Beazer Homes USA, Inc.

Good afternoon and welcome to the Beezer Homes Earnings Conference call for the quarter ended December 31st, 2021. 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.beezer.com. At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer. Thank you, sir. You may begin.

Thank you. Good afternoon, and welcome to the Beezer Homes conference call, discussing our results for the first quarter of fiscal 22. Before we begin, you should be aware that during this call, we will be making forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors which are described in our SEC filings, which may cause actual results to differ materially from our projections. Any forward-looking statement speaks only as the date the statement is made, and we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. New factors emerge from time to time, and it is simply not possible to predict all such factors. Joining me today is Alan Merrill, our Chairman and Chief Executive Officer. On our call today, Alan will review highlights from the first quarter, comment on how we are addressing challenges in the current environment, and update some of our expectations for Fiscal 22. I will cover our first quarter results in greater depth and provide detailed expectations for the second quarter and full year. I will then give an update on the continued growth in our land position and future key growth in community count, followed by a wrap-up by Alan. After our prepared remarks, we'll take questions in the time remaining. I will now turn the call over to Alan.

Thank you, Dave, and thank you for joining us on our call this afternoon. We generated excellent results in the first quarter, with higher home prices contributing to much higher operating margins and a substantial increase in profitability. For the quarter, we generated a 40 percent increase in adjusted EBITDA and more than doubled our EPS compared to a year ago. Operationally, we achieved our objectives in sales, closings, and land acquisition. In terms of sales, we carefully managed volumes to align with our anticipated spring production capacity. We remain unwilling to sell too far in front of our ability to start homes, both because of risks on the cost side and the frustration it causes home buyers. On the closing side, we were able to deliver homes in line with our expectations, but it required a pretty heroic effort and a fair bit of timing flexibility from our customers. Appliances and certain HVAC components were a particular challenge this quarter, with both manufacturing and distribution bottlenecks arising in various markets. In terms of land activity, we continued to find attractive opportunities to either own or control through options, allowing us to expand our total lot position for the fifth consecutive quarter. One other highlight of note was in relation to our ESG efforts. In December, we published our first-ever ESG summary aligned with our industry SASB metrics. A link to this report is included in today's slides and is also available in the investor relations section of our website. The operating environment during our first quarter reflected many of the characteristics of recent quarters, notably continued strength in consumer demand and persistent supply chain challenges worsened by the surge in COVID cases in December. Even with a reduction in COVID cases, we expect these dynamics to remain in place over the balance of our fiscal year. On a longer-term basis, we believe the setup for our industry remains very strong. A robust employment market with meaningful wage growth, like we are seeing now, is a clear positive for housing. But we are also in the early stages of a demographic shift toward homeownership, which we believe has been amplified by the pandemic. Collectively, this represents a very strong case for housing demand for years to come. What makes this environment all the more encouraging is that there is, by nearly all accounts, a multi-million unit housing deficit that has accumulated over the past decade. Of course, when demand strength meets supply constraints, there are going to be consequences, and we are clearly seeing several of these, including rising home prices, material and labor availability issues, and cost increases. And no discussion of the challenges our industry faces would be complete without an acknowledgement that, for the first time in at least a decade, the likely direction of mortgage rates is higher in the coming years. Ultimately, we're very confident the supply chain issues can be resolved. Investments in capacity, improved vendor information sharing, product substitutions, and frankly a lot of hard work should see these challenges resolved over time. So in our view, that leaves home affordability as the most significant and the most likely long-term risk to industry outcomes. As we would do with any significant systemic operational risk, We have done a lot of work on understanding the magnitude of this affordability risk, and crucially, implementing strategies to help mitigate it. As the media often reports, home price indices have been establishing new highs for several years. But when we look at monthly payments in relation to household income, we see a slightly different picture. We have provided a couple of charts to help illustrate this fact. But please, don't misunderstand our point of view. We understand that for most home buyers, home prices are high and that mortgage rates may well move higher. That's why we take addressing affordability so seriously. Now, as much as I would like to, I am not going to try and sell you a new Beezer home during this earnings call. But I am going to point out that the three fundamental pillars of our value proposition for buyers all explicitly address affordability. First, our choice plans allow customers to select from a list of structural options at no additional cost. For many buyers, this is a great value since they have choices not present in spec homes but don't have to bear the additional expense to enjoy them. Second, our mortgage choice platform shines in a rising rate environment since the competition among lenders for our customers' business provides the most efficient origination mechanism a new home buyer can find. That's because we have eliminated the typical mortgage subsidiary middleman. There's no overhead to pay for, and we don't participate in origination fees or loan sale profits. Instead, our customers simply save money. And third, our surprising performance pillar results in homes that cost far less to operate due to their energy efficiency. For our buyers, the energy savings embedded in our homes may be a deciding factor in their purchase decision. And unlike many of our competitors who charge extra for these features, Ours are included in every Beezer home at no additional cost. Taken together, these pillars help us compete for home buyers with a coherent and compelling focus on affordability. At the outset of the year, we announced our expectation to earn more than $5 in earnings per share in fiscal 22. Given the strength in our Q1 results and the visibility we have into our backlog, we are confident our full year results will be even better than we anticipated in November despite concerns about additional cycle time challenges. While it seems likely COVID cases will decline in the months ahead, we're extremely cautious about predicting improvements in material and labor availability. In fact, with the normal surge in spring construction activity looming, we think it is possible that industry cycle times will extend even further over the next few months. Trying to estimate the impact of potential future delays is nearly impossible. But even if cycle times do worsen from current levels, we are confident we can exceed $5 in earnings. This confidence comes from the number of homes, the ASPs, and the margins in our backlog. If it turns out that the production environment is better than we anticipate, we'll have some upside. Separate and apart from the discussion of earnings so far, I'd like to also update you on a positive development in our tax rate. You may recall that in fiscal 21, we realized about $12 million in energy efficiency tax credits. While the tax law that gave rise to these credits expired on December 31st, we're in the process of documenting and claiming the benefit for thousands of homes delivered in recent years. In the first quarter, we realized another $3 million in these credits, and we expect the full-year fiscal 22 benefit to be about $12 million or about 40 cents per share. While these tax benefits are obviously non-recurring, They are incremental to our earnings guidance and will add to the growth in our book value. Now, with that riveting discussion about taxes completed, let me turn the call over to Dave. Thanks, Alan.