Beazer Homes USA Inc Q4 2024 Earnings Call Transcript

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

Question: Alex Hantman - Sidoti & Company - Analyst : Hello. This is Alex Hantman on for Julio. Thanks for taking questions.

Question: Alex Hantman - Sidoti & Company - Analyst : Good. How are you?

Question: Alex Hantman - Sidoti & Company - Analyst : Great. Well, thank you very much for sharing the guide. And maybe we could talk a little bit about the community count ramp. I would love to hear how you're thinking about your confidence in the ramp you've outlined in that path for growth?

Question: Alex Hantman - Sidoti & Company - Analyst : Thank you. And maybe just touching on sales pacing. Could you talk a little bit about what you're seeing in October, maybe some improvement relative to September?

Question: Alex Hantman - Sidoti & Company - Analyst : Great. Thank you for the context. Will hop back in queue.

Question: Alan Ratner - Zelman & Associates - Analyst : Hey guys, good afternoon. Thanks as always for all the helpful details so far. So I know it's tough to give any full year guidance at this point. It's a pretty rapidly changing environment. But one of the data points I wanted to just drill in a little bit more on is your outlook for absorptions for the year, given the range of 2.5, I guess, at the low end to 3 at the high end. Your absorption pace this year was just under 2.5 per month. And obviously, the year ended challengingly, but it was generally a pretty solid year, especially in the spring. So I'm curious if you could just talk through a little bit more of your expectations there because it doesn't seem like you're anticipating any meaningful improvement in the macro as far as mortgage rates or the economy. It seems like you've pulled back a little bit on those incentives that drove some of the momentum in October. What gives you the confidence that even at the low end of your guidance range that they'll come in with a better absorption rate in '25 versus '24.

Question: Alan Ratner - Zelman & Associates - Analyst : No, understood. I appreciate that, Allan. Second question, if I look at your 1Q margin guide 19% adjusted, that would be -- I think if our model is right, the lowest margin you've generated in over a decade. And I know you're expecting that to ramp through the year, and I think your explanation makes sense to me. But we're starting to hear a little bit of chatter from some land sellers and developers that not necessarily Beazer specific, but some builders are attempting to maybe renegotiate some option terms and take down prices just given the fact that rates have clearly stayed higher than many had expected. Incentives have remained more elevated. So as you look at where your margin is today and a relatively thinner margin than perhaps some of your peers and maybe where you had expected, are you in the process of maybe trying to take some of your more recent land buys and renegotiate them given the changing macro environment? Or do you feel like as those deals come to market, even with the choppier environment that you'll still generate margins better than you're generating today?

Question: Alan Ratner - Zelman & Associates - Analyst : Great. I appreciate the thoughts. Thanks a lot.

Question: Tyler Batory - Oppenheimer & Co - Analyst : Hey, good afternoon. Thanks for taking my questions. A couple for me. And I want to start, Allan, in your prepared comments, you talked about the Zero Energy Ready homes in the benefits that you're seeing. You alluded to a point of margin higher than the prior series. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:00PM, BZH.N - Q4 2024 Beazer Homes USA Inc Earnings Call Can you just unpack that a little bit more, explain what drives that higher margin. And then when you look at the sales process when you look at construction as well, how much low-hanging fruit is there to improve those and to drive the margin even higher?

Question: Tyler Batory - Oppenheimer & Co - Analyst : Okay. Excellent detail. A follow-up question on the incentives. You sound like you ramped up incentives and you pulled back. I guess, which markets did you lean in a little bit more? Are those the same markets where you've been able to pull back? And then when you look ahead to fiscal '25 it sounds like lower incentives are part of that gross margin improvement. Just talk a little bit more about your confidence in that, your expectations for incentives next year? And maybe just for the industry overall. I mean it does appear like the competitive environment is pretty robust. There are lots of builders out there that are getting pretty aggressive in terms of what they're offering. I mean what needs to happen for that to change? I mean, do you think these incentive levels are just here to stay? Is it in a mortgage rate scenario. I'd just be curious your thoughts on all those topics.

Question: Tyler Batory - Oppenheimer & Co - Analyst : Okay. Great. So last question for me, and I don't want to put you too much on the spot here. I appreciate all the detail for 2025, sometimes updating a model real time can be a little bit treacherous. But just based on the -- if I used the low end of your guide, I mean, it sounds like EBITDA should be growing next year. Do you think you can see EPS growth next year? Or perhaps there's a tax rate issue that's impacting the just the different growth rates there on a

Question: Tyler Batory - Oppenheimer & Co - Analyst : Okay. Alright, I'll leave it there. I appreciate all the detail. Thank you.

Question: James McCanless - Wedbush Securities - Analyst : Hey. Good afternoon, everyone. I just wanted to clarify on the fiscal '25 guidance, that is adjusted gross margin you're forecasting to, correct?

Question: James McCanless - Wedbush Securities - Analyst : Okay. And then I guess the next question I have, I guess, could you guys reconcile -- and I know you said the community count is going to grow, but there may be some pickups along the way. I guess why try to push on absorptions and get back to a more normal level in the guidance when it doesn't -- it sounds like you've got confidence that the count is going to grow, but you're not sure exactly how quickly it's going to grow. So I guess, why go aggressive on the guidance given maybe some pitfalls along the way with community count? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:00PM, BZH.N - Q4 2024 Beazer Homes USA Inc Earnings Call

Question: James McCanless - Wedbush Securities - Analyst : Okay. And then just the last question I had, with what you guys are going to open on community count and given what seems to be better demand across the industry for move-up, whether it's first or second move-up homes, do you have any flexibility to change some of this product up to go from -- to bring that 60% spec down, which I'm assuming most of that's going to be entry level, bringing some of that down and put it out there

Question: James McCanless - Wedbush Securities - Analyst : Okay. Got it. Great. Thanks.

Question: Alexander Rygiel - B. Riley Securities - Analyst : Thank you. Nice quarter, gentlemen. Are -- any chance you could go around the country and talk to us a little bit about some of the strengths and weaknesses across the different geographies?

Question: Alexander Rygiel - B. Riley Securities - Analyst : Very helpful. And then it sounded like in September and October, dirt builds actually picked up a little bit. But yet your messaging is for the next 12 months to expect the mix shift towards more spec builds. So if you could maybe reconcile those two.

Question: Alexander Rygiel - B. Riley Securities - Analyst : Super helpful. Thank you.

Question: Alex Barron - Housing Research Center - Analyst : Hey, guys. Thank you and I appreciate all the details. I was hoping you could elaborate what changed in the example you gave of Houston where the sales doubled if you could give more specifics on what's driving the confidence in the increase in sales pace you guys are expecting this year?

Question: Alex Barron - Housing Research Center - Analyst : Got it. Yeah. No, it makes a ton of sense, I think, taking a little bit less margin if you can double your sales or 30% increase in your sales makes a ton of sense. Now that you guys are building more specs, are you by the same notion, offering either forward commitment or a share -- sorry, rate buydown or something that causes people to absorb those before they get to completion?

Question: Alex Barron - Housing Research Center - Analyst : Got it. And if I could ask one last one, any thoughts on share buybacks, given your stock is still below one-time book?

Question: Alex Barron - Housing Research Center - Analyst : Okay. Best of luck, guys. Thank you.

Question: Alan Ratner - Zelman & Associates - Analyst : No. Thank you for squeezing me in again. Well, I'm not sure it's a softball, but I'm curious.

Question: Alan Ratner - Zelman & Associates - Analyst : Absolutely. Well, I'm surprised it didn't come up, which is why I hop back in. So we're a week post election and obviously, still a few months away from the administration change. But just curious, as you think about all the proposals and discussions that have been thrown out there up to this point related to a whole host of issues, any thoughts about how -- what impact, if any, like the discussion about, for example, mass deportation, does that concern you at all as far as labor availability, anything about GSE reform? Just a jump ball here, but curious if you've given any thoughts to the upcoming administration change.

Question: Alan Ratner - Zelman & Associates - Analyst : Very helpful. Thanks, again.