PulteGroup (PHM) Q1 2025 earnings call transcript

Great, Kelvin. Thank you. Good morning and welcome to today's call. We look forward to discussing our first quarter operating and financial results. With me today are Ryan Marshall, President C. E. O. and Jim Osowski, Executive Vice President C. F. O. As always, a copy of earnings release. In this morning's presentation, I've been posted to a corporate website at PULTYgroup. com who also posted an audio replay of this call later today. I would highlight that today's presentation includes forward-looking statements about the company's expected Q2 performance.

Actual results could differ materially when those suggested by our colleagues 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. These are factors and other key information are detailed in our SEC filings, including our annual quarterly reports.

Now let me turn the call over Ryan Marshall.

Thanks, Jim. Good morning. I appreciate the opportunity to speak with everyone today. In addition to discussing PULTYgroup's Q1 results this morning, I will also share our views on the current macro environment and how our business model and execution against our strategic initiatives for helping us navigate today's evolving market conditions.

Let me start by recognizing the incredible work our teams did in delivering PULTYgroup's strong first quarter results. Given the crosscurrents, the housing industry has encountered in 2025, we believe our results show the value of PULTYgroup's proven operating model, balance portfolio, and the expertise of our local operating teams. In what proved to be a dynamic operating environment, we met or exceeded our guidance in delivering over 6,500 homes, gross margins of 27.5%, that income of $523 million, and most importantly, a trailing 12-month return on equity of 25.4%.

As the country moves through economic cycles, the housing industry will inevitably encounter periods when we are experiencing changes in the operating environment. I truly believe that the balanced and highly diversified operating model that we have built over the past decade in combination with our strategic focus on generating high returns over the housing cycle offer important and competitive advantages.

Our national footprint and strategy of serving all buyer groups with a targeted offering of spec and built to order homes, along with our broader capacity to use both price and or pace to drive returns, give our operators more flexibility when navigating periods of economic transition. In the back half of 2024, many of our meetings with analysts and investors included questions about housing demand and the state of the housing cycle.

In response to these questions, we indicated that the spring selling season of 2025 would provide the best opportunity to assess the condition of today's home buying consumer.

Having reached the midway point of the spring selling season, I wanted to provide a few thoughts on what we've experienced and how we are responding. First and foremost, I strongly believe people still aspire to homeownership, and if you can provide the right value of create equation, they are excited to get into a new home. We saw this as the first quarter progressed and demonstrated a typical seasonal pattern with traffic, gross orders, and net new orders trending higher as we move through the quarter.

Within the quarter, we also saw the level of home buying activity respond positively to the 30 year mortgage rate dropping below 7%, which allowed roughly 20% of our divisions to increase prices within many of our communities.

Consistent with the relative strength we've seen among move up and active adult buyers over the past few quarters, we saw the average spend on options and law premiums per home, climb to $110,000 in Q1. This is up from the $102,000 and $107,000 in the first and fourth quarters respectively of last year. The financial strength of move up and active adult home buyers is why we have purposely aligned 60% of our portfolio to serve these key buyer groups. However, the quarter also saw consumers continuing to face affordability challenges that exist for would be home buyers in metro regions across the country.

From the high absolute selling prices of today's homes to the resulting high monthly mortgage payments, consumers are struggling with the affordability challenges when it comes to purchasing a home. These headwinds have only been exacerbated recently by growing concerns about the potential for a slowing economy. As one of the nation's largest home builders, we have developed and deployed a variety of tools to help consumers overcome their personal home ownership hurdles.

This includes offering new product designs and more efficient floor plans, as well as offering meaningful incentives, including programs that can offer consumers a below market rate on a full 30 year fixed rate mortgage.

We leaned into incentives a little more heavily in the first quarter as we executed on our plan to reduce excess spec inventory by actively selling our in process and finished spec inventory, while also adjusting our start pace, the better match current demand. As a result, our incentive rate increased 8% for the period, but we lowered specs to 47% of production down from 53% in the fourth quarter, while still reporting strong opera strong gross margins of 27.5%. In sum, buyer interest and activity in the first quarter were directionally in line with our planning expectations heading into the period.

As we've moved from March to April, however, we have seen consumers at all price points impacted by changing macro conditions and any resulting decline in overall consumer confidence. Whether it's the volatility in the stock market, concerns about tariff induced inflation, the fluctuation in interest rates, or the growing talk of recession, demand in April has been more volatile and less predictable day to day. We can certainly empathize with our customers concerns as our businesses have to adapt and manage through constantly changing and shifting tariff landscape, the potential costs of which could be significant.

While our Q1 build costs were effectively flat on a year over year basis, proposed tariffs had the potential to add thousands of dollars to the cost of construction. We are a builder with 75 years of experience in a resilient operating model, and as tariffs have been imposed or proposed, our cycle tested procurement teams have developed and begin implementing response strategies.

Let me now turn the call over to Jim Olsowski. You will recall that in February, Jim officially assumed his responsibilities as pulpy groups chief financial officer. I'm excited to have him in his new role, and I know that our organization will benefit greatly from Jim's leadership and experience. After his remarks, I will offer some additional thoughts on how we plan to manage our business given the current operating environment. Jim?

Thank you, Ryan, and good morning. I appreciate the opportunity to review pulpy groups quarterly results. In the first quarter, our net new orders totaled 7,765 homes, which is a decrease of 7% in the first quarter of 2024.

What were orders in the period were driven primarily by a 10% increase in net new orders per store, which is partially offset by the 3% increase in our average community count to 961 for the quarter. Notably, the cancellation rate as the percentage of starting backlog increased only slightly to 11% compared to 10% in the priority.

Specific to the quarter, we would say that demand conditions followed a pretty typical seasonal pattern with net new orders increasing as the quarter progressed. On a sequential basis, net new orders increased 26% from the quarter of 2024.

This increases, however, below historic averages reflects a consumer that is carefully assessing the high cost of homeownership and more recently concerns about the economy and overall employment conditions.

On a year over year basis, net new orders by 3% buyers were down 11%, move up buyers were down 4%, and I have to build buyers 25%. To continue to realize meaningful relative health performance among our move up active adult consumers is they have greater financial flexibility and can more easily adjust to market changes. That being said, the extreme volatility in the financial markets can cause even these consumers to pause for making large purchases.

Moving from orders to closings, wholesale revenues in the first quarter ordered total $3.7 billion down 2% from the $3.8 billion of revenues generated last year. The lower home sale revenues for the period were the result of 7% decrease in closings to 6,583 homes largely offset by a 6% increase in average sales price to $570,000. By buyer group, the breakdown in closings in the first quarter was 39% first time, 40% move up, and 21% active adult.

In the first quarter of last year, our closings were comprised of 42% first time, 35% move up, and 23% active adult. As we have discussed on prior calls, we have experienced a modest decline in the percentage of closings from active adult buyers driven by the closed out several Dell Web communities for the past 12 months. I'm happy to report that we are extremely pleased with buyer response to recent Dell Web openings in Cleveland in Indianapolis and Southern California.

We are equally excited about the additional Web community openings coming later this year. Closings from these new Web communities will be more heavily weighted towards 2,026 and beyond, getting these communities open for sales is a critical first step.

Based on sales and closings activities in this period, we ended the quarter with a backlog of 11,335 homes, which is down 16% from last year. On a dollar basis, our backlog was $7.2 billion, which is down 12% compared with last year's first quarter. As Ryan mentioned earlier, we adjusted our start space as part of a process lower spec inventory in alignment with our target range.

In the first quarter, we started approximately 6,700 homes, which is down from approximately 7,500 homes. We started about Q1 and Q4 of last year. Reflective of this action, we ended the first quarter with 16,548 homes in production, of which 7,840 respects units. In just one quarter, we reduced our spec counseling over 900 homes while lowering our spec percentage from 53% to 47% of inventory.

This moved us closer to our target range of 40 to 45% from overall in units in production. Of our spec units, 1,800 were completed at quarter end, and we had finished spec to continue trending lower in the slowdown in our start space.

The goal in aggressively managing our production pipeline is to more effectively balance the need to have units available to meet the immediate buyer demand while still selling from a position of strength within our communities. In the current environment, we believe prioritizing price and margin over buying makes most strategic.

Based on recent sales cases in the midst of units under construction, we expected to deliver between 7,400 and 7,800 closings in the second quarter. Well, buyer demand over the next few months would be a key determinant given that more than 16,000 units we have under production. In cycle times of approximately 110 days, we currently expected to deliver between 29,000 and 30,000 homes for the full year, slightly below a prior guidance of 31,000.

Embedded within our updated delivery guide is our expectation that quarterly community count will be 3 to 5% higher in 2025 than in the comparable prior year period. Consistent with our first quarter results and our previous guidance, we currently expect the average sales price of closings to be in the range of $560,000 to $570,000 in each of the remaining three quarters.

Continuing down the income statement, our gross margin in the first quarter was 27.5%, which is flat on a sequential basis from the fourth quarter, but down from a very strong Q1 of 2024.

While sales incentives increase to 8% of the quarter, gross margins in the period benefit from a favorable mix, homes close both in terms of geography and buyer.

As it relates to gross margins going forward, we continue to expect gross margins in the second quarter to be in the range of 26.5% to 27.0%. And we now expect gross margins in the third and fourth quarters to be in the range of 26.0% to 26.5% found slightly from our prior range of 26.5% to 27.0%.

Our guide on gross margins assumes incentives remain elevated at the elevated levels experienced in the first quarter. Further gross margins in the back half of the year reflect the estimated impact of tariffs that have been imposed, which are expected to increase our house cost by an estimated 1% of average selling price. In the first quarter, we reported SG&A expensive $393 million for 10.5% of home sale revenues, which compares with prior year reported SG&A expensive $358 million for 9.4% of home sale revenues.

Given the uncertainties of the current operating environment, we continue to carefully assess SG&A expenditures as we seek to maintain an appropriate overhead structure.

Our financial services operations reported first quarter of pre-texting come up $36 million compared to $41 million. The lower pre-texting come primarily reflects the impact of lower closing volumes within the company's home building operation. The tax rate in the quarter increased to 86% up from 84% last year.

One of the first quarter, our reported pre-texting come was $600 million and we recorded a tax expense of $158 million, or an effective tax rate of 23.2%. Our first quarter of effective tax rate was benefited by renewable energy tax credits and stock compensation deductions reported.

At this time, we continued to expect our tax rate to be approximately 24.5%, excluding the impact of the needs of the street period of the census.

Our first quarter, we reported an end income of $523 million for $2.57 per share. In the first quarter of 2024, we reported an end income of $663 million, $3.10 per share.

Prior year results are included with $65 million, or $0.23 per share in pre-text benefits related to the sale of a joint venture in the aforementioned insurance benefits.

Earning's per share for the quarter was calculated based on 204 million diluted shares, which is down 5% from the prior year, and continues to systematically repurchase our shares. In the first quarter of 2025, we repurchased 2.8 million shares for $300 million, or an average price of $108.03 per share. As noting this morning's release, we needed the first quarter with $1.9 billion remaining under our existing share repurchase authorization.

In addition to repurchasing our shares, in the first quarter, we allocated $1.2 billion to land acquisitions and development. In Q1, 52% of our spend was associated with the development of our existing land asset.

As Ryan noted, given today's macro uncertainties, we are asking our land teams to review project returns and confirm they still meet our hurdle rates given changing market conditions. We are confident that in this type of operating environment, our discipline underwriting processes serve as well as it is done during prior periods of research.

Given our current pace of sales and starts, we now expect our land investment in 2025 to be approximately $5 billion. We remain positive on the long-term outlook for housing, but we are prepared to adjust our near-term land spend in response to changes up or down in prior demand. While we are slowing projected land spend, we are still prepared to use our financial strength to capitalize on land opportunities that could develop during these choppier market conditions.

Based on the updated expectations for our home building operations, we continue to expect operating cash full of generations from the full year to be approximately $1.4 billion.

We have such flexibility because we already control a strong land pipeline that can support the future growth of our business platform. At the end of the first quarter, Polte Group had 244,000 lots under control of which 59% were controlled via option. Just the past year, we have increased our option lot count by almost 30% while reducing our old lot count at the same time.

I want to underscore that whether these land options are with the underlying land seller or one-off transactions with a land banker, our ability to mitigate market risk is as important as the rate returned when assessing each transaction. On a deal-by-deal basis, we continue to strike balance in evaluating the profitability and risk management opportunities that might result from optioning the underlying land parcel.

And finally, I am pleased to say that Polte Group remains in an exceptionally strong financial position as it ended the quarter with a debt-to-capital ratio of 11.7% with $1.3 billion of cash, further validating the strength of our operating and financial positions.

Moody's recently upgraded our senior under-secure notes to the AA1. Now, let me turn the call back to Ryan for some final time.

Thanks, Jim. Given our backlog units under production and current build cycle, we now expect to deliver between 29,000 and 30,000 homes in 2025. Assuming the whole mind demand is sufficient and in aligns with our prioritizing price over pace to drive near-term risk returns. As Jim detailed, we lowered our start pace in the first quarter by approximately 10%. Our strategy has always been about balancing price and pace to drive high returns.

Rather than to ride a chase of volume number, we will continue with our efforts to reduce any excess spec inventory and move closer to our target of 40 to 45%. We will remain agile and are prepared to make further adjustments up or down to our start pace in response to changes in buyer demand. For pulpit group, balancing price and pace with the bias towards price has resulted in gross margin being an important driver of our returns.

Our Q1 gross margin of 27.5% is reflective of our approach. In addition to driving top-tier returns, our industry-leading gross margin gives our divisions more room to put over and managing their communities on a day-to-day basis. In 2024, we invested $5.3 billion in land acquisition and development and entered 2025 with plans to increase our land spend to $5.5 billion.

Given greater macroeconomic uncertainty, we are recalibrating our land spend and expect it will be closer to $5 billion. Given the strength of our existing land pipeline, deferring a small percentage of our land acquisition spend will not impact our ability to grow our operating platform. For any change that we will implement over the near term in response to evolving demand conditions, what won't change is our focus on delivering high returns over the housing cycle.

As we have demonstrated working through the myriad of macro challenges of the past five years, generating high returns requires decision-making that is consistently in alignment with long-term goals and objectives. We have remained disciplined in our business practices while making prudent adjustments, such as moderating our starts pace and response to changing market conditions as we work to successfully navigate the current environment.

We continue to believe in the long-term demand dynamics within the housing industry. In a country that has a growing population and has already short several million housing units, it is reasonable to expect that demand will be there in the future. As Jim suggested earlier, disruptions in the marketplace can create exciting opportunities that have the potential to accelerate future performance.

We certainly had the balance sheet strength to take advantage of any such opportunities should they emerge. In closing, I want to highlight that we have worked hard over the past decade to build a Brit business platform that is arguably unmatched in terms of its presence across major markets and buyer groups. Our performance over time has demonstrated the competitive advantages of such a portfolio in driving high returns and navigating through market changes.

Further, we have shown our commitment to intelligently allocate capital to support the growth of Polte Group while consistently returning funds to shareholders through dividends and shared purchases. And finally, I want to again thank our entire organization for their efforts in delivering an unmatched home buying experience to our customers. We don't talk about it enough, but I want to recognize our divisions for reaching record build quality and record net promoter scores, all while creating a culture that once again, put Polte Group on Fortune's top 100 best companies to work for list for the fifth year in a row. You are truly the best in the business.

Now let me turn the call over to Jim Zomer.

Thanks, Madam. We're now prepared to open the call to questions so we can get to as many questions as possible during the remaining time in this call. We ask that you limit yourself to one question and one follow up. Thank you and I'll now ask the operator to open up Q&A.

Yeah, John. So the incentive load that we've assumed is consistent with the 8% that we realized in Q&A. So that's embedded in the margin guide. And that's throughout all four quarters of this year. Relating to the tariff question, I mentioned it's 1% of average sales price. So, you know, we're in the range of $5,000 on average and it'll, you know, it'll impact every single price point and consumer group that we serve.

You know, there might be a few minor nuances, but it's pretty broad across the spectrum. Look, you know, our procurement teams are cycle tested. They're the best in the business. They do a really nice job. You know, Jim highlighted that we've kept our build costs flat on a year over your basis. And so I think that's a tremendous accomplishment.

You know, we've got good relationships with our suppliers. We want it to be a win-win. But, you know, we think we offer value in the volume and predictability. And so we do look for, you know, better pricing than I think what you'd find in kind of the broader home building universe. You know, every, I think every business is dealing with added costs and, you know, we're going to work to minimize it. I think keeping it to the 1% that we've talked about is significantly less than what you're hearing from the broader home building universe. So, you know, I think you're seeing pretty good execution from us in the guide that we've given about 1% of ASP.

Yeah, we would agree 100% with that. And then maybe the second question just on the share repurchases 300 million in the quarter, which is a really good level. I guess the question wouldn't be. That's consistent with what you guys have done over the past couple quarters. You know, why not lean in a little bit more as the stock pulled back?

Yeah, John, it's a great question. $300 million is significantly more than pocket change. So we feel pretty good about what we did. Our board authorized an incremental $1.5 billion in share authorization in January. So our remaining authorization is $1.9 billion. We've had a practice of reporting the news as opposed to giving the guidance.

You know, we do think that, you know, the equities of value today. And so, you know, we'll, we'll check back in with you at the end of the second quarter and let you know where we land on Q2 repurchases.

Well, I'll take the first question. So on the cash flow guide, the $1.4 billion assumes kind of the homes that we need to put in a production over the balance of the year to hit our $29,000 to $30,000 guide that we've given. We certainly have the capability to do more than that if the opportunity was there. But that's really what's been factored in. One of the things that I highlighted in my section, Stephen, was that we've adjusted our land spend as we've looked at development opportunities over the balance of the year in acquisition.

We factor that into the operating cash flow guide. Stephen, your second question, you broke up just a little bit. Would you mind repeating that about tariffs?

Yeah, Stephen, the latter. So, you know, things that are already in production, there's no tariff impact on that. And, you know, things that were already on the water, you know, largely there's no tariff impact there either. So it's more about looking at our supply chain where things come from and anticipating what the impact could look like as we hit the fourth quarter.

So, you know, we're not expecting much of any impact until probably mid to late fourth quarter closings of this year.

Yes, Steve, I think you're spot on. And it's part of the reason that we've highlighted the way our model has been built is really built for this exact environment. You know, we always try to, we always strive to strike the right balance between price and pace. But we've always had, you know, probably a slight bias toward gross margins.

The reason we continue to deliver industry leading gross margins. In this environment, I think you're spot on. There's, there is a underlying desire for homeownership, and there's a lot of buyers that still want to buy homes. And we're selling them those homes at very good profitability and good value to the consumer as well. The incentives that we're offering are mostly driven towards financing related incentives.

And while, you know, all consumers and price points are getting incentives, there's certainly more or a higher percentage that are going into that first time buyer group or affordability, you know, certainly more challenge. And so look, in this environment, we're still really confident about the long term. We know that we're going to sell a lot of homes and, you know, the operating platform that we have with over 60% of our, of our consumer mix being an active adult and move up. We think we're really well positioned to continue to exceed, you know, despite the challenging macro.

Great question, Sam. So, you know, as we look at you three and two for, you know, as Ryan said, we are expecting our incentives to stay at that elevated level for the balance of the year. One of the things we have done very well in the first quarter, we talked about it as we've been selling some of our speculative inventory that's either in process or finish. So we will start to see some of that come through in our Q three and our Q four. And then as Ryan alluded to, you know, really, we will see the tariff impact primarily in the fourth quarter. So we still feel really good about it. You know, so we sit here at 26.0 to 26.5% for the back half of the year.

We're really happy and pleased with our operators are doing.

Yeah, Sam, it's Ryan. Thanks for the question that the del web buyer continues to be a real shining star in our overall portfolio. We have mentioned in prior periods that it's a buyer that is more sensitive to macro and market volatility, but it doesn't mean that they go away. In fact, you know, you look at the signups that we had in the most recent quarter. It was one of our better performing consumer groups along with the move up. So we feel good about it. As it relates to April, you know, April always takes a little bit of a seasonal shift down in signups and we certainly saw that this year. The one thing that we would note about April is the day-to-day volatility was somewhat unusual.

And I think that's totally understandable given what the consumer is dealing with. There's, you know, there's a lot of noise in the macro, you know, concerns about recession, stock market volatility, interest rates up and down, you know, the fears about tariff induced inflation, et cetera. So, you know, I think, you know, not specific just to the del web, but really all consumers.

There's a lot to deal with there. We're short millions and millions of homes in this country. And, you know, given the way that we're balancing, you know, more of the focus on price versus pace going back to Stephen's comment. You know, I think we're as well positioned as anybody in the space to continue to have success in this environment.

Good morning, Mike. Thanks for the question. It's Ryan. Let me, let me maybe first start with the guide and in terms of the full unit guide. It, you know, as we move through Q1, Q1 results were largely in line with our planning expectations. You know, wasn't the most robust spring selling season, but it wasn't the worst that we've ever seen either. So, you know, largely what we expected, April's definitely had more volatility.

You know, the tricky part is we're, you know, 22 some odd days into April. So, you know, I don't think you want to overreact to 22 days of data, but we did use that to come up with a modified guide for the balance of the year. We think we've incorporated everything that we know. There's a lot that we don't know out there, but, you know, what we're trying to convey is confidence to the investment community that we've got an unbelievable platform.

Our balance sheet is world class and rock solid. We got a lot of cash. We got low debt. We've got the ability to do a lot of things in this environment and, you know, and to really put some distance between us and the rest of the competitive set. We still have the capacity like to build 31,000 homes.

Our, you know, our procurement teams, our construction teams, the land is there. So, you know, if we took the other side of the coin and say, hey, what if confidence from the consumer were to improve, then what? Well, we're still really well positioned to take advantage of that as well. So, I think, you know, we want you to hear we're being very balanced, very pragmatic.

And, you know, we're on this. We're not, we're not in panic mode. There's no reason to be in panic mode because we know that we've just got an unbelievable operating platform. In terms of being large and proud, we're also not going to be smart and stupid.

And we're, we've said that we're going to, we're going to find the right balance between price and pace. And, you know, the Stevens question in this environment, we know there's this embedded level of underlying demand that's there. We're working to drive high returns. You know, if we saw the ability to drive a little more volume without given excessive discounts, I think you'd see us do that. But that's not the environment that we're in now.

Yeah. So Mike, there's, there's a lot there. I'll try and pick through it. In terms of tariffs, it is back half a quarter. We've estimated it to be 1% in terms of big categories, plumbing, specifically tank water heaters, porcelain, HVAC parts, especially things that, you know, HVAC parts that come out of China tile flooring the global 10% tariff that affects every country. And most of the flooring comes from somewhere else.

And then the other, you know, category would be electrical components and the related circuit breakers, load centers, et cetera. You know, that's all wrapped up in our 1% estimate. In terms of the margin guide in the back half, it's partly because of the incentive load. It's also partly because of, you know, higher land costs, but that was, that was embedded in our guide to begin with. And if you compare our current guide to for the prior guide, we're down 50 basis points.

And that's really reflective of the updated tariff information and the incentive load that we've talked about.

Yeah, Matt, thanks for the question and your point. It's a hell of a quarter for Jim to have his first call, but I'm thrilled to have him here with us. And, you know, he's been integral part of our team for a long time. In terms of the land spend guide, I think one of the most important decisions that we make as management team is capital allocation and specifically how much money we're going to spend on land.

We do have ambitious growth plans. We've talked about our long term growth guide of being five to 10%. And, you know, we're confident in that based on the land pipeline that we've been investing in for the last several years. We've got 244,000 lots under control. And so being a little more prudent in this environment, and trimming the land spend, and it's really about, you know, delaying things a little bit as opposed to canceling.

You know, there's, there's a, if it were a market where we were really, really concerned, you might see canceling a plan contract. That's just not where we're at. So, you know, in terms of our ability to deliver 26 and 27. A little bit of a delay or a pause in land spend this year is not going to have an impact on that.

You know, we'll also see if there's an opportunity to make the land spend go a little further, meaning 5 billion may buy almost as much as what 5.5 billion did. You know, we haven't seen that emerge yet, but that's certainly something that we're looking for.

Yeah, Matthew, that's a great question. And you hit on it right at the very end there. As we look at it, as we started to trim our speculative inventory, we've been doing a really nice job showing through that in the first quarter. As we start to see that get down into our target range of 40 to 45%. We see the opportunities that ease off that a little bit. Now, the environment may require us to do other things in order to keep moving home. But as we get our spec inventory in balance, we think we have the opportunities lower.

Yeah, Mike. You know, I don't know that we're going to slice it quite debt then. You know, I think we've tried to be really responsive to give kind of detail around spring selling and how things progress. January started, I think the way a lot of January's do. You know, I mentioned in our last call that we were seeing some green shoots and February's a good month and March got even better.

So spring selling season, I think played out the way that we would have expected it in total. And Jim had it some of his prepared remarks. The seasonal increase from Q four to Q one was less than what we would normally expect. So, you know, you could argue based on that spring selling season was was maybe a little below average as we moved into April. You know, I think I've said it, but I'll reiterate it.

We've had more volatility from the consumer than we normally expect. And, you know, I think the reasons why are very well understood.

I'll jump on that real quick. You know, what we've tried to do is to articulate and quantify that into our full year volume guide. So, you know, you'll have to take our word for it based on April sales, you know, combined with what we did in Q one. But I think the bigger drivers, what's happened in April, we've modified the full year volume guide.

Right.

Yeah, not really trying to telegraph any kind of hidden messages there. Matt, you know, probably the end we've not seen and probably wouldn't expect to have a major reset in the land market. You know, other than the, you know, the great financial crisis land just doesn't seem to go through a reset. It's in short supply. It's part of the reason that we're so short housing is because land is so hard to come by. So I think, you know, land values are going to be pretty durable.

Where, you know, we think that there could be some exciting opportunities. There are builders that are not as well capitalized or as balance sheet strong as what we are. And for, you know, a number of reasons, they may elect to walk away from something. And, you know, that may create some opportunities where, you know, we can step in and grab something at a good value.

You know, maybe something that was tied up at a prior value, you know, that we're able to inherit, et cetera. So time will tell whether or not that plays out. We haven't seen a ton of it yet. But, you know, we're, you know, they say hope is not a strategy, but should some of those opportunities emerge? We're really well positioned and in a great financial position to take advantage.

Yeah. You know, Karl, when we're talking about volatility, we're talking about rate of daily sales. That's the volatility. You know, the other things have been largely stable, including cannery. We have not seen, you know, a run for the doors from consumers that previously made a decision to buy and are in our backlog. That's been, you know, that's been really stable. And, you know, Jim highlighted, we saw modest, you know, a very small tick up in cannery in the first quarter to 1%. And we haven't seen a change in behavior in April either.

So, cycle time, Karl, we talked about it last quarter. We're basically at 100 days on our single family, which is so mission accomplished there. We don't really expect any more kind of changes. We're at where we want to be. Jim, you know, quoted word 110 days overall. And what that includes is a lot of our whole type family condo buildings that have, you know, much longer cycle time than a single family. So, where we want to be on cycle time. In terms of land optionality, we make tremendous progress toward that kind of target of 70%. You know, what Jim talked about in his prepared remarks is that we're going to be really prudent in evaluating when and where and how we drive for optionality.

When we think about optionality, we're looking to be capital efficient. We're also looking to mitigate risk associated with owning land.

And so, that will be our driving force north star is mitigating risk associated with owning land. A secondary benefit will be, you know, the improved efficiency that we get on return. But we're not going to let the tail whack the dog on this one, Carl.

Yeah, Alan, Florida is a really important market for us. You know, the thing that I would highlight about our Florida market is the majority of our business there is in the move up in the active built space. And, you know, we've talked about, you know, we've talked about that being one of the stronger segments. So I feel from a strategic standpoint, I feel really good about how we're positioned in Florida. In the near term, resale inventory in Florida across the states, probably higher than what anybody would like to be.

You know, the last number that I saw is I think it's around seven months of total inventory, which is, you know, slightly over the ideal of sex or lower. So, you know, maybe not perfect, but also not in full long panic mode either. Our Florida business is only down five percent on a year over your basis. So, you know, down a little bit, but certainly not catastrophic.

You know, the, the, so I'd probably leave it there as it relates to Florida, Alan.

Yeah, Alan, I, there are some and exactly where they're going to be. I can't predict that. I'm not anticipating covert level disruption in the supply chain. But to assume there's going to be none, I think would be very in your head in the sand. There are things going on in the global supply chain that will inevitably create hotspots and issues will be really transparent with you when we see those. And how what we're doing to mitigate it. The confidence that I give you as I go back to our world class procurement team.

They know how to deal with this. They know how to be agile. We're fresh off of, you know, three years of dealing with COVID related supply chain. I, you know, I'm not suggesting this is going to be a lay down, but I think it'll be, you know, potentially an easier obstacle course to navigate than the COVID supply chain. Disruptions, but, you know, I do think the industry needs to be prepared and not just the industry. The world needs to be prepared for some disruptions as a result of things that are going on. Tariff induced.

Yeah, Ken. So I'll take the first part and I'll let Jim take the part on margins and incentives. As it relates to inventory, our target range is 40 to 45%. And I think what you've seen from us is we've adjusted our inventory levels in reaction to things that have been going on in the broader market right now. You know, we're probably in a little bit of a risk off mode of inventory. And so you've seen us trending from where we were to getting back inside of our range. In terms of the year over year comparison, I think it'll depend, but I'd expect us to be within our stated range, which I believe would be lower that it ended up being lower than where we were at the end of 2424.

Jim, you want to take the other two?

Yeah. We don't really slice them back then. What I would tell you is incentives can come in different shapes and forms. If it's a speculative inventory unit, maybe there's a discount associated with that. You touched on our active adult buyers. Many of those are past buyers. So maybe incentive they get is, you know, a discount on options that are design centers.

You know, it varies across all of them. Particularly on the first time buyer, you know, they probably need a little bit more help on the financing side. So again, incentives come in different shapes and forms. And we think we just find the right balance for each individual consumer.

Appreciate everybody's time on the call this morning. Actually, we're a few people up in the queue, but we simply run out of time on this call. We're available over the remainder of the day to get any questions. Otherwise, we will look forward to speaking with you on our second quarter call.