Thank you for standing by. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the PulteGroup Inc. Q1 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ 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. If you would like to withdraw your question, press star, one again. Thank you. I would now like to turn the conference over to Jim Zeumer. You may begin.

Great, thanks Jeannie. Good morning. Let me welcome everyone to today’s call. We look forward to discussing PulteGroup’s outstanding Q1 operating and financial results for the period ended March 31, 2024. I’m joined on the call today by Ryan Marshall, President and CEO; Bob O’Shaughnessy, Executive Vice President and CFO; and Jim Ossowski, Senior VP, Finance. A copy of our earnings release and this morning’s presentation slides has been posted to our corporate website at pultegroup.com. We’ll post an audio replay of this call later today. We 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 you read in this morning’s press release, PulteGroup reported record first quarter results across many of our key financial metrics. From top line revenues of $3.8 billion and gross margins of 29.6% to bottom line earnings of $3.10 per share, it was an exceptional quarter. These strong first quarter results helped to drive a return on equity of 27.3% for the trailing 12-month period. Our strong first quarter results reflect long-term strategic planning and a disciplined capital allocation process that have underpinned PulteGroup’s success for more than a decade. I would suggest that another driver of our record Q1 results are decisions we made in the fourth quarter of last year, decisions that I think are emblematic of the balanced approach we take to running our business and to delivering high returns. On our last earnings call, we talked about decisions we made in the fourth quarter of last year to not lower our prices in a chase for volume. As you will recall, demand in the fourth quarter of 2023 had started slowly but improved as interest rates began to moderate. As we made the decision to push incentives aggressively as the quarter progressed, we likely could have delivered higher closing volumes in ’23. With demand improving in the fourth quarter, we elected to hold our pricing and have had more inventory available for the 2024 spring selling season. The result of this decision is that we were in a position to sell and close more homes in the first quarter of 2024, and at higher margins. That’s what you see in our Q1 results - closings and gross margins above our guide as demand dynamics allowed us to sell more homes with better net pricing. When buyer demand is rising, we’re often…

Thanks Bob. As you would expect, given the strength of our first quarter results, buyer interest was high in the period as order paces increased beyond typical seasonality. That sales momentum continued into April, although we are now seeing some moderation of traffic into our communities due to the recent increases in interest rates, particularly within the Centex brand. While the change is relatively modest and based on a limited number of days, consumer feedback suggests that higher rates are causing some buyers to evaluate the timing of their activity due to the volatile interest rate environment. We’ll continue to monitor how buyers respond to changes in the rate environment and are prepared to adjust pricing or incentives to ensure we are appropriately turning assets. During our last earnings call, we talked about the opportunity for PulteGroup to grow its business 5% to 10% annually. Given the lengthy land investment process, organic change in this industry takes time to accomplish, but we have been systematically planning and positioning to deliver against this goal for the past few years. I think that the company’s efforts are reflected in the allocation of capital into growing our business. Including our Q1 spend, since 2021 our operating teams have invested approximately $14 billion in land acquisition and development, with plans to invest another $5 billion in 2024. Along with the land, we have been investing in our people and working to ensure the needed trade capacity is available to support our expanding operations. I’m proud to say that we have accomplished this while adhering to the same underwriting hurdles and investment disciplines which have been the cornerstone of PulteGroup for the past decade. Such discipline has allowed PulteGroup to more consistently grow its earnings, drive substantial cash flow from operations and deliver high returns, we have accomplished this while maintaining the superior build quality and customer experience which PulteGroup home buyers have come to expect. Before opening the call to questions, I want to take a minute to recognize and celebrate our team for once again being named a Fortune 100 Best Company to Work For. What makes this recognition so important and gratifying is that it’s based on feedback from all of our employees. This marks PulteGroup’s fourth consecutive year on the list and is a testament to the culture of personal caring and professional development that we work to maintain. I am proud to lead such an organization that is committed to taking care of our customers and each other. Let me now turn the call back to Jim Zeumer.

Great, thanks Ryan. We’re now prepared to open the call for questions. So we can get to as many questions as possible during the remaining time of this call, we ask that you limit yourself to one question and one follow-up. Jeannie, if you would explain the process, we’ll get ready to--we can start with our Q&A.

Thank you. [Operator instructions] Your first question comes from the line of Stephen Kim with Evercore ISI. Please go ahead.

Yes, thanks very much, guys. Impressive results, and appreciate all the guidance that you provided. I guess my first question relates to your longer term targets with respect to land. Ryan, I think the last time I asked you this question, I was curious about where your long-term target is, and I think I stated it in terms of years owned. I understand that you want to have about seven years controlled with about 30% optioned over the long term - that would put you at about a little over two years of owned land. You’re quite a bit above that now, and so my question is, am I thinking about that right? Is your long-term target for owned land - you know, a little over two years owned, and over what time span do you think we should expect you to migrate to that, if that is in fact your target?

Yes Stephen, thanks for the question. I think your overall target of seven years controlled is about right, and then we stated our long-term target of optionality at 70%. We do think it will be a multi-year journey in getting there, and that’s really driven by the fact, Stephen, that we want to do it in a very organic, natural way that drives ideal economics for each individual transaction. We highlighted in the prepared remarks, Bob did, that in the quarter, 74% of the deals that we approved were under option. We think that type of activity over the next several years will have us arrive at our long-term target in a very natural way. When we do that, to your point, we’ll be right around something just over two, two and a half years of owned land at that point.

Yes, thanks for that. As you progress in that manner, it will unlock some additional cash flow in addition to your net earnings, and so I wanted to turn to cash flow next. I think you gave a guide for cash flow from operations for the full year previously at about $1.8 billion. You’ve taken up--you had a great 1Q, you’ve taken up your outlook for both volume and gross margin and, let’s just say, operating margin for the year. Can you give us an update on where you’re thinking cash flow from operations may come in for the full year in light of those changes, and maybe even more importantly, what should we expect in terms of deployment into dividends and repurchases. I noticed this quarter, for example, it was pretty much--buybacks were pretty much equal to cash flow from operations, and your leverage has pretty much stabilized in low single digits, so is it right to think that maybe whatever you generate in cash flow from operations, with a little bit of flex quarter to quarter, but in general that’s about what you would deliver in terms of repayment--sorry, repurchases in dividends? Robert O’Shaughnessy: Yes Stephen, it’s Bob. Good morning. We didn’t update the guide on cash flow. It’s early in the year. We’re thinking about what we’re investing in the business. You can see, if you look at the balance sheet just since the end of the year, we’re up about $300 million in investment in the balance sheet, roughly half land, half house, and so to your point, we certainly expect with incremental volume and incremental margin that we’ll generate a pretty healthy amount of cash. Some of that will be invested to meet that 5%, 10% growth that we’ve talked about, so more to come on that as the year progresses, certainly, but I think the bias will be for more cash from operations. To your point on capital allocation, I think we’ve been pretty consistent, right, for the last 10 years since we laid out our strategy for capital allocation: A, invest in the business, pay a dividend that grows with earnings, buy back stock with excess capital against a modest debt profile. Obviously the leverage is lower than we had anticipated. We look at liability management as part of our capital allocation, so I don’t know that I’d go so far as to say cash flow from operations will equal repurchase activity. I think we’ve been pretty clear we’re going to report the news on what our repurchases are going to be, but we obviously--in a world where we’re generating cash at that level, particularly if we have less invested in the balance sheet as we move towards that 70%, it will free up capital, and we’ll work through what to do with that capital as we generate it.

Okay, well we’ll be staying tuned. Thanks a lot, guys, and congratulations on the strong results.

Thanks Stephen.

Your next question comes from the line of Matthew Bouley with Barclays. Please go ahead.

Morning everyone. Thank you for taking the questions. In the fourth quarter, as you mentioned, you didn’t raise incentives to chase volume. Now speaking to rates being higher for longer, eventually we’ll be past the peak of the spring demand and all that, so I guess going forward, how are you thinking about that trade-off with incentives from here, given where your margins are? Is there an opportunity to perhaps trade a little bit of that margin to drive better growth, obviously in the context of supporting returns? Thank you.

Matt, good morning, it’s Ryan. Thanks for the question. We’ve said in the past, we’re not going to be margin proud, and I would tell you that remains true. As we highlighted in some of my prepared remarks today, we believe our operating platform and how we’ve positioned our specific community investments, we’re in a great position to command excellent pricing, get pace and price, which you saw in this most recent quarter. Given the interest rate environment that we are clearly going into, higher for longer, we’ve got the ability to use the very powerful tool of forward mortgage rate commitments that allow us to offer a pretty attractive incentive program. Right now, we’re at 5.75% nationally, and about 25% of our buyers are taking advantage of it. The other thing I’d highlight is that 60% of our business is move-up and active adult, which tends to not be quite as rate-sensitive as the first-time buyer. With that first-time buyer, that’s where predominantly our Centex brand, predominantly first-time buyers, and we see a higher percentage of those buyers take advantage of the forward rate commitments. The last piece, Matthew, that I’d probably point out is that our guide for the balance of the year assumes that the incentive load that we currently have, which on the most recent quarter, closings was running at 6.5%, we’ve assumed that that stays flat going forward.

Got you, okay. Thank you for that, Ryan. The second one, I wanted to move to the topic of land costs and land inflation. I think last quarter, you had spoken to the potential for mid to upper single-digit inflation in land, but maybe it wasn’t totally clear on exactly when that would impact your gross margin. I’m curious, can you kind of walk us through the timing of land costs flowing into your gross margin, and then what are you seeing in real time in the land market? Has the market started to decelerate at all, or is it still chugging along at that mid upper single-digit rate? Thank you. Robert O’Shaughnessy: Matt, it’s Bob. That mid to high single-digit increase in our lot cost was in our Q1 and is expected to continue through the balance of the year. When we gave the margin guide, we had pretty good visibility into our lot costs, because those are lots typically on the ground already, so it’s there. In terms of the current market conditions, it’s still competitive out there. I’ve said this before - land hasn’t gone on sale, and slight variations in market typically don’t result in prices declining. The market is super efficient on the way up, a little bit sticky on the way down, so for quality parcels it’s competitive.

Got you, all right. That’s clear. Thanks Bob. Good luck, guys.

Your next question comes from the line of Carl Reichardt with BTIG. Please go ahead.

Thanks, morning guys. I think this is the first time since mid-2020 when you have addressed construction cycle times, so I thought at least I’d ask. Across the markets, products and geographic markets, are cycle times effectively normalized now for you, or are we still a little bit longer than you were pre-COVID?

Good morning Carl, thanks for the question. We saw a couple of days of cycle time improvement in the most recent quarter, so we were at 128 days, down from 130 that we ended the fourth quarter of 2023 in. We are still on track and still are targeting being at 100 days by the end of the year. When we look deeper at our Q1 numbers, we had some long cycled closings that had been in production for a long time, in many cases were multi-family and condo buildings that we think kept the overall number that I just shared with you of 128 days a little bit higher than what we think is our actual run rate at this point. When we look at a lot of our markets, we’re already back to pre-COVID cycle times of even sub-100 days, so we’ve made a lot of progress in a lot of places. We have a few markets that are a little stickier, where we’re working hard to get cycle times back to where we’d like them to, but by and large we still feel that the target we’ve set of 100 days is very much in reach.

Great, thank you Ryan. Then you talked a little bit about existing home inventory creep that I think we’re seeing in some of the data. If we dig into that, Ryan, if you can dig into that, is this inventory that you’d expect would be effectively a net neutral impact to the demand supply; in other words, [indiscernible] to move elsewhere versus vacant capacity, meaning investors or second homeowners who are putting their homes on the market effectively vacant, because I think there’s an important difference between the two. To the extent that you know, what are you seeing? Thanks.

Yes, outside there might be--I’m sure there’s some markets, Carl, where there is vacant investor-driven inventory that you could characterize as new supply. The majority of the markets where we operate, we think any existing resale inventory that does come to market, those are buyers that are going to buy another home somewhere else, so we think it’s largely neutral on the overall supply side.

Thank you Ryan. Thanks all.

Your next question comes from the line of Anthony Pettinari with Citi. Your line is open.

Good morning. I was wondering if you could talk about maybe the potential impact of the NAR settlement on your business, or maybe the broader industry and any kind of potential secondary impacts to Pulte.

Yes Anthony, we’re watching it closely, as I think a lot of the real estate world is. Where we think it ultimately goes is it will create better transparency around the fee structure and will likely change over time the way that the providers of those services charge and the users, or the consumers, of those services ultimately pay. Realtors are an important part of our business and probably over 60% of the sales that we have include a buy-side realtor involved, so we certainly support the realtor community, they’ve been an important part of our company for a long time, but we are watching the way that the landscape there will certainly change.

Okay. Then you talked about stronger trends regionally, I think in Nevada, Arizona, California if I got that right. Is there anything particularly driving that in your view, and maybe if you can just talk about the long term attractiveness of that region as you build out the community count.

Yes, a couple things happened there. It was a market that saw a lot of price appreciation in the COVID years. Affordability, we think got strained for certain. Last year, we did a fair amount of price discovery as we worked to right-size what our go-to-market price was in those markets. That combined with, I think, a general improvement in buyer sentiment contributed to the lights coming back on in the western markets. Some of the markets that we’d highlighted pretty consistently last year - Seattle, northern California, southern California, Las Vegas, Phoenix, those were strong contributors to our overall results in this most recent quarter. We’d expect that to continue. Bob highlighted that the relative margin contribution out of those markets will be lower than some of the other parts of our business. We’ve incorporated that incremental volume that we’re getting at a slightly lower margin contribution profile into our guide. Look - we’re pleased that those markets are contributing. We’ve got a lot of capital invested there, they’re big housing markets. People want to live there for a number of reasons - climate, jobs, etc., so we’re pleased that they’re doing well.

Okay, that’s helpful. I’ll turn it over.

Your next question comes from the line of Michael Rehaut with JP Morgan. Please go ahead.

Hey guys, good morning. This is Andrew Azzi on for Mike. A quick one. I just wanted to drill down, if I could, on the demand trends you’ve been seeing over the last few months, just given the change of rates and some concerns in the market. I’d love any kind of progression you saw in the quarter and here into April.

Yes, it was a strong quarter, a strong first quarter. We highlighted that we saw some trends that were even stronger than normal seasonality. The first few weeks of April have continued to show signs of strength. We did highlight that as we look at traffic, new traffic that’s coming into the stores, while a limited number of days in that data set, we are seeing a small downturn that we think is reflective of the change in the rate environment. We’re going to keep an eye on it. We don’t at this point think it’s anything to be too alarmed about, but we’re watching it.

Great, thank you. Then I guess secondly on the material cost, how have these trended, and any kind of detail on how that’s reflected in your 2Q gross margin, kind of your assumptions for stick and brick costs? Robert O’Shaughnessy: Sure. Build costs, they were stable in the first quarter, about $80 a square foot for base house. That’s flat with Q4 of ’23 and it’s actually down from $84 a square foot in the first quarter of last year. As we look at ’24, we expect cost inflation on labor and materials to be pretty manageable with low single digit increases, and we’ve factored that into our guide.

Thank you so much, I appreciate it. Congrats on the quarter.

Thank you.

Your next question comes from the line of John Lovallo with UBS Financial. Please go ahead.

Good morning guys. Thank you for taking my questions as well. The revised full-year gross margin outlook is about flat year-over-year, and I think previously you had talked about pricing being flat year-over-year - that was a little bit better in the first quarter, for sure, mid to high single digit land cost appreciation, kind of low single digit construction cost appreciation. Just curious how you guys are managing that to actually achieve a flat year-over-year gross margin in that kind of cost environment with what had previously been expected to be sort of flattish pricing. Robert O’Shaughnessy: Yes, I think it’s the strength of the market, John. We highlighted that we’re raising prices in a number of our communities, that 1% to 5%. That’s really the driver combined, certainly in this first quarter, with the mix differential that we had highlighted.

So is it pricing and mix a little bit better than previously expected? Robert O’Shaughnessy: Yes, and just to be clear, John, the mix was really a Q1 issue. We think that smoothes out based on the relative strength of volume that Ryan highlighted out west, so we’ll get more of that relatively lower margin profile in the back half of the year.

Okay, and that was sort of my follow-up. If we think about the positive mix impact of the first quarter, how much of the slight step-down from 29.6 to 29.2 in the gross margin outlook for the second quarter is the reversal of that mix impact, or is that really more of a back half phenomenon? Robert O’Shaughnessy: It’s both, right, but you’ll see some of it in Q2 based on the sales that we did in the first quarter, and then you’ll see more of it later in the year. That’s part of the reason for the step-down in margin. The other thing that we highlighted on the call, we still have a lot of homes to sell for the back half of the year, and so the point we were making is it depends on how the demand environment holds up. If it does, that’s good; if the market changed, you could see plus or minus depending on whether it’s a positive change or a negative change.

Understood, thank you guys.

Your next question comes from the line of Sam Reid with Wells Fargo. Please go ahead.

Awesome. Thanks so much, guys, for taking my questions, and thanks for the incremental color on April, especially the traffic detail. It definitely makes sense that the Centex buyer is a bit more rate-slash-payment sensitive, but I wanted to drill down on this a bit more and maybe see if you had any perspective on traffic across other parts of your business, that 60% that’s kind of active adult and move-up, and what you’re seeing from that buyer cohort, if anything, as rates move.

Sam, we’re not parsing the traffic data quite that finely for the purpose of this call. One other data point that I will tell you, while we’ve seen traffic into the stores moderate over the last several days, traffic to the website has been incredibly strong, so we still think that there’s high buyer demand and desire for home ownership. Certainly any time there is rate fluctuations, it can cause some disruption in buyer behavior, but we think the fundamental--or the overall demand for housing remains incredibly strong, and we’re still in a very supply constrained environment. The overall thesis about this has been a strong operating environment for the industry and this company in what’s been a pretty high interest rate environment, we think the environment that we would expect for the balance of the year, we can continue to show success in that type of situation as well. Affordability, there’s no question it is the headwind that we’ll continue to navigate for the balance of the year, and we think we’ve got the tools to do that.

That’s helpful. Then maybe switching gears here, it’s been a little while since this topic has come up, but can you talk to your relationship with Invitation on the single family rental side, and give us an update on where things stand, perhaps how many homes you’re looking to sell to them this year. Any color there would be great, thanks.

Yes, we targeted--when we kind of kicked off the philosophy or the strategy that we had on single family rental with Invitation Homes, and we also partner with some other local single family rental operators as well, we’ve targeted to be somewhere around 5% of our total volume would go into the single family rental channels. The current year, the closings that we have that will go into that pipeline are right in that 5% range. Certainly the interest rate environment currently, I think makes it harder for the single family rental operators to underwrite their deals. We wouldn’t expect that to necessarily be the case forever, but in the right here and now a little harder to make those deals pencil for those SFR operators. It’s part of the reason that we’ve said we want it to be part of our business, but not such an outsized component that it creates disruptions in how we operate.

That’s helpful. I’ll pass it along, guys.

Your next question comes from the line of Rafe Jadrosich with Bank of America. Please go ahead.

Hi, good morning. Thanks for taking my questions. I was wondering if you could talk a little bit about on the cost side, what are you seeing today in terms of the cash costs for land and materials relative to what’s flowing through your P&L, and what’s kind of the outlook on the cost side. Robert O’Shaughnessy: Certainly on the materials side, it is pretty consistent, and as Jim highlighted, our build cost per foot flat. The only thing where we’re really feeling any pressure there is on OSP, which has run up a little bit. In terms of the land, we’ve highlighted that high single digit increase in lot costs - that is, candidly, continuing a theme that has been going on for a number of years and is likely to persist. I’ve often described it as a conveyer belt of land - you know, three years of lots that we buy in any or control at any one point in time, and they kind of roll on, the most recent year falls off. Every new year coming on is a little bit more expensive, and that’s a combination of increased land costs and increased development costs, but we haven’t seen a step change in that, if that’s really what you’re focused on. Again, I think you can and should expect to see our lot costs going up for the foreseeable future.

Got it, that’s helpful. Then just looking at the first quarter gross margin, can you just talk about the drivers of the quarter, the 70 basis point quarter-over-quarter step-up, and then what were the upsides to your initial guidance? Robert O’Shaughnessy: Sorry, was that--are you asking sequentially or year-over-year?

Sequentially. Robert O’Shaughnessy: Yes, so you’ve got 70 basis points - certainly a part of that is going to be the strength of the--relative to our guide of the strength of the market, where for the spec homes that we sold, we got better pricing, which was a relative margin benefit over the fourth quarter. The other thing is the mix shift, not just in terms of geography, which we had highlighted, but on a sequential basis we also had a mix shift towards move-up, which has a higher margin profile relative to first-time, which is where the margin came from. I hate to use this, but there is mix and there’s a couple of different mixes going on, but when you’re looking at the sequential margin performance, certainly it’s the strength of the market relative to what we thought coming into it, and also it’s a little bit more move-up, which has a higher margin profile for us.

Great, thank you.

Your next question comes from the line of Mike Dahl with RBC Capital Markets. Please go ahead.

Hi, thanks for taking my questions. I’m going to stick with margins. Bob, you kind of alluded to this - it’s a tricky time when you’ve just had this rate move, you’re maybe just on the front end of seeing some traffic impacts but you’re having to give guide out a few quarters, and so I appreciate that there’s still some uncertainty when you’ve got a third of your full year closings yet to be sold. Maybe just talk through the assumption for flat incentives against this move in rates. Just talk about why that is the baseline assumption, or if it just felt like the right placeholders and matches what your backlog margins look like today. Maybe just a little more detail on how you went through this process at kind of an odd time, when the rate move just happened. Robert O’Shaughnessy: Yes, it’s interesting. I’d refer back to something Ryan offered, which is the affordability is still a challenge. Against that backdrop, our expectation is that we will need to continue to incentivize folks, and the predominant way we’re doing that today is through our national commitments and some sort of rate finance support. Our expectation is that that continues. That was our expectation coming into the year. In the first quarter, you heard us say it was 6.5% again, just like the fourth quarter - that’s roughly $35,000, $40,000 a house. In a world where rates are actually trending back up, I think that we’re going to need to continue to support that. It’s a little bit challenging, to your point, but I think on balance, our expectation is that’s where we’re going to need to be to meet some of the affordability needs. It’s one of the reasons we think you’ll continue to see this strong market performance on a relative basis of new versus resale, because we can offer those incentives.

I guess as my follow-up, more specifically, that kind of implies that you’ll get your advertised rate flow up over time to match what the market move is and maintain your relative incentive, and so if you’re allowing your rate to kind of float up, call it 40, 50 basis points from where it may have been a month or two ago, what have you done or seen in terms of thinking about sensitizing some of the recent demand trends, particularly in your Centex brand? I understand that it’s not going to be a major--potentially not as major a dynamic for your move-up or active adult, but in your Centex brand, what’s the sensitivity to a 40, 50 basis point move in rates that you’ve seen or thought about? Robert O’Shaughnessy: Well, certainly for that true entry-level buyer, it’s the game, right, and so we’ve got programs that offer them lower cost incentives, so we’re giving them more rate support relative to others who have choices. It’s worth it to remember we offer a national program, but there’s a lot of detail in terms of what we can and actually do offer to people and what they want to access in terms of our support. There will be some people with rates moving up that will literally fall off the ability to buy a home - that’s not the case for our active adult and move-up buyers. Candidly, for a lot of our Centex buyers, you look at our average sales price at $419,000 in this most recent quarter, that’s not typically your true entry level buyer - we’re at a little bit higher price point. Our first time communities are typically a little bit closer in, and so I think it depends on who your buyer is, but to answer your question about will we vary our offering, the answer is yes. We have been. We are actively managing these national programs. We’re buying commitments in relatively small amounts so that we don’t get caught by market changes, and what it allows us to do is change our offering based on what the market is doing. As the market--as rates floated down, we moved our offer rate down somewhat to try and be responsive to deliver a real savings versus the street rate that they can get on their mortgage. As rates tick back up, we’re moving those rates up a little bit. It’s an art, not a science, but I think what you could expect us to do is listen to the consumers in terms of what they need and seek to offer them programs that give them what they need.

Thanks Bob, appreciate that.

Your next question comes from the line of Alan Ratner with Zelman & Associates. Please go ahead.

Hey guys, good morning. Thanks for squeezing me in here. Nice quarter. Would love to get your updated thoughts on specs versus build to order. I know you and others ramped the spec production as cycle times re-elongated and there was a premium, or at least that margin differential spec versus BTO was kind of smaller than it historically has been. I’m just curious if you’re thinking about that any differently today with cycle times continuing to normalize and rates seemingly being higher for longer. It sounds like maybe the Centex offering, which is predominantly spec, I would think, is maybe seeing more of that impact than the move-up rate, so are you at the point now where you are kind of dialing back the spec starts a bit, or do you still want to maintain the current mix of your business?

We’re pretty happy with where we’re operating, and we look at a couple--I mean, the first thing we look at is what’s the percentage of build-to-order versus spec sales. Right now, that’s running around 50/50, and then we highlighted in Bob’s prepared remarks, 40% of our width is spec, and we’ve got a little bit higher than one final per active community. We pay attention to it closely. It’s something we spend a lot of time managing and being responsive to what we’re seeing in the market. To your point, most of our spec--our Centex business is spec. We certainly have a little bit of spec in the other two brands, but Pulte and Del Webb tend to be more of a build-to-order model, and we’re certainly responsive to those as well. We’re going to watch it, but in a higher interest rate environment, having available specs that you can more efficiently and effectively apply the most powerful incentive to in the form of the forward mortgage rate commitments, you can do that better on spec inventory, which makes it more attractive. You’ll probably see us stay pretty close to where we’re at.

Great, appreciate your thoughts there, Ryan. Then pivoting to the incentive environment, I think obviously you guys certainly made the right call by not chasing the market lower in the fourth quarter, based on your performance this quarter. It sounds like from your guide for flattish incentives, you’re not expecting to have to ramp discounts as the selling season moves into its later stages, but what is the sensitivity you’re looking at there? How much longer will the more recent, I guess softer traffic trends, or maybe sales activity, how long would that have to persist before you would sit there and say, you know what, we need to maybe increase those incentives a little bit to bring up the sales pace? Is it a few months, is it getting past the peak of the selling season and you’re sitting on more inventory than you’d like? What’s the decision process there look like?

Yes Alan, we look at sales rates every single day - it’s one of the first emails that I look at, what did sales for the prior day come in at, and we look at qualitative and quantitative feedback that we get from our field operations in going through that decision making process. What I can tell you is the rate--the change in rage, nevermind what it was and nevermind what it’s going to, just the mere fact something changed, we’ve seen that cause pauses in buyer behavior over the last two or--you know, last 24 months. Anytime there’s been a step change in rate and the media cycle that goes with it, that certainly has a pretty profound impact on buyer behavior. Time does seem to cure it. The only thing that I would continue to caveat and put out there is that affordability continues to be a real issue, and so we’ve got to balance the change there. We think--you know, one of the things that we’re going to continue to do is pay attention to what the headline rate is, and Bob talked about that a few questions ago. Our national mortgage rate incentives have got the flexibility to move based on what the market’s doing, so we still think we can have a compelling offer out there relative to the street rate that doesn’t necessarily cost us a whole bunch more, relative to what we’re currently paying. The last piece, Alan, is we are going to keep our production machine moving. We are a production builder and we’re going to do that in a way that we think optimizes kind of returns, so if there are price changes or discount changes that ultimately have an impact on affordability, that allow us to continue to turn the asset and keep the market share that we have, we’ll definitely do that.

Thanks a lot for the thoughts, guys. Appreciate it.

We have reached the end of the call, and we’ll take our final question from Ken Zener with Seaport Research Partners. Please go ahead.

Good morning everybody. Robert O’Shaughnessy: Hey Ken.

Wonder if you could just give some context on the regional comments you made, and I want to narrow it down to Florida because it’s a segment that obviously generates quite a bit of your EBIT. Can you, within Florida, talk about how that existing market supply rising affected, let’s say, the Centex versus your move-up brand, realizing Orlando is different than coastal markets? It’s such a big market for you guys profitability-wise. If you could maybe give a little color related to the margin swings you’re kind of seeing with those trade-up buyers’ entry within markets that are seeing the pick-up in inventory specific to Florida, thank you.

Yes Ken, I want to make sure that I understood kind of the full question. Maybe I’ll give you a little bit of Florida commentary and then if there’s more follow-up, I’ll let you ask that. Florida is a tremendous part of our business. We’re in nearly every major housing market there save Miami. A big part of our business there tends to be focused on move-up and age targeted. We have some entry-level business in our Tampa and Orlando businesses, but the other big markets are predominantly move-up and age targeted. We get a little bit of move-up in Jacksonville as well--or a little bit of entry-level on Jacksonville as well, so. Really strong business, a lot of job relocation there, a lot of folks that want to be there because they’ve got flexible work arrangements that allow them to work from home or work from elsewhere. The headwinds in Florida are definitely affordability - we’ve seen strong price appreciation in most Florida markets, and then the other headwind that you’ve got there is around property taxes and insurance. Certainly those things kind of play into that, but Florida continues to be a big part of our business and a real bright spot for our business as well.

That was sufficient, thank you very much.

I will now turn the conference back over to Jim Zeumer for closing remarks.

Great, appreciate everybody’s time today. We’re around the remainder of the day for ay follow-up questions, and we will look forward to speaking with you at various upcoming conferences and/or on our next quarter’s earnings call. Thanks for your time.

This concludes today’s call. You may now disconnect.