BZH - Earnings call transcript Q3 2020

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Operator

Good afternoon, and welcome to the Beazer Homes Earnings conference call for the quarter ended June 30, 2020. Today’s call is being recorded, and a replay will be available on the company’s website later today.

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

David Goldberg

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

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

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

to by land expectations our greater turn spending as in an I come over and After will then the time results Allan me new Chief questions remaining. full are sheet, our Vice and and and prepared quarter Allan. third the Chief in Joining Financial Bob our Allan. the the year. for strength the will our will pandemic on response quarters. Executive then take and now to our market Officer; fourth today, well balance review will Merrill, Chairman the On for by as Executive detail quarter Allan our the strategic Bob Salomon, third objectives quarter, I our the remarks, provide President wrap-up the a will and back coming call of today cover Officer. recap our home update we highlights from our and followed call to

Allan Merrill

to call you with leading third Thank financial and joining XX% in EBITDA. in results us very growth the strong gross adjusted increases both quarter, margins, our nearly closings in this afternoon. home generated on We for

From May, accelerated strong a June for we ten fiscal sales Together, us net environment have highest to we in best a leading year. our also finish have very difficult June, income April, perspective, third in in to which a our in weathering in quarter positioned results pace generated these demand reported decade. a after years. sales over the We improved experienced

the environment and my safety highlighted and this objectives. around to Last for outlined response employees, our a the As our David outlined, for pandemic, priority comments ongoing customers the are our of three This aspect with of the continues by to our quick ongoing demand be organized home of of response we balance the afternoon new our we initial to trade evolving review topics; every and the implications quarter, business. health our pandemic, partners. priority and place on highest strategic

third revised of the from adjustments. addition the protocols, our course numerous In were safety over and we to and financial operational primary practices. these outcomes There reviewed quarter, three

we First, a full on maintaining quarter. end the until the draw of our revolver preserve liquidity by

and While than other to have disruption quarter, greater closings. With fully seasonal repaid to we it clarity and with in the for deal this interest not it liquidity sales that increased the any currently intend potential we ensured cash strong had expense needs. drawn environment, in do operational around the revolver substantial

apply the allowed to new criteria to an quarter. every in it land importantly, and us But supply. underwriting. spending slowing paused we new Temporarily to against during employment, contributed our land household to proposed Second, review transaction spending COVID-related increase risk income more risks to liquidity

of the handful positions a exiting us in were transactions. renegotiate majority pending cases, in resulted of vast to validate review we able our While or

cost we our growth lot of a And ambitions. are we the improved forward, pipeline business. Going have structure supports third, confident the we that

very wage demand ability new In improve we the home a rates, April, That was unemployment, gave was was strong, COVID-XX growth, low to pandemic. arguably opportunities high our consumer us prior And quarters to sell quite by to were because build that to very supply heard important there housing and and March, than the mortgage the recovering quickly, low environment, was rebounding homes and number you’ve in reducing us ahead. for the our late of supported Prior realized better adapted we to pandemic, to But June, saw plummeted. market the the pandemic. growing way read, to by demand a confidence. demand without new working industry-wide and momentum in low we housing as began cost As structure quickly.

for in two and is crucial Only this you here the time But what answers. and we did Where from? questions. driving And is may raises reveal is it sustainable? us, For it think it surge last. why that come demand will

buyers; from First, schooling increasing improves affordability, especially rates to led This to shelter second, home mortgage from lower. even for a gotten of it low access real homes a plus home time buyers massive have is for and all working segments, as buyer reappraisal have first needs. new

over Our better used crucial homes plans new most time-consuming or living features. ready outdoor buyers Plus and advantages telling homes; flexible us including and and are floor more don’t cleaning improvements. apartments offer costly they’re that require move-in space, more

reluctant elimination boost tipping by revenue and the from And efficient Despite only capable are balanced this which from than growth to of be for of posed to leveraged to can shift employers the faster observation, a return enormous be U.S. working longer-term the appears This and from the by strategy, pandemic, predicted about desirability and we homes. growing preferences reflecting by a commutes. inevitability demand places, the the embrace deviate represent which our double-digit arising no from workers, for have challenges fourth, more may work of that a new have but less durable. most millennials decade, the some demographers quarter of experienced an reason have a benefit many work, different housing remote EBITDA is watched point remote speculative completely ownership see millennials our Despite moment productivity in balance of particular, the challenges sheet. so Knowledge employees closely. population, their Third, homeownership. both very presented assets on targets to be

our increase liquidity to by plenty assets the of both we our long-term grow monetize the below reduce to course billion. controlled will and we generate and As on longer-term option, share $X of lots business debt remain

discrimination injustice Finally, of I for want and support elimination to express our the our corporate in country. prejudice,

pleased a my has company our employees corporate and to media, team in the shown our enthusiasm have issues our I shared wrote addressing these views about extraordinarily communities. I honestly to learn discuss social We expressing and personal these our on to letter our both and commitment issues. with am

diversity steps with turn employees, are to call shareholders. us taking over will customers, inclusion going know greater that, the to We that I of I’m partners our benefits and With can Bob. to the our allow efforts make difference. share trade a and

Bob Salomon

the $XX As nearly million. results performance earlier, EBITDA metrics. adjusted XX% This across up Allan by highlighted our prior was quarter core strong year in was driven to versus the

X% Specifically, in by an compared revenue X% year, as to benefited with last combined million ASP. we grew increase we in our increase a $XXX.X XX% closings, homebuilding from to

This margins with XXX revolver our million. approximately by margin, abandonments a around $X.X a million structure. our was up GAAP revenue $X.X debt basis efforts million, purposes. gross and our and activities. with in was of excludes simplify ongoing to $X.X increased result our with interest impairments process, nearly associated expense on ongoing product through excluding as due quarter SG&A interest, of points XX.X%, onetime refinancing spec charges margin Even was and fully to up was amortized entire our Our cost XX.X%, Even down re-underwriting to to reduce retirements cash expense million drawn homes basis abandonments, $X.X for and Total total that, associated totaling impairments as incentives. however, our driven the decision and with interest XX a percentage points. improving primarily down liquidity carry prior

tax was in million quarter, owned EPS million taken average from quarter The prior rate together, the $X.X XX%. this income continuing an Our operations up million in expense for of about tax $X.XX we or year. $X net of $XX.X versus the

offering the full for As into we the conditions guidance improved, our clarity and are the comfortable quarter. expectations following market fourth year has into

fiscal full to adjusted expect than level last up would the impact offsetting a For fewer with of XX% This big represent highest year, year XXXX, a we X% compared improvement EBITDA of margin; produced closings. EBITDA in more to be decade. home to of the gross second we’ve the in

our impacted For quarter, operational metrics, pandemic the the of timing. particularly variety a fourth has

usual in year. impacted deliver during our conversion such than will beginning but first the stage backlog we fourth COVID to completion For XXXX quarter low The the different. both our is orders we Accordingly, backlog flat the example, the backlog rather larger XXs, like expect very and this the of quarter of share had the range that will last a fiscal XX% timing than of the the level of this starts year. of year, is quarter be high last rather in outbreak spec than essentially ratio

occurred the third expectations margin in quarter demand our improvement during cost strength Our reflect the that and efforts.

around up we SG&A down XXX be dollar absolute will XX%, Specifically, more X% expect be basis gross and than basis. points an will on at to margins least

over component our cash At with to million. spend $XXX it this of will point, turn the exceeding Finally, likely re-underwriting land accelerate, complete, I’ll David.

David Goldberg

in million. development on the approach land-based owned regular position more the a million business unrestricted by growing sustain $XXX point the least than and supported more share quarter in growing ahead. on ended of to-be-built us at and risk. this over XXXX. and controlled our the share and that process. controlled pandemic durable or sufficient borrowings grow normalized have the the quarter better than of environment, With coronavirus may re-underwriting reflected XX-month our expect we of liquidity process and spec on position by homes to three-year This acquisition land were liquidity, our fiscal us model return fourth both years land in closings. spending expect to outstandings we quarter, levels demand just This complete that And At cash given with our the of during the We no in of mixes expect ongoing under a trailing Strategically, totaling of demand allowed more revolver. spread and a into resulted to reduce With $XXX third we double and options, long-term land the to leverage land our evident, on representing business we development $XX with to the and reduce supply acquisition larger our to year. beginning impacts more third our re-underwrite This course, last position of generate options, supply take three-year a and improve and disciplined quarter, have a and spending land a assets assess fiscal spending, and we’ll pause deals activity the modest than million a improvements allowing process return economy. to resumed spend, lot

$XX will until our back of have each of We in repayments for maturities total we on Allan let $X have debt call our no below repayment, the next upcoming conclusion. After his $XXX deleveraging the me XXXX, clearly million our bringing goal over significant September just term million loan that, remaining our over to defined With turn years. path and includes three billion.

Allan Merrill

The third closings was margins, revenue We driving XXXX improved very both growth. and increased profitability successful. quarter fiscal of and

that with the to business objectives balance growth coupled steps ongoing half These realize experienced tremendous our improve in quarter the we took and the position the our to us also cost We momentum back of results, sales of strategy. structure.

and this confident strategy to call our the into operator fluid that, for While resources team years. of people, be, there over coming the Q&A. proud have operating With continue the and improve execute associated we because during let with very and me plan long-term challenges to taking value. will that pandemic, to over the I’m the It navigate have am decisive to the is the of to them steps turn our us I many been, shareholder environment take

Operator

you. Thank

call. today’s from Instructions] from We Associates. will First Alan question of comes Zelman & [Operator begin the now question-and-answer session Ratner

open, line sir. is Your

Alan Ratner

afternoon. Good guys. Hey,

congrats First off, on and retirement the see on Good the promotion. Great to to Bob upcoming to David both. luck.

first, And to quickly in is just probably over now. of I the accelerate back count. on guess, those offset looked deck any guess, right way that the it to just I’m just like question, looks environment, like, going is this guess strong the a community I’d to count few in Have I community that a quarters? quarters. declines? occur community a similar way you next right, your bit Atlanta how meaningfully little bit first might fairly better in thinking magnitude the next based count on Slide of of to drill little of M&A love prevent If there the reading here XX drop-off I’d on, pull understanding broadly, of I this of you exactly growth get to So to love what that sales couple a there’s obviously, looks if a did of potential couple to deal a years environment in ago, more the into And cadence

David Goldberg

Yes, it’s Alan, Dave.

Let it. address me to try

right you have to So aggregate, community in to to enough that I you a see can communities if and neutral the But in the saying you would the have decline. pipeline more number. XX, enough you’re going count we’re in look on some I Slide closeouts get that offset think say openings,

guiding the not magnitude. we’re magnitude, the to Now

about not specifics. We’re talking the

know, what But are There’s we’re a we community I some levers pull the to to and in everybody be the want of there’s – have As correct profitability. the sales you down that really look, lot right? there’s predict on, think you is, margin, There’s lot a But, to there’s think to going timing. there’s it side communities pace, of difficult I of focus that business. deleveraging doing, it’s think plus driving we to count. quite where

out. But So are we’re trend, looking figure it’s a community not you’ve just count there we that identified trying to the at. it out and certainly,

and to talk through. while, did probably kind talked I think we of look all likely that a markets. the in that not if more we land them deals M&A the find about talk be always about about make previously, happy And I’m perspective, We you they’re thing as acquisitions. So for want as from come The We we We interested pencil going sense our kind to of of M&A. don’t think than – as looking. is we’re answer same to know with in deals at that existing right?

community But And drive So drive with is count. on to our and a to again, pull higher growth our yes, look, strategy. we’re there’s EBITDA. focused very balanced that focus levers of certainly lot profitability

Alan Ratner

guess, broadly, question, prior Got you And to price I’m it. can I helpful, That’s Dave. I the it you July, dynamic it, all back here those been closeout? tracking? us I about And sorry with give versus guess, that’s if commentary any then, on thinking more tying but are communities missed the pace approaching how how

Allan Merrill

last by which you But we XX% Alan, a it’s mean Allan. was The same put acceleration the reasons that I been we pace, saw And are June. really up almost finger year-over-year think amount. very your good. in in in through quarter has up not And were the pace margin. remarkable. felt one, few but main there It I is for that. on the July

and in emphasizing have and and I margin other. think one and, not all markets, the been pace of it want clearly the call I we I our or

role. And much our in definitely that’s a playing mind, very so and that’s

other the price in really where areas greatest price-driven the that value or have better thing and think play, margin. get I area to buyers are pace action is the volume both, some we the has I where think the been we only price where a the right, opportunity do or

Alan Ratner

Thanks a Got right. All Good lot. luck. it.

Allan Merrill

Thank Alan. you,

Operator

you. Thank

from Sachs. comes Goldman Susan Maklari question Next from

open. Your is line

Susan Maklari

Dave, and very Bob both to congratulations And you. Thank exciting news.

Bob Salomon

Thanks.

David Goldberg

Sue. Thanks,

Susan Maklari

or the you how of terms specs of about thinking it about months that quickly. to sustainability any on are question we’ve is as inventory first is last maybe ability thinking close in seem what to that? that have position have Are given strategy seen their your you really trend? And to given the over few relates that specs changes focused outperformed My builders buyers

Allan Merrill

year, XX-XX, Sue, for we number we’ve couple XX, in over In may an the I that as little we’re look next out equation a XX that’s into have units. quarter, provide, been value years. in last probably be. not the to think our we range of it a going But I think given where mind the really just oscillate of And we bit. the the

really the increase competitive I marketplace. think going just specs extravagant us. particular, we’re don’t so an see strategy to And for because in I some think In in is on response

to sure see that bit happening. to we And of to protect our We’re I want a it, there’s starting fair we a that think we already submarkets. in where going and proposition into be make wait value knife fight don’t certain

this, So – I community level. it’s like at really we’ve our position. always said It’s the

model, slight heavier almost slight really pretty majority a is think, operate some to-be-built that to But with in communities exclusively operate or durable. blend basis. to-be-built, on our preference Some spec I a

Susan Maklari

have pulled sense that, been that made and and housing’s should term, still earlier the of nice Allan. near the some last for do favor, you some that be seem trends forward seen think up, comments this quarters. you pretty the months maybe from moving next we Or has the then now some few been to do this a Thanks work some long-term home And that’s we’ve the get coming Okay. we low of over demand in But and rates pent-up such. more levels about tailwinds few see demand? of following that growth some in that has through growth sense the over you

Allan Merrill

deeper different good a certainly the things been during my this March into time fiscal just By So what shifted happen. likely pretty got June July, third were and convinced that we quarter, May we saw from thinking had felt, it third further bit. and into I think our pent-up I quarter, little into catching up April. on June we as as two and in was

the forward. teams, And there. I were sales is going don’t to we I think it as think demand our that to is about that pulling talk we As have happened what’s

our That matters, the giant. as been go. people normal Gosh, car, in house bigger would into of six time had five space, the I over or apartments if And office, the it more apartment. folks of to awakening in a cohort we really occupancy at aggregate had time I kind dissatisfied time or housing, less off got the new in their it less few industry home the those in years. think And say, years, the over who last the I bleed who of with look sleeping much last markets have have we the and now the in about seen

I in used awakened a I well. as think occupants homes giant. group we’ve think that of there’s And

So presented space. we’re more looking space, at the having more opportunities flexible by

the to right, to to the see want the for like I don’t get So We temporary we’re enthusiasm, this and employment to mean, the know intentional do unemployment say, quarter. this comments and need disconnected I my feel that a that proverbial we that the markets. a while, over the We this I tipping is improve. the this want very the that sure, I We but pandemic to not be but not We long, was be it. awaking the we very can’t, in of from I careful. And to numbers been point next trends They’ve this to feel I optimistic pretty millennial just today. kind numbers thinking need has side of continue is look little of number I constructive. sustainable kind giant, at absolutely dropping what really with the work, is about talk for people the GDP our to sleeping whether be buyers. in macro-economy. those is. environment up. next quarters And saw back stirred the for of or other

our at in clearly I that’s for new of we is look decade. that aggregate I homes, latent overhang. us nearly that front haven’t serve for so think in society now. when And an demand to that’s total begun But a And we think

Susan Maklari

luck All with right. Good, Allan. of That’s very Best encouraging. everything.

Allan Merrill

Thanks, Sue.

Operator

Thank you.

from comes question from Wedbush. McCanless Jay Next

line Your open. is

Jay McCanless

Very Dave good news. everyone. afternoon, Good Hey. Bob. Congrats, and

David Goldberg

Jay. Thanks,

Bob Salomon

Thanks, Jay.

Jay McCanless

absolutely. first – question yes, The

quarter? was of I what the first that spec did question How had, last year? The to the count at your compare end

Bob Salomon

it and less we of than Jay, Yes. of last about at quarter, almost XXX the end a specs year. the was couple had XXX hundred,

Jay McCanless

sales the the I last trying you you it to down, monthly the – And absorption, guys to like was year-over-year. are versus more was get or to down the price address a also looks quarter function as things sales community of do there wore count that that but on all some shortfall know need was

Allan Merrill

course pace Well, what little of of X.X%, a was quarter the remarkable. off was happened but quarter for which last was the three, the was year, which pretty the over

history, we we think know, about the highest pace four reported I in June. June were having over XX in of don’t I we’ve years; talked had

into think was confident a pace then of And were we very So the kind the is in good I price that it pretty number that shape. frankly, on side.

Bob Salomon

tell your had, no spec question, that. original the specs. just would timing; and deliberate, It April March that you some nothing was there’s specs. I there to Yes, to And we on slowdown was the shrink side, lets hey

some as be mentioned of basis. the strong environment timing just a similar think, of demand earlier, April, a situation. and was to-be-built and down and how how some kind I And seeing pretty slowing again, There’s specs. on company given specs assessing we’ll for frankly, March kind spend the the kind Allan to go-forward of

Jay McCanless

happening. the surprising lot wondering up the on given skewing April a But everything mean can the the I’m than higher the was? it XX.X%, then about it’s rate, is quarter? how that’s can talk it’s I number, And if progressed through you can not really just rate

Allan Merrill

time that got strong to we I Jay. rate with the even little especially the is, last were you down bit. sales flat by year to June, a can pretty June, in and absolutely the tell numbers It gross

June, were normalized, by gross being So you in usual. April, and things pretty the a better than number had even bit little from April down the sales but

Jay McCanless

for Thanks questions. taking my great. Sounds

David Goldberg

Absolutely, Jay.

Allan Merrill

Jay. Thanks,

Operator

Center. Barron Research [Operator comes question from Next Alex Instructions] from Housing

is Your line sir. open,

Alex Barron

of And bit also the promotion. focus, again to the little just were to I on And if on first-time retirement going congratulations guess, buyers? talked wondering wanted I your a that year of about. sleeping you the do percentage kind what And again you us I and you current trends where or you. sales guess, if Thank this kind of giant remind next see persist? entry-level quarter, can

Allan Merrill

clearly about Yes. and try be It’s price serve, the the and the first-time the always look range, of bedrooms, the portfolio, product that to of two other that buyer. components realm that the But skew are move about down of you low ranch we competing precise buyer points for little buyer then and you’ve buying of category, but within the XXXX, other if feet that And plan, a important, is down in half, either sort buyers. the our three right last whom level. a unit. square tricky and they’re not within that’s and got gathering’s XXXX about, Alex, at that footages we’ve they’re our exactly typically square peer It in then think around our single-story is which first-time thing more at is a first move-up or mansion the group. probably got living, buying buyer for to width half a is move footage And square kind business

millennials. kind of we’ve distribution and the that’s So aging business. as about, it’s talked about boomers And of really our

David Goldberg

Alex, a did follow-up question? you have

Operator

in There are further questions time. no at queue this

David Goldberg

Well, And today’s We’ll at months Thank the talk Okay. of us again much for year. I to call. your concludes the this the want everybody in you time. on three joining for call. end fiscal very look, thank

Operator

That concludes today’s conference.

at may this for joining. thank time, you You disconnect and

Beazer Homes USA (BZH) 1 Aug 202020 Q3 Earnings call transcript