PulteGroup (PHM) Q3 2025 earnings call transcript

Thanks Rob. Good morning. And thank you for joining today's call as we look forward to discussing the Paulty Group's third quarter operating and financial results. With me today are Ryan Marshall, President and CEO, Jim Osowski, Executive Vice President and CFO and David Carrier, Senior Vice President and Finance. As always, a copy of our earnings released this morning's presentation has been posted to our corporate website at poltygroup. com. We will also post an audio replay of this call later today. I would highlight that today's presentation includes forward-looking statements about the company's expected future performance.

Act results could differ materially from those suggested by our comments today. The most significant risk factors that could affect huge results are summarized as part of today's earnings release and within the accompanying presentation. These risk factors and other key information are detailed and RICC filings, including our annual and quarterly reports.

Now let me turn the call over to Ryan, right?

Good morning. And thank you for joining this morning's call. I look forward to updating you on Polty Group's strong Q3 financial results and underlying business strategies that have positioned our operations for ongoing success. Specific to the company's third quarter results, our home building operations successfully closed over 7,500 homes, which helped to drive another quarter of overall strong financial results.

As Jim will expand on shortly, I am pleased to highlight that Polty Group generated third-quarter home sale revenues of $4.2 billion, operating margins of 16.8% and earnings of $2.96 per share. And given our focus on returns, I would also highlight that the company has delivered a return on equity of 21% for the trailing 12 months. These results reflect the strength of our diversified operating model, which continues to serve us well in a U. S. housing market where home buying demand has been challenging. Geographically, our diversified operating platform that spans across 47 major markets remains a key strain. While our broad reach across buyer groups, first-time move up and active adult provides unique strategic advantages that are helping us to successfully navigate today's demand dynamics.

Specifically in today's market, weaker consumer confidence and stretch affordability are limiting opportunities with first-time buyers, while demand has been more resilient within the active adult segment where we, through our Dell Web brand, are a recognized leader. For those of you that have not had the opportunity to visit the Dell Web community, think Disney cruise ship for those 55 and older. At 500 to 1,000 homes, Dell Web communities are larger and offer amenity packages that can conclude everything from tennis, pickleball, fitness, spa, to social activities, food, and dining. But more than anything, Dell Web communities offer personal connections and a place to belong. As we highlighted on previous calls, we are capitalizing on the brand recognition and power of the Dell Web name through our new Dell Web Explorer communities.

Our new Dell Web Explorer brand is designed to serve today's channel expires looking for the amazing luxury lifestyle but without the age restriction. We are in the early stages of planning a get-to-know Dell Web event in 2026, and we will keep you posted on the timing. Getting back to our results in the third quarter, traffic to our communities was higher than last year, although conversion rates fluctuated from week to week. Based on feedback from our sales associates, consumers remain engaged in the whole buying process but they are proceeding with caution, given concerns which I think range from economic weakness and job stability to stretched affordability. I think that is why buyer response to the decrease in interest rates was more muted than we experienced in other periods of recent rate declines.

We have always said that interest rates are a positive, lower interest rates are a positive for housing demand but rates don't operate in a vacuum. There is a clear offset if rates are coming down because the economy is flowing and people are worried about their jobs. I believe that is the scenario we are experiencing right now. That being said, I would note that our 2-3 absorption rate of 2.2 homes per month was consistent with our pre-COVID average, although down from last year's third quarter absorption rate of 2.4. Again, while demand conditions differ by market to buyer segment, we would characterize US housing demand as good, albeit competitive and with some challenges.

But one in which our size and scale allow us to compete effectively. As discussed on prior calls, earlier in the year, we proactively made decisions to better align production levels with sales volumes. In the third quarter, we started 6,557 homes which effectively equaled our 2-3 sales pace. This pace is consistent with our strategy. The match starts with sales as we work toward an appropriate level of inventory relative to current market demand. When setting our pace, our goal is to have the right level of inventory to meet core demand while avoiding excess finished spec production, thus allowing our sales team to self-room position of strength.

With our average build cycle now down to just 106 days, we can carry less inventory and still be responsive to any demand acceleration in Q4 or as we enter 2026. Along with adjusting our planned land spend for 2025 and remain on track to invest approximately $5 billion in land acquisition and development. At over $5 billion, our land spend would be down 5% from last year, but we remain in a strong position with a healthy land pipeline. A pipeline that can enable us to grow the business when home buying demand increases. Let me finish my comments by recognizing and saying thank you to the entire FULTY team. They have truly done an outstanding job navigating 2025s of all the market conditions.

While staying focused on delivering outstanding quality and service to our home buyers, you've done an amazing job team. Now let me turn the call over to CHIP for a detailed review of our third quarter results. CHIP.

Thank you Ryan and good morning everyone. I appreciate the opportunity to do FULTY groups Q3 financial results. In the third quarter, FULTY's net new orders told 6,638 homes to 6% lower than the third quarter of last year. The year-over-year decline in Q3 net new orders reflects a 10% decrease in absorption pace, partially offset by a 5% increase in our average community count to 1,002 communities for the quarter. As a percentage of starting backlog, our cancellation rate for the third quarter was 12%, which is modestly up from 10% last year. On a sequential basis, the Q3 cancellation rate was up 60 basis points from the second quarter, which tells us that most home buyers, once under contract, remain committed to their own.

As Ryan noted, our third quarter absorption pace is 2.2 homes per month compared with 2.4 homes per month in Q3 of last year. Fire demand in the quarter reflected a typical seasonal pattern, although quarter demand in 2025 has been below what we experienced in 2020.

Broke it down by buyer group, net new orders among first-time buyers were down 14% from last year, and our move-up business was down 3%. As it has been the case throughout 2025, our active adult business remains our strongest buyer group, as net new orders increased 7% over Q3 of last year. In the third quarter, net new orders with interactive adult business benefited from both an increase in community count and absorption base. Active adult sales represented 24% of Q3 net new orders, and as we have shared on previous costs, most of these homes will be delivered in 2026. Home sale revenues in the third quarter totaled $4.2 billion, which is down 2% from last year's Q3 revenue to $4.3 billion.

The decline in home sale revenues reflects a 5% decrease in closing volumes to 7,529 homes, partially offset by a 3% increase in average sales price to $564,000, closing ASP benefited from the geographic mix of deliveries realized in Q3 of this year.

By buyer group, closings in the third quarter were comprised 39% first-time, 39% move-up, and our active adult business represented 22%. This is generally in line with our mix in the third quarter of last year when our closings were 40% first-time, 40% move-up, and 20% active adult. Reflective of Q3 orders and closing volume, we ended the third quarter with a backlog of 9,888 homes valued at $6.2 billion. In the third quarter of last year, our backlog was 12,089 homes with a value of $7.7 billion. We ended Q3 with 15,096 homes in production, of which 7,369 or 49% were spec homes. In absolute numbers, our quarter-end inventory of spec homes was down 1% from the third quarter of last year, and down 16%, from almost 1,400 houses from the start of this year.

Our field teams have done an excellent job managing startups, as they work to balance inventory levels with consumer demand. Giving current sales trends, and specifically the number of built-to-order contracts we are executing, specs are like the remaining close to the 50% of production in the next several quarters, which is higher than our spec homes continue to make up a large percentage of overall sales, we are comfortable with our strategy for managing our spec. Based on sales activity and the number of homes in our production pipeline, we expect to close between 7,200 to 7,600 homes in the fourth quarter. Given this guide for expecting Q4 closings, the math tells you that we could exceed our previous guidance, this full year closings likely end up in the range, 29,000, 29,400 homes.

We still have homes to sell and close to achieve these numbers, so we are focused on converting spec inventory into closing, and finishing the year strong. Given our backlog, production pipeline, and recent order trends, we are still guiding to our average sales price of closings to be in the range of $560,000 to $570,000 in the fourth quarter and the full year of 2025. Looking at our land pipeline, we continue to expect our community count before quarter to be 3% to 5% higher than the comparable prior year period.

Inlining with our previous guidance, we reported the third quarter gross margin of 26.2% the time the sequential basis is down to 80 basis points from Q2. Multi third quarter gross margin is inclusive of higher incentives incurred during the period, resulting from demand conditions and local competitive dynamics. The incentives in the third quarter were 8.9% of gross sales price, which compares with 7.0% last year and 8.7% in the second quarter. While incentives move slightly higher, changes do an excellent job of controlling bill of cost, which at $79 per square foot were consistent with the prior year and with the second quarter of 2020.

Let me just add a quick update here to our prior comments regarding the impact of tariffs. At this time, we estimated that tariffs will effectively have little to no one impact on our closings in Q4 of 2025, but they could increase bill cost by roughly $1,500 per home starting in 2016. We'll provide a more definitive estimate on tariffs when we report our fourth quarter earnings in January. Factoring in current demand conditions, the generally competitive local market dynamics and our goal of reducing excess finished spec inventory, we now expect fourth quarter gross margin to be in the range of 25.5% to 26.0%. For a third quarter, that's GNA expense was $401 million per 9.4% of home sale revenue.

This is comparable to prior SG&A expense of $407 million for 9.4% of home sale revenues. In the face of current market dynamics, we remain focused on appropriately controlling our overhead spend and finding opportunities to lower expenses while still delivering fulfilling quality and finding experience, which please know.

Given the success of our efforts, we are maintaining our previous guide for full year 2025 SG&A expense to be in the range of 9.5% to 9.7% home sale. Our financial services operations reported third quarter pretext income of $44 million, which is down from $55 million to Q3 of last year. Pretext income from the quarter was impacted by lower closing volumes and our home building operations and a lower capture rate in the period. Our mortgage capture rate in the third quarter was 84% pyramid 87% last year. Four to the third quarter, full to groups reported pretext income of $768 million. In the period, our tax expense was $182 million or an effective tax rate of 23.7%.

Our effective tax rate in Q3 benefited from the purchase of renewable energy tax credits. For the fourth quarter, we expect our tax rate to be approximately 24.5%, assuming no discrete period specific tax. We reported third quarter net income of $568 million for $2.96 per share. In the third quarter of last year, company reported net income of $698 million for $3.35 per share.

Multi groups third quarter earnings per share was calculated based on $198 million for mid shares outstanding. Our share count is down 5% from the prior year as we continue to execute our stock repurchase program. In this year's third quarter, we repurchased 2.4 million common shares for $300 million. Through the first nine months of 2025, the company repurchased 8.2 million common shares per total of $900 million for an average price of $109 in 81 cents per share. At quarter end, we have $1.3 billion of meaning under our existing share repurchase sponsor.

Consistent with our state of capital allocation priorities, we invested $1.3 billion in land acquisition element. The third quarter is 54% deployed toward the development of our existing land asset. Here to date, we have invested $3.8 billion in land acquisition and development, as we work to maintain a reliable pipeline in the year and long-term buildable lives.

We ended the third quarter with approximately 240,000 lives under control. On a sequential basis, down 9,000 lives from the second quarter, as we elected to walk away from certain option deals that were years out and really in this kind of end process. These actions are consistent with our disciplined land underwriting practices and capital allocation. Our ability to program active, re-manage our land pipeline demonstrates the importance of our differentiated approach to controlling critical land assets. As we have highlighted in the past over 80% of pulpit land options with the underlying land seller, the remainder structure was one-off transaction that faced a select number of land managers. We remain disciplined in executing our option strategy and focus on enhancing private returns and mitigating market risk.

Based on operating results, results in the first three quarters of 2025 and adjustments we have made to this year's production and planned land spend. We still expect cash flow generations for the full year to be approximately $1.4 million.

Let me close with a few comments about our balance sheet. We ended the third quarter with $1.5 billion of cash and the debt to capital ratio of 11.2%. Adjusting for the cash balance are net debt to capital ratio with a quarter end with 1.1%.

Now, let me turn the call back to Ryan for some final comments.

Thanks, Jim. Before opening the call to questions, I wanted to provide some additional color as to the market conditions we are experiencing. Generally, buyer demand in the third quarter reflected a typical seasonal pattern. Although buyer demand at the local market level also reflected new and existing home inventories, which in a number of markets remain elevated. Seasonal demand trends remain on track through the first few weeks of October. With traffic and buyer interest generally comparable to what we experience in Q3.

From a sales standpoint, we are now in the seasonally slowest part of the year, but we remain optimistic that lower rates in combination with strong economy and higher confidence can ultimately work to energize new and just as importantly, existing home sales. For all these reasons, we focus on the new home market, but demand within existing home market remains soft.

Resulting in elevated levels of inventory. To extend the lower rates can revitalize existing home sales. It will be a positive for U. S. housing. Specific to faulty groups, third quarter results, we experience better home buying demand in parts of the Midwest, northeast, and the southeast in markets ranging from Cleveland, Charlotte, and the coastal Carolinas to Tennessee and D. C. , northern Virginia. I'm also extremely pleased to get to call out the relative strength of our Florida operations as our teams there continue to execute at a very high level. As you can see in this morning's press release, third quarter net new workers for the state of Florida increased by 2 percent over the prior year.

Market conditions are competitive when our local teams are led by experienced operators who have assembled exceptional land pipelines over the years. As has been the case for much of the year, consumer demand in our Texas and western markets remains soft in the third quarter. You have heard me say before that we can't be margin proud, so when operating in more difficult market conditions, our local teams understand the importance of finding the market and turning assets while not giving away price needlessly. That is the approach we continue to take as we compete for sales and work to sell through finished inventory. I think it's fair to say that home buying demand in 2025 has been more challenging than the industry was anticipating.

And while it has been more challenging, I think polity groups year-to-date results continue to demonstrate the importance of our diversified and balanced approach to the business. With a platform that extends across multiple markets and buyer groups and a business model that allows for greater operating flexibility, we continue to deliver strong cash flows and high returns. Before wrapping up, I think it's appropriate to offer some thoughts about comments issued recently by President Trump regarding the need for more housing and better affordability. We agree with the president's perspective as it is consistent with industry estimates that routinely reference an underbuild in this country of three to four million houses.

While this supply deficit certainly has an impact on affordability generally, the complexities of the new home construction industry dictate that tackling the problem of this scale requires a coordinated and comprehensive approach that brings together federal, state, and local leaders working in partnership with the new home construction industry.

We share the president's focus on housing and wanting to make the American dream more attainable for everyone. We look forward to helping address the issue of housing in America and working with the administration and developing actionable solutions that are consistent with pull these long-term strategic plans.

Now, let me turn the call over to Jim Silver.

Okay. Thanks, Ryan. We are prepared to open the call for questions so that we can get to as many questions as possible during the remaining time of this call. We're asking to limit yourself for one question and one follow-up. Thank you. And now I ask Rob to explain the process and open the call for questions.

Yeah, so Matt, in fairness, we're not going to have this call be dominated by some of the comments of recent past. There's too many positive things happening inside of our business. And we're too excited about the future strategic direction that we're going. You know, the prepared remarks that I just shared, I think, are fully comprehensive of how we feel on the topic.

We have had communication with the administration. And, you know, we certainly think it is a complicated issue that is largely rooted in local politics and anti-growth mentalities, and it's going to be complicated to unravel it, and it's going to take a coordinated effort. So, you know, hopefully that helps. But, you know, it's going to, it's taking us a long time to get into the situation that we're in as a country to create this structural housing shortage. It's going to take time to unwind it as well.

Yeah, Matt, there's probably two concepts here that I'd highlight. Number one, we've been saying consistently for the entire year. We wanted starts to be aligned with sales and we ideally like our overall spec production to be, respect inventory to be 40 to 45%. That hasn't changed. Because of the challenging sales environment that we've been in, we've sold fewer to be built homes than we would have anticipated. And so, just the way the math works out of what our overall backlog looks like, the math is yielded a slightly higher percentage of specs, despite actually lowering the number of specs that we have in production. So, the headline percentage is higher. We're not worrying too much about that.

We're more focused on what are the actual number of specs that we have that we're comfortable with. And then, you know, we really, what we're really focused on is more dirt to be built sales, which is, you know, fully aligned with how we've historically operated the company. And due time, I think that percentage will come very much in line with where we ultimately want to be.

Yeah, we are, John. There are markets that we've been bullish on. You know, even if you went back two or three quarters ago and there was a lot of concern about Florida, we were pretty consistent saying, Florida's a good market for us. We've got great locations. We're not worried. And I think the results that we demonstrated over the last two quarters that have, so we're now two quarters in a one of the outstanding locations that we have that buyers want to live in those communities.

And then two, I think there is some good stabilization in Florida. You mentioned the southeast as well. I think the same holds true. So, you know, the southeast and Florida are still places people want to move to. The weather is certainly desirable. From a business standpoint, locations are generally programmed. They've got good tax policies. And I think those are things that are, you know, very accommodative to having a healthy housing operation.

We are, John, we're definitely seeing some favorable terms, particularly on earth moving and some of the underground work, you know, things that involve heavy machinery. You know, we're seeing, you know, more favorable terms than what we've experienced over the last few years. And those input costs that go into our future a lot of costs, I think that will certainly be beneficial in helping to reduce the amount of land inflation that we've been seeing.

Yeah. So Mike, we've worked really hard to kind of position our land pipeline toward what we view as an optimal mix of business that's indexed against what the overall opportunity is. Starting with the first time entry level buyer group, we see that business in the kind of 38 to 40% range overall. So pretty consistent with where we're operating today. And I think that is indexed against the overall buying opportunity, your buyer profile in the United States. The move up business, we have intentionally brought down into that same range of about 35 to 38% ideally. And then the balance is our active adult business at 25. So we're, you know, with our current sales rate, which, you know, Jim shared was basically, we were 40, 38, 22 in the quarter, we're almost like perfectly indexed to where we want to be.

We, you know, the change that you'll see continue to play out over the next few quarters will be the active adult business going up to that ideal 25%. So we'd like to weigh the business's position. Certainly the first time entry level buyer group is one that's been more challenged in this current environment. That won't last forever. And we certainly think is the, you know, the housing demand starts to return. You know, that's a buyer group that we're going to be well positioned to serve. I would remind everyone that our first time entry level communities do tend to play on the higher end of the price range of first time entry level. They're typically closer and slightly better located.

And so while it is a first time entry level buyer, it's, it's, you know, not the lowest price segment of that particular consumer group.

Yeah, you know, Mike, we'll, we'll look forward to giving kind of full 2026 guidance at the end of our next quarter, you know, as we wrap up the full year. So, you know, stay tuned for that. You know, that said, we've got an amazing land pipeline that we've worked incredibly hard to build over the last three, four years, that is very much in line and, and prepped for us to continue to grow our business. We certainly see, you know, need the, the consumer and the market to cooperate with that. And what you've heard from us is we're going to continue to be balanced in our start rate to make sure that that's responsive and reflective for the actual demand that we're seeing.

Some of those things we can't control, all that said, you know, we are seeing, you know, some, some things out there that I think if they shape up with rates that come down a little bit, consumer confidence improves a little bit, you know, we know that there is, is a desire for home ownership. And we certainly think that we're well positioned to capitalize on that. You know, the other piece that I think sets us up for success next year is our built, our build time. We're down to 106 days. And then some of our entry level starter communities, it's even faster than that. So, you know, we've really got some time before we need to make the decision on ramping our production levels to deal with, you know, the, the prospect of growing our business in 2026 over what we've done in 2025.

So, we remain pretty positive and optimistic, Mike, about kind of where the business is at and more importantly, what the opportunity is. And, you know, stay tuned for kind of our full 2026 guide at the end of next quarter.

Yeah, Alan, I think the majority of the focus that I would probably share is around consumer confidence. And so the benefit that we've seen when rates have come down has been the overall lift in consumer confidence. The actual financial benefit from rates coming down is still not at the level that we're incentivizing with our forward mortgage commitment. So the rates we've been offering and continue to offer are far better than anything that the consumer will get by a change in the interest rate environment coming, getting better coming down.

So, you know, what we're kind of looking toward and for is some improvement in the kind of overall footing and foundation of consumer confidence. There's a lot that goes into that.

You know, we're at a dog on there at a 10 year low. So, you know, hopefully we're kind of bottoming out on that and we can start to turn that around and go the other direction. You combine that with the opportunity potentially for some further rate cuts this year and into next year. And I think the industry can be in a tremendous position to capitalize on what is that underlying desire for homeownership and housing demand. We know there's a structure shortage of housing and if we can just get consumers confident about making this major purchase in their life, I think we can see some upside in 26.

Yeah, Alan, I that what I would highlight, you know, trying to stay, you know, neutral on the political spectrum. We're seeing left, right, and middle politicians talk about housing, and that's the piece that I think we should all be focused on is is this country, you know, we all want to grow the economy. We want to see jobs grown, and we need to strike the balance that as we grow jobs, we've got when we have new jobs, we need new homes to go with those jobs. And if we can get our political leaders, community, both the federal, state, and local level to, you know, really focus on saying housing is a essential ingredient to growing the economy.

That's where I think it's positive. So whether it's conversations that are happening in the Senate or in the executive branch or, you know, at your local city council, if we can put some things in place, and I would really boil it down to a simple formula of, you know, the general of thumb is for every two jobs that are created, we need one home. So if we can focus on a mantra of two for one, two jobs, one home, and we can work on policies that put that into play, I think over time, we could really see ourselves work out of this structural housing shortage that we've created.

Yeah, Stephen, great question. So any of the incentives that we have, whether it's in the form of financing incentives, or say a discount, to your point on some of the options that we might give people off, those are reduction in your gross sales price, so they're reduction in your ASP. The financing incentives are probably about a third of the total incentive package that we report.

Yes, it is to be, you know, if we want to give you money off in a design center, maybe you have a finished spec inventory, you give a little bit of a discount on that. So that's about two thirds of the mix.

Yeah, I mean, the four commitments I tell you probably roughly 30% of our consumers actually use that. So it's not a large percentage in total, but I would tell you financing incentives have been around forever. You know, if you go back even pre COVID times, those have always been there and probably 80% of our customers have had some sort of financing incentives. So I'd say it's probably maybe a half of it is some of the four commitments. But again, we're always looking for things that we can go ahead and help consumers as they're looking to kind of find the right financial payment that they need every month or closing costs to get them over the finish line.

Yeah, great question. So I tell you, the four commitments or mortgage buy-downs, really, it's not that impactful. Rates have moved a little bit, but it's really not there. It's really, you know, as we step back and we created the guide for the fourth quarter, there's a lot of moving parts and pieces in there. You know, we look at backlog we have. We look at incentives that we have on sales board today. You know, speculative inventory. We talked about that. You know, we have to stay competitive in particular markets. So as we created a guide and we looked at it, it was really a matter of kind of putting all the parts and pieces together. And I'd say, you know, moving some of that spec inventory is what drew us to the conclusion of the lower guide a little bit going into the fourth quarter.

To this point, no. Now, there are certain loan programs that we were the shape and size of our business and the types of programs that we use. We've not been impacted to this point.

Thanks, Anthony.

Yeah, I would tell you that incentives to the three months of the quarter were fairly consistent as it relates to kind of the guide. I stepped back as we created the guide. I mean, there's on 1,000 homes that we have to kind of book and close within the quarter. So when we came up with the guide, we had to make assumptions about where we were going to sell them, when we were going to sell them. And so those all factored into it. So we haven't gotten that more granular, but we've assumed that as we move some of this back inventory in the fourth quarter, we feel comfortable with the guide that we presented.

Yeah, Mike, we'll hold on that. You know, like I shared when Mike really hard asked the question, give us 90 days when we report Q4. We'll have full 2026 guidance for you and kind of break it all down.

Yeah, Rafe, we have right around 2000 finished specs. So it's about two per average community. It's almost double where we'd ideally like to be. We generally like to run somewhere around 1 per, you know, slightly more than 1 per maybe 1.2 finished specs per community is ideal for us. So, you know, like I said, we're a little higher than we'd like to be. Part of that is rolled into the incremental incentive glow that Jim's been talking about. We're not, we're not exactly worried about the inventory position, but we'd like it to be lower to be optimized. So, you know, the rate at which we've been starting homes is perfectly aligned with where we want to be in terms of kind of a sales rate.

We'll continue to chip away the kind of the finished specs and, you know, that'll be part of, you know, we think as we move into 2026, we'll get that kind of normalized and we'll start to work our way back into the optimal balance of finished specs, total specs as a percentage of inventory, and then, you know, really focus on increasing the number of dirt sales or built the order sales that we have, which, you know, is the ideal place for us to be in terms of how we run our business.

You know, as we look at it, I think our Q4 S&A, you know, fairly consistent with where we are in Q3, you know, we've got a wider range as it relates to our closing guide. As we said, we've got a lot of specumentary that we're looking to move in the quarter, so that probably targets it. But I would tell you, there isn't anything out of the norm that I would point to with our S&A in the fourth quarter.

Land development generally runs 9 to 12 months, depending on the geography and the size of the phase that you're developing. So, you know, things we're developing right now in Q3, Q4 will have a, you know, a favorable impact in the back half 26 potentially, and then kind of fully impacted in 2027.

We've been building communities of that size down for about a decade. So, that is what our Dell Web business has been. We have a few, you know, less than five legacy communities that are of the older vintage, you know, very large, you know, two and three thousand unit plus Dell Web communities. But there's not, there's not really anything in our Dell Web business that's different from what it's been. It would have an impact on the margin profile of how those communities have historically performed.

Yeah, Sue. I think in, is it relates to Texas, there was a buildup of inventory there, post-COVID, along with rapid price appreciation and the combination of those two things that the Texas markets have been working through that. We're seeing progress being made. We're still selling homes there, still good jobs and a lot of people that want to be in Texas. We think we're at a moment in time. We're not overly worried about it. Is it relates to California? I think we're dealing with a very high-cost state.

That's also got a lot of tech-dependent jobs. Some of the, I think, the concern and the challenges around the tech industry have played into consumer confidence with the buyers that work in those spaces or in those job categories. There's a lot there. I won't unpack every single one of them. Then you can just combine that with overall high prices and challenge affordability. I think that's what's made Northern and Southern California more challenged. I put Seattle in the same category for a lot of the same reasons.

Yeah, Sue, we have a really thorough detailed process for how we think about capital allocation. Our view is always to generate the best outcome for our shareholder, whether it's about capital allocation or the number of homes we're building or the amount of spec inventory that we're carrying. We really think about what's going to yield optimal return on investor capital. We meet with our board often and they take a very active role in working with us as management to find the best outcome for capital allocation.

We've been very consistent with share buyback and we've been very consistent in laying out our priorities. We want to invest in our business first and foremost. That's what our investors have charged us with. They've given us their capital to say, go invest in your business, go grow your business. We do that to the level that we believe generates great results. Then we think about returning cash, excess cash that's being generated by successful operations in the business. That's what we think about returning. Fortunately for us over the last number of years, we've been able to do everything. We've invested in the business. We've grown our land pipeline. We've increased our dividends several times. We've paid down debt and we've continued to be a consistent buyer of our own equity.

We'd like to continue to do everything but we'll go through the prioritization and the priority setting in that way. Invest in the business, pay our dividend, return access cash to shareholders.

Thank you.

Yeah. So, Ken, in terms of kind of the distribution of incentives, broadly, I would tell you, less incentives in places like Florida and Southeast, Northeast, Midwest, more incentives than Texas and the West, which is, it's totally distributed in a line based on where things are harder to sell, where things are easier to sell.

Sliceing it any thinner than that is probably more than we'd want to get into on this call. In terms of the Texas markets and slowing job growth, I'd probably not over-index on that.

Dallas, in fact, all four Texas markets are places where populations growing and jobs are growing. And as long as you have those two factors, you can and will have a thriving housing environment. And the Texas markets satisfy both those criteria, growing jobs, growing populations. So, you know, the fact that the rate of change is a little bit different, I probably wouldn't read too much into that just based on, you know, one period of slightly lower job growth.

Thanks, Ken.

Thank you, everybody, for their time this morning. Certainly available. The remainder of the day has had to develop questions, otherwise we will look forward to speak with you in the fourth quarter. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.