Good day, and welcome to the PulteGroup's Quarter 2, 2017 Quarterly Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jim Zeumer. Please go ahead, sir.

Great. Thank you, Savannah, and good morning. I'm pleased to welcome all participants to PulteGroup's second quarter earnings call. Joining me today are Ryan Marshall, President and CEO; Bob O'Shaughnessy, Executive Vice President and CFO; and Jim Ossowski, Senior Vice President, 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 also post an audio replay of today's call to our website a little later today. PulteGroup's second quarter earnings were impacted by several significant items, which are noted in our earnings release. As part of the call, we will be discussing our reported results, as well as certain aspects of our business as adjusted to exclude the impact of these significant items. A reconciliation of these adjusted results to our reported results is included in this morning's release and within the webcast slides accompanying this call. We encourage you to review these tables to assist in your analysis of our Q2 results. 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. Now let me turn the call over to Ryan Marshall. Ryan?

Thanks, Jim, and good morning to everyone on the call. I'm excited to speak with you today about PulteGroup's second quarter operating and financial results. Building on the strength and momentum of Q1, the company's results show a continuation of strong demand and even a slight acceleration in the business. Starting right at the top, our 12% growth in orders reflects both a strong demand environment and the increased investment we've made in the business. Given our emphasis on building to order, starting limited specs and our expanding share among higher price points, being able to accelerate from a year-over-year order increase of 8% in Q1 to 12% in Q2 surely reflects the strength of the underlying business. We also reported 12% growth in second quarter revenues, which supported an even more significant 27% increase in adjusting earnings of $0.47 per share. The leverage in earnings per share came in the form of an 80 basis point improvement in operating margin, coupled with a 10% reduction in share count, resulting from our ongoing repurchase program. However, it can't just be about driving growth for growth sake. We are seeking to grow intelligently, which I believe we're demonstrating as evidenced by the 140 basis point increase in ROE to 12.8% that we realized for the trailing 12 months. And with the backlog at $4.5 billion, our highest in a decade I might add, we are extremely well positioned to continue delivering strong operating and financial performance going forward. Our Q2 results clearly demonstrate the great progress we're making to grow our business, while delivering value to our shareholders. As pleased as I am with our growth and the strength of our quarterly results, I actually do want to address the earnings charge that we recorded in Q2 relating to our decision…

Thanks, Ryan, and good morning, everyone. Our second quarter results demonstrate the continued growth and overall strong financial performance of our business. As reported in this morning's release and mentioned by Jim, our reported Q2 results were impacted by several significant items that were recorded in the period. We spoke to these items in the release and provided a non-GAAP reconciliation table with the financials. But I think it'll be helpful for me to quickly walk through the items and highlight which income statement lines they impact. First, our decision to dispose of certain non-core land assets resulted in a charge of approximately $121 million, which breaks down as follows; $31.5 million of land impairment that is reflected in home sale cost of revenues, $81 million of net realizable value adjustments that are reflected in landfill cost of revenues, and $8 million of impairments of land held in a joint venture that is reflected in other expense, net. Second, we recorded a $12.1 million charge to home sale cost of revenues for warranty work associated with a construction claim at a closed community in Florida. As costs associated with this claim had previously been recorded in our construction defect reserves, we reversed $19.8 million of reserves that were directly attributable to this claim, including the development of incurred, but not reported claim activity. The benefit of this reversal is reflected as a reduction of SG&A. And finally, we recorded a net benefit of $23.8 million in our income tax expense line, resulting primarily from tax law changes and the favorable resolution of certain tax matters. Excluding this benefit, the company's effective tax rate would have been approximately 37%. I'll note the impact of these items as appropriate over the remainder of my comments. Let me now begin the review of…

Thanks, Bob. With the low interest rate environment helping first-time buyer demand, along with supportive economic and demographic trends, we're positive on housing demand over the near and mid-term. We fully appreciate, however, that the economic and housing recoveries are getting long by historic standards, so we remain disciplined in how and where we're investing our capital and how we run our operations day to day. As sign-ups in the quarter and for the first half of 2017 demonstrate, we continue to operate within favorable demand conditions. At a high level, the market conditions we experienced during the quarter were as follows. Demand in our Northeast, Southeast and Florida markets was strong throughout the quarter, although as I mentioned, higher price points in some markets are increasingly competitive. Still, we've been very pleased with the traffic and conversion rates in these areas in the first half of the year. We continue to see very good buyer demand in our Midwest and Texas markets. Texas, in particular, is doing well and this includes Houston, which continues to deliver consistent traffic in the face of volatile conditions for the oil industry. And out West, demand conditions are still very strong across essentially all of the geographies, with notable strength in Nevada, Northern California and Arizona. Nevada's results include the opening of Reverence, a community of almost 900 home sites in the Summerlin master plan, which experienced exceptional demand when it grand opened in early June. Looking into the third quarter, demand in the first few weeks of July has demonstrated nominal seasonal patterns consistent with the positive environment we operated in the first and second quarters of 2017. We've had a great start to the year, and I want to thank our employees who've made that happen. They've done a superb job in delivering both an exceptional experience to our homebuyers and excellent financial results for our shareholders. Now, let me turn the call back to Jim Zeumer. Jim?

Great. Thank you, Ryan. We will now open the call for questions, so that we can speak to as many participants as possible during the remaining time of this call. We ask that you limit yourself to one question and one follow-up. Savannah, if you'll explain the process, we'll get started.

Thank you. And we will take our first question from Nishu Sood from Deutsche Bank. Please go ahead.

Thank you. Thanks. So, yeah, first I just wanted to ask about the gross margins. They're pretty close to the range in the second quarter, but you mentioned that the trends in the back half might be a little bit lower than you'd previously expected. Just wondering if you could just break down the drivers for us, and specifically I was looking for where – which division has the compression or which brand has the compression come in? And you mentioned a little bit of the higher price points, some pricing pressures in the second quarter, and maybe if you can tie that and how much that's affecting the second half as well, please.

Yeah, Nishu, this is Ryan. Thanks for the question. We're really pleased with how the business is performing. We like the current operating environment that we're in. As I think Bob noted, we're seeing nice margin improvement as we move throughout the year. We saw sequential improvement moving from Q1 to Q2, and we anticipate that to continue into the back half of the year. So, I think that's representative and indicative of the favorable market dynamics that we're currently operating in. As it relates to some of the margin compression that we alluded to, we saw an incremental amount of discounting as we moved from Q1 to Q2, somewhere in the order of about 20 basis points. So, it was enough to move the needle a bit. But by no means what I overreact to it and it was – as far as the brands go, it was in the Pulte brands, which is typically where our higher price points, that's the brand that we house our higher price points in. It was a few specific communities in a couple of markets within the Southeast part of the United States. So, again, I just reiterate how positive we are on the market and the strength that we're seeing with the overall margin profile of the business.

Got it. Got it. Thank you. And on absorptions, if your community count had, I think, come in closer to what the expectations had been and some of those slower sell-out communities had sold out as scheduled, the absorptions would have looked a little bit better than expected, I believe. And so looking forward, as some of these committees begin to sell out, does that imply maybe the potential for some absorption bump on an overall basis? Or how should we be thinking about that?

Yeah, Nishu, this is Ryan again. Certainly the numbers that you've got in the numerator and the denominator, when it comes to community absorptions, it can really move the numbers. We have had some slower closeouts of some communities that we thought would have been gone by now. And we're working to move through those. And as Bob indicated, our expectation is that they'll be gone by the end of the year, and our community count guide will be in that 5% to 10% range year-over-year that we'd previously provided. Just to give you an idea of how sensitive it can be, when I went in and I looked at the detail of what was going on with our committee counts, we had, as an example, four communities that had a grand total of about eight sign-ups. If you took those four communities out of the numerator and the denominator, our per community absorptions would have essentially been flat. Again, I'd talk about the strength of the overall business, the 12% order growth that we saw in the second quarter was really strong. We're very pleased with that. And as Bob noted in his prepared remarks, at overall community absorptions of 2.7 per community, we like how the business is running.

Okay. Thanks.

And we will take our next question from John Lovallo from Bank of America.

Hey, guys. Thank you for taking my questions. First question, I guess, would be on the SG&A performance in the quarter, which was much better than what we were expecting. Can you maybe help us think about some of the major kind of drivers in the quarter? Was there anything quirky in the adjusted SG&A number of $236 million? And then, I would have thought that maybe there could have been a little bit more upside in the outlook for SG&A. What's driving kind of the increase in the back half? Is it just community count? Or is there anything else going on?

Yeah, John, this is Ryan. I'll give you just a couple of pieces and then I'll let Bob give you some incremental color on some of the details. But as far as what was in the adjusted numbers, no, the adjusted numbers, there's nothing quirky or unusual. It's reflective of the changes that we made really starting in the back half of last year, and that's continued to be a focus for our entire organization to run an efficient shop. As we move through the back half of the year, the increase will be completely aligned with the new opening of some of our new stores. We talked about before, we open about 250 new home – new communities a year, and the incremental spend will really be associated with the grand opening type activities that have slightly elevated SG&A, one-time expenses that are mashed up with those new communities. But other than that, we continue to be on the same trend line and the same level of efficiency that we've been on for the previous three quarters, and that's reflective of the full year guidance that we've provided. We had been operating in a 12% to 12.5% target. We're quite confident in the progress that we're making, and so we've improved and updated what that overall guide is for the full year, to that 11.7% to 12% range. So, I'll ask – maybe Bob can give you maybe just a tad bit more color on some of the details on the SG&A number.

No, I wouldn't add anything. The only thing, obviously, since we've got commissions there, you've got more seasonal influence on the SG&A, so we'll have more – as we close more in the back half of the year, you'll have more commission expense and that's reflected on top of, as Ryan pointed out, the community activity.

Okay. Thanks. And then, Ryan, in terms of your comments, making sure the business is addressing kind of all segments, I would assume that it's been perhaps moving a little bit more into entry level. Is that correct? And if so, does that mean kind of investing more in Centex? Or is there another strategy that you guys are thinking about?

Yeah. John, certainly, Centex is a big component of our first-time buyer business, but we've talked for the last several years about really looking at the first-time buyer could include our millennials, which in some cases we market to under our Pulte brand. So, some combination of Centex and Pulte targeted toward the first-time buyer and the entry-level segment. We are maintaining and sticking true to our underwriting criteria of investing, making investment decisions based on where we can drive the best return on invested capital for our shareholder, while balancing the overall risk profile that we're looking for. As we entered into the recovery two or three years ago, as I commented in my prepared remarks, that strategy really led us to more investment in the move-up buyer and, look, I think today's results are reflective of how beneficial that's been to our overall business profile, but as we move forward and today as the market continues to recovery, we're seeing opportunities to serve all buyer groups. And not only is buyer behavior reflective of that, the returns that we can underwrite to are supportive of that as well.

Okay. Thanks, guys.

And we will take our next question from Michael Rehaut from JPMorgan.

Thanks. Good morning, everyone.

Hi.

First question, going back to the SG&A for a moment, continued progress there, and I think second time you've lowered the range expected for the year. And I believe, correct me if I'm wrong, but it's on a – your revenue expectations, broadly speaking, have remained pretty consistent. So, I was hoping to get a little help on just what's driving that incremental efficiency. Are there just better-than-expected cost takeouts? Or on a community level, are things a little more efficient? And where would you see over the next two or three years that number arriving at?

Hey, Mike, it's Ryan. Thanks for the question. So, it's really in three main categories. We made some changes to the level of personnel that we are running the operation with in the back half of last year. We've been able to then change some of our processes that have allowed us to run a very efficient business with that level of personnel. So, not a surprise, the majority of our spend is in our people. So, a lot of the savings has come from that. We've also been able to maintain some nice efficiency at the subdivision level with the amount of money that we spend to run our individual subdivisions. We had a lot of cost-saving measures and process changes directed at that. And finally, I would tell you, and really give kudos to our marketing team. Our marketing team has done some really nice things with our digital marketing efforts to drive efficiency of spend there and improve our conversion rate when folks actually cross the threshold of our stores. We're seeing some nice improvements in overall conversion rates, which has given us great efficiency in the marketing dollars. So, those are the three probably big categories that I'd highlight.

Mike, the only thing I'd add is in terms of the improvement versus where we had set expectations, we had put these plans in place, but we candidly weren't sure exactly how quickly they would take hold. And to Ryan's point, we've made outstanding progress. And so we've been able to tighten the range. In terms of going forward, we'll give some color on that when we provide guidance for next year.

That's helpful. Thanks, Bob. And I guess just then going back to the gross margin for a moment, I did find it encouraging that you kind of said it was more limited to a few communities and a couple of markets in the Southeast at higher price points. So, from a geographic standpoint, are we to just interpret that? And I'd be curious if you're able to give us color on which markets those were in the Southeast. But as a result, you're saying the broad swath of your remaining geography incentives and pricing patterns were essentially more stable, is that fair to say?

Yeah, Mike. I think that's an appropriate characterization. The Northeast is an area that remains competitive, where our business is performing essentially in line with our expectations, but it is competitive. And I would characterize the balance of the country as strong. I highlighted the Texas markets. I highlighted the Midwest. I highlighted the West. Those are all some places where we're seeing nice strength.

And just lastly, real quick, sales pace by customer segment, I think it's something you've given out in the past, just the change for the quarter. Thank you.

Yeah. So, we were – absorptions were 3.4 per month at the first-time level, 2.1 for the move-up and 3.5, so on a comparative basis, down 6% on the first time, up 1% and up 1% on the move-up and active adult, Mike.

Great. Thanks so much.

And we will take our next question from Mike Dahl from Barclays.

Hi. Thanks for taking my questions. As I know that specs aren't as much of a part of your strategy as for some others, but I was hoping you could give us some color on just how the spec margins looked in this quarter versus dirt? And how does that compare to the first quarter and maybe late 2016?

Yeah. We typically haven't given that level of detail. We can try and get you some stuff offline.

Got it. I guess what I'm trying to get at is another way of attacking the pricing angle, and maybe back to the prior comment on the balance of the markets being strong. Would you characterize it as kind of price-cost relationship, ex these couple of markets that you've talked about as being more challenged? Has that relationship improved relative to what you were seeing in the first quarter? Or is it about the same as far as what you're seeing?

I think – I apologize, Mike, I might be answering the wrong question here. But our view forward with sequential margin improvement would tell you, I think, that the price-to-cost profile is pretty favorable right now. And obviously, the closings that we have in Q3 and Q4 are going to be the sales that we reported in Q1 and Q2.

And we will take our next question from Robert Wetenhall from RBC Capital Markets.

Hey, guys, good morning. You're crushing in on the SG&A, it's really nice to see.

Hey, Bob. How are you this morning?

Pretty good, sir. Nice to talk with you.

Likewise.

Just wanted to ask you, it sounds like a lot of operational progress, good visibility, Bob's tightening up the range, which is great to see. Nobody's talking about your land program of getting down to kind of, like, six years of supply split between options and owned lots. I was hoping you'd just spend a minute and go big picture a little bit and talk about the land strategy at this point in the cycle. And how you're adapting the strategy to drive return on invested capital? And I was also hoping you could give a little bit of view on how your land purchasing is evolving versus some of the long-dated assets you have on the balance sheet. How should we be thinking about this?

Bob, did I get three questions in one there?

I was trying to beat Mike Rehaut, no.

Got it. All right. Well, let me see if I can address all of those. So, we are very focused on improving the efficiency of our land portfolio, and it's something that I outlined in some of my very first commentary once I came into the role in September of last year. We have put the three years owned and three years optioned target out there, it's something that I think we're continuing to make progress against as indicated by the current land inventory that we have right now. One of the big things that we did is, we took the comprehensive look at our entire land portfolio, and that is part of what drove the actions that we took in the second quarter with the book of assets that we intend to move through. So, that certainly was a big step in the right direction to get our land portfolio moving the right way. The second piece is, what are we underwriting at today? And, Bob, I would suggest and share with you that over the last three or four years under our underwriting criteria, the average lot size of communities that we've been buying has been in the 120 lot per transaction range. When we're running at about 35 or so absorptions per community per year, that's right about that three-year average. And you mix in the options and some of those kind of things, and we're very much moving in the path where we want to go. Now the difference is essentially the long-dated or the bigger Del Webb communities that we have that are performing very well, but as we've talked about quite a bit in the past, there's a little bit more land there. It's going to take some time. But we like where we're going, we're at 4.4 today versus eight years, not too long ago. So, pretty dramatic improvement in a pretty short period of time, and I like the trajectory of where we're going.

That's helpful. And just for my second question, Bob, could you maybe talk about – in concert with the land program in place, you're finishing out your capital spending program on share repurchase, for $1.5 billion, this $300 million in buyback is pretty solid this quarter. How should we be thinking, in not just this year but for 2018, about capital allocation with any free cash flow? Thanks, and good luck.

Thanks, Bob. Yeah. No change on the capital allocation front, candidly. We've highlighted that we're targeting $1 billion. We've got $600 million left to get there. We've got that authorization in place. We always think about market conditions when we look at that, but obviously we bought a pretty big slug of stock in this second quarter, reflective of the cash position and the strength of the balance sheet coming into it. So, really no change. In terms of forward capital allocation, I think the process that we laid out back in, gosh, December of 2014, remains today the way we look at it. So, as long as we're constructive on the market, I know you've heard me say this before, we're going to invest in the business first and foremost. We're then going to pay our dividend, then we would look to buy back stock with any excess capital, all subject to that 30% to 40% debt to cap. We're a little bit outside that range today. Again, our expectation is that earnings will pull us back inside of that 40% target. So, in that mindset, we'll look at 2018 and beyond. We plan for multiple years, and we'll look at what the business generates, what we see in terms of opportunities, and you heard Ryan talk about the opportunities we're seeing across demographic and geographic markets. So, we're building our plans now. And in terms of capital, it means we're refreshing that which we already created. And we'll give more color on what we think we'll do in 2018 as we give our guidance with our fourth quarter earnings release.

And we will take our next question from Stephen Kim from Evercore ISI.

Thanks very much guys. Really a strong quarter on the SG&A, let me just add my congratulations there. I didn't hear you all mention land spend number, maybe I missed it, but I was wondering could you give us the acquisition and development spend in the quarter.

Yeah, Stephen. So, for the quarter, acquisition was $236 million, development was $373 million, so $609 million in total. That brings the total for the year to just under $500 million for acq and just under $700 million for development.

Yeah. Okay. That's a kind of a tight number which will be consistent with your view. So, okay, thanks for that. I guess, I had a few questions, but let me just go head and just boil it down to one. Recently, there's been some action by one of your larger competitors on the land front in terms of getting in front of an approaching constraint in land development as they see it, maybe some partners on the land development side and the land financing side. And was curious as to your thoughts regarding both the impetus for driving interest in something like that as well as maybe something about that particular kind of structure as you've looked at that from afar. And then secondly, another one of your competitors has been pretty active in terms of making investments on the technology front. And so, I was wondering if you could sort of address those two areas of strategic thinking and positioning as you look ahead over the next couple of years. If you can maybe address just your – how you size up the landscape and what your response to that is?

Stephen, good morning. This is Ryan. Let me take maybe the first question for – the first question you asked about a couple of the things on the land front that one of our competitors is doing. I certainly don't have the inside information or baseball. I've read a lot of the things that are out there about the transaction. I certainly think it's interesting. Probably tough for me to comment on exactly what their strategy is and what they're trying to accomplish on it. Land is certainly a challenge that all builders face, and that is essentially the number one raw material that we need to continue to run our business. And so we are, like all of our competitors, looking to gain a competitive edge in how we acquire, entitle and develop raw land. So, time will tell, I think, on how that works out. We do put a lot of emphasis on acquisition talent and specifically entitlement talent. And those are things where we can really add value to the overall land pipeline that we're acquiring. So, I think we've got a really talented land team, and I think we're doing as good a job as any of our competitors when it comes to that front. As far as technology goes, Stephen, we're making significant investments in technology. There is a number of things that we're doing with how we run our business, whether it's on the way we market and run our website and the way that we're reaching out to our customers, there are certainly investments in technology that we're making there. We recently launched a updated new website in the last six or so months, and we're happy with how that's performing. We're doing a number of things in the way that we're building our homes, purchasing systems or things that we're looking to enhance our technology on, all the way down to what are the parts, pieces and components of things that we're putting into our home, making them smarter, making them more digital, allowing homeowners to have kind of control of their home, the same way they have control of many other parts of their digital lifestyle. So, it's a big beast to tackle for certain, but it's something that our entire team is focused on, and we're looking to make as many gains as we possibly can.

And we will take our next question from Alan Ratner from Zelman & Associates. Alan Ratner - Zelman & Associates: Hey, guys. Nice quarter. Thanks for taking the questions. So, I appreciate all the detail on the margin and discussing what's going on in the pricing side. Two questions related to that. First on the tick-up in incentives, I'm curious if that was – if you kind of think about the handful of communities, it sounds like those occurred in, was that more in response to actions taken by competitors that you kind of had to match in order to maintain a sales pace? Or is that some actions maybe you're taking proactively to jump-start some activity in maybe some of those underperforming communities? And then the second follow-up to that, just on the cost side, there wasn't a whole lot of conversation about what you're seeing on costs. Curious how that's trending both materials and labor. And then just broadly in your conversations with the trades, how do you feel the labor environment is situated as we head into the back half of the year? We had a good selling season, obviously. Do you think the labor – the trades are really in a good position to get those homes built and delivered before year-end? Thank you.

Yeah, Alan, thanks for the questions. Let me take the incentive question first. Not – I would tell you it's not an overreaction to anything. We're constantly evaluating the competitive environment that we're in and the inventory that we have in our pipeline, and we felt like there was an opportunity to be a bit more competitive. As an aside, you probably noted in some of Bob's comments, our finished inventory came down from prior quarter. And so certainly, I think some of those incremental incentives helped to move through some finished inventory that we had. Nothing that we did – we're looking at – we're always looking at the competitive environment, including our other competitors and you've got to be responsive to that, but not any kind of a significant trend that I would point to. And then on the cost front, we've previously provided guidance that our cost estimates were in the 1.5% to 2% range. We're still operating within that range. Labor is the piece that is getting tighter and – or is running a little hotter, which would arguably push us to the higher end of that 1.5 to 2 points, especially as we move into the back half of the year. As you mentioned, it's been a strong selling season, there's a lot of volume in the system. While we've seen some nice gains in labor, labor is still the piece that remains tight. On the commodity side, concrete and lumber are the two pieces that I would point to. Concrete is not something that we can buy at a national level, it's typically something that we're acquiring at a regional level, at best. And then, on the lumber side, we had the Canadian lumber tariff in the first quarter. And then in current time, there're a number of forest fires in the Canadian province that are creating some logistical challenges with the mills. Our expectation is that'll continue to put some pressure on the back half as well, which will push us to the higher end of that 1.5 to 2 points we've been operating in. Alan Ratner - Zelman & Associates: I appreciate that, Ryan. So, just to be clear then, it sounds like at least part of the revised view on the margins is probably somewhat cost driven as well.

Correct. Alan Ratner - Zelman & Associates: Okay. Perfect. Thanks guys. Good luck.

Thank you.

Thanks.

And we will take our next question from Stephen East from Wells Fargo.

Thank you. Good morning guys. Ryan, you've been in your job roughly a year give or take now and as you look at the company versus maybe your vision, where do you think you stand with? And then as you look out over the next few years, what are your key objectives of where you want to drive the company? I mean, you've talked some about the returns and all that, but I was thinking maybe a notch below it, and what are some of the key drivers you think you need to put in place to move the company to where you want it to go.

Yeah, Stephen. Thanks for the question, and what I would tell you is, it's been a great year. I think we've made tremendous progress. We've got an unbelievable company with a rich history. We've got wonderful employees that, I think, are doing just a marvelous job executing the strategy that we've laid out. Some of the tweaks that I articulated, that I wanted to see us modify and change, I wanted to see us own less land and get to a three and three mix, and I think we're clearly taking some steps in that direction. We made a giant step with the announcement of the changes that we intended to make to our overall land portfolio in moving through some long-dated assets that frankly just didn't fit within our portfolio and weren't aligned with our current strategy. So, harvesting that cash and redeploying it into high returning projects, I think, is going to be a great step for the organization as well. I'd like to see us be a little more balanced in the consumers that we're serving. We're making nice progress in that. I like the traction that we're getting. We've seen a slight uptick in the number of first-time and entry-level projects that we're able to invest in, which are being supported by the returns. So, everything is coming together on that front. I also really like to focus that our team has put on running a more predictable and efficient operation. I think as evidenced by two really solid quarters of home deliveries, I like the way that our construction operation is building and getting homes closed. We've had a tremendous focus on quality and taking care of our customer. And I think that is paying us nice dividends today. It'll pay us huge dividends into the future, as our reputation continues to be enhanced and improved by really taking care of the customer, creating a great customer experience and building a superior quality home, all things that our teams are focused on. So, Stephen, we've had great success. I'm really energized and excited about the trajectory of the company. I like the land deals that we're buying. There's a lot of real positivity happening out there in our field right now, and it's going to be an exciting ride.

All right. That's great. That's very helpful for me. And you look at – you've talked about demand quite a bit and, I guess, as you look at the cycle, it sounds like you all see it lasting several more years. As you look at your split between active adult, entry-level, move-up, you want to get it more balanced. How long do you think it takes you to get to where you're balanced in that? And, I guess, involved with that has a lot to do with entry-level and how quickly you can drive it. Are you seeing most – the biggest chunk of your deals coming at entry-level today? And is mortgage availability – I guess the question is, how do you get entry-level to be a more balanced piece of your business, both the mortgage availability, the deals you're doing, the product that you're putting on the ground and the competition that's out there?

Yeah, Stephen, it's going to be a multi-year journey. We're not going to swing the pendulum to the other side overnight, and nor would we want to. The intent is that we're running a balanced approach every single day and by doing that, it's going to take time to evolve the entire portfolio. So, I think patience here is truly going to be a virtue. More so than trying to hit specific metrics and what percentage of a certain buyer group that we have, we're looking to run the best possible business that we can, drive the best return for our shareholders. And that's the playbook that, I think, we're executing quite effectively.

Okay.

Yeah, Stephen, the only thing I'd add to that is, to your question, are we doing more deals, yeah, we are, actually. And I think if you think of the way we've positioned the way we buy land, we seek return. The increasing velocity that we're seeing out of that buyer group makes some stuff pencil for us that didn't pencil in the past. So, we are certainly seeing some of that activity, and to Ryan's point, it will take a while. Just like it took a while for all that move-up business that we bought back in time to work its way through and it's a big shift to influence the total for the company will take some time. But, yeah, we're seeing activity with that buyer group, because they're more active.

Yeah, got you. Is mortgage availability improving there?

I don't know that it's improving. I think you've got plenty of programs out there with low money down type activity. The QRM rules are what they are. I would argue that it was never that great a hindrance to that buyer group. There have been people who have said – a lot of them just didn't know they could qualify if they went and asked, they'd find out they could. So, I don't know that it's a big mover one way or the other. Because I think there is credit available for them when they're shopping. But price becomes an issue as it always has been for that first-time buyer.

Got you. Thank you.

And we will take our next question from Carl Reichardt from BTIG.

Hi guys. How are you?

Good morning, Carl.

I just have one question. Morning. And you've talked a lot about a mix shift move over time. When we talk about markets, obviously, you've flushed some backlog of lots that have been sitting for a while; you've exited St. Louis recently or will be. Are you thinking, Ryan, in terms of looking at your geographic market locations and beginning to thin some out and reinvest? And I think that's just tied to the comment you made earlier about leveraging local efficiencies and scale better. Would there be a chance that you would shrink your market mix and reinvest more heavily in certain markets to grow share?

Yeah, Carl, what I would tell you, scale matters. And we've talked about that for a long time. And market share matters. And I think you heard a little bit of it in my prepared remarks that we're working with our local operators to shore up and make sure that our market share and our scale foundations are solid in every single market that we operate in. If we find a market where we think we have weakness, we don't have the scale, we don't have the market share that we want, we're putting plans in place to change that. And in the event that we don't see a path forward, we will make the decision to leave the market. And I think you – that was one of the things that we saw in St. Louis. We felt that there was more opportunity to take that capital and reinvest it in other locations, but my preference would be to see us operate in as many markets as we possibly can as long as we can have scale and the appropriate market share to drive the efficiencies that we need to make our platform work.

Great. Thanks guys. Appreciate it.

And we will take our next question from Susan Maklari from Credit Suisse. Susan Maklari - Credit Suisse Securities (USA) LLC: Good morning.

Hey, Susan. Susan Maklari - Credit Suisse Securities (USA) LLC: I'm wondering if – you noted that your recent land purchases have risen to about 150 lots per community, and that's a little bit higher than the 120 that you've been targeting over the last few years or so. Can you talk to how you think about that rise relative to your focus on driving returns, focusing on the margin side of things? And perhaps what does that imply for the sales pace as we think about this looking out over time?

Yeah, Susan, I think in a small subset, the numbers can be a little bit, not misleading, but can lead you to odd conclusions. We noted that there was a Del Webb in there, which was a large lot count relative to the normal deals that we do. So, we put 7,000 lots under control. A pretty big percentage of that actually came from one deal that influences it. Similarly, you have heard us say that we have been doing a little bit more in that first-time space. With higher velocities, typically, again in a three-year deal, you're going to have a little bit larger lot count there. So, I don't think it's anything in terms of – we haven't changed our underwriting, our return criteria is still the same. It's not a margin equation for us, it's actually return. And so it's just a mix of assets that we happen to buy in this quarter. Susan Maklari - Credit Suisse Securities (USA) LLC: Okay. All right. Thanks. And then just thinking about the 11% increase in the price that you saw in your first-time buyer segments there, can you talk to how much of that was mix shift? And maybe how much pricing power you're actually seeing among that buyer side?

It's hard for us to break that down in real time. I would tell you that there is pricing power there, but there is mix in that, for sure. Susan Maklari - Credit Suisse Securities (USA) LLC: Okay. Thanks.

And this concludes today's question-and-answer session. Mr. Zeumer, at this time, I will turn the conference back over to you for any additional or closing remarks.

Great. Thank you very much. We've run out of time for this morning's call. We will be available for the remainder of the day, if you do have any follow-up questions. Thank you for your time and we look forward to speaking with you on our Q3 call.

And this concludes today's conference. Thank you for your participation. And you may now disconnect.