Ivy Lynne Zelman

Ivy Zelman asked about the multiple compression observed in recent acquisitions and the portion of 2026 CapEx allocated to AI initiatives, seeking details on how AI is transforming the business, particularly regarding headcount reductions in 2025 and future expectations. She also sought clarification on Pleasant Valley Homes' offerings (factory-built HUD modular vs. manufactured housing) and whether modular construction provides a real cost differential compared to traditional site-built construction for builder customers.

Answer

CEO Peter Jackson stated that acquisition multiples are within historical ranges, though paybacks have extended due to declining volumes. Regarding AI, he emphasized pragmatic investments focused on driving customer-facing benefits, especially in estimating, to enhance salesperson experience and capacity, with minimal headcount reductions observed so far. He clarified that Pleasant Valley Homes produces both HUD-compliant manufactured homes and semi-custom modular homes on the same line, believing there is a cost differential, with initial analysis suggesting they can build at or below site-built costs due to manufacturing efficiencies.

Ivy Zelman inquired about the multiple compression observed in recent acquisitions and the portion of 2026 CapEx related to AI initiatives. She also asked for details on how AI is transforming the business, specifically regarding headcount reductions in 2025 or expected in 2026, and the cost differential and attributes of modular housing from Pleasant Valley Homes compared to site-built construction.

Answer

CEO Peter Jackson stated that acquisition multiples are within historical ranges, though payback periods have extended due to declining volumes. He explained that AI investments are pragmatic, focusing on driving outcomes like enhancing sales experience and speeding up estimating. He noted minimal headcount reductions from AI so far, with benefits primarily seen in pace, capacity, and customer relationships. Regarding Pleasant Valley Homes, he clarified it produces both HUD and semi-custom modular homes, with the ability to customize. He believes there is a cost differential, allowing for construction at or below site-built costs due to line efficiency, weather protection, and leveraging staffing.

Ivy Zelman of Zelman & Associates asked for the rationale behind preferring land options with underlying land sellers over land bankers. She also questioned if PulteGroup is successfully retrading existing land options for better terms and inquired about the potential cost impact from doubling Canadian lumber tariffs.

Answer

President & CEO Ryan Marshall explained that direct deals with land sellers offer a more diversified risk profile and better price execution, viewing land bankers as a tool to increase the overall option percentage from around 50% to their 70% target. He confirmed they are actively retrading deals where appropriate, seeking either better pricing or more time. EVP & CFO James Ossowski noted that 20-25% of their lumber is from Canada, implying a tariff increase would have a manageable, not catastrophic, impact.

Ivy Lynne Zelman questioned why full-year guidance remained unchanged despite the market becoming 'mixed,' and asked for a quantification of the remaining land that was purchased pre-COVID.

Answer

Executive Chairman Douglas Yearley explained that the initial guidance in December was already cautious and that better-than-expected spec pricing and a favorable mix of luxury homes in the second half support the forecast. CFO Martin Connor specified that approximately 30% of the current land bank was priced pre-COVID (using a December 2020 cutoff).