BZH - Earnings call transcript Q2 2019

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Operator

Good afternoon, and welcome to the Beazer Homes Earnings Conference Call for the Quarter Ended March 31, 2019. Today's call is being recorded. And a replay will be available on the company's Web site later today.

In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company's Web site at www.beazer.com. At this point, I will turn the call over to David Goldberg, Vice President and Treasurer. begin. may you you, Thank

David Goldberg

Thank you, Homes' second to Beazer and of Good call discussing morning conference the XXXX. welcome our fiscal the Michelle. results quarter for

call, be Before Any our you forward-looking And results speaks materially undertake to known as our Form filings, projections. of information, quarter, are this and revise made. differ and the of a statements. as is any aware described or new date we uncertainties whether involve will future we statement the which forward-looking risks, update XX-Q from actual only not factors, that Such statement we for statements events any result be should obligation may or including during statement other begin, to unknown do otherwise. in forward-looking making SEC this cause which our

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

Allan. by I fiscal to call our and the time account provide back of today Salomon, quarter in for wrap-up today, details took expectations second turn questions we Executive review Bob our insights will in the are then our quarter. call from President Allan. land third allocation Allan Joining now Vice Merrill, the impairment the results Financial will into our On by prepared spend, provide community this will Chief greater remarks, Chief an second the Executive quarter followed and XXXX. come depth, our well as highlights as about priorities will cover I a and quarter remaining. Allan Officer. me Bob and will After and over to take we capital our provide Officer; our more President updated

Allan Merrill

David, and afternoon. our joining this thank on Thanks us call for you

or lower quick of to time, Encouragingly, to deliver and the the better as our and weakness at wage of in that sales growth an environment price the we across we enhanced pricing our experienced quarter's from occurred continued call. led last earnings for competitive first our were expressed results response the quarter. conditions benefit improvements markets, resulted well in This At quarter expectations combination to a accelerating that above extraordinary as improvement reflected in the product the the on quarter sequential home mortgage sales second value the affordable pricing. Our our changes demand rates, into April. at same strategy more sales during affordability. The

Building we to of count we'd operational our In sales financial what a do. community the Home per were we in Sales quarter in our did our recent from declined and rebounded terms pace less years. surpassed driven in quarter our Orders with going and in a healthy quarter, decline also higher growing said nicely metrics, than by offset we pace. the community second as closings. results expectation, first per month second reflected line expected revenue

identical nearly Our percentage was and operating as last a And as we we we a margin from just than guided. higher gross year as revenue. finally, to land anticipated, was lower benefited of margin better SG&A spending

capital As million allocation, investors we $X.X share buybacks of with it more than to debt the and during relates $XX quarter million in to million retirement. returned $X

completed has program. board have our reminder, million. we a $XX date, $XX approximately As authorized repurchase share a To million

and targets expectation. returns strategy, debt have our our continued which to our We have that share be In exceed financially, also growth said retirements that buybacks to balanced short, improving we operationally and continues less will leveraged. and execute our by year-end

development. California a future course, these basis. or totaled previously an These XX XXXX. impairments and to assets assets. currently acquired impairments assets, $XXX The impairments of after-tax were all in categories. quarter other news The held which occurred for the Of as on impairments second two of million were XX related on $XXX land the big was in before classified basis certain pretax the million non-cash on

The first related to nine projects that are actively or/are under development selling.

fell pre-tax and Southern across spread this the million impairment that contributed California. of $XXX were into Assets category

that related California. The classified held were to land have decided pre-tax held The category future development still to no California. adjustments, we between second six future to that these we northern split impairment $XX for in remaining communities was for land and sell related assets these have development. as southern million After

assets characteristics times. underlying held We our of have many discussed the land

have that they past them to market was delivering been improved would the when recover tied as company's previously several activating the carry capital up. Nonetheless below over years, began we've us said consistently to homes, these conditions gradually that average. begin We margins assets the allowing

been As demand is three considerably true homes in months in was XXXX. last affordability new noted, calendar of the slowed where has particularly widely This especially for challenging. California

us lower reasons up this the Slide is our The the brought for the of future we line. this about do, norms, As actions do to underlying market illustration open slowdown certain and works. way From effect assets undiscounted allowed. that adjustment line accounting an competitors, below pricing to higher think current reductions above add market sale. are prices no impairment in those process flow for is The cash had community is even the easiest of margins the value. how momentum. below acceptable flipping asset the is an line impairment and achieve we we book if market and to X to its line impairment are they the impairment for If demand of that assess communities sales a needed standpoint, observed have accounting with a for we the of stimulated concluded broader price took the level reactions these

accounting an the cash is point, cash the amount below market the must price led align up to asset to its with if to impaired. those below straightforward. assets took aggregate At flows Book the we However, reductions current value, line add impaired. flows The be the we that for

previous same the the current difference community. and We value, present of of a book have to for those present but The each flows flows varied ended book value. cash just under loss of based those duration considerably on the the record value of value cash averaging XX% between up the

second condition assets the sell the that improve to These value. of are related each decision California on to This at assets for carried market the we expected was our decided based of their instead The intent asset, category to impairments and develop. realizable our strategy longer-term ROA. now

communities, impairments better recovery use. these With repurchases, to cash, benefit put reallocate are in allowing positioned this Whether new us, capital reduction our or shareholders. to ways to we accelerate communities share over into capital be lower of these gross margins, that debt results I'll can cost leading the next is Bob us a walk the will through EPS generate detail. At the basis, call the and years. better higher in to more turn to to point, with few this behind EBITDA And in

Bob Salomon

afternoon, Thanks Allan. everyone. good And

to X% Looking home X% partially Homebuilding results driven compared the year, $XXX,XXX. at to $XXX to community by decreased With quarter month prior X,XXX. of ASP XX% orders revenue second X.X% X.X. to increase by offset our decrease per closings, million in dropped new per sales in

basis increased. XX%, backlog homes Our was and sold the over number the quarter of ratio up in points nearly XXX as closed conversion

we the average previous and count from increase Our a community with XX toXXX, rose XXX the communities quarter entered year, an communities. of

about $XX Our was results. of related to added points. primarily of led ahead basis of EBITDA abandonment interest our to XX.X% adjusted improvement an which second expectations, is XX quarter points was gross million. a of total as and benefits This margin excluding to impairments percentage revenue SG&A which XX non-recurring amortized our basis XX.X%,

$XXX Finally, driven by certain net the operations impairments California was on assets, our taken million. continuing for loss

these impairments, profitable Excluding an on were operating basis. we

for Turning now third to our the quarter. expectations

sales improvement orders drive margins. year-over-year, were to XX% to similar be we up average expect community continuing we're Accordingly, up count. to in advantage and of Our offer increase April strongly this our higher in X% to take

closed and margins Speaking thus on to in in expect be backlog, margin, XX%. far of based third the gross margin quarter the we've gross we about what

a the mix course, quarter trough that either our represent in that a sales Regardless, margin could should the by for quarter Of the influence in third point of direction. quarter gross year. the closed additional

we closings quarter. through the earlier because the heightened built represent homes and in will incentives work in the be a fourth of to percentage As from year higher

be year and the the should prior $XXX,XXX second versus ASP quarter. Our up above

We should be spend SG&A on expense year XX%. basis. over last be of this above million. a component David. ratio a backlog below $XXX land should cash above At to conversion And turn expect finally, it I'll the point,

David Goldberg

any prior million following in Allan year, we Thanks land land land peak reduced XXXXX million. California. less California held development is noted, $XX in no have Bob. strategy longer for we the for to our have quarter, $XXX balance This our development we to relatively of In future flat long-held spent change with the future versus development as and million in down respect and our assets, $XXX held from a now on than

of half we second down year, the two to be this the spending driven factors. land million prior versus $XXX approximately to Looking year, million $XXX to expect fiscal by our

balance discouraging continuing bulk increasing our options the of our efficiency improve large of sheet through we're First, to and use purchases.

spending half our we components On our slide coming the acquisition. the count Venture Second, outline the last XX, Homes our second quarters. expected of in land community of for growth included year

selling have months spending current XX majority land ASPs price. The us count. will of has for these communities past community our Our growing over positioned average a the new below

than more is active expect higher growth We though is end by trends XXX drive quarterly to The forecasting fiscal increasing on inefficiently without base. with strategy communities of our our XXXX assets challenging. improving continue to EBITDA objective asset our exact our balanced to the returns

we've sheet on top -earning thus the quarters, producing revenue. continued we In You expected discussed our achieved success assets can slide ROA far the non previous as in see we've XX. the balance improvement started at of

the While this of is quarter the value assets, these carrying took unchanged. story underlying reduced the impairment we

of held that Over we'll revenue land contributing months, returns. better today, virtually start the the we next all non-earning former to are producing that XX expect assets

with in buybacks shares our Since the to have more than or the the first than repurchase We total progress programs representing deal and X.X completing November. X% continued ASR quarter, execution in shares, our million announcement a more debt their company. to $XX we made of our following of great share repurchase bringing million have

debt XXst, we retired notes. of more during we quarter, through senior our March and XXXX and $X began than addition, XXXX outstanding our In repurchases second million the

call significant targeting a non-earning net and profitability, debt EBITDA of conclusion. y our monetization let million. With improving debt capital floors previously adjusted reduced adjusted strides and $XXX the made we're over me XXXX, on has our to turn last Allan the to further including the indebtedness in we've the that through EBITDA our Since back XX improving debt. X.Xx declined total his than fiscal having to reducing leverage, by years, more for to Over net our

Allan Merrill

resumption of growth this spring, and the by that strategy right confident encouraged is remain healthier demand our We're balanced trends David. Thanks this we for environment.

mortgage Over more the community of quarter, our with footprint. include homes, support our and platform gathering strategy our affordably technology priced expanding in this and extending activities choice our next will growing count

the In want terms accelerate shares. ongoing repurchase confident of have capital, opportunistically and resources in repurchases and I'm with for the our our on the to to allocating turn thank invest And efforts. team our their continue coming business, years. that I'll people, to we'll debt into that, strategy the we I Q&A. to to take over call over the operator us execute our the plan

Operator

first Jay with Wedbush. Our question Instructions] [Operator from McCanless come will

Your is now line open

Jay McCanless

that is for sell. to the you that any afternoon. cash with had I Hi, that any guys thanks of taking questions. are you guess my sheet? under looking And hit balance asset to timing when Do I first the the have going contract, six good is one

David Goldberg

in be I quarter, its of made a to under commit this this for to yet. decision priority it The it'll us a timing None contract cash, point. but Jay. convert at but was No, to high can't just

Jay McCanless

maybe sales this it First the slower and ought walk quarter. I markets. in those factors? price do deceleration through some maybe you just it some to it of you Could guess was maybe pace, ahead was go

David Goldberg

Sure.

acceptable sledding point our nice perspective. particularly last benefited price a were level remembering And and think where what we we pretty sales deep each and in over all pointing that And appreciation December a the realized So for And it was the prices and by time a tough a November, we're any period rates Affordability I the home were us to paramount communities, in years. that was sales. new in from from uneven. any dive an over. of And in market breaking market. of California structural October, is that number simply sustain of we level really context rising we're euphemism of competitors doing, high that led news issues that's of out not our too at home have

those gave made chance, What within active decision California a about we markets and think do power the pointed XX years. XX good Southern buyer committed bringing comments, with reset ones out we markets are us at? Which ally. books sub geography the on also more but I and So a northern products? to be we are been to and communities dealt about it our where we the really the active, than Which Which that is have as of here profiles? assets And my to? we in XX want Jay, for

we places we've in acknowledge that are bigger said, came on this to build assets And we've business we the those the our build first this really be. and but these is in or a analysis of and can it build now velocity was quarter, did. these fiscal deeper in led we focused time had that strategy, terms together we is to to that it trigger time, let's said, the kind going California, that and locations reduction prices we want growing but assets, to out all So the to really go we got a to the it well, like clearly

Jay McCanless

the that's impressed QX like discounting margin of about is in gross levels this into how see in I that QX up to your gone bit think you discount And moved a sequentially it's I to last talk Maybe which little the what can going was not be to from versus line, year of April? we've And seen QX as you've looks year? some from competitors.

David Goldberg

So a couple just clarification. of things,

of had we we more margin gross in XX.X%, that and like benefits QX really some acknowledge XX.X%. it that, Our was

mix already depending quarter around got specs, oscillate XX%. We're closed, will We backlog and on XX down the the we've right. that of quarter we're that and points sold specs percent-ish XX% a what based going looks on of range sell We've to selling still and XX or have those the in think margin are in the in basis spring on gave heat bracket the the we based said them, about we up closed around third season.

So from fair I characterize of or to flatness QX. would say, it's QX kind to QX

structural more of your Let me get part question to the now.

was quite from December about was it think if than that selling you in was And less up a we the it if was year-over-year. year-over-year almost not and about, think March you double If was digits. frankly about, down sense talk better because what year-over-year. was but happened January perspective, flat flat better April not February than January

heightened deal what the to We time. that with. of activity. and in some second February a selling incentives the to fact with happened reduction that has you incentives that dealt pushed and the So we'll in quarter in in we in is January deal going quarter and stimulate is third we're environment of expect reasonably period has what manifested But itself over would

quarter, that that's dynamic that kind the I with we largely in through have but on going third of work of what's incentives. think

Jay McCanless

you on the Yes. straightening margin. for me Thank gross out

David Goldberg

sure Jay, to I Yes, to and out want properly. we get clear be this make

We third trough would for also the quarter the said margins. be

QX we improvement confusion Allan see into but next that's where and year. QX Now so we in and as as was improvement head clearly maybe QX some said the

Jay McCanless

we talk, and And Was life can guess was you I of back talk came April. think other active - buyer sudden that only the to that? guys I adult heard for from a Allan, also had And double-digit Thanks if I you at builders more March David. other you growth all that could question about said you the April.

if that'll guys comment things So on be for two those it and could me. you

Allan Merrill

and really segment Well, footprint across every April. have turned differentiation as I I strength in you. say don't comment a and point into each turned at February for would March into market our seen March we've price

our profiles hasn't experience. So that I particular buyer much distinguish wouldn't try been so and

Jay McCanless

And year? then versus orders last April for

Allan Merrill

Yes.

that more but to correctly do want had margin the up. regain we pace Bob the increase they of that for was We so. I month, count face So an strength is in actual were up think established thing in community one than

we'll used doing it driving margins. the XX% and not it. month month, and in in environment push one it's going order environment we're we're interested it April or we've because So orders helpful or to keep We already we've that May better in but in one one other. that be is to guided And both I'm margins improvements been using X% just in, using

Operator

Our next from JPMorgan. question Michael will come from Rehaut

line Your now open. is

Unidentified Analyst

Mike. is actually on Hey. This for Maggie

of kind last up to Just to the question. follow

that better get new April at price markets or saw specific throughout digits, orders quarter up point to that the any and trended every color? there You was market you that call and are more strength said some in out that like that double you'd but

David Goldberg

us other talks few will answer time a macro your it's be are directly, I mean little not or a others let saying. a in because were clear. Sure. at record what Any and sure there and bit at looking a builder data I for about market make we say, question well, is that places may but any gee that the strength just always me pretty market, you let dangerous that's me,

a a one distorting. mix communities and So quick And be example. can between year another of give little oftentimes the bit you I'll

what quarter. in big sales was highest in Our XX% Vegas Las numbers, in did We're year-over-year. it division really but is pace down the of what, proud they second guess pace

in and a strength. year-over-year where pick is it up the want for pace. great individual us we some to careful the examples sales saw that's just be nice of in area as mid-Atlantic strength in so markets. and places Raleigh the about we best saw story country or comment That where the I to We an is was down the of tick So is story it's in

Operator

Our Alan next Zelman question come will & from Associates. from Ratner

is line now open. Your

Alan Ratner

Hey, questions. guys. for Good the afternoon, taking thanks

So the sounds previously projects on books like the that been for they've it them? they on you was charge first been impaired during the the just impaired while. or downturn Have on took a

David Goldberg

annually or reluctant in held may recovered, since a be the they an tested were more was once been assessment answer would could they for the had have One little impairment have impairment, into because but to land definitively. XXXX where I not impaired them or category, be way. same it went of they the they that XXXX

So largely assume it's untouched. to fair they were reasonably

Alan Ratner

okay. it, Got

necessarily we indication to been assets California have that over as risk extrapolate other might an several last that be there So shouldn't some purchased there? years the could that

David Goldberg

I duration you, the were you agree to extrapolation. with make should we of That's careful not that these assets. out point why

Alan Ratner

And development guys held from given of I an others that standpoint, is future the but past company the had land more communities and or number of just said guess a I know of broadly a for think when indicator of potential I have in indicators bucket you kind the past --in small impairment.

if curious that getting other that maybe assets, company. just you there us other to the close of ledge they're could for you walked I'm communities maybe kind Are just about So talk where through?

David Goldberg

So up. a kind things I'll and this split couple of Bob will and of

The related; about that be they're be watching a asking I may to product is related; question may such is it reason there have closely process or really there be profile for in may that. not and standpoint. of develop communities strategy it in we is asset. number impairment buyer our related. some entitlement are think not because there communities, an It land that infrastructure They're it small a from a you're we held that

that's different intention that's reasons million and a those develop. held a variety don't a current bucks So have of there really are that why typically down to intent. And bucket land around $XX bucket to in set we

business our to job question your rest and better the a Bob assets. process the can with about I think can those than I of gets do talking

Bob Salomon

go either that XX-Q, our We actual Yes. certain we got impaired. margins they mathematical and cash And list into communities discounted. we list. run of had when call had have where did were about reasons that other watch other as discounted had below we reviewed XX category to or a either get not And that on X flow X level that or them or the review watch we you communities process it you'll you reasons where - before on expected a notice margins fall

Alan Ratner

your could to a I comment, in If California. what's about very We've that I a just guess, kind in one high-cost you're longer-term you guys, That's a California? give lot deals Allan, here into requires helpful. going the environment heard sneak of certainly make more there. capital you area last maybe sense today lot the mentioned for to And a just one it's but and general investments. quick of recycle commitment just

that So longer is term? a still that to are is market that-- you committed guys your

Allan Merrill

a people lot I'm of glad because are and employees you call, investors sellers. asked listen who are and some are some there to are land and this some

in that. be the chance that So I demand great what markets. is if appreciate why fundamental concluded so, that so a is and took very our it And or asking the much assessment to questions that extent We about imbalance you market the we warrants this through sub really in capital. ask California, the opportunity which to and

about our we scale pick points to our your spots. to others have relative means Now

want I which think product we profiles know can to sub And types, to we which which buyer at. have that. excel We markets, do

profile, high chance about and I we presence have Oceanside. biggest Our builder we're disciplined through time. our X,XXX market. strong not who will IX California whole probably be We've Sacramento business good coming return master gives to buyer have market in us. are estate being don't a and really a have a invested California Southern unit important for not And the right on California, appetite cycles. we long ambition Sacramento We knowing least a in sub but bunch we've business us and Southern million now, our think those plan be in asset this We very IXXX a the markets. in more a we're I think there to year. a can IXX, in real in $XXX got there. the of There's going like for In online And got , that's out

Operator

Our next Center. Housing question will Research come from Alex Barron with

Your now line open. is

Alex Barron

you. thank Yes,

I heard were on move can mentioned on that comment in the specific hoping was bit more I to level these did these you assets or higher type more you communities location? a more California get color So up price were but into

David Goldberg

Well, Alex, the in all We about individual and than were we around were of And product a as don't of they of Southern talk old. about was said context. the variety types, XX nine more variety that category communities but California. they one years which spread gain locations and of

some they and I know but A we So that is wouldn't the And B to locations. A is we've say is common they think I had really the strategy, and reflected going what that ones. other sell we've for recognized what particular and the locations a location thing we're kept us B in

Alex Barron

That Yes. was next question. going my to be

you strategies guess what So guys be more to in forward you doing going I going identifying What said spots your are forward to the pick when your you're are going going California? you there?

David Goldberg

things demonstrable definitely what whom and We're first, we I'm is. are and put comfort that's Having long-term in But materials really price. we've buyers. have the EVAP believe use terms into important to just don't we compromise the about down construction because that there the That other think second that chasing not price the very We're expertise and for and value and and a Yes. made Value things include are energy. that, we decisions Extraordinary means their Price. we we we not move-up said that market on lowest going want get Affordable livability home quality we and point. sorry that lowest absolute to are that at There builder very, be are third acronym for of to that builders can't in an

handful of an a So single-story are competing that is codes, value what what there a been good really where price. DNA. And we we're legacy oriented We've with move-up on product lot buyer we've successful what for isn't been got long school the we've but it's time, of And We've first to a very zip that's first exclusively of in we're just base districts going worth. That and a of studied communities. good handful the California awful got of of lot in at keep profile doing. time.

Alex Barron

Got I I any this next don't if points range heard be I say basis or the is missed roughly points to where quarter? know like you point or I thought basis the it. you expect you margins And like give the margin then might if sense low of give like down be couple any you it that of quarter a did

Bob Salomon

the said would margins could fourth to XX Yes. the in be in specs Alex, trough well. in as additional what we quarter I we but down, the or expect was sell up script improve basis in as the we that that year XX would think but we'd about points quarter oscillate the be the after

David Goldberg

make basis XX but gross on regular up X% a more to it had did non-recurring about sure we margin that up a now And quarter, heard, put items point you XX.X. so this

was that and what the then gave. we flat So about relatively that we guidance range is talked XX

Operator

time. this at questions further no have We

David Goldberg

right. about at our forward Okay, XX quarter look We Thank second to to days. participating you everyone call. in earnings talking we Well, thank you. all want to

Operator

Thank so This concludes time. for in today's conference. participants you All today's this at participation much disconnect may your call.

Beazer Homes USA (BZH) 2 May 192019 Q2 Earnings call transcript