PulteGroup, Inc.

Good morning. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Pulte Group Inc. Q4 2022 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 one on your telephone keypad. And if you would like to withdraw your question at any time, again, press star, followed by the number one on your telephone keypad. Thank you for your patience. Mr. Jim Zoomer, you may begin the conference.

Good morning, Devin. Good morning. Thank you, Devin. Look forward to discussing Pulte Group's outstanding fourth quarter earnings for the period ended December 31, 2022. 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 Finance. A copy of our earnings release and this morning's presentation slides have been posted to our corporate website at pultegroup.com. We'll post an audio replay of this call later today. Please note that consistent with this morning's earnings release, we will be discussing our reported fourth quarter numbers, as well as our financial results adjusted to exclude the benefit of certain insurance reserve adjustments and JV income, as well as the write-off of deposits and pre-acquisition spend and a tax charge recorded in the period. 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 finally, 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 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. Ryan?

Thanks, Jim, and good morning. We ended 2022 on a high note as we closed almost 8,900 homes and delivered all-time fourth quarter records with home building revenues of $5.1 billion and earnings of $3.85 per share. These results, in turn, helped Pulte Group finish the year with over $1 billion in cash and a net debt to capital ratio below 10%. Bob will detail the rest of our Q4 results in a few minutes. Driven by the company's exceptional fourth quarter performance, Pulte Group delivered another year of great financial results. For 2022, our home sale revenues increased 18% over the prior year to $15.8 billion, Our reported pre-tax earnings increased by 37% to $3.4 billion, and our reported earnings increased 48% to $11.01 per share. These results provided us the flexibility to invest $4.5 billion into the business, while returning over $1.2 billion to shareholders, dividends, and share repurchases. Let me just pause right here and thank our entire organization for their efforts in delivering such a great operating and financial results under some challenging market conditions. We are truly fortunate to have such an outstanding team. In assessing our 2022 financial results, we fully appreciate that gains in volume, pricing, gross margin, and earnings reflect the stronger demand environment that existed earlier in 2022. As we all know, the Federal Reserve decision to hike rates seven times in 2022 and its fight against inflation is successfully slowing the economy, including housing. For the full year, national new and existing home sales across the country fell 16% and 18% respectively from 2021. Consistent with the trend of these national numbers, Our 2022 net new orders were down roughly 27% from 2021. The softer demand we've experienced is the result of consumers priced out of the market by higher prices and higher mortgage rates, along with those individuals who have moved to the sidelines given market uncertainties and risks. Despite the higher rate environment dominating the national conversation, we saw buyer demand improve as the fourth quarter progressed, and can confirm this strength continued through the month of January. We'll have to see how things progress from here, but I think this improvement attests to the ongoing desire for homeownership that exists in this country. Net signups, both in absolute number and absorption pace, increased as we moved through each month of the fourth quarter and through the month of January. While seasonal trends have been distorted over the past few years, monthly sales moving higher as the fourth quarter progressed is atypical. In short, we are encouraged by the recent improvement in our new home sales. Based on feedback from our sales offices, buyers have been responding to the decline in mortgage rates. Consistent with this idea, I would add that rate buy downs remain among the top incentives for our customers. Along with the decline in mortgage rates, actions we've taken to help improve overall affordability appear to be gaining traction. In alignment with our strategy to find price and turn our assets, we continue to implement programs that enable consumers to buy homes in today's higher rate environment. The cost of these programs, which might include rate buy downs, lower lot premiums, or even price reductions, can be seen in our higher Q4 incentives. In the fourth quarter, incentives increased to 4.3% of sales price. On a sequential basis, this is up from 2.2% on closings in the third quarter of 2022. Beyond just adjusting incentives, in many of our active communities, we have already introduced smaller floor plans to help lower future prices and associated costs. The introduction of smaller floor plans is just part of a comprehensive effort to lower overall construction costs to help offset the pressure on sales price. The obvious question now is, will this strengthening of demand continue? Like all of us on this call, I've heard strong arguments on both sides, but the honest answer is that no one really knows. Homebuilders are optimists by nature, and I want to believe that the Fed can orchestrate a soft landing, but the risk of a recession is real. We're currently seeing buyers respond to lower rates and better pricing, but what happens as Fed actions weaken the employment picture is uncertain. With today's volatile market dynamics, one of our frequent conversations with investors is around how Pulte plans to operate its business over the near term. Given the long timelines associated with land development and home construction, we need to set a plan, but be prepared to adjust as market dynamics require. At a high level, I'd like to share how we plan to operate the business for the foreseeable future. At our core, we remain a build to order builder, but our system operates best with a steady volume of production. As such, our plan is for a consistent cadence of new starts. This would include starting spec homes on a pace consistent with spec sales. We shared on prior calls that in the current environment, Buyers are showing a preference for homes that have near-term delivery dates. As an example, in the fourth quarter, spec sales represented over 60% of our new orders. Our recent sales show that we are finding the market clearing price using our strategic pricing tools to set price and incentives. Within today's sales environment, we will be intelligent about the process as we optimize our production machine and turn through our land assets. As always, our primary focus will be to deliver strong relative returns on invested capital through a cycle. In planning for 2023, we have assumed our current cycle time of six plus months will remain the reality for the next several months. Combining our plan starts with our 18,000 homes currently in production, we expect to have a production universe that will allow us to close approximately 25,000 homes in 2023. We have goals in place to reduce cycle time, and our procurement and construction teams are already realizing success in cutting production days, but a lot of work remains to be done. Fire demand will ultimately determine what the coming year looks like, but this is our operating plan. We see this as a prudent, balanced approach that checks key strategic boxes, namely, We maintain a level of production in our communities, which is critical when negotiating with local trades and suppliers. We keep an appropriate level of specs in production while seeking to control finished inventory. And we continue to turn our assets, generate cash, and position the business for the next leg of the housing cycle. Given today's market dynamics, at this time we will be providing guidance for our first quarter, but not the full year. In sharing our operational approach for 2023, we have hopefully conveyed a thoughtful process and conceptualized the opportunity we see for our business. Let me now turn the call over to Bob for a detailed review of our fourth quarter results.