Ladies and gentlemen, thank you for standing by and welcome to the Q2 2020 PulteGroup, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Mr. Jim Zeumer. Please go ahead.

Great. Thank you, Sharon and good morning. I want to welcome you to PulteGroup’s second quarter earnings call. We hope that you have been able to remain healthy and safe throughout these challenging times. As with our Q1 call, we will provide an update on the pandemic's impact on our operations, along with a detailed review of our second quarter financial results. Participating along with me on today's call are Ryan Marshall, President and CEO; Bob O’Shaughnessy, Executive Vice President and CFO; Jim Ossowski, Senior Vice President, Finance. Jim and Bob are dialing in from outside. A copy of this morning's earnings release and the presentation slides that accompanies today's call have been posted to our corporate website at pultegroup.com. We'll also post an audio replay of the call later today. I want to highlight that we will be discussing our reported results as well as our results adjusted to exclude the impact of insurance and severance adjustments recorded in the period. A reconciliation of our adjusted results to our reported results is included in this morning's release and within our webcast slides. We encourage you to review these tables to assist in your analysis of our results. Also, I want to alert everyone that today's presentation includes forward-looking statements about the company's expected future performance. Actual results could differ materially from those suggested by our comments made today. The most significant risk factors that could affect future results are summarized as part of today's earnings release and within the accompany presentation slides. These risk factors and other key information are detailed in our SEC filings, including our annual and quarterly reports. Now let me turn the call over to Ryan. Ryan?

Thanks Jim, and good morning. I am very pleased to report that the recovery in new home demand that we experienced over the course of the second quarter was nothing short of outstanding. Our second quarter results show a remarkable rebound in demand as April net new orders fell 53% from last year, only to see year-over-year orders increased 50% for the month of June. Led by strong demand among first-time buyers, we saw meaningful improvement across all buyer groups and geographies as the quarter advanced. This improvement culminated in June orders increasing 77% for first time, 48% for move up and 21% for active adult over June of last year. The rebound in demand during the quarter resulted in our aggregate second quarter orders declining only 4% from last year. We are very encouraged by the fact that the momentum of this dramatic recovery continues as demand has remained strong through the first few weeks of July. Improving industry dynamics in combination with disciplined business practices allowed us to drive meaningful gains in our operating results and financial position. These gains include revenue growth, margin expansion, and improved overhead leverage, which when coupled with our prudent financial planning, and strong cash generation, leave us in the position of strength as we work through the balance of the year. For all the positive dynamics we are experiencing in our business. It's clear that COVID-19 continues to act a severe toll on the economy, and more importantly, the people of our country. It goes beyond any business implications, but simply as human beings, one cannot look at the ongoing health impacts and loss of life and see it as anything but a tragic situation. With this as a backdrop, it is our heartfelt hope that everyone on this call, your families…

Operating in the midst of a global pandemic and extreme market volatility, the company delivered an outstanding quarterly earnings performance, while generating strong cash flows that further strengthened our financial position and flexibility. I want to say that we are certainly encouraged by the rebound and acceleration in demand that we've experienced over the past few months. While there are different thoughts on the drivers of this demand, what is clear is that the desire for home ownership remains high for all buyer groups, whether it's the first time buyer looking to exit a shared living space or the active adult buyer looking for a new adventure, people want a place to call their own. That being said, we continue to monitor the acceleration of COVID-19 cases in cities across the country, along with delays and even step backs in the reopening of local economies. Given these conditions, we remain committed to taking a disciplined and thoughtful approach to running our business. While we have had to adjust business practices, our fundamental goals and strategies have not changed, as we continue to focus on generating high returns through time. This means allocating capital and alignment with our stated priorities of investing in the business, paying our dividend and when appropriate returning excess capital to shareholders through share repurchases. This also means operating against the same risk weighted criteria that we have used so successfully to invest in land for the past eight years. Although, given today's environment, we are certainly working to assess any elevated risks associated with operating during a global pandemic. I want to thank all of our teams from our corporate and division offices to our frontline field personnel for their tremendous efforts during these very challenging times, everyone has pulled together as we transitioned our operations to work remotely and then where appropriate moved back on site as sales centers could reopen and markets exited their lockdowns. From implementing new technologies and virtual selling strategies, we’re using PPE and appropriate social distancing, our people have done smart, fast, resilient and maybe most of all invested in each other and in our company. Let me turn the call back to Jim.

Great. Thanks Ryan. We're now prepared to open the call for questions. So we can ask – so we can get to as many questions as possible during the remaining time of the call. We ask that you limit yourself to one question and one follow-up. Thanks, and Sharon would ask, could you just repeat the instructions and we'll get started.

[Operator Instructions] Your first question comes from John Lovallo with Bank of America. Please go ahead.

Thank you for taking my question. The first one is, obviously the bounce that we've seen has been remarkable in terms of strength and sustainability here. But I guess the question is, going forward, the big question in our mind is, how sustainable is this going to be? And I know that's a very difficult thing to answer, but what I'm wondering is, what are the things that you're kind of monitoring to gauge whether you should kind of step on the gas here or maybe pull back a bit?

Well, John it's Ryan and good morning, thanks for the question. We're monitoring all the same metrics that we typically monitor when we run the business. So we're looking at what's going on with consumer behavior, what are we seeing the desire for home ownership, what's happening in a new home searches on the internet, some of the things that we described in our prepared remarks. We clearly pay attention to what's happening in the resale market, which still to this day remains our biggest competitor. Certainly we have new home competitors, but with the majority of home sales being dominated by resale, we certainly pay attention to what's happening there. We look at what's happening in the job market with unemployment, with job creation, et cetera. So we're really focused, John, the biggest thing that I would emphasize is we're focused on delivering high returns through time. And so while we certainly have got a little bit of a tailwind at our back right now with consumer demand, the investments that we're making, the way that we're running the company, the way that we're managing debt, the way that we're managing cash, we're very much focused on those being through cycle type you movements. The other thing, I think in the more kind of short-term that we've got to pay attention to is state, shelter in place orders, and what might potentially happen as local economies may revert back to Phase 1, Phase 2, et cetera, certainly that could have an impact on the kind of shorter-term demand that we might see in a sales office.

That's helpful. And then maybe just on the Vegas market specifically in American West. So what – are you seeing any improvement there as some of the casinos have begun to reopen?

Yes. Surprisingly John, if you remember, at the end of the first quarter call, I highlighted Vegas as a market that we were quite concerned about given the dominance of tourism and travel related economy. That market has performed incredibly well, and in fact had a spectacular June. So with the reopening of the casinos, even at a limited capacity, we've seen a lot of the local workers go back to work. And folks are back in the casinos and staying at the hotels. So our Vegas business did quite well in June, and we're very happy about that.

Great. Thanks very much guys.

Thanks, John.

Next question comes from Mike Dahl. Please state your company. Your line is open.

Hi, this is Chris on from Mike. Thanks for taking our questions. My first question, which I want to ask, what's your latest price versus a thoughts are in the current demand environment. You guys mentioned you were able to raise pricing over 50% of your communities, which is kind of in line with what we were seeing as well. And I was hoping to see, if your thinking has changed at all in terms of pricing. When should we think about price moving up past that 1% to 3%, you mentioned, given work demands running right now?

Yes, Chris. It's the same process that we've always used, which is we evaluated on a community-by-community basis, taking into consideration what's happening in the local resale market that we compete against as well as what we're doing in our competitive efforts against our other new home competitors. Those are the things that really influence, what's going on in our pricing decisions. We're certainly focused on driving the best through cycle returns that we can. And so, that continues to be the overarching theme and umbrella that we use to make decisions. I would remind you that, you need to really pay attention to rent as well, especially with our first time buyer business that is an alternative source of shelter for that consumer. And so they're going to constantly look at the economics of what's more advantageous. So while demand is good, we don't believe that you can raise prices in an unfettered work.

Got it. That makes sense. And then just my second question, I probably could drill in a little deeper into the latest demand trends you're seeing in some of the COVID hotspots in Texas, Florida, Arizona. I really, it's tough to gauge what demand ultimately look like there, but for the last few weeks, have you seen any sort of decipherable trends as far as the impact there?

Yes. So those markets have been incredibly strong for us, Chris. The three that you highlighted Arizona, particularly Phoenix, Texas and Florida, not only are they hot in temperature right now, they're also hot in terms of sales pace. So despite the fact that there has been an increase in COVID cases in those markets, they have been some of the most aggressive in reopening the local economies. And we've certainly seen that translate in success in our sales offices as well.

Got it. Appreciate the color guys.

Next question comes from Michael Rehaut with JP Morgan.

Hi, thanks, good morning, everyone, and congrats on the recent results.

Thanks, Mike.

Where that hit, and I know it's a little tough to go too detailed. But the June result is obviously, incredibly strong and you talked about July showing strength as well. But I think there is obviously a lot of focus around the exit rate coming out of the quarter. I assume you don't want people to model 50% order growth in the back half of the year. So it's just trying to get a sense of, maybe to give a rough idea of so far, how July is trending, obviously there is a lot of movement within the quarter, there could be some pent up demand, it can also be some increased incremental demand from meets and perhaps COVID itself. But any directional help around how July is going so far and around any expectations of, where that order growth may or may not settle out in the third quarter would be helpful. I know it's very forward looking, but the numbers are just very, very volatile currently.

Yes Mike, good morning and thanks for the question. June was a spectacular month and we're very pleased with that. To your point, I do think there was some pent up demand for a lot of the reasons that we listed in our prepared remarks and some of the things that you've highlighted. So to assume that growth rates like that would continue forward, that's – the time will tell. What I will tell you about July and we're not going to deviate from our traditional practice other than to comment on the how the first three or so weeks of July have been. The first three weeks in July had continued to be strong, albeit on a somewhat seasonally adjusted basis as we go into the kind of dog days of summer. So we're very happy with how July has performed, we're optimistic about kind of what the summer selling months will hold for our business. But we’ll stop short of kind of providing a full forecast for the third quarter.

Okay. I appreciate that. And obviously had to try there, because again, there is a tremendous amount of focus. Second question, I guess, talking about the price increases and about half your communities, which is encouraging. Obviously, you've had a spike in lumber costs as well. Traditionally, actually when you've had cost inflation, you've actually had the industry has to believe and had margin expansion is top line gains exceed, the cost side of the business. Do you see the current environment as being anything different and could you mention obviously trying to not allow pricing to get out of hand you don't want to price yourself out maybe similar to a couple of years ago? But how do you see your ability to at least offset cost inflation in the current environment? Bob O’Shaughnessy: Yes. Hey Mike, it's Bob and a fair question. Certainly lumber has trended to candidly all time highs. We've given a guide on our margins for the balance of the year. And I think most folks are familiar with the way we purchased lumber, it's on a trailing 13 week basis. And so our lumber package pricing for the balance of the year is pretty much set. So these increases will really be more of an impact in 2021, depending on how the market, the lumber market performs over the next three to six weeks, 12 weeks. So on balance, actually the market is pretty good for commodities, lumber being an outlier. And I think most builders were able to try and work with their trades to drive pricing down, we'll see some benefit for that, that's incorporated into our guide for the balance of the year twice you see margin improving as we continue through the year. Given the pretty quick ramp up in the business, I think it's reasonable to expect that the trades will be looking for some of that money back as time goes by. In a world where we can get some modest price increases that's to your point, usually sufficient for us to offset it those potential increases in costs. So we're not giving a guide on margin beyond 2020, but you can tell from the guide for the balance of the year, which is up from where we were in Q3, which is – sorry, Q2, which was up from Q1 and up a lot from last year that the market is pretty good. And so we are always conscious of overall affordability to Ryan's point, rent is always the biggest competitor and\or resale, but we feel pretty good about our pricing opportunities and our cost controls today.

Next question comes from Kenneth Zener with KeyBanc. Please go ahead.

Good morning, everybody.

Hi, Ken. Bob O’Shaughnessy: Hi, Ken.

Can you – given your – appreciate the outlet and the volatility. Given your closing guidance for 3Q, it's actually a little higher as a percent of your units under construction than is normal, which reflects slower initial construction phase in the second quarter. But can you talk to how you think the industry or Pulte in particular might be constrained in terms of production? There is obviously a lot of order growth, demand in a time of job losses. But, what is really constraining your growth? I mean, is it that your build construction times, you don't want to go out more than six months? You made very specific comments around a pre-build model, it's not what you want to do, but you said you guys can do first time buyers, I believe in 80 days. So what is really the protection constraints you're seeing within given communities that kind of limits your units under construction as we think about where you can go in the second half of the year? Thank you.

Good morning, Ken and thanks for the question. When we think about production constraints, it's – the number one continues to be labor, which is not a new theme, the entire industry has talked about that for a long time. And it's one of the big reasons that we made the acquisition of ICG down in Jacksonville earlier in the years, we felt that moving to more offsite type manufacturing was going to be one of the ways that we could really look to eliminate some of the pinch points over time over the long pole with labor, by being more efficient with the way that we're able to manufacture the shell. So labor, I think continues to be the number one theme. What we are finding is that the labor wants to work. So as shelter in place, restrictions have been lifted more and more and using appropriate PPE and social distancing, we've been able to get homes built. There are additional requirements, I would tell you that it probably adds a few days in some places to cycle time, just because it's a little bit slower than what you'd maybe ideally like. So that might be a little bit of an added overlay constraint directly related to COVID. The other one is municipality. So, municipalities are typically fairly lean in inspectors and permit, their back office permitting facilitation. And so as those municipalities have sheltered in place, and they've asked their city and county employees to do the same, we have seen and experienced a bit of delay in our overall cycle time, just in our ability to get permits and get instructions.

Thank you.

Thanks, Ken.

Next question comes from Truman Patterson with Wells Fargo.

Hi, good morning guys. Nice results, and thank you for all the detail. There is a lot to digest there. So first question, big picture you're seeing some buyers exit, more densely populated urban areas, which metros or regions are you seeing as the most pronounced? And on top of that, are you actually seeing migration from a more densely populated regions, like the Northeast to less densely populated areas like the South? And just looking forward, how do you think this kind of plays out over the next year or two?

Good morning, Truman; it’s Ryan. Thanks for the question. As far – I'll answer your second question first, as far as Northeast to the South, that's a trend that we've been experiencing for a long time. And so it's hard to suggest that it's any more than what it already was due to solve or housing affordability and a number of other things as some of the Southern States, I think have really worked to ramp up their job creation and create opportunities in the South. So I would suggest that, that continues to kind of happen and I wouldn't necessarily suggest that it's accelerating. As far as, the markets that we highlighted, where we are seeing an increase in our local business as a result of an urban exodus, if you will, I'll use that term loosely San Antonio, North Florida, Southwest Florida, which for us would be the Naples Fort Myers, Sarasota kind of West coast of Florida. And then we're also seeing a bit of it in the Northeast corridor, which is middle and Southern Jersey and in the Pennsylvania. So there, I think we are seeing some folks that maybe were living closer to the city, New York City that is looking for an opportunity to be a little bit more suburban in New Jersey and Pennsylvania.

Okay. Thanks for that. And then on your entry level, just some of your thoughts moving forward, you all have a – it seems like now you're making a bit more of an aggressive push towards the first time buyer entry-level segment. What portion of your business are you kind of targeting at this point? Is it primarily through expanding through your Centex brand nationwide? And it seems like everybody that makes us rotation it's really been actually a benefit to gross margin. Can you just talk about some of those moving parts for us?

Sure, I'll take you on a bit of a time machine trip and go back to fall of 2016. We talked to the company that we felt that we had an opportunity to reposition our business to be a bit more balanced in the consumers that we target. And we laid out that ideally we wanted our first time buyer business to be about 35% of our business. What we highlighted was, is that we wanted to do it the right way and intentionally go out and buy parcels of the land that would allow us to be – to effectively and successfully and specifically target the first time buyer business. We've done that as is evidenced by the lots that we control currently for our first time buyer business equal 34% of the total lots we control are targeted to the first time by our business. And what we talked about is it would take some time from the time that we acquire and secure that land to where you see it coming through in the business. The most recent quarter, 31% of our closings represent – or were specifically targeted to the first time buyer, that compares to 32% of our closings in Q2 – I mean Q1. So we're – and then, compared to prior year’s second quarter, we were 28%. So what you've seen is it's gone from our business being 26%, 27% first time to we're now in the 31%, 32%. And we're moving much closer to that ideal target of 35%. So we think it's done wonders for our business, we're seeing nice growth there, we're probably just a few percentage points shy of where we ideally want to be in terms of closing mix at this point in time, but we've got the land pipeline that will drive that.

Next question comes from Alan Ratner from Zelman & Associates.

Hey guys, good morning. Nice quarter and congrats on the execution during this difficult time. Ryan, just on that last point on the land pipeline, obviously you're starting to gradually ramp the acquisition and development back up again and presumably the land you're buying now is probably for maybe late 2021, 2022 deliveries, I would imagine at this point. But just trying to think forward here, you're in a difficult spot where you kind of do have to take a view on the sustainability of the trends we're seeing now, you could do certain things to mitigate the risks such as optioning more. But, when you look at 2021 and the pipeline you have, assuming this is sustainable. Do you foresee any air pockets on the supply side, thinking about the land pipeline primarily, where you would not be in a position to grow in 2021, assuming this kind of flurry of activity continues through the end of the year or do you think the pipeline is sufficient to continue growing through 2021?

Yes, Alan, thanks for the question. I appreciate it. We're not giving any guidance on 2021 at this point in time. What I will tell you just broadly about our land pipeline is it's healthy. We control over 160,000 lots. And to your point about how sustainable and how you can manage that risk with that forward view, it's a bigger reason that we've been driving toward the 50/50 mix on owned versus option. I'm really proud of what our team has been able to do and pushing that number to 46% options, which is the highest that we've ever seen in our business in over a decade. So that's a real win. And when we look at the lots that we've actually approved in the current year, the percentage of options are over 60%. So while we've moved the entire portfolio inclusive of Del Webb, when we isolate it just to 2020 acquisitions, we're north of 60%. So I think that's a big part of it. We've got a really big backlog, Alan, we're over 13,000 homes in backlog, 12% increase over prior year. So we're well positioned to not only deliver the next six months of the year, but that gives us a really nice kind of running start into early 2021 as well, which we think is a real advantage in kind of our build-to-order model is that it gives us so much forward visibility. And we know that it's a big part of what's continues to contribute to the outsize margins that our business is able to generate. We did highlight in Q1 and again, as part of kind of our land spend numbers in this quarter, we did we were cautious in the amount of land development dollars that we outlaid early in Q2. Certainly that will have a bit of impact on our ability to get new communities opened on the original timeline. We think that's a short-term kind of blip and it's not something that's going to materially impact our ability to continue to perform well.

Got it. That's helpful, Ryan. I appreciate that. And then second, you had some positive comments on Vegas earlier, and it's good to see that market continuing to or performing well in the face of a tough job environment there. As you look at the land spend for the back half of the year and your footprint, you have the benefit of being very well diversified. Are there any markets, thinking about Vegas or Orlando, maybe where you're going to be a little bit more conservative on land spend and perhaps reallocate those dollars elsewhere or do you feel like your whole portfolio right now has an equal look at land opportunities? Bob O’Shaughnessy: Yes, Alan, it's Bob. I think the simple answer to that is that all the markets are open. We are seeing positive demand trends across the country as Ryan walks you through. And so our view is until we see something change, we're willing and able to invest everywhere. You heard Ryan say that we're looking through with a little bit tighter lens. And, so as an example, for the things that we deferred 30 or 60 or 90 days ago, we have a new process that we've instituted where Jim Ossowski and the asset management team actually refreshes our expectations of market conditions. So at approval that got me for argument's sake, 10 months ago, waiting for some final entitlement. Before we move money, we're actually going back and saying, okay, did the pro formas that we built then do they still apply. And so I think, what I would characterize it is we're using the same discipline we always have. We've put one more hurdle in the purchase process. And that hurdle is applicable to every market. And so using Vegas or North Florida, in your example certainly, as Vegas has opened and improved our attitude towards it has gotten a little bit better. And so really we're looking at current on the ground data. We're listening to what the state regulators, governments are saying about shelter-in-place. And we think we're making educated investment decisions. So I don’t know if that gets you all the way to where you want it to be, but in general, we're open for business, but we are being disciplined in that thought process.

Next question comes from Stephen Kim with Evercore ISI.

Yes. Thanks very much, guys. I'm really intrigued about the opportunity for you guys to raise prices. I know you said, you raised prices in more than half of your communities in one and a half year divisions. And I'm thinking that you've probably crossed over the absorption rate threshold in your communities and most of your communities by now, above which further growth lead you to raise price. We're also seeing mortgage rates down 80 basis points year-over-year. And so I'm thinking that the median monthly payment that your entry level buyer is paying is probably down quite a bit and probably down a lot more than the decline and they're seeing in rents. So I'm curious, when was the last time you think you saw buyer's monthly payments down this much versus rents. And is there any reason to think that there is going to, that's going to be provide you a lot of headroom to raise prices, in a way that is very different from what we've seen in the last few years?

Yes, Stephen, a tough question. There's a lot in that, I'll try and unpack it. And maybe easier than unpacking it is just to simply say, it's a really favorable demand environment out there. And I think as we highlighted, there's a number of factors that are driving that. One, money is very affordable right now. And so the prospect of being able to afford a new home is probably better than it's been a long time. I will caveat it by saying the first-time buyers still got to have a down payment. So there's got to be enough savings from somewhere in order to make that happen. And we don't see that being a huge impediment, but it is a restrictor out there that our hurdle rate or hurdle that needs to be cleared before the first-time buyer can enter the home buying market or the home ownership market. To your point, Stephen, I think it's not been often that the decline in interest rates and resulting payment has been faster than the decline in rent. And so you combine that with the fact that there's a desire to probably not live in more densely constructed apartment type complexes. I think those are really positive tailwinds for the entire industry. And certainly, as we move our business closer to 35%, being first time, we think that bodes well for the future of the business.

Yes, it certainly does. My follow-up relates to the down payment comment that you made. Historically, you're right, down payment has been viewed as like one of the key impediments to first-time buyers. But I'm thinking in this environment, we've seen student loan forbearance through from March to September. We found that the average payment on that student debt is nearly $400 a month. If you take a couple with – that both may have student loans, I mean, ramp it out or grow it through September plus a couple of $1,200 stimulus checks. I mean, that alone can pretty much match go a long way towards providing the down payment. So I'm curious as to whether or not you are hearing from the folks in your communities, the sales folks that the ability to come up with a down payment is not the hurdle that it once was. And in fact, that hurdle may actually be getting lower given the increased savings.

Yes, Stephen, I don't know that we've specifically heard direct feedback on down payment related concerns that there's anything there that I would highlight. What I would tell you is evidenced by the year-over-year growth rate that we highlighted in our June sales from the first-time segment. We were up 70%, 70-plus percent in the first-time buyer segment. So if you use that as a data point, it wouldn't largely suggest that those buyers are able and are finding ways to come up with a down payment, whether it's from the means that you suggested or something else, the money is clearly there and that's translating into a favorable sales environment out of that segment.

Next question comes from Susan Maklari with Goldman Sachs.

Thank you. Good morning.

Hi, Susan.

My first question is, can you give us a little bit more color on the SG&A side, especially as it sounds like you have taken back some of those people that you've furloughed and perhaps we're even adding to the headcount from some of the more permanent reductions that you did. How should we think about that flowing through? And can you give us some sense of where you are in terms of the headcount? Bob O’Shaughnessy: Yes. Sure, Susan. I think if you kind of piece together everything that we included in the remarks, because the business has been strong, we have brought back almost all of the furloughed folks that we had asked to wait to come back to work. We've even rehired a couple of people but on balance, we had announced about $65 million worth of save in fiscal 2020 related to the actions that we took. And I would tell you that remains pretty much where we think we landed. We may reintroduce a couple of costs and principally I'm thinking on the IT side, to make sure we continue to advance that work beyond where we thought we would, based on the work we did in May. So with that, our spend is pretty much what we thought it was going to be that is reflected in the guide that we gave. So if you think about it, our full year guide at 10.3% to 10.7% of revenues in SG&A is better than by about 20 basis points, the guide that we had at the beginning of the year which we obviously took down at the beginning of the pandemic. So we don't see a lot of creep back into the business, which is good. And we want to be disciplined about that. We hadn't included the furloughed folks in the save. And so we had hoped and expected to bring those folks back to work. They've come back, to Ryan's point, they're mostly field personnel, so they're serving revenue producing activities. So we feel pretty good about our expense structure for where we are in the business. And if the business continues to perform at a heightened level, we might need to bring some more people back. But again, I think that would be well leveraged from an overhead perspective, because they would be bringing – we would be bringing them back to do things once again that are revenue producing.

Okay. All right. That's very helpful. And then, given the trends that we've seen and obviously, the relative confidence in your outlook, can you just talk a bit to what you need to see to get comfortable, to start to resume some of the repurchase activity and any color on what the timing of that could potentially be? Bob O’Shaughnessy: Yes. So I think in fairness, we've come through a pretty tough time. We fully drew our revolver. We were able to pay that back comfortably. We have a very nice cash position, debt-to-cap is at 32% and a year ago it was at 35%. So we've made progress there. If you look at it on a net basis, it's a 15.5% down from 29% a year ago. So feel really good about our financial position. Having said that, we're still in the midst of a pandemic and so I think what we will do is very consistent with what we've done historically is we'll report the news. So as and when we get into the market after we've done that, you'll hear about it. But the process will be, Ryan and I, and the team here will work through, what are our medium to longer term capital needs? What do we think the business produces no different than pre-pandemic, share and work through that with the board and come up with a game plan for how to repurchase equity. You heard Ryan say it earlier in the call, our capital priorities have not changed. It's still invested in the business at high return, it's pay our dividend and if we have extra, we will use it to buy back stock. We also talked about leverage. We're in a good spot there. We do have a maturity in March of next year, $420-some-odd million. That will be something that we would likely at this point think that we're going to use cash to satisfy. But obviously market conditions needs for cash and capital will weigh on that as we get closer. So we'll have more to say about that as time goes by.

Next question comes from Jay McCanless with Wedbush.

Hey, good morning. Thanks for taking my questions. I guess, the first question I had is could you give us any color on where you expect community growth for the rest of this year and maybe a hint or a preview for 2021? Bob O’Shaughnessy: Yes, so community count growth we are thinking is going to be somewhere from between 2% and 4% down in Q3 and Q4 each versus the average in the preceding year quarter. So Q3 versus Q3 of the year prior, certainly the development delays and the land purchase delays. You heard Ryan talk about it earlier in the call, that come from what we did, call it beginning of April through the middle to late June. We've started to ramp that back up but that will have an impact on our community count as we go forward. We have not provided any guidance for fiscal 2021. We'll give you that as we get closer to the end of the year and we go through our planning process.

That's helpful. Thank you for that. The second question I had in terms of what you're looking for, for new land acquisition and some of the migration away from the urban core, you guys talked about. I mean, is Pulte as a company starting to look at further out land positions, larger land positions, more lots, I mean, has COVID and everything we've seen over the last four months affected the way you guys are buying land or thinking about land going forward?

Yes, Jay, this is Ryan. I think what we highlighted is that the process that we've used to evaluate risk associated with buying land remains very consistent. So we have not made major changes there. Certainly, I do think the changes in consumer behavior from COVID that will clearly influence things over time. I think some of the bigger influences are going to be on home design, quite frankly. But our business always has been somewhat or mostly suburban, just because that's where available land is. So as far as going into the exurbs and into B and C type locations and really making big bets on land, I don't know that you should expect to see that from us. We're going to continue to be very disciplined in where we invest. We still think that access to transportation corridors, good schools, employment, entertainment, shopping, et cetera. We still think those things all matter. And so we're going to continue to look at buying in locations where we think buyers want to be, pre-COVID, post-COVID. And those are the elements that we think drive through-cycle return.

Do you think that and from a plan standpoint, you guys are in good shape or are you seeing a lot more requests for the double work from home or the students and the kids working from home environment, are you guys adapting to that? And what are you hearing from your customers right now, as far as that goes, if you're not going to go further out, maybe talk about what you're going to do with some of the house plans, et cetera?

Yes. So Jay, I think it's one of the things that's been a real strength for the company is our consumer inspired focus and the research that we've been doing for the past seven or eight years with our commonly managed plans. We've really been designing and creating just some spectacular floor plans that not only I think meet current consumer needs, they allow for great flexibility. So in our build-to-order model, there are a number of things where we have flexible spaces that can be turned into a gym or a home office or a second master or an in-law suite. Those are all things that our current portfolio of plans allow for. We'll continue to listen to the customer, especially in light of what's currently changing to see if there's more opportunity to accelerate that. But keep in mind, what I highlighted early in the call, our biggest competitor is resale. And I can promise you that any of the new plans that we have are far better than housing stock that's 10, 20, 30 years old.

At this time, I'll turn the call over to the presenters.

Great. Thank you very much. Appreciate everybody's time this morning. We'll be available for questions over the remainder of the day, and we'll look forward to speaking with you on the next call.

This concludes today's conference call. You may now disconnect.