Beazer Homes USA, Inc.

Thank you all for holding for today's conference. Please continue to stand by. We will begin today's call momentarily. Again, please continue to stand by. Thank you. Good afternoon and welcome to the Beezer Homes earnings conference call for the quarter ended March 31st, 2022. 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. Good afternoon and welcome to the Beezer Homes Conference Call, discussing our results for the second 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 described in our SEC filings, which may cause actual results to differ materially from our projections. Any forward-looking statement speaks only as of the date the statement is made. 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 second quarter, discuss our positioning and strategy as it relates to affordability, and announce two exciting developments for the company. I'll then provide more details on our results, expectations, and balance sheet. We will conclude with a wrap-up by Alan. After our prepared remarks, we will take questions in the time remaining. I will now turn the call over to Alan.

Thanks, Dave, and thank you for joining us on our call this afternoon. We had an exceptional quarter, highlighted by significant year-over-year growth in our gross margin, adjusted EBITDA, and earnings per share. Operationally, we generated new home orders slightly ahead of our expectations, expanded our controlled lot position, and reduced debt. Taken together, these results embody the goals of our long-standing balanced growth strategy, which is to grow profitability faster than revenue from a less leveraged and more efficient balance sheet. Given the visibility from our backlog and production universe, we now expect to generate full year earnings per share of at least $6, inclusive of previously disclosed energy efficiency tax benefits of about 40 cents per share. While our results for the balance of this year will reflect the demand we've enjoyed for the last few quarters, we know investors' focus is on whether we're at an inflection point for pricing and demand. Rather than trying to make predictions about specific outcomes, let me share with you the major factors we believe will determine those outcomes. Any discussion of the industry's longer-term outlook should start with the demographics of demand and the practical realities on the supply side. In the interest of time, we've summarized it in two charts. First, there continues to be a structural gap between the demand for housing and the total supply of housing. The age and ownership preferences of the demographics are compelling, but there is no practical way for the supply of lots, labor, or materials to meaningfully reduce this gap in the next several years. Second, the level of unsold inventory of both new and used homes is at historically low levels. In fact, there's only a quarter of the unsold inventory that existed in 2006, which helps explain the strength in the current pricing environment, even as rates have risen. The other macro factor that bears watching is the mortgage market, and more specifically, the risk of foreclosures, defaults, or the removal of liquidity that could disrupt the housing market. The news on this front is pretty good because the mortgage market is in a very healthy place. The credit quality of the loan book is high, loan-to-value ratios are near historical lows, and importantly, there are almost no adjustable rate loans with looming pricing resets. So, considering demand, supply, and the mortgage market, we think the multi-year context for new home activity is pretty positive. Of course, against this reasonably optimistic backdrop, the obvious threat facing our industry is affordability. It doesn't matter how much demand there is for housing if consumers can't afford to pay a price that reflects the cost of production. On slide seven, we've updated the chart we presented last quarter which reflects household incomes in relation to mortgage payments. As you can see, rising home prices combined with significant increases in mortgage rates over the last several months have caused affordability to move above the long-term historical average. Although faster wage growth, slower home price appreciation, and stability in mortgage rates can and likely will normalize affordability, that's not likely to happen quickly enough to dispel concerns. As it turns out, this is exactly the kind of environment we've been preparing for, both strategically and operationally. Our consumer-facing strategy is driven by a simple ambition, to deliver extraordinary value at an affordable price, EVAP, or EVAP for short. Now, fortunately, this isn't our marketing slogan, but it is the inspiration for our strategy and many of our tactics. It makes us think deeply about value, not just price, and it forces us to consider affordability in a highly localized sense and in the context of monthly payments, not just home prices. Now, our strategy for delivering value to customers has been embedded in the three pillars we always talk about. Mortgage choice, which requires lenders to compete for our customers' business, surprising performance, which delivers homes that cost far less to operate, and choice plans, which provide our customers with a number of structural options at no additional cost. These pillars are real differentiators, and in a market increasingly focused on value and affordability, they're immensely important and quite difficult to replicate. So that's how we deliver value. Let me turn to how we're addressing affordability. While higher home prices have helped us offset material and labor cost increases, we're constantly looking for ways to make home ownership more accessible and more affordable. These efforts include simplifying our home designs, standardizing specifications, and substituting more cost and energy efficient products. We also work with municipalities to identify ways to reduce development costs and fees, which are a significant component of housing costs. On the land side, the question of affordability begins when we consider buying a new community. Before approving that community, we try and ensure that there are enough consumers in the location with the incomes and the propensity to buy a new home to support that community, while of course allowing a measure of success for the likely competitors. This requires census track level income analysis and detailed information about current and potential future competitors. And in our underwriting, it also requires stress testing for affordability at higher than market mortgage rates since we've known that eventually mortgage rates were going to move up. On the sales side, this spring we formalized the practice of testing all buyers in backlog at higher than current market mortgage rates. This yielded an insignificant number of cancellations and helps explain our confidence in our backlog. Our affordability-driven efforts don't guarantee that every new community will perform exactly as expected or that every buyer and backlog will close, but they do help us manage affordability risks. Before turning the call back over to Dave, I'd like to highlight a couple of exciting new developments for Beazer. Today, we announced our plans to acquire substantially all of the assets of Imagine Homes in San Antonio. We've held a minority stake in Imagine for the past 16 years, so we are very familiar with the market, their business, and their highly capable team. With strong job growth and excellent affordability, we expect to be able to grow our business in San Antonio in the coming years. Imagine has long been a champion of green building practices, which fits well with our energy efficiency initiatives, including our commitment that every home we build will be net zero energy ready by 2025. Finally, I'd like to highlight a significant recognition we received this month. We were named the number one most trusted construction company on Newsweek's list of America's most trusted companies for 2022. This ranking reflects an extensive survey across customers, investors, and employees and was neither solicited nor paid for. It's a tremendous honor and it reflects our commitment to doing what we say we're going to do. With that, I'll turn the call over to Dave. Thanks, Alan.