Good day and welcome to the PulteGroup's Q1 2017 Quarterly Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jim Zeumer. Please go ahead, sir.

Great. Thank you, Rochelle, and good morning. I want to welcome you to PulteGroup's Conference Call to discuss our first quarter financial results for the period ended March 31, 2017. Joining me for today's call are Ryan Marshall, President and CEO; Bob O'Shaughnessy, Executive Vice President and CFO; and Jim Ossowski, Senior Vice President of Finance. A copy of this morning's earnings release and the presentation slide that accompanies today's call have been posted to our corporate website at pultegroupinc.com. We will also post an audio replay of today's call to our website a little later today. Before we begin the discussion, I want to alert all participants that today's presentation may include forward-looking statements about PulteGroup's 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. That said, let me turn the call over to Ryan Marshall. Ryan?

Thanks, Jim, and good morning. As we closed out 2016, there was concern in and around the housing industry about the potential impact the rising interest rates would have on buyer demand heading into the 2017 spring selling season. With the first quarter complete, it is clear that higher rates have not dampened buyer interest. In fact, it looks like the housing recovery may be picking up steam. There are several dynamics that continue to sustain and drive the housing recovery. On the demand side, gains in jobs combined with low interest rates are all working to drive consumer confidence higher. Coupled with the limited supply of new homes, we're experiencing a supply and demand environment that is favorable for housing. In particular, I would point to jobs, wages, and consumer confidence as being among the most important drivers of housing demand as they link a potential buyer's ability to buy a home with the confidence to do so. Overall, we believe these dynamics will continue to support an improving new home sales environment. And like most in the industry, we're encouraged by Q1 demand conditions and have high expectations for the remainder of 2017. With this as a background on the current business environment, we're excited to discuss the company's first quarter operating and financial results. As was the trend for much of 2016, our Q1 results reflect a positive impact of our increased investments as we generated 14% growth on the top line and 17% growth in earnings per share. I'm pleased to say that consistent with our value creation focus, we've been able to grow our operations while continuing to deliver high returns on invested capital. Bob will review the quarter in detail, but there are a few points that I want to touch on. First, our…

Thanks, Ryan, and good morning. Our first quarter results have the company off to a strong start and position us to achieve the performance objectives we have set for the year. Sign-ups in the first quarter increased 8% to 6,126 home and were up 16% in dollars to $2.4 billion. Looking at our Q1 sign-ups by buyer group, first time was essentially flat compared with last year at 1,762 homes; move up gained 12% to 2,831 homes; and active adult increased 13% to 1,533 homes. The nice increase in active adult was driven in part by our new Del Webb in Nashville which, as Ryan noted, is receiving great buyer interest. Our absorption pace for the quarter which was down 1% compared with last year was influenced by the timing of community openings and closeouts over the past 12 months. We had a number of high volume first time buyer communities operating in 2016 that ultimately sold out during the year and their replacements are just getting opened. In the case of active adult paces, our newest Del Webb had a positive impact in the quarter. Breaking absorption down by buyer group, first time and move up were both down 5% while active adult was up a robust 17%. Consistent with recent trends, we continue to realize meaningful top line growth as Q1 home sale revenues increased by 14% to $1.6 billion. The higher revenues for the period were driven by a 6% or a $22,000 increase in average selling price to $375,000 combined with a 7% increase in closings to 4,225 homes. Our Q1 closings by buyer group were 29% first time, 44% move up, and 27% active adult. This compares to 29% first time, 41% move up, and 30% active adult in the first quarter of last year.…

Thanks, Bob. As I've talked about at the outset of this call, we have a positive view on the overall housing demand and believe that economic improvement, jobs, consumer confidence, and limited housing supply will continue to provide long-term support for new home sales. These factors along with favorable demographics will continue to work in our favor. While the potential for higher rates and any resulting impact on affordability must be watched, we are optimistic about buyer demand and overall supply dynamics going forward. More specific to our first quarter, let me provide a few high-level comments. Starting out West, overall demand conditions were very strong and I would highlight Arizona, Nevada, and New Mexico and Northern California as the areas of particularly strong buyer interest. Weather in California was an issue not so much in terms of hindering demand but it certainly created challenges with construction and land development. Similar to what we've experienced in Texas in prior years, we will be playing catch-up for a couple of quarters. We generally saw very good demand in the middle third of the country as buyers remained active within our Midwest and Texas operations. And finishing here in the East, demand conditions held up well in the quarter although we did see pockets of softness at higher price points in some of our markets. Through the first few weeks of Q2, we continue to experience strong buyer demand and good traffic into our communities. Combined with historically low interest rates, we have every reason to expect demand will remain strong through the remainder of the spring selling season. Before opening the call to questions, I want to thank our employees who do an outstanding job every day of delivering a superior quality home and a great buying experience for our customers. You're the reason we've gotten off to a great start in 2017. Now, let me turn the call back to Jim Zeumer

Okay. Thank you, Ryan. We will open the call for questions. So that we can speak with as many participants as possible during the remaining time in this call, we ask that you limit yourselves to one question and one follow-up. Rochelle, if you explain the process we'll get started with the Q&A.

Thank you. And we'll take our first question from Robert Wetenhall with RBC Capital Markets.

Hi. Good morning. Thanks for taking my questions. Hey, Ryan, just wanted to ask you. The SG&A improvement was pretty dramatic during the quarter which speaks to a disciplined approach to operations. How much is left? And with the SG&A dollars you took out coming from existing markets that you're de-emphasizing, how much is left and how do we think about where the trajectory of SG&A goes from here?

Yeah. Good morning, Bob. Thanks for the question. We're very pleased with the movement that we've made with a disciplined focus in dramatically reducing our SG&A expense. As far as the forward rate goes, what I would tell you is excluding commissions which we've now included in our SG&A line as I think everyone's well aware now, our SG&A will continue to slightly grow as we move throughout the year which is mostly driven by expenses associated with new community openings. As we talked about on our Q4 call, we expect to open about 250 new communities in 2017 so that'll have a little bit of an impact as we move throughout the year. But our expectation is that we'll continue to see favorable improvement on our overall SG&A spend.

Good. You're making a ton of progress. I was just hoping for my second question. Maybe you could give us a little bit more regional color in terms of where you're seeing strength and weakness in markets? And kind of if you got, like, $50 or $60 stability in Texas for oil, how that market will look going forward? All your comments are very encouraging. It seems like you're aggressively managing demand to optimize return on capital by balancing pace and price. Do you see the same pace of demand persisting during the balance of the year and which markets will reflect that the most? Thanks and good luck.

Yeah, Bob, that's a great question. I'll probably just reiterate some of the things that I shared in the prepared remarks which is really reflective of what we're seeing. We like the demand environment that we're seeing in California. The weather was certainly tough with a lot of rain that came in the first quarter. Didn't seem to impact demand but certainly will have an impact on our development timelines. We like what we're seeing in Arizona for certain. Texas remains a strong market for us. We also like what we've gotten out of the Midwest which has been a very strong performer. I also like what we're seeing in Florida. When we look to the Northeast and the Southeast, good markets for us where we have some nice positions. We did see some pockets of softness especially in some of the higher price points.

Got it. And just one last thing. Thoughts on the lumber tariff relative to impact on profitability going forward? Obviously, kind of very recent development with today's news. Thank you.

Yeah, Bob. I guess on the lumber tariffs, you've seen lumber prices move over the last 10 or 12 weeks. I think most people would suggest that's really been in anticipation of this. And I don't think that the announcement last night was any more significant; it might even be a little less significant than people were expecting. So volatility drives change and I'm not sure what will happen. But at this point it looks like the market has been expecting this so we don't expect anything dramatic from that. Obviously, how it plays out over time can have an influence on our cost structure

And next we'll hear from Michael Rehaut with JPMorgan.

Thanks very much. Good morning, everyone. I wanted to dive into the absorption pace data that you gave out before, and it was very helpful obviously. And you kind of alluded to timing of community closeouts influencing the sales pace decline year-over-year. Just trying to get a sense of, perhaps, how much that really did impact. I mean, was it a degree of magnitude, a couple of percent or was it essentially all of the decline? And even if, let's say, if the sales pace was flat and I'm thinking now more in terms of the first time segment, that's still kind of contrast, perhaps, to other builders that are seeing more demonstrable year-over-year increases in absorption rate. And I was just kind of curious in how do you think about that. Is it a mix issue for you guys or a positioning issue? Perhaps some of the stronger demand is in further out regions that maybe you're still not exposed to? So just any thoughts around that would be helpful.

Yeah. Mike, it's Bob. Communities matter and as an example I'd use the fact that we posted really strong absorptions in the active adult side of the business which was impacted by the opening of the store in Tennessee that we talked about. Looking across the spectrum, if you look at the 5% down in the first time space, last year we had a number of communities that were generating really significant paces, that their replacements are either opening now or already have but we haven't seen the same paces out of them. You can cut this data 1 million different ways. If you look at the lower price points, those were typically that higher price point of the first time. We actually saw absorptions increase within that. So the mix of the communities we have opened at points in time contributes to the relative absorption pace. In terms of the move up space, you heard Ryan talk about that at the higher price points and this might be because consumers have more choice. There's more product on the ground or they're just taking a little bit longer to make decisions. So we think that contributed to the decrease in the move up space. We still feel good about the business. The margins are still good there; we just haven't seen the absorptions increase from where they were.

Yeah. Mike, it's Ryan. Thanks for the question. The other thing that I'd maybe share with you is we were very pleased with our Q1 sign-ups and, frankly, they were very much in line with our internal plan. I know you don't have visibility to that, but we were pleased with the results. When we look at comparing our results to our competitors, there's so many variables out there that do make it difficult to do an apples-to-apples comparison. The other thing that kind of plays into that is the different approaches that everybody's taking with their different strategies as that relates to the buyer groups that we serve. As an example, I'd tell you you get a very different outcome if new community openings are skewed more toward first time buyers versus move up buyers. So that also kind of played into the results that we posted in Q1.

Thank you, Ryan. That's helpful additional color as well. I guess just moving on the second question on the gross margins. You reiterated, I believe, your full year guidance and still expecting it to come in at the lower end of the range but maintaining that range. I was just curious in terms of, perhaps, so far this year you're almost four months done and a couple of months – two, three months – into the critical selling season. How would you view kind of upside or downside pressures to that gross margin guidance at this point in the year? I mean, Bob mentioned the lumber and you kind of feel like that's maybe baked into the market. But given how pricing is starting to shape up and a lot of balance of the year kind of maybe takes its queue from the selling season, how do you kind of ascertain upside and downside pressures to that gross margin guidance as you see it today?

Well, Mike, what we offer in terms of guidance is based on our backlog, so obviously we have a pretty significant backlog for the balance of the year. We're looking at margins on recent sales and we also think about the communities that we have coming online. So we're of the view that we can continue to deliver higher margins and we do expect improvement over the balance of the year. In terms of the variability against that, I think a lot of it will depend on consumer confidence. We think that's a primary driver of sort of the demand equation. Obviously, local decision-making, what communities are next to you, what are your competitors doing, can influence local decisions. But, broadly, we think that consumer confidence and obviously interest rates, we've got the specter of rising rates but it hasn't happened yet. So how people feel will probably be the driver of what happens on a relative basis, the margins between now and the end of the year.

Yeah. Mike, and the only thing I'd add to that and Bob's kind of alluded to it, but I think when you look at the overall supply and demand dynamics that we're dealing with right now, it's favorable. There's not a lot of supply out there and demand is reasonably high given an improving economy and some good job growth and high consumer confidence. And so there's a lot of variability as Bob talked about, that we've got to pay attention to lumber and labor and other commodities. But on the whole, combined with what's out there in a broader economy along with the mix of communities, and this is – I hate to say mix again – but when you look at the communities that we know we have coming online and what the profile is, we like the guidance that we've provided for the balance of the year.

And next we'll move to Nishu Sood with Deutsche Bank.

Thanks. Just want to come back to the order number and make sure I'm understanding the comments you're laying out. I mean, a lot of folks are going to look at the 8% deceleration from the 15% to 17% you had in the second half of last year, also somewhat especially relative to peers at odds with their comments about the strong spring selling season. Now, is the main driver of that the shifting of the closing out of these high-volume communities? And if so, I heard a couple of different things about the replacements for those, that they will be coming on in 2Q which would imply that you could see some reacceleration in the absorption of order growth rate. But then I also heard that they may not have the same absorption pace. So how should we think about that? Is this just a temporary dip in the order rate do you expect with the strong demand reacceleration later on this year?

Yeah. Nishu, there's a lot in there in the question but I think the best guidance that we can provide for you is that our absorption rate growth will be driven by our community count growth. We provided guidance that we'll be in the 5% to 10% range. We're executing against that. We ended the quarter at the higher end of that range given the slower closeout. So that's the direction that I would point you. Couple that with the things that Bob shared with you about some very high volume communities that we had in the first quarter of 2016 and as those replacements are just getting opened, I think that also contributed to the quarter-over-quarter comparison discrepancy that you're referring to.

Got it. Got it. And also thinking about the margins, the strong demand that we've seen so far, this certainly surprised a lot of people as you mentioned despite the increase in interest rates. Is it translating to pricing power? From some of your peers we've heard comments more along the lines of we need to max out absorptions and that's how the demand will be captured. Given that your absorptions are coming in more flattish, I know you mentioned some of the factors, but just broadly is this environment conducive for pricing power especially since rates have dipped back down again though?

I think that is going to be market-specific. Certainly, where you've got strong demand you have the opportunity to work on price. I think we're trying to offset cost increases. But you've got a different, I think, dynamic at different price points, and so were you at the lower price points where you're seeing more volume you might have more opportunity for price rather than at the higher price points.

And, Nishu, to your question about pace versus price, I would tell you that's something that we pay a lot of attention to as our stated goal is we're driving the highest and best returns that we possibly can on a community-by-community basis. Sometimes that's the volume lever, sometimes just a price lever and we work to optimize that in every single community.

And next we'll move to Stephen Kim with Evercore ISI.

Thanks very much. I just wanted to follow-up, I guess, first with the comment about lumber prices. If you could just give us a sense for kind of a rule of thumb what we should be thinking about in terms of the leverage to your margins if we see, let's say, a 10% increase in lumber cost year-over-year. On balance, I usually think of lumber being somewhere in the vicinity of high single digits to very low double digits of revenues. But I was curious as to what you would give us as a guidance rubric for titrating the effect of lumber prices to your margins.

I think where you are, Stephen, in terms of as a percentage of lumber cost as a percentage of revenue, high single digits for the lumber package in total is probably not that far off but I think you also then have to split it though between your sticks versus your OSB because I'm pretty sure when you get into the high single digits you're probably including OSB as part of that package.

Yeah, fair. Okay. Great. And then obviously a lot of things we could talk about this quarter and you talk about the environment being strong, and certainly we see that and there's a degree to which a rising tide benefits everybody. At the same time though, your commentary about your slower sell out of communities, I couldn't help but noticing that that was similar language to what you had said in the fourth quarter. And so I guess the essence of my question is given the fact that there has been a fair amount of change at the company from a management perspective and a board level, it wouldn't surprise me if you all were in the process of sort of overhauling some of your processes, the way you analyze things and so forth. And I'm curious as to whether or not any of this in your estimation is manifesting itself at the grassroots level in your sales data and whether we should view this as sort of a transition period because I don't think you've articulated in that way unless I've missed it. But I was curious as to whether you think any of that is at work in what we're seeing here and it's sort of a temporary issue in nature.

No, Stephen, I don't think that's the case at all. We're just turning over a lot of communities. We turn over, on average, 250 to 275 communities a year. So with the churn of those closing out and the new ones opening up, sometimes you've got a few straggler sign-ups that may linger a quarter longer than we would've originally anticipated.

And next we'll move to Mike Dahl with Barclays.

Hi. Thanks for taking my questions. Ryan, just a follow-up on that last question and comment. In terms of the slower than expected closeouts, is there any geographic concentration or price point concentration that you can speak to on those delayed closeouts and is there a specific action plan in place for those communities?

Mike, we manage all of that at our local level and our local operations teams are incredibly skilled at managing the closeout of those communities and making those decisions. We're not managing to an exact community count number; that's just simply not the way that we run the business. I mentioned they may sign-up or two, may hang on an extra quarter. And not to get too far into the weeds, but the convention that we use to count whether or not a community is open is if it has activity in the quarter. So you could've had something, for example, a closeout in January and it's done but it would've been reported as an active community in the quarter. So it's not anything that we're concerned about frankly.

Okay. I think that point is helpful because convention is different across builders. So thanks for that clarification. And then shifting to some of the comments around active adult and the community opening in Nashville. So I gather this is one of the newer vintages of the Del Webb community which looks quite a bit different than the legacy ones. Can you speak to of what you think has been the kind of the attributes that have accreted for a successful launch so far and whether or not you have similar community openings scheduled for the balance of the year on the Del Webb side and where those will be?

Yeah. Mike, that's a great question. I would tell you that the attractive attributes of this particular Del Webb community are the same as the prior Del Webb communities that have very attractive lifestyle components that we know Del Webb buyers enjoy. And as much as we're selling a house, we're selling a lifestyle and that's really what that brand has been centered around for a long, long time. This particular community is one of our newer vintage communities of course that is a little smaller in nature, that doesn't have as much capital investment, they're a little faster turning. They also happen to be a little closer in to the city center, the restaurants, and some of the other infrastructure that those active adult buyers are looking for. So we're very optimistic and encouraged by the early demand that we've seen. It is still early. As I mentioned in my prepared remarks, we haven't formally grand-opened yet but early returns are positive.

And next we'll move to Stephen East with Wells Fargo.

This is Paul Przybylski actually on for Stephen. First, I guess a question with your strategy for pricing. You mentioned earlier that we had the specter of rates moving higher this year. With respect to entry level, do you keep those prices flat or raise them with the risk of shrinking that buyer pool as we move through the year?

Yeah. Paul, it is a community-by-community decision that we make with respect to pace and price and we under-write returns as I think we've shared with many of the folks often, and both elements are equally important. And so it's tough to paint it with a broad brush and tell you that one is more important than the other and that we're using one more often than the other.

Okay. And then how was the order cadence in the quarter and do you think you're continuing to see any pull forward and demand from the rate increase last year?

Yeah. Paul, as I mentioned on maybe one of the earlier questions, as we looked at the order rate that came in through the first quarter of the year, we're very pleased with it. It was very much in line with our expectations and the way that we had kind of built our business plan for the year

Okay. Thank you.

And next we move to Alan Ratner with Zelman & Associates. Alan Ratner - Zelman & Associates: Hey, guys. Good morning. Thanks for taking my questions and nice job on the SG&A leverage. Ryan, my first question, I wanted to dig into active adult as well. You sounded pretty bullish on the future of active adult and, obviously, with the size of the buyer pool equaling the millennials probably is a little bit under-focused on by investors. But at the same time, we have seen several builders either start a new active adult line or make an effort or commentary of expanding into active adult, and you guys are just kind of switching your focus there and away from the kind of the cruise liner Del Webb communities as you've called them to more smaller product, maybe with amenities but not as highly amenitized as the legacy communities. So as you look at the landscape today in active adult, and I have a follow-up just on the trends you're seeing from a demand perspective, but how do you view Del Webb today from a competitive landscape versus some of these other builders that have either recently entered active adult or are looking to expand their exposure there?

Yeah, Alan. Thanks for the question. We are bullish on the Del Webb brand and have been for a long time. It's a big part of our company, it's a big part of what makes us unique and different, and that's a story that we've been telling for a long time. As far as these newer vintage communities, they're still quite large. They're still in the neighborhood of 500 to 1,000 lots, just substantially smaller than the 7,500-lot communities with multiple golf courses that we did under the kind of the cruise liner Del Webb days. But still quite large communities that will provide several years of strong absorptions and create a nice sense of community within those individual locations. When you look at the competitive landscape, we're not surprised at all that there are a lot of competitors that are seeing this as a big opportunity. There's 75 million buyers in that demographic. They're the wealthiest generation. They've arguably got the most liquid balance sheets, high homeowner ship rates, and they've got flexibility to kind of go and do the things that they want to do as they move into their retirement ages. The other piece that I think is important to think about is demographics here matter. And one of the things that we think we have working in our favor, as the millennials are beginning to reach age, as we see the peak of the millennial generation hitting the age 30 in the year 2020, they're starting to move on and buy their own homes as is demonstrated in some of the first time buyer numbers that are being reported. Well, the millennials are the children of the boomers and that's also freeing up the boomers to do some of the things that maybe they have put off doing as they've tried to get their millennial kids out of the nest. So we like the competitive position we have, we like the capability that we've spent several decades building inside of our organization, and we think we're positioned as well as anybody to compete in that segment. Alan Ratner - Zelman & Associates: That's helpful, Ryan. Thank you.

One other thing, Alan, that I'd maybe just add, that I failed to mention, is we're doing a significant amount or we're expanding our thinking to include something beyond just Del Webb as it relates to that boomer demographic. There is a significant piece of that boomer demographic that's not interested in age-restricted but they are interested in downsizing and living a different type of lifestyle as they retire. Alan Ratner - Zelman & Associates: Got it. I appreciate that, Ryan. And then just on the demand side from these buyers. You mention the flexibility and, of course, as the millennials move out from their basements that should free them up to move on to the next stages of their lives. But as we look at existing inventories where all these buyers have a home to sell, inventories continue to drop. They're among the lowest levels on record which would suggest, at least for the time being, they haven't moved forward with actually listing their homes on the market for sale. Now, understanding that most of these buyers are probably buying to-be-built homes from you, so maybe they wait to actually list their homes, can you give us any data maybe on traffic trends, or just anecdotal if you have that, just that would suggest that we should expect to start to see those wheels get set in motion going forward or is this, at this point, more of a kind of a view of what could happen or should happen based on the demographics? Thank you.

Yeah, Alan. It's a good question. I think the best thing that I can probably provide for you is just a comment on what we saw overall within the quarter. We were very pleased with the traffic, very pleased with buyer interest and buyer demand and that really applied across all consumer groups that we serve.

And next we'll move to Jack Micenko with SIG Investment.

Hey. Good morning. On slide six in the presentation, you talked about shortening the duration of your projects, I think, two and a half years. Obviously the Del Webbs, there's some longer tail communities in there and that sort of thing. Wondering if you could give us some context around where that's gone to and from, say I don't know, two or three years ago and how recent of a shift on that timeline is that? Is that something that's been in the works for some time or is that something more tied to, Ryan, your leadership? Just give us a sense of how that's kind of migrated over time?

Yeah, Jack. This is a big tanker and it takes a little while for actions to take place. This really goes back to 2011 for all intents and purposes. So the value creation initiatives that got started then were focused on less land, not necessarily the three years owned, three years option that Ryan's outlined, that we're moving towards. But if you look over the last four or five years, the profile of the land that we've been buying has been much shorter in duration. We mentioned that we're two and a half years in the most recent quarter. It's not much different than that over the last couple of years before. So our owned lot position down below five years today was up in excess of eight years several years ago, and I think you'll continue to see that move down as we continue to cycle through these shorter positions and work off some of those longer positions that you talked about. That takes a little while but we're very pleased actually with the tenure of the land that we've been buying now over the last few years and expect to be able to do more of that over time. We're looking at options even in the Del Webb brand. We're trying to be capital-efficient. So I think we've talked about this, but there's a longer-dated community that we've gotten involved in in South Carolina. We think we'll be there for 10 years but we're buying the land on time, and so we think we could be really capital-efficient with that land as well.

Okay. And then, Bob, since we have you, so the buyback cadence was lighter this quarter. Obviously, cash flows in your business change from quarter-to quarter. I know you acknowledge that – I guess the question here, the $1 billion this year is that still committed to and would that still get in the model?

Yeah. Certainly. I mean, with the usual caveat of subject to market conditions, we are planning to buy back $1 billion of stock this year. Yes.

All right. Thank you.

And next we'll move to Joel Locker with FBN Securities.

Thanks, guys. Just digging down into SG&A a little bit. What was the commission for the first quarter I guess first of all?

3.5%.

Roughly 3.5%.

Sorry, I thought you were asking in dollars. I don't know that off the top of my head.

So if you take the $55 million and the $15 million charge, is it safe to say your base rate for SG&A is $166 million and growing? Is that a good way to look at it from our perspective?

I think what Ryan talked about earlier, I think, is the right way to think about this. Our SG&A spend is truly variable on the sales commissions, but it is also variable based on new community openings. We've got start-up expenses. And so what we've tried to give you is a target run rate for the year. We had given you 12.5% coming into the year. We think we can do a little bit better than that, and so we've widened that out to 12% to 12.5%.

12.5%. And was there anything else besides the $15 million that made it lighter? Like, if you don't actually do the math and you have $166 million outside of the charge and the commissions, was there anything else that you're maybe trying or that you see coming or increases you see in the second quarter based on new community openings that haven't been expensed yet?

Yeah, and that's what I alluded to in one of the earlier questions and Bob just kind of touched on it, Joel. We have 250 new communities that are opening throughout the year. We expense a significant amount of the new opening costs or the costs associated with those new openings in the quarter that those communities open. So in addition to the other variable components as new communities come online, that's the other variable number that will be added to our SG&A run rate on a go forward basis.

All right. Thanks a lot, guys.

And next we'll move on to John Lovallo with Bank of America. Peter Thomas Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Hey, guys. It's actually Pete Galbo on for John. Thanks for taking the questions.

Hey, Pete.

Hey, Pete.

Good morning. Peter Thomas Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Just a first one on SG&A. Bob, the total dollar amount being lower year-over-year and given some of the cost takeout that you mentioned from 3Q, can you just kind of dimension some of those cost takeouts for us that you kind of saw in the quarter and how to think about that on a run rate for the rest of the year?

I think it was, really, it's people. And I don't mean to be insensitive, but we took a pretty big swing at people and I think we've talked about this in the past. It was largely focused on the corporate office. The reason being, and I think Ryan has used this analogy and I think it's perfect, as we were going through the initiatives of value creation over time, we were trying to fix the cars that was on the road or a building that we're ready to build so we put scaffolding up around it. We essentially, as most of those skill sets and processes and data analytics has been moved out to the field operations, thought that we had an opportunity to take down that scaffolding. So it's the people that we've taken out of the organization that really influenced that. Peter Thomas Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Got it. No, that's helpful. And I know there's been a lot of questions around active adult here, and I think Ryan maybe touched on this briefly. But within that 17% absorption growth that you saw within active adult, is there a way to break out what percentage or factor that was the Del Webb portion versus the age-targeted but non-age-restricted piece that you guys have mentioned in the past?

The majority of it was Del Webb. I don't have a specific percentage, but I'd point you to the majority of it being Del Webb. We are making new investments that are going to this non-Del Webb age-targeted but those are openings that will come in future periods. Peter Thomas Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Got it. Okay. Thanks, guys.

Thanks, Pete.

And next we'll move on to Buck Horne with Raymond James. Buck Horne - Raymond James & Associates, Inc.: Hey. Thanks. Good morning. Going back to the comment about the repurchase program and potential market conditions. Could you elaborate on what may be some potential triggers or other thresholds that you would look at in terms of something that may reduce the targeted spend of $1 billion dollars this year?

Hey, Buck, it's Ryan. I think the biggest message that I'd want you to hear is that we're committed to the $1 billion buyback. Bob mentioned in his prepared script that we're taking into consideration the cash needs of the business. We ended the first quarter with $450-ish million in cash, so we really like our cash position. As we look at the balance of the year, we certainly anticipate ramping up that spend amount as we move into the second quarter. We probably don't have enough time on this call to list all of the potential things that could go wrong with the world economy that would influence that. I think the best bet is to go with the plan that we're buying $1 billion back. Buck Horne - Raymond James & Associates, Inc.: Okay. And going to another just kind of a operating strategy thing. With demand strengthening and the spring selling season off to a good start, would it be a thought to strategically increase the production of unsold spec units even further to meet some of that demand? Is that something you would consider, and obviously that comes with balancing some of the risks of spec production? Just looking for some thoughts on that subject. And also if you've got the cancellation rate in the quarter, that'd be great.

So, Buck, I'll speak to the spec start question first. About 18 months or so ago we did introduce an incremental additional amount of specs into our production pipeline. We like where we're running right now. As far as would we introduce more, we would introduce more in an effort to balance out our production pipeline to ensure that we can maintain a consistent and predictable cadence of production for our trades. We want to give nice stability and visibility to our trade partners so that we can keep them on our job site. We think that's one of the, probably, best and strongest tools that we have to maintain a predictable production pipeline. So our strategy is different than some of our other competitors that run at a higher spec rate. We believe that given our strategy and our focus on driving better returns on invested capital, the rate that we're running at is about right. And then to your question on the cancellation rate in the quarter, it was just over 12%. Buck Horne - Raymond James & Associates, Inc.: Thanks, guys. Appreciate it.

Thanks, Buck.

And we'll move on to Jay McCanless with Wedbush.

Hey. Good morning, everyone. Congratulations on the new Del Webb community here. It's a good looking community and I know it's been a long time coming for you guys. The first question I had with the community count and the closeouts maybe going slower than what you'd anticipated, should we think about gross margins in 2Q being at the lower end? I think you said 30 to 60-basis point improvement sequentially. Should we trim or think more about it being closer to 30 than 60?

It's hard to answer that question with specificity. A lot of it's going to depend on when and where closings come in. We offer the range without a bias towards higher or lower within it.

Okay. The second question I had, and I apologize if I missed this, did you all give any guidance for SG&A and where it should trend for 2Q?

Jay, we did not give it specific to Q2. What we have given is a full year range of 12% to 12.5% which is a 50-basis point improvement over the prior guidance that we had given of 12.5%. So I think as you're modeling it, you're building your models, look to our community count guidance that I'm sure you'll use to model your volume and that'll help give you a kind of a guidance of where overheads will run. As Bob mentioned and some of the other commentary that we provided, we're incredibly pleased with the movement that we've made on SG&A. We do anticipate it increasing slightly as we move through the year on the non-variable components. As we open up our new communities, there is spend that's associated with getting those new communities open.

Great. Thanks for taking my questions.

Thanks, Jay.

And we'll move on to Ken Zener with Keybanc.

Good morning, gentlemen.

Hey, Ken.

Ken.

So I have a kind of a simple question. There was obviously a lot of enthusiasm communicated by builders, and today people might've thought your orders fell short. We look at it a little differently which is that your seasonal pace rose 40% which is actually your long-term average over 18 years, so I think you're doing well there. Is there anything – if I just flip it around, your community count growth, it was a lot, if it impacted the comments you made. Is there any reason to assume seasonality is not going to persist into the next quarter? Is there something dramatically different that we saw about March trends?

Ken, this is Ryan, and I'd answer it as a simple no. The seasonal trends that played out in the first quarter were very much in line with our expectations.

Excellent. And then my next question. Since you brought up spec, do you guys comment on or disclose your total units under construction which would be, obviously, your backlog, true spec, and then model homes so we could get a sense of the conversion of those total units in your closings?

Yeah. We've got 8,206 units under construction at March 31.

And that's backlog...?

That's all inclusive.

All-in.

And what was that last year and in 4Q please? Thank you.

It's up 4% over last year. 4Q? Hang on a sec.

There was 7,486 at December 31.

There you go.

Thank you.

And that will be all the time we have for questions. I would like to turn the call back over to today's speakers for any additional or closing remarks.

Great. Thank you, Rochelle. Thank you for your time on today's call. We will be available for calls throughout today. And we'll look forward to speaking with you in Q2. Thanks.

And that will conclude today's call. Thank you for your participation.