PulteGroup, Inc. Q2 FY2025 earnings call

• Diversified and balanced operating model offers strategic benefits, including strength in serving active adult buyers with high-margin closings. • Geographic breadth and market diversity, with Midwest, Southeast, and Northeast operations offsetting challenging markets out west and in Texas. • Florida operations saw net new orders increase 2% y-o-y, with exceptional land positions and experienced leadership. • Ability to serve both immediate delivery of spec homes and personalized home building as competitive advantages, with average options and lot premiums of $109,000 in H1 2025. • Adjusted operations to market conditions by slowing land spend, reducing starts rate, and selling excess spec inventory. • Land pipeline progress: over 250,000 lots under control, with option lots comprising 60% of total land pipeline, moving towards 70% options and 30% owned lots.

PulteGroup's second quarter 2025 results showed net new orders totaled 7,083 homes, down 7% from the prior year. Home sale revenues were $4.3 billion, down 4% from the prior year. Gross margin was 27.0%, at the top end of guidance. Net new orders by buyer group: first-time and move-up buyers down 9% and 14% respectively, while active adult business up 9%. Closings mix: 38% first-time, 42% move-up, 20% active adult in Q2 2025. Backlog at end of Q2 was 10,779 homes valued at $6.8 billion.

• Refined full-year 2025 closing guide to 29,000 homes. • Expect Q3 closings to be between 7,100 and 7,600 homes. • Q3 and Q4 average sales price of closings expected in range of $560,000 to $578,000. • Gross margin guidance for Q3 and Q4 26.0% to 26.5%. • Q3 and Q4 average community count expected 3% to 5% higher than comparable prior year period.

• Market volatility and uncertain consumer confidence affecting demand. • Interest rate changes impacting buyer traffic and sign-up activity. • Tariffs potentially affecting costs, though impact in Q4 2025 expected lower than initial projection. • Labor force disruptions related to ICE enforcement potentially affecting construction labor availability.

Q: Good morning, guys. Thanks for taking my questions. The first one I had is that you guys talked about some encouraging signs as the rates kind of pulled back in late June. Curious, you know, rates have been a little bit bouncy, but fairly stable, I guess, through the lives of the finish. If the improvement that you saw in June kind of carried through into July. And we've also seen some recent improvement in consumer confidence. Is that helping, you know, kind of support this demand in your view?

A: Yeah, John. We did see a real positive response from the consumer the last couple of weeks of June when rates came down. As we highlighted in the prepared remarks, it drove extra or incremental traffic into the communities, and we saw good conversion out of that incremental traffic. So we're certainly encouraged by the consumer response. July, you know, I would tell you July's been a little up and down. There's been just really good days and there's been, you know, some down days as well. The first week of July was, I feel like the entire country went on vacation with the way the Fourth of July fell. But, you know, we're encouraged by what we've been seeing the last couple of weeks.

Q: Good morning. Great quarter, guys. Congrats. Really strong performance. Maybe we can start with the comments you made, Jim, as it relates to the land options that you're predominantly utilizing land developers as your the one selling you those options as opposed to land bankers. Can you elaborate as to why you think that's better? Or maybe there's it's a lower cost, I presume. Can you just go through your rationale there?

A: Yeah. Hi. It's Ryan. Good morning. Good to hear from you. And we've made optionality specific with land bankers a piece of our business. Our primary focus is with underlying land sellers, and with those individual families or owners that own that land, we think in those the reason that we like that, Ivy, is we end up with a more diversified risk profile. And we also get better execution of price with those underlying land sellers and what it costs us to get the options. We found that we ran into natural resistance somewhere between fifty and, you know, around fifty percent is kind of where it was about as high as we could get. And so to get more optionality, we went to, you know, the idea of using land bankers in a moderate way. And we think that that's the tool that allows us to go from fifty percent option to seventy percent option. You know, the other and the reason that we've kind of elected this type of mix is we think that it's the best tool to give us risk mitigation, which is the primary thing that we're looking for when we think about optionality. Certainly, there is a trade-off. You give up a little bit of return or a little bit of margin to get a better return. And we know that return is what creates value for our shareholder. That we think that's the second order or a follow-on benefit. The primary benefit we're after with optionality is risk mitigation.