Beazer Homes USA, Inc.

Good afternoon and welcome to the Beezer Homes Earnings Conference call for the quarter and fiscal year ended September 30th, 2022. Today's call is being recorded and the 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 fourth quarter and full year 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 to the date this 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 is Alan Merrill, our Chairman and Chief Executive Officer. On our call today, Alan will discuss highlights of our fiscal 22 performance, our thoughts on the current macroeconomic environment, fiscal 23 operational initiatives, and our competitive strategy. I'll then provide details on our full year results, our expectations for the first quarter, and some additional operating priorities for the year. We will conclude with a wrap-up by Allen. After our prepared remarks, we will take questions in the time remaining. I will now turn the call over to Allen. Thank you, Dave, and thank you for joining us on our call this afternoon.

We finished fiscal 22 with strong financial results, even as the environment for new home sales was under extraordinary pressure. During the course of the year, our team successfully navigated complex challenges with both customers and trade partners, which allowed us to generate historically strong financial results and exceed the strategic objectives we established at the beginning of the year. We grew EBITDA by nearly 41%, leading to more than $7 in earnings per share. We generated an average return on equity of 26.5%, or 34%, excluding our deferred tax assets. We reached our longstanding leverage goal by reducing debt below a billion dollars, and we increased our active lot position by almost 14%, primarily by securing option lots. Despite a fundamental shift in the environment for new home sales during the year, we did what we said we were going to do, and then some. While it is clear to all of us that the magnitude of our financial results in fiscal 22 were greatly aided by the enthusiasm for housing that developed during the COVID crisis, It is also clear that our results were directionally consistent with our performance over the past decade. As you can see on this slide, our longstanding balanced growth strategy has allowed us to dramatically improve profitability without growing our assets, and at the same time, reduce leverage and enhance the efficiency of our balance sheet. Balanced growth has also created tremendous value for our shareholders. We've been able to improve both the quantity and composition of our book value which positions us to be more resilient and opportunistic in the face of significant challenges. Over the past few years, we've consistently identified declining affordability as the greatest risk to our industry. In recent quarters, we've shown the graphic on this slide to illustrate the concern. As the COVID pandemic played out, rising demand for new homes and a constrained supply chain led to rapidly increasing home prices and rents. At the same time, inflation in other parts of the economy proved to be persistent, which, as we all know, has led to much higher interest rates. With 30-year mortgages now about 7%, affordability isn't a risk. It is the explanation for one of the sharpest drops in demand we've ever experienced. This has already pushed down both new and used home prices, and we anticipate continued weakness in both demand and pricing in the quarters ahead. As tough as this environment is right now, a positive longer-term thesis for housing and homeownership remains firmly in place. We've underbuilt the country's demographic growth for a decade, resulting in a multi-million home deficit. Employment conditions remain strong, with work from home entrenched in many of the fastest-growing industries. And unlike the last serious housing downturn, the credit quality of the existing mortgage book is unlikely to contribute a wave of short sales or foreclosures to the housing supply. That's why we're confident that affordability will recover over time as prices, wages, and interest rates find a new equilibrium. Entering fiscal 23, we're not waiting on a recovery. We're proactively addressing the weak demand environment. Like other builders, we're adjusting prices, incentives, and specification levels to enhance buyer affordability. Additionally, we're working on two other initiatives that should offset some of the pricing pressure we're facing. First, we expect to reduce our construction costs. Comparing our most recent quarter to fiscal 19, our average sales price increased by more than $130,000, allowing gross profit to increase by nearly $60,000. That means our costs went up $70,000, the vast majority of which is related to vertical construction. We are intensely focused on recapturing those dollars. With lumber prices back to pre-COVID levels, we're already seeing reductions in the cost of our framing packages. We're now realizing about $15,000 in lumber savings on new starts, which will benefit future closings. Beyond lumber, we're targeting significant savings across our other direct cost categories. Second, we expect to reduce our construction cycle time. Prior to COVID, we were generally able to start homes as late as April, and still close them before fiscal year end. Over the last two years, construction cycle times have extended by about 120 days, meaning that last year, our construction cutoff dates were generally in January. Dramatic reductions in housing starts are beginning to release some of the pressure on the supply chain. That's why we're targeting at least an additional month of sales and closings in our current fiscal year. While affordability and availability are crucial elements in selling new homes in a challenging environment, they're not the only things that matter. The experience we provide and the home we build also matter. That's why we're vigorously emphasizing two strategies that differentiate us from our competitors. First, mortgage choice is an exceptional competitive advantage. Mortgage choice 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, rate locks, buy downs that a typical in-house lender simply can't match. Second, our home's surprising performance and the monthly savings it creates resonates with buyers. Our homes are built to energy efficiency standards that exceed current energy codes for new construction and are light years ahead of used homes. That means our homes cost less to operate and are more likely to retain value against the energy efficient homes that will inevitably be built in the future. With monthly cost of ownership and resale value at the center of most buyer conversations, our commitment to energy efficiency is a big advantage. We know that fiscal 23 is going to be intensely challenging, but we also know that we're positioned to emerge from this environment in strong shape. It's not just that our corporate and operating management teams are battle tested from the last downturn. We're a fundamentally different company. We've got a sizable and efficiently controlled land position. We've massively reduced debt and interest expense. And perhaps most importantly, we've developed durable, competitive strategies to compete for buyers. With that, I'll turn the call over to Dave.