Beazer Homes USA, Inc.

Good afternoon and welcome to the Beezer Homes earnings conference call for the quarter ended June 30th, 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.

David Goldberg Thank you. Good afternoon and welcome to the Beezer Homes conference call discussing our results for the third 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 discuss highlights from the third quarter, insight into the conditions in the housing market, and how we are positioned for this environment. I'll then provide details on our quarterly results, financial and operational expectations for the remainder of the year, and our approach to capital allocation. 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.

Thank you, Dave, and thank you for joining us on our call this afternoon. We generated excellent financial results in the third quarter. The strength of our backlog combined with disciplined execution in the field and careful management of overheads produced significant year-over-year growth and profitability. Adjusted gross margin was above 28%, up 390 basis points. Adjusted EBITDA was $88 million, up almost 12%. and earnings per share were $1.76, up nearly 45%. With a backlog of 3,000 homes valued at more than $1.5 billion, we have good visibility into the remainder of the fiscal year, allowing us to raise full-year earnings expectations again. While we were able to exceed our third quarter profitability expectations, as we anticipated, the sales environment has become significantly more challenging. We've highlighted affordability risks in prior quarters, driven by higher home prices and higher mortgage rates. Those forces, together with the highest inflation reading since 1981, finally reached a tipping point with consumers during the quarter, resulting in lower traffic and sales and an uptick in cancellation rates. This weakness represents an abrupt change from the past two years, and it reflects both economic and perceptual concerns. Many consumers are having to confront the limits to their purchasing power while others are reassessing their confidence in a home purchase decision even though they can manage the payments arising from higher rates. While we can't know the duration or severity of this more difficult sales environment, we believe our consumer positioning, operational processes, and capital allocation approach will allow us to navigate the environment that lies ahead. Our consumer positioning is both desirable and durable. For many years, we have been refining our ability to deliver extraordinary value at an affordable price, specifically through our three pillars. Our Mortgage Choice Program is designed to ensure that a carefully selected group of lenders competes for our buyer's business. This means our customers have access to an array of loan programs, extended rate locks, and buy-downs that a single in-house lender simply can't match. Beezer's surprising performance ensures our buyers have among the lowest utility bills of any new home buyers. With monthly payments at the center of most conversations with customers, the value of low utility bills has never been more apparent. Finally, our choice plans allow buyers to modify the floor plan of their homes to match their needs at no additional cost. Instead of having to buy a bigger home, to get the types of space that they need, our buyers can select pre-engineered plan options to maximize the value they get from every square foot of the home. These three pillars deliver durable value to buyers, allowing us to have a consistent strategy even in challenging markets. One of our most important operational processes is a weekly CMA review of every community. This involves deep analysis of competitive market data, including availability, pricing, features, and incentives. With this information, we can quickly refine our offering to best position our community. As an example, we may decide it makes no sense for us to match the dollar value of a competitor's closing cost incentive available on a completed spec home if we're selling to-be-built homes that we'll deliver next spring. Instead, we may offer a combination of credit to be spent in a design center and a contribution toward an extended rate log. Sometimes, however, the market shifts more significantly. In June, our analysis led us to selectively increase the dollar value of incentives in many of our communities and reduce base prices in others. To date, these adjustments have been modest for three reasons. First, even if sales have weakened, the structural imbalance between the supply and demand for homes remains in place, and there's simply no way this gap can close in the near term. Second, the labor market remains very strong, with low unemployment and rising incomes in virtually every industry. A period of stable home prices will improve affordability. And finally, locking in housing costs remains compelling in an environment of rising rental rates for apartments and single-family homes. To be clear, as market conditions evolve, we will adjust our approach in each community in ways that we feel best represent long-term shareholder interest. For the past decade, our approach to capital allocation has been driven by our balanced growth strategy. This has allowed us to deliver improved profitability and returns from a less leveraged and more efficient balance sheet. Several years ago, after improving operating margins and substantially reducing debt, we began allocating more capital to the growth of our lot position. These efforts have been successful, even as we have continued deleveraging the balance sheet. We now have over 24,000 lots controlled, more than half of which are under option. We remain active in the land market, because we remain confident in the multiyear supply shortage impacting housing. But in the near term, we expect to be highly disciplined in the deployment of land acquisition dollars. As Dave will discuss in more detail, both debt and equity repurchases are likely to also play a role as we attempt to maximize risk-adjusted returns. In summary, we believe we have the right consumer positioning, the necessary operational processes, and the correct approach to capital allocation for this environment. With that, I'll turn the call over to Dave.