Beazer Homes USA Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tyler Batory - Oppenheimer & Co. Inc. - Analyst : First one for me, just on the demand side of things, so far, in Q2 and in January. Just talk a little bit more about what you're seeing in the field. I'm not sure, any anecdotes or any green shoots in terms of demand out there in your markets?

Question: Tyler Batory - Oppenheimer & Co. Inc. - Analyst : Okay. Great. In terms of incentive levels, can you talk a little bit more about where you were on incentives in Q1, how that compared with Q4? And then talk a little bit more about your expectations for incentive activity for the rest of this fiscal year.

Question: Tyler Batory - Oppenheimer & Co. Inc. - Analyst : Okay. That's good.

Question: Tyler Batory - Oppenheimer & Co. Inc. - Analyst : No, no, that was very good. Very good detail. Very good detail. I appreciate that. And kind of a segue to my last question, just on the gross margin guide. And it implies a pretty significant ramp, I think, in the back half of the year. So maybe talk a little bit first about what's driving the sequential progression into Q2? And then talk a little bit more about just the inflection, if you will, in the second half of the year, too?

Question: Alan Ratner - Zelman & Associates - Analyst : Hey, guys. Good afternoon. Thanks for all the detail, as always. I guess, first question on the order pace through the quarter. You gave the guidance roughly midway through. And I certainly understand the closings shortfall and the impact that, that had on margin. I guess, I want to focus a little bit more on the order side in terms of what transpired there. As you look at kind of results in the back half of the quarter, obviously, December wasn't a great month. But is there something you could put your finger on specifically that you feel like really contributed to that shortfall, at least in your results? Like was it your competitors got more aggressive than you did on incentives? Were there specific markets that really drove that shortfall? Any color you can kind of give there would be helpful.

Question: Alan Ratner - Zelman & Associates - Analyst : Got it. No, that's helpful additional color there. Second question, just on kind of the energy efficiency strategy and kind of the benefits you've seen on the tax rate side. I'm just curious, from an economic standpoint, I know you've kind of touted, obviously, you feel like you can get a premium for this product in the market, but there's also this benefit on the tax line as well. As you think about the new administration and kind of the seeming deemphasis on a lot of the energy efficiency side of things, are you rethinking some of the moves and the investments you're making in this category under the possibility that perhaps it's less beneficial going forward if there is tax reform there? Or are you kind of full steam ahead still on this move?

Question: Alan Ratner - Zelman & Associates - Analyst : All right. Well said, and I appreciate the conviction there. If I can add one more, possibly. Just if I look at your current margins today, obviously, you expect improvement in the back half of the year. But right now, the operating margin is pretty thin in terms of cushion overall, which leads to me to believe there's at least some communities, maybe even divisions, that are kind of hovering closer to breakeven for the time being. Can you give us any framework to think about, impairment risk or abandonment risk on any land deals or markets where the margins might be thinner than company average?

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Sorry, I was on mute there. I guess, maybe starting on, can you maybe expand on the two factors that kind of led to a little bit of sales softness in the first quarter. I think you talked about in the prepared remarks about labor availability in Texas and meter availability in California, if you could give a little more context on those 2 issues? And then also, what kind of gives you the comfort that those issues kind of won't persist? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, BZH.N - Q1 2025 Beazer Homes USA Inc Earnings Call

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Got you. Very helpful context. So I guess no broader effect that you guys are seeing from either kind of like immigration issues or wildfires or anything of that nature?

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Okay.

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Understood. And then it sounds like you're very much on track for your community count goals this year. You said you're activating more than 60 new communities before year-end. Can you maybe just touch on how does the cadence of closeouts kind of affect your expectations for the year?

Question: Julio Romero - Sidoti & Company, LLC - Analyst : Very helpful. And then last one for me is just taking a broader view. Obviously, affordability is going to be a big challenge in fiscal '25. But maybe looking at a little broader than that, just talk about your ability, how you're positioned to improve margin and profitability once the broader market would improve?

Question: Jay McCanless - Wedbush Securities Inc. - Analyst : I got a few of them. So we'll just -- we'll go rattle them off as quick as I can. I guess the first one on the deportation, the immigration issues, are you all seeing any impact of that in the field yet or hearing any impact on that from your subs?

Question: Jay McCanless - Wedbush Securities Inc. - Analyst : Okay. And then could you talk about where your gross margins are on the average spec right now versus dirt starts? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 30, 2025 / 10:00PM, BZH.N - Q1 2025 Beazer Homes USA Inc Earnings Call

Question: Jay McCanless - Wedbush Securities Inc. - Analyst : And what do you think the long-term goal should be for that (inaudible)?

Question: Jay McCanless - Wedbush Securities Inc. - Analyst : And actually, could you touch on that for a second? Because I guess, from a cost differential or gross margin differential, are you giving up some of that advantage in the to-be-built by using that longer-term rate lock? And I guess -- I don't even know if you've already done this yet, but like what would the gross margin difference will be versus a spec that closes in two months versus the to-be-built that closes at seven months using that rate lock?

Question: Jay McCanless - Wedbush Securities Inc. - Analyst : Okay. And then on the fiscal '25 guide, it looks like it's the same as what you all had in the fourth quarter slides, except you guys are pointing to the low end of the gross margin range. Is that -- I think that's only real change I heard in the prepared comments.

Question: Jay McCanless - Wedbush Securities Inc. - Analyst : And then if you look at the West, you guys had a decent order growth there, I think, 10%, 11%, which, based on what you said about Texas, would imply, I think, that California, Arizona, et cetera, probably we're up 30%, 40% in orders and then Texas was down. I guess, do you have the community count coming online in California and Arizona to keep that up or should we expect the West to slow down a little bit after such a robust quarter?

Question: Jay McCanless - Wedbush Securities Inc. - Analyst : And the last one I had, just knowing that you called out the $3,000 savings there. I guess, could you talk about what that $3,000 represents as a percentage of the average build -- the build cost on the home?