BZH - Earnings call transcript Q1 2021

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Operator

Good afternoon. And welcome to the Beazer Homes Earnings Conference Call for the Quarter Ended December 31, 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 will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer.

David Goldberg

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

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

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

today remarks, greater home and is we a highlights second wrap provide will Allan update up to by Allan. of by depth will Executive cover will basis results of expectations recently I After for for in our call questions detailed we continued prepared will call the strategy. XXXX. take significant fiscal Chairman time part our I over our expectation turn our remaining. our the quarter, the quarter made also XXXX. Merrill, ESG improving I first land now our quarter review our followed On position, in year full He in describe then and and fiscal Allan will will of commitments growth the our explain in Allan. market and two confidence Officer. discuss new Joining our Chief expectations day, for from as first the me the

Allan Merrill

up generated sales With were our year-over-year, joining quarter. operational driven a Dave, orders thank pace first Operationally, by was outstanding and an we and than up and safety, this XX%. afternoon. XX% more more Thank for us results financial the that focus on health in acute you, on you call than

a as pace quarter orders intentionally even sales decade, slowed their In fact, more highest sales increases. and first our we both price reached than levels in with

expanded income. homes also Financially, path net demand the We improvements we adjusted The for and lot our creating future exceeded in for past strengthened growth. gross our EBITDA expectation new delivered a months. has margin, six over big supply,

homes, everyone’s that have on We that the pent-up this which based we and was We strong on question between for industry is on anemic other. this What million and known From that anticipate few their are some housing homes. well years been our excellent. affordability formation means homes decade job Many to demand XX that unlikely growth focused hand consumers disconnect most outdoor for for to have household last how think above a last? the whether better need building delivered an and one did on quarters likely far space, we believe demand cumulative was for exhaust it’s would long strength location, a good materialize. on or is time. deficit conservatively starts the their now has The fewer a the predicted. new X than more perspective, not for demographics last the in will housing of the has Well, is, demand pandemic mind to persist supply begin catalyst space, to would space are new a improving be living entirely situation, motivation

hand, affordability. Affordability better as job durability be of and seen the case, question With two security down of perspective that boils mortgage are about concern demand? So what things, can the soon and vaccines to we typically as they about the demand sale ultimately that optimistic may and form about need the durability economic to homeowners In a may Well, that job growth home in a the income homes buy resume afford. of at as rates home, spring. for prices. a

Although, we prices record is are the buyers the the rates to Fed is to why We on know markets have so right believe exactly period, growth. is most home within positioning keep hard reach work of extended job supporting the and important. is for best low an that in our we we with

price. in the several at and millennials targeting delivering a an boomers will value We affordable and growth primarily are positioning baby over years. price, us exceptional housing market pivot competing towards confidence gives strong allow focus next to the that fully largest on on participate buyer Ultimately, we this not our segments, us

enter selling we our last and unusually this That’s of therefore value nearly likely full visibility year. XX% is dollar to of the results. degree high spring’s year backlog in an As season, compared because have our up we confidence

while now So this expect activity land fiscal today, for higher Dave increased exceeding our precise outlined balance we summary, we and are and on expectations than is each the to less for we sheet. profitability to XXXX. But earnings growth which are make grow progress year, figures objectives. comments. significant provide assets increasing earlier repayment going designed faster of revenue, and leveraged we debt strategy, objectives in efficient his In our will balanced more more

attention, increased something isn’t Although, ESG new Beazer. is receiving it at

attaching our is the alternative sized most we national accordance it commitment for Underscoring draw which seven. that as our every as of Today, build significant energy home homes reduction energy it it slide purpose have of in to all most conservation of level, important emissions. In system rating all addressing the by is as numeric energy proud energy we this Ready will In because are or the like of a ESG recent attention are part rating a much to our we a we a Ready. terms, and Net efficiency XX an Department we of be statement achieve so of made to statement, generate this your which properly a will compensation far three At system. that Program partner fundamental builder HERS we of announced on included plans fulfilling greenhouse beyond energy well. the gas will that or standard building Energy in Zero of with in our less, to commitment, is our in been they builder Energy’s means energy XXX% have have proxy first by consume homes existing Zero homes see I’d that we short, will have We we program. building years, our facets committed long-term Improving Energy XXXX, and end production result Homes as codes. commit the home to

call I one to strategy, Dave, namely Before to to over responsibility. talk ESG of the turning our back social commitment about want more aspect our

relationship in standing Foundation, homes military the House that and We with Fisher a where have loved an families hospital. can veteran one while builds charge, a organization of is stay long free

for House an To us Fisher Charity charity. insurance and innovative, our last source impact to work on ESG number XXX% the do donate the contribution can efforts, this XXXX fund levels statement I year relations a encourage want the our profits in of materials philanthropic website. in organizations annual able employees, Dave. available our over we report, of both to and of review proxy we will expand contained We you our are expect which With and support. the turn our be that, to investor to to to with Our will we had customers call dedicated and it’s section more. called to Title creating our its agency started has title funding By profound that ambition, caused our partners, a

David Goldberg

Thanks, Allan.

XX% increased pace X% at month. sales increased home $XXX Looking first lower to closings. X,XXX, was about the count. a XX% on to the compared quarter flat orders million community to over to year, X.X Homebuilding prior despite up community per revenue new per Sales

Our basis the down of SG&A excluding was Total XXX up expense and million total amortized to and was of abandonments as points up approximately XX% overhead adjusted revenue. by in of interest about This percentage gross quarter, interest, margin, GAAP revenue exceeding nearly X%. controlling was to a driven $XX.X points. XX.X%, XX EBITDA led down approximately XX.X%, expenses. XX% basis impairments

Our quarter about for tax rate of $X.X effective XX.X%. was expense million tax for the an

all cash expense. offset tax reminder, on tax our a As deferred substantially a basis, assets our of

Taken the together, from up last continued income over of period versus $XX to per operations same share, three $X.XX times net or million this year. led

Looking to second quarter, we year. expect the following the versus prior

slightly. should be down homeowners New

to sales up, next to as XX%. we expectation likely be expect we quarter. are expect are impacting couple fully There offset margin closings be factors to we pace Closings to for it a XX% community reduced not increasing and returns. do our While focus count our on

pressures close First, sell and this customer given commitment the to to have time with homes demand, are quarter. fewer bouncing spec delivering exceptional we experience. and And second, our we strength cycle

margin pricing mix affordability. adjusting note We $XXX,XXX. reflective approximately be are in as opportunity, to ASP constantly we our retain the expected is or is product and of our ASP Our that change power features

In fact, lower this two had segments ASPs and substantially quarter higher we with margins.

we would increases lumber the SG&A last second from total down leverage. quarter. slightly Despite margin points, up the gross headwind in least a go a prices as margin at of topline same to reflecting revenue should September we described percentage the October for year. this, and be create As in quarter, on versus basis gross quarter modest XX expect benefits last

be to EBITDA as revenue Xs. a low percentage XX%. Interest in of more amortized expect should than be We homebuilding up the

net to XX%. income XX%. for year, than And earnings provide expected Our tax be expectation our the drive and full is we per share of rate year results. At more should combined, start this our fiscal up about our

first of we expectations. quarter each our as to our those now performance, outlook, positive Given able as increase well are

year second or of we in least margin is than expected versus points at much expect previously rate versus expect EBITDA XXXX. slightly the This grow up gross fiscal EBITDA we profitability, prior increased growth to be faster improvement We revenue. the over driven First, double-digit million, as to in to the $XXX to year. up XX prior be at by now basis a largely assets the half

this Second, of growth less than quarter. represented to $X by on at low now that we $XX we per last to to for share. more finally, have per now million share earnings intend $XX targeted of $X.XX. committed be reduce million. And the than double-digit At We end, closer would expect call. our earnings last debt least We per EPS share

expected our equity level our $XX. share return and tax be our profitability, generate fiscal expect profits, We value if the which of XX%, our excess to be deferred over should average don’t approximately XXXX with of full should you for a end assets, ROA year per And book exclude in XX%.

quarter and with we year. $XXX nearly liquidity, more and ended $XXX on the million versus than $XXX land spent million up prior the million of development, acquisition During

On operations. ultimately spending cash depict in XXXX, from expect year. initially the from still the quarters for $XXX which slide trough by We community liquidity XXXs our we funded anticipate count, of exceeding million XX, later our the near-term likely land expectations remaining we and this to we this accelerate in anticipated, cash will

evident XX,XXX. XX% And importantly, The lots will grew this evident to effort growth expanded a would initial our We lots spending. increase. at options. we from quarter inflection active results expect as active X% sequential we account use as more the said were we important an by benefit in we capital X-point growth quarter fiscal Last control we our our XXXX, over community allocated in XXXX as increased quarter, of about year, of be through of land and our options end, first to be

the move we turn Given through for grow conclusion. you deals, call of Allan over With expect to that, year. continue our to let of me back the as to his current land our the remainder pipeline position

Allan Merrill

Thank you, Dave.

healthy operational in first we our to supply. we for and improve our our fiscal is this grew a margins constrained fiscal Even described expected by home future XXXX pace, through new SG&A, and as to market was an persist increased inflection highly In improved backlog profitability, better, the growth. November, gross XXXX expect expanding modestly momentum we and efficient characterized very where year year, lot for investing we demand Beazer, while quarter fiscal position of a in sales The while productive both manner.

and be to over over reduction. debt XXXX the and I us the to much ESG our to our years. profitability, In to shareholder the team will take strategies. than strategy investment to that, our from turn we fact, their allowing expectations improve returns to that for it want demonstrate call ongoing again our more thank I up is growth shaping am I value and raise balanced opportunity confident should durable With create to people, Q&A. for have into coming that, Operator resources us the efforts. the Ultimately, the

Operator

question first will Instructions] with McCanless our Jay Thank be And you. from [Operator Wedbush.

open. is line Your

Jay McCanless

for Thanks afternoon. good or taking morning my Good questions. Hey.

The raising the first what the question any for in seen year, and repayment. the But getting have I to have on run that maybe stock to and the had, this equity a repay? I more debt some like you -- you with ‘XX are little there got to see thought you is XX attacking aggressive

David Goldberg

well, a Yeah. Jay, has always opportunity are good and run. us I the from perspective, market. we would a that’s we capital pretty certainly had tell you, in Stock considering allocation every

We we know anything. them on we options if let are we will you nothing and just paying attention to now, and will frankly, But plan it leave keep right and open. do

Jay McCanless

little the community that out. this glad to it’s when that like biased count, Okay. over or year geographic see And then the bottoms more still in end geography to terms of one preference Any a looking another? of

Allan Merrill

pretty really, all am excited geographies. I to Not Allan. I I our you, of the tell Jay, mean, good across about afternoon. pipeline got It’s

finding deals it’s our of rationalizing of On quarter, two, you so just hard we in know see those the over through markets. over that last a in I But are they of through path am years, our seeing to to are and markets. move places years, We things and deal flow, how going everywhere. the can a or XX year given available process. vagaries if process in do grow bigger it a of of I become any are think each the at as every one we you markets five look way We went and kind we

Jay McCanless

there? the was a two the function growth a of West Was other just bit in anything or order talk or there -- community little Got about that then timing than out it. slower And point regions. to a

Allan Merrill

No.

Western experience in talked using I few and bit script price, some a the a in we of with exposure part about or some demand that think, markets. have our we did to in little control

big So markets, way well. that customer of mean, in to to backlog in a part keep starts of experience. could about that careful out as and appropriate a was some that so it we there backlog, those have the wanted adding I be that got such we we get

it to So than more side in -- sales I it side say, was near-term on related growth. as change probably the would the the community was order a

Jay McCanless

Okay. That’s for Thank my all taking had. questions. I you

David Goldberg

Jay. Thanks,

Operator

Our next question comes from & Alan Ratner with Zelman Associates.

open. is Your line

Alan Ratner

and picking and That’s initiatives. think, question Good Congrats from update there. the first acquisition a is on builders the the efforts the market, the the congratulations of there. we three land thanks and are are on the lot on over hearing is months afternoon. obviously performance that, the to relates guys six to My sharply guys. for a Hey, you land ESG strong of certainly industry last in noteworthy mix months pretty pace up I common theme the

maybe that on a avoid going doing deals, about remain buying in going reduce the to talking costs. things competitive some of are the builders further out means larger lot whether inflation whether to that’s means bit that Some certain that and kind market, of little

A, a you the bit underwriting little either B, of you and land talk nature the the curious, deal with at that your inflation are changed about to am have can the all targeted seeing, competitive you or standards today? I market of So kind

Allan Merrill

and they there priced. are we XX permits, submarkets we Well, enthusiasm, or a a where are obvious them our XXX way those year. that I you of XXX Alan, go currently to barbell, have a have in described or are where incredibly priced. And XX-lot of success of Where XX aggressively market, a oversimplification small doing it But are units kind right. is, of have is that builders highly XXXX absolutely time very markets give all of lot seeing for we more deals, can’t is be -- there most of bespoke do found can the an in deals lots us footprint are of and where markets. private on somebody very little good where and waste think are the deeper. in kind to are over And lots super have if kind deals competitive. it I a I are you XX in can mean, maybe The will particular really they

there a bit of a And that find in for our so of we many is that. window markets

economics size more thing this is value just We is it the the to an location? successful really ability we we lucky? from the extract we deal So we to Why of paid we have that be did target. kind ourselves, that in most why And site. or do get ask so are able

not the know the you our team, letting very refer have we make very got submarkets, not feel to team submarket, and I I strategy start that, into when of to I we I the a that getting the is, a kitchen. opportunity new know is, in end new area, submarket other we somebody buyer we you profiles, part area, have price tell an dumb other of could paying ourselves adventuresome. realtor up to. a and and for our find be are because in we the that when the what trades into us like an So mean, to tax, Where new cautious, kind we else gets that’s paid relationships sure new and always are

So -- I changing not our are definitely we underwriting numerics.

builders think, all. know sticking key at really up would smaller if effective us, we anything, of are than bit pursue. for been a we eased what frankly, for but biggest have But maybe deals to our meaningful strategy. us with haven’t the the that are is, I finding pretty And We very options and some

Alan Ratner

Got helpful color it. there. That’s really

that. appreciate I So

single-family your acting lot threshold far years and there your as Second not a the operators? in active a so for either thoughts comment initiative you different I And raising aware, you how know that under I space in are opinions rent lot any built toe are a I a starts single-family because pressure of I And on. question, early about ago, the GC clearly, you love earlier across have on as there’s see rental that rental. But being as single-family probably on am you from seeing But that water heard demand dip of your capital view for are that am competitive yet? today. are It’s curious if you I’d -- in aggressively or really for purpose. to builders million think X a to speak, equation, from just do or street as or the about a building shifting few view communities, that apartment more do you for you kind bit that little your development competition today? as homes of

Allan Merrill

the Boy, were We a I Owned Pre our do are our this right. want and that’s it portfolio. guess we with credential topic We thing. we big it partners the early I we REITs -- scale that and value public Homes started created both Rental time, simply have and establish very that XXXX, we at enough the our when in our did I didn’t, to to well humility. you mean, in the I they to Company. right with big partners it sold even of for fast and and capital, have done think one ourselves. And

it a are being humble is business business. bid into some out of is of question there look, in And a that operating I whose It few plays someone a an difficulty. we degree market -- land are plays But been by I Being of and about where am to absolutely asset we it a for the intention the the actually space. different turn community. was it landlord were think So different at a of rental that scenarios it difficulty case the competitive, about your we in levels. have respectful degree

that competitive is so a demand yes, source it’s of way. land So, that for and in

decision of to for made they a think become buyers, homeowners. I lot have a our

autonomy kind But not am And morning, I betwixt of is, I an -- XX issue and become I -- as am They the an building so and come owner, decided. the universally wealth have have I are with that is between true. in this am a They I crossed or being am to sense a and sure It’s owner. they time and that that in don’t renter not their value an value threshold. owner. creation

is really great I with a competing that But I it’s other primarily. So do options rental would view rental say. option option

old us rent in be below of of because that rental think pleased of PITI if served our see good production renters, the to those And much to the constructed make homes, I every rather about payments -- virtually to newly cost used rate. homes, ends are a those case create us land that rates rental monthly be lot been for date a to the attractive built I there cost that than require, a in who monthly are important instance an up home. communities the that poorly the yardstick why measuring in also really being out know pretty against. of I time But mean a anything, a being a pretax for those this home of homeowner. for a is still have That’s better

So it’s it major take We seriously. a factor.

sold lots have rental operators. We to

decided are operations. we originally intended bought that for rental have operations that for ownership better they lots We were

say don’t any it. those to urge my try are we get in would I business. a pretty it. I are to So But thoughts to back start and close go new feel about

awfully excited our growing We about own business. are

Alan Ratner

thoughts will your over that few and watch appreciate on that really next to interesting the I be it unfold years.

So thank you.

Allan Merrill

Okay.

Operator

the from next & Julio Romero with question comes Sidoti And Company. you. Thank

open. Your line is

Julio Romero

everyone. Hey. Good afternoon,

Allan Merrill

Julio. Hey,

Julio Romero

is that, be costs, color? -- you any we product growth a you Can other expect maybe quarter to mix headwinds. just mentioned low those or talk lumber or slightly you up of in function any that even So additional the about with different

David Goldberg

still price that When the and about question, think I the would little and question in bit we and up margins, you and script, gross quarter lumber on a our had October increases in we lumber in in given the think impact we that way September expectation. was good the and Julio, talked we Yeah. on having broke timing I second margin margin about a increase comfortable and of cost backlog, price of year-over-year second match terms our we can market the pricing in in get in terms the from increases market. pretty the the have got are We quarter. the price visibility

Julio Romero

I in will hop Thank back queue. the Understood. you.

Allan Merrill

think point but Dave, second it’s do I like important won’t to out, will quarter. the than quarter did in year, better the that we last first it we be

David Goldberg

Yeah.

Allan Merrill

there is be and headwind but that we up, so will It by a lot less.

Operator

Our Research from with Alex next comes question Barron Housing Center.

Your line is open.

Alex Barron

you. going your guys. I the of I quarter. your job margin, I all in Thank interest the related expense around outside is XX had the interest to interest about impact am in capitalization a and comments points, of that afternoon, Great Good margins that? or basis question guessing up the the guess, expense.

David Goldberg

that’s basis half be to points increase the Alex, than basis QX was in XX interest. and the up comment the and just more back gross in very clear, the in margin So slight of yeah, clearly on excluding year-over-year the a year,

Alex Barron

Okay.

if incurred been Now we the and the that we focus more ran that’s little goods to obviously, higher start interest the have guys sold incurred. than running the bit year? interest expect narrowing interest interest than of debt the through through of interest of paying cost cost down cost last a in was of sold Should you year goods goods sold, on this kind

David Goldberg

about of and It’s before. goods balance function talked interest, Remember cost have of the capitalized it’s we a it our sold. through inventory amortized of Yeah. turnover. the Alex,

numbers It’s balance some away. But you down, starts And to that to we to so kind It’s as will going be two you see move the not going get right its to convergence. point, of eventually take converge. those will see capitalized some time. way

Allan Merrill

I interest think of this I goods Well, exceed incurred precise, again sold would our expect interest the be to year. will more in cost

David Goldberg

Yes.

Alex Barron

I the moving is... which is But in direction, that it. general Got Okay. trend, guess,

David Goldberg

time They will should expect migrate. convergence. in XXXX. be that won’t are Over narrow. But you it going to It

is we expense interest business, it put lower the through are the our is got news that’s so there’s the difference. So of interest extra than but have interest mean GAAP I book running we good earnings to little just our cash power effectively liquidity expense, that a land. into because and understates

Alex Barron

Right.

Now your that orders count. the drop being if I about am correct to comments I am I can has flattish, do and guessing in more community on you wrong, am me the guessing with

is do that’s So up, you reason because count for guys the limiting starts see community if is, point inflection are two or some at going and of where the this questions, factor? not one you point just other sales

David Goldberg

right. Well, you are XXX%

makes expect at community that, high unlikely we We we reduction we last be trying QX to year’s and homes the are asset, little last environment that slower to in match lot we this very careful total us a sense. not of very so of manage a we and count the in given which this trying will But count, QX the won’t is the pace our stronger why to power selling that community releases, our year in we know maximize that bit the with in than year. the are community let probably markets, value yes, will will orders. enough much about it offset because of every what is, associated pricing And absolutely is are being level scarcity

So that is process. the thought

that a each we pace But pace that bit. a is market set You is taking macro the with sales dampening which the slightly issues. effect that approach slowing community of the can having price, little are has appreciate of different every in definitely

development. of we least is of you year vagaries tell we will occur, is a in trying and We going sorry, inflection know have going we here the land year day, at I that. point that when trough to to count to precise week in community the community that’s be I mid-to-late out enough found, really quarters a my next am higher what will of the terms foolish, what count. But do to I happen, experience that because found In making at this couple XXXs about know we can’t Alex, of that projections just

Alex Barron

lot. a Thanks it. Got Okay.

Allan Merrill

Alex. Thanks,

Operator

currently other questions. no are There

Allan Merrill

quarter call. second Okay. for us I conference our see This you you and we call. for first want to joining for will our concludes very much. everybody today’s quarter thank call Thank

Operator

that We you participation appreciate disconnect. and conclude your And you. Thank today Thank today’s does may call. you.

Beazer Homes USA (BZH) 29 Jan 212021 Q1 Earnings call transcript