 2022. The Florence facility is our second off-site manufacturing plant and follows our earlier acquisition of ICG at the beginning of 2020. These two plants are part of our long-term strategy to address labor and related production challenges that we expect will continue impacting the future of home building. As part of our disciplined capital allocation policies, we are also continuing to return capital to shareholders. Through the first six months of this year, we've returned just shy of $430 million through share repurchases and dividends. You will recall our Q1 announcement of a $1 billion increase to our repurchase authorization. You can see that we're already putting this authorization to use. Having capital available to allocate comes from strong cash flows being generated from well-run operations. Bob will provide the details, but I would like to highlight that our reported operating margins in the second quarter exceeded 18%, with adjusted operating margins approaching 17%. With an industry that historically achieved operating margins of approximately 10%, our performance over the last several years is clearly breaking with this old paradigm. More broadly, I think it's important to acknowledge that our entire industry is working to raise this performance bar. And finally, we believe creating long-term value for our shareholders comes from generating high returns over the housing cycle. For the trailing 12 months, Pulte Group has delivered an outstanding return of 25.7% on our equity. Driving higher returns is something we've been talking about for the past decade. so we are proud to be delivering on that objective. The returns we generate are an outcome that reflect the myriad of day-to-day decisions we make as we allocate capital and run our business. As I noted, we are making these decisions today based on a favorable long-term view of the U.S. housing market, although we appreciate recent questions about near-term conditions. As a general statement, I will tell you that housing demand was strong in the second quarter, and that these trends have continued into the first few weeks of July. From Google website searches to community visits, we continue to see a very high level of consumer interest in buying new homes. Given the unusual demand dynamics created by the pandemic, we are careful when comparing 2021 to 2020, so we also look back to prior years for additional perspective. To that end, we monitor an array of traffic, conversion, and sign-up trends, and our local operations provide insights on what is happening on the ground in their respective markets. Based on all the metrics we monitor and consistent with our business performance, we would say that the second quarter demand in the overwhelming majority of our markets was as strong or stronger than the first 90 days of this year. I would also tell you that buyer interest in the period was stronger than the second quarter of 2019, in other words, prior to the pandemic. Buyer demand has been strong, but customer feedback also hints at a sense of frustration with the lack of homes available for purchase and the rate of price appreciation they have seen in the market. With this as a backdrop, I would also tell you that we purposely restricted sales through lot releases or similar actions in roughly 75% of our communities across the country. These actions were taken to better align our sales efforts with our current production capacity and to begin rebuilding spec homes closer to our historical level of 25%. Said simply, we likely could have sold a lot more homes in the quarter above the 28% increase in net new orders and 40% increase in absorption pace that we reported. When we thread all these data points together, we continue to see a strong demand environment with a very high level of interest in buying a new home. As has been the case for multiple years, the ongoing strength in demand reflects powerful macro forces, including favorable demographics, an undersupply of new and resale homes, an improving economy, and a supportive interest rate environment. While meaningful constraints on home availability and price increases are likely influencing short-term conditions, we remain very optimistic about the long-term demand trends. Now let me turn the call over to Bob for a review of our second quarter results.