BEAZER HOMES USA INC Q3 FY2024 earnings call

• Despite affordability challenges, third quarter profitability was in line with expectations.
• Substantially grew total lot pipeline to over 28,000 lots, a 25% increase from the previous year.
• Reached a major energy efficiency milestone by closing more homes to the DOE's single-family zero energy-ready requirements than any other homebuilder.
• New home orders were softer than anticipated due to macro and market-specific factors, but long-term confidence in the new home market remains strong.
• Ended the quarter with 146 active communities, expecting over 155 by the end of FY '24 and aiming for over 200 by the end of FY '26.
• Progress on deleveraging: Expecting net debt-to-net cap in the mid-30s by the end of FY '24 and target below 30% by the end of FY '26.
• 90% of starts were Ready series homes, making progress towards 100% Zero Energy Ready by the end of 2025.

In the third quarter of fiscal 2024, Beazer Homes generated homebuilding revenue of $589.6 million from closing 1,167 homes. Adjusted gross margin was 20.3%, adjusted EBITDA was $53.5 million, net income was $27.2 million or $0.88 per share. There is no specific breakdown of revenue contribution by product segment provided, but the focus is on homebuilding operations.

• Fourth quarter expected sales pace similar to the third quarter, ending community count above 155, ~1,100 orders, ~1,500 closings, average sales price (ASP) ~$520,000, adjusted gross margin ~20%, adjusted EBITDA above $80 million, diluted EPS ~$1.35.
• Full year adjusted EBITDA expected ~$230 million.
• Expect revenue growth of about 20% in FY '25 driven by community count growth, cycle time improvement, and modest sales base improvement.

• Affordability constrained market impacting new home sales.
• Macro factors such as prospective buyers struggling to qualify for mortgages and deferring purchases.
• Weather events in Texas disrupting sales.
• Volatile sales patterns in individual markets due to stretched affordability and for-sale inventory growth.

Q: Drill in on pace and price decision, margin pressure, incentives A: Allan Merrill discusses intentional move through non-Ready series specs, being cautious in Houston and San Antonio due to demand shift, and hopeful lower interest rates will reduce incentives.

Q: State of other geographic markets A: Strength coastally, Mid-Atlantic, Southern Cal, Las Vegas, Nashville strong; Texas weakness due to specific market factors.

Q: Southeast orders, land spend, interest rates and incentives A: Atlanta had community count troughing, land spend full year expected ~$750 million, hopeful lower rates lead to lower incentives.

Q: Share buybacks A: Dave Goldberg says it's part of capital allocation model, using excess capital for repurchases, debt, or land spend.

Q: July sales, specs, gross margin A: Last week of July better, conservatism around gross margin due to non-Zero Energy Ready specs.