Beazer Homes USA (BZH) 27 Jul 232023 Q3 Earnings call transcript

Good afternoon. And welcome to the Beazer Homes Earnings Conference Call for the Fiscal Third Quarter Ended June 30, 2023. Today’s call is being recorded and a replay will be available on the company’s website later today.

In addition, presentation slides intended to accompany this call are available within the Investor Relations section of the company’s website at www.beazer.com.

At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer.

you. Thank afternoon. Good the for to conference discussing call And third Beazer quarter results the of our welcome Homes fiscal XXXX.

you be differ our Such filings, which Before call, materially other factors unknown from begin, should cause our that and aware we SEC in during risks, we uncertainties will involve actual making projections. statements statements. may described forward-looking known and be this results to

of obligation Any do the update speaks forward-looking as date We forward-looking any only is information, future any a not statement revise events undertake as or result to new the or made. whether otherwise. statement statements, of

New from emerge not factors. is simply possible to factors and all such time-to-time predict it

from home Chairman and future the end balance environment expectations Allan goals me on our our the our Chief third we sales have Merrill, sheet. for times quarter, quarter, reduction I’ll provide highlights Joining and the for update at the and and current results, our strategy updates Officer. a on our Today, on look an new cost Executive details is third initiatives Allan discuss for future. cycle with will and

remaining. will We the prepared we Allan. the wrap-up take time questions After will remarks, during our by with conclude

will I the to over Allan. turn now call

for the the factors and us allowed expectations further Dave, recovery These and strength of We you, very exceed orders home times. quarter, us a work in productive cycle and had in Thank we third thank April. our joining you to new afternoon. this construction continued highlighted in great by outlined team our

homes. resurgence demand interested spring move-in exceeded in through month, ready our and up both January improvements cycle in X.X of a we ready times prior per experienced orders, expectations, sales Closings and in the nearly year. community home homes. starting higher-than-anticipated the new On generated to-be-built move-in buyers of per pace we XX% from both with in from The continued homes

fewer generate us also and of new incentives we were nearly closings allowed and million of than just to secure EBITDA anticipated Higher better backlog needed $XX to to make adjusted as income our under margins million. sales. gross Homebuilding net $XX margins gross in

From or exceeding per we $XX perspective, another share. shareholders’ billion $X sheet a important celebrated equity nearly with milestone balance yet

Just to lack ago, payments end to income, as pushing mortgage led rates Predictably, of drop year over sharply of average. substantially home higher, affordability through this a in percentage move their began sales the a long-term XXXX. a persisted mortgage that and above used new big of

growth which During picture. this even time wage continued, period, strained. the returned more slightly to Then was and in improved January, though home direction demand levels, prices reversed affordability still normal

a level, to attribute macro two strength primary we this On factors.

X we there calls, housing, long-term homes. as housing and shortage short-term First, both million have as deficits. are great prior noted the of potentially structural In

I and think deficit as underpin will it years. homes demand believe of a this new many for long-term for

now, used right seeing shortage a and for different deficit we’re a But homes listed sale. that’s of

list sale of While a rates are until lower. home issue, likely substantially may interest their to more remain reluctant this is for homeowners short-term

the levels in continuing been has housing time, Unemployment job and low remain place quite gains very growth conditions. employment overall the Second, strong. Both wage and of now. pretty demand quarter. the economy of wage through indicators reliable remains are right good with most one Over a

these relying just on not macro to we’re dynamics But address affordability.

compete to in ourselves environment. affordability positioned have we company, an challenged a As

choice performance we markets segments home demonstrated in targeted demand, mortgage choice, buyer plans. three have largest surprising new with and We home we’ve valuable differentiators, are developed invested and the

efforts Taken together, extraordinary deliver allow to these new value at an affordable us homebuyers. to price

growing It above profitability, characterized generating sheet our of strategy call by we remain is Growth. shareholders, returns capital. committed cost efficiency we long-term For balance to improving a Balanced and

in more far so of do even proud progress we’ve made ahead. We’re the we the and years to expect

quarter, provided of our roadmap and leverage longer specifically related the growth, term goals, we homes. energy to efficiency for Last a our those

we more for XX visibility least to active in have relates year-over-year the months. it each growth, As than into expect next our at end to growth the XXXX, of quarter XXX communities with excellent by

As sheet, over it to invest next net relates to will ratio a allow net years, balance us business. plenty that three we to pace to expect below our to our flexibility reduce our cap XX% debt the in measured of

public expect the were that to Energy’s Zero will divisions. it the Zero homes every the our standard. we achieve standard. and of the December as start Ready Energy of QX, XXXX, of still first Ready finally, today we XXXX, relates built, builder Energy the meet that and to XX% Department every commit And by of one of end In home we to became included in only starts we our homes In

proud in about Overall, excited we’re I’m third what I’m we very of where able to were and accomplish quarter the going.

With turn that, call to I’ll the over Dave.

Allan. Thanks,

with X,XXX million, For $XXX price average interest, year new about amortized revenue generating abandonments and Gross fiscal excluding the XX.X%. of homes, was third of homebuilding closed quarter XXXX, margin, an impairments $XXX,XXX. sales we of

margin construction profitability higher we homes sold on anticipated, and result which and closed costs our than the Allan the better-than-anticipated As came mentioned, during was in of quarter. lower

XX basis a SG&A as benefited leverage. year-over-year for from total as quarter, revenue of points was percentage improved the XX.X% we down

adjusted higher of together, improved margin $XX.X and to led EBITDA million. closings Taken

revenue homebuilding Interest was of percentage amortized a as X.X%.

tax effective tax realized expense to closings the GAAP income rate an both million per was quarter current efficiency $X.X $XX.X and energy as in $X.X years. million or approximately was for XX.X% credits prior tax Net million of related of share. from we Our $X.XX

compared per providing we’re up fiscal be We XX% about prior the sales X.X year. to community the to anticipate to month forward expectations. Looking homes approximately quarter, or our pace per the following fourth

is be expected to about XX% Ending active count community year-over-year. up

more same X,XXX backlog ratio X year. We expect last close points versus up roughly to the than homes, a conversion exceeding period XX%, reflecting

should price sales average $XXX,XXX. around Our be

gross expect XX%. to excluding margin, We interest roughly be

year. quarter dollars spent same be absolute should relatively last the Our flat on SG&A versus

to in $XX this adjusted approximately million. of EBITDA expect result We

in as per credits. below the $X.XX lead in energy diluted amortized $X.XX. should be effective tax to Interest to of Xs to of the our be and share our should should revenue benefit to continue as rate earnings This we a low percentage range XX%, efficiency be homebuilding from tax

we spend be Finally, year-over-year. up sequentially to expect and land

With more to $X.XX of year fiscal in than $XXX third the performance earnings expect our for of now and generate share million we excess fiscal diluted EBITDA quarter, per in XXXX.

share fall value book a to top Our $XX is should likely to net XX%. debt our capitalization and below net

for to While goals, and directional share, we growth standard. even count anticipate expect to visibility value profitability that and more we per of XXXX, year book Ready revenue, FY we meet metrics ratio our expectations healthy XXXX time. share in this community closings, be year quarter, our until provide we some Energy to a sizable our leverage can as our In don’t in fiscal next full in expect plan specific increases affordable to mix starts lead to Zero improvements we ASPs the increase the of from around Relative a other communities. percentage multiyear $XXX,XXX at

date final us we’ve on generated that As our can operational new homes objectives update of want starts, has the we calls, the allowed in to improvements fiscal in forth In the to I year, we prior cutoff cycle we’ve for you October. close back highlighted times quarter push enter our set which within fiscal consistently on the year.

about in which were materialized quarter, cycle third days improvements our times XX closings, the of down last the In versus quarter. these

times getting where focused remain COVID we on forward, they Looking disruptions. to cycle before back were

On side, cost the picture. more is a of savings it mixed

back the with because have pleased expectations sales stronger been been That’s environment caused spring. costs, this for we’ve pricing lumber from other While in tempered the housing has somewhat. to categories reduction bounce our significant starts savings and

The the faced categories are to years. the cost and of risk we removes is some over like past good normal the several of most constrained times, back that delivery which some news garage product appliances doors

We assets because from and tax don’t are investors understand fully energy and deferred credits tax have that heard not things intuitive. efficiency understandable our tax like position that’s they

So today, future taxes. we provide framework that and estimating cash GAAP to will we’re believe our going simplify a

home These they rate to in energy we year. as period not in GAAP stringent claimed meet are reduce tax used our tax cash we criteria, efficiency they build are are Because a if perspective credits. the credits from energy eligible even claim efficiency that the

the Zero our this closed expectations the of Energy expect claiming standard. rise our on annual in credits as XX% GAAP well our to that ENERGY meet we effective somewhere to the to XX% claimed from related years. rate a prior Based standard moving below prior for and will Today, Ready and percentage growing credits be years, tax from as we homes This STAR earned fully meet year, homes year have XX% all XXXX. forward once between credits fiscal

NOLs, and years, fiscal tax then also prior which a which we our expect tax to From our cash energy assets. don’t in credits we fiscal utilize included as have the our we a fiscal perspective, in assets XXXX, efficiency of from XXXX deferred included accumulated XXXX portion taxes cash tax are and apply are deferred for pay

As should and rate energy generated. newly are tax efficiency credits cash the GAAP into with year we tax utilized fiscal beyond, are earned align XXXX they our move rate as our in

the of million On and the liquidity was revolver. at cash $XXX to unrestricted Total $XXX balance of sheet. end comprised available our $XXX million on of million, undrawn fully the quarter

our was LTM debt decreased and X.X to EBITDA cap to net times. net debt adjusted XX.X% Our to net

to repayment using senior and our refinancing we XXXX notes anticipate represent address Our of nearest it. maturity a combination and

in the registration do While weeks. market, have shelf immediate our in we be expect we next statement plans to renew the couple of no to

call Allan. I’ll over With turn the that, to back

Dave. you, Thank

two by energy conversion. excellent backlog The our sales third quarter goals. was highly and balance successful strong generated operationally, we the progress Financially, results multiyear improvements growth, we made fronts. pace and in sheet And demonstrable driven efficiency toward on

balance growing the the and years With ahead. have stakeholders sheet, value resources land a and operating to in financial create team, less leveraged dedicated the a more and durable count efficient we community for team, the our a

call the us turn With into Q&A. take that, the I’ll Operator over to to

question Zelman Instructions] of Our the line Thank you. from & comes Ratner from Please first Associates. ahead. go Alan [Operator

so progress Good guys. afternoon. far. Congrats year the Hey, all great on this

Hi, Alan.

I go the question, the guess, margin, that. gross inputs that First into on and

of even comments, from you’re XQ maybe incentives. bit The back touch So nice implies upside that quarter. a be could seems a flattish, rounding. on down your guidance like pulling But this and like, for it kind Allan,

trades of on again stretched. my little lower of, I upward cost the might I seems The the an a get question least for It re-inflect would But pricing be point. guess certainly near-term, could this at higher wouldn’t the through? is, if stable given power. trajectory, coming imagine, You at have margins environment flow-through bit why pretty incentives

fourth Yeah. I is the of to toward mean to in calendar be early closings sold homes that heavily going mix weighted in quarter were the the continue year.

the third sales So really be any the in to won’t it quarter great really results the activity -- quarter in extent. fourth

uncertainty, of bit So it’s little Alan. and frankly mix it’s just a

you think of sold it, end I But sold, of we’ve backlog and of at year, last the as beginning that, that’s looked think falls. it at very this where flattish. it But as out, within lot characterized when from we it’s calendar year a perspective, was I was a pointed

Got it.

that. Okay. I appreciate

on and is over the years last lot significant that detail. of handful kind you When the to next your from XXX look community a yet of this if count, Second, ramp it’s handful XXX given guys been communities up of apologize and at you’ve the going expect over count ramp. steady years very I I fairly

guess, are much need to land over, of cetera? I the do So growth we these and support it, in -- land et lot that pricing I’m curious, months ramp? terms how much about call how more the just availability, days market type feeling XX see And you of next broadly, to how

lot back now or Alan, the significant Well, I last pretty over a what’s in had the look have years in really bit. four obviously little the count you’re a growth and would growth the seeing. were the we’re XX,XXX in years, community in you that is lots. which land We XX,XXX three position We fueling range

to COVID, seen that So really especially count you’ve on that’s going growth some in it’s given we’ve really increase throughout we’re community had. of lots, it’s taken the that driving to some disruptions see those time go XXXX. that But during the

we finding see second continue the and mentioned we as have count we getting eye update of of by to during script perspective. we frankly, count. into end and as that our on well set us a we’re visibility we’ll out community forward the question, the pencil count growth and we XXX XXXX, the what over for As for and But have grow of community the that’s deals, from to And go guidance land good go we next kind pencil quarter-to-quarter, community the kind part to XX your look, of go that months.

Alan, bank familiar I’ll equation you just the based. for to attention What’s that because on I and little -- revolver let’s of you’re pay a with private market changed the I builders. has it’s just will I’m with, finance add or land the lot know builders market something in bit a say, comment financing a happened were, the project sure

And expansive but group so be deals, that’s been than still there land to there’s say, plenty are competition and little that constructive. of are of for just builders less, used let’s a they a

XXX close is count And at Understood. just tailed I XXXX, I go where back in Dave, obviously. guess at say, was circle ramp looking terms I I you just the last know similar really to number few appreciate If that and was off, got terms that. to it to numbers. in the lot appreciate of today, of absolute time just kind I the what to, your years. back. I that over communities. pretty never

apples So around higher probably but to ramp That’s what oranges extent, of I that probably to lot and I does need like at think kind some really XXX count at, XXX, a out support it’s XXX? peaked communities. to how much go was you getting somewhere

And is the You be year-over-year, couple XX,XXX going we’ll in it to lot which years quarter put beyond. of get fourth year. think, the to will next count should fact, expect above over up this I XX and our in

held lot stretch. lot not future older land development. some those that that’s those days, ago long periods of So or big for was a in Remember, count a of

Yeah.

terms that community chunky as count. eventually lots. were big there some count closings, They XXX, lots. some lot there it efficient XXX that weren’t XXX, assets they in but were XXX, of were in those They And mixed became generating positions terribly

Thank Understood. lot plan. a you, Good Allan. guys. Thanks

Thanks, Alan.

Next, Please we’ll from of Alex go go ahead. Securities. B. Rygiel Riley to the line

A very afternoon, quarter. Thank you. gentlemen. Good nice

leverage? the overhead a community little As there given add a G&A, so it growth is meaningful bit to just relates need in count, to of lose might you

going I Well, wouldn’t that say, we’re lose leverage. to Alex,

the running bit little think now, I visibility because we’re count that on side growth community for planning a overhead the higher we have into. we’re

G&A and five getting think, we of I how we’ve count job been good level the real Well, four of going over we’ve thinking years bit Look, dollar little done of to from the lost really absolute community of probably last years managing the about growth. kind for we’re a this a leverage or kind a as perspective. year grow ready

there’s be So a count leverage we’re today negative I necessarily think the in the probably for but up growth. future, we’re as of don’t not number at that community would setting we kind

also Very out? several where backlog helpful. this could and And higher then conversion year-over-year the could quarters trend you go talk to

this, and months several make picked happen Yeah. about Look, starts. or on to real pontificate well don’t talked we’ve quarters want estimates But out. cycle I going time to key is that’s three about Alex, the up we’ve of

goal go and for out and see clearly, the work there days we XX flow more XX to before And from disruption. towards were starting is really about We’re pre-COVID way us our days where back We our get on talked getting that back. through closings. to

and So coming conversion times driving is come made that’s on claw and time. we’ve continue should idea really closings rates, cycle that higher what on are good and the to progress over because starts right, through go lost to back down we’ve

very you much. Thank helpful. Super

Thanks, Alex.

from McCanless Please Wedbush. line Jay go we’ll to the Next, of go ahead.

Thanks it to have printed to but follow four get different afternoon. for on what saying I a question. end what that the pretty to on year is it’s that with the my by a $XXX,XXX to be from you down fiscal where end mean taking is it not I this going Dave, year? Good were price Hey. ramp you XXXX, quarter, it you the ASP, you by of you going for wanted think? handle maybe Is of a something the fast or flat be much

a is It Jay. ramp down,

And of from We some specifics a mix a in bit a remarks, ramp it’s given we down. is like haven’t prepared said there’s just in perspective. community XXXX, it but the that about

move as year online you go closings our of the communities, affordable from gradually you’ll you those see more down. get we So and get as that through coming communities some some

one just Jay, And point.

about, prior didn’t million. our relates a $XXX $XXX I that in or issue, want trending guidance into or It QX answer to six like as mix next little talked And see told something question concerned, we’re prior year. homes off question. You’ll months we that’s it that that -- to ago, a folks we the were sold nine the relates months

for level. I So will be that we we’ll think right full trend year expect it $XXX average But the down. around the

pricing could color power were to areas that? then quarter, talk And take the percentage on whether you able it. us during you or Any about give you Got price? Okay. third could

mean were closings I closing I things. those sales not and at of Yeah. And of making, had, I benefit a we contributions the very kinds was cost that couple points. think look there and between discounts on and was of many incentives the of we that which

always well, talking because change get But I’m previously as price a some you provided the a right? your that look giving base prices base yeah, if to it’s I could little sometimes your we incentives. gee, hard this, by say, incentive, you dollar lot amount give secret. nervous that Now not about state an were didn’t over lower. away because see time, any you Well, when You

about you, this was. and just included the that is caution features you couple competes is really price that, base as up also are what and marketplace. I there’s picking the incentives about But percentage of believe on So in terrific it what think dialogue a Jay, I the points ongoing best

of super incentives to price related on confidence undue a number both that and parts area that in lot are There’s of, moving the given external well an it’s is think features. think, understood. measuring do not I I the And side

would it little So a helpful was I power, pricing bit super answer, saw a there I And that’s know and in we those not say not of a levers. different ton I’m to not point that equation. trying really it X lend there itself X components It to other are doesn’t because be evasive. it to It’s points. just was was -- these

Got it. you question, be Okay. wouldn’t something to the another ask different. incentive -- then had, And it I’ll the guess, going I I was last but question --

sorry. I out. worry I’m

No. No. all right. That’s Yeah.

this the -- margins over see from So should continues, think cash you up when a lumber nine in higher everything weeks, do gross higher show last we’ve to or mid-XXXX seen your eight expect addition headwind in in if when weeks like move we or that the this will little maybe when higher lumber else? to

Yeah. It we’ve -- of is having and of. me aware days, for sometime spring couple I this XXXX. in and been XX-day say. we’re that to a lots pretty hard mean days XX I’m effective It’s XXX XXX-day,

feel If have if we for couple it resiliency. point. certainly rates quarters So but won’t we’ll we lumber moves feel some a stays and -- higher, at this of that, higher

right. Okay. All

my for Sounds good. Thanks taking question.

Thanks, Jay.

Thanks.

Instructions] of Next, go we’ll go Romero [Operator from to ahead. Sidoti. Julio line the Please

afternoon. bit little for to ask Good about wanted directional I more a the Hey. visibility XXXX. fiscal Thanks.

affordable $XXX,XXX give lesser more expect more smaller the do homes be can ASPs change, on around that. geographies helpful? you us I maybe to or amenities, was you just expect on mix would about anything talked due the mix. could you being maybe you You the expand Do hoping just to

features were else pricing be higher, right everybody removed fall, what looking that the we are the approach affordability? from can to incentives? to last summer this rates you So, address happened know homes as way and versus help were What’s moving Julio, last what’s course, the in at

really of so didn’t XXXX was year fiscal from the our effects much But many us XXXX. those fiscal closings into of because fiscal XXXX, carried affect for

what of that year full will the made the of that effect So that’s in the for adjustments we’ve in year -- the is the component you’re have will be the seeing really last very probably mix that largest and lion’s share. the

that’s X,XXX-foot have had a is Taking it X,XXX-foot X,XXX-foot, home that’s changing easy and it really If the may hard downsizing plan. to a a and a XX-square-feet, by is plan at X,XXX-foot eliminated X,XXX-foot, lineup rest And The a plan, we do. of to the do. edge community. a we the X,XXX-foot in

lineup it. is we plan area an the after got So where

make but And have we frankly, a again the be we been has hugely community a in there higher for us, do percentage, attached slightly joining multiyear not sure will stay a part townhome communities which of percentage some of affordable. product strategy higher count XXXX, to

buckets. the helpful? those Is bigger So that are

question plan I that. for is. to then maybe Zero have of starts Energy appreciate And Net changing thing that be, second have What to would so one my looking the I year be isn’t Energy percentage you target you’re next Ready. that -- your It do Ready? guess, Zero obviously a Net is

that an really blame don’t you upward, of -- chart. I spent was asking. for I like, looking It’s a try. we I Nice lot -- time at

get XXX% to by XXXX. going fiscal of the We’re to end

X% jump percentage But We will ago It to little I be a much to we a quarters. significant going is XXXX. make quarters higher a be boy, to want careful. two quarter. from in in the went this coming XX%

questions. will for taking the very take much I Thanks it.

Yeah.

final is our go showing Housing Please from And Research Barron from in question Alex ahead. queue Center.

I any million trading buyback, repurchase. is guys. I given to much curious, share you’re still -- the Thanks, to how debt as below on $X is constrained update around are book able also, Yeah. do? thoughts you there you’re And was the noticed there value?

Yeah.

have the and liquidity mentioned the XX we So go the completely. and that with maturity script look, wanted the off start, for we to is deal with limitation. the the repayment, to There bonds. let’s And but to we no the we of capacity in expect Alex, refinancing pay combination if

But what a We have a financing or a to do to of believe we’re give that going we an really where talked in a kind is position won’t happy at us the -- to do we do get yield conditions mix refinancing are price not ability that there’s put some of at that the do with. about. to market we

really perspective liquidity certainly, at perspective, all. flexibility, perspective and issue from what we from a a So no can of we do have covenant there lot a and

grow a right priority of would share you do there growth and about kind our low think we It is repurchases, something I given of it’s are in now, have times now, right us. land out go tell aspirations, the highest we that us and for terms In the to that’s now. business for returns for it. and risk invest aspirations But adjusted right to

Okay.

it, this. you you’ll And guys I Did the comment kind keep able do mentioned but what maybe or you you -- anything guidance to sorry next year missed for be quarter? I on closings for if think do of

We next year gave quarter, and Alex, then there. of from closings can you closings X,XXX kind of the sum to

right, Got and job. it. All guys. good Thanks you. great Thank luck and

you. Thank

Thanks, Alex.

And this we further have time. no questions at

want everybody on your us appreciate I conference year. Okay. to and talk up quarter in back call. our We’ll thank joining to Beazer the We interest for wrap soon. third we’ll quarter the in be

conference. Thank for you in all participating today’s

line the day. disconnect rest of enjoy and You your may your