Beazer Homes USA, Inc.

Good afternoon and welcome to the Beezer Homes Earnings Conference call for the fiscal third quarter ended June 30th, 2023. Today's call is being recorded and a replay will be available on the company's website later today. In addition, presentation slides intended to accompany this call are available within 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 third quarter of fiscal 2023. 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 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 is Alan Merrill, our Chairman and Chief Executive Officer. Today, Alan will discuss highlights from our third quarter the current environment for new home sales, and an update on our strategy and the goals we have for the future. I'll provide details on the third quarter, expectations for future results, updates on our cycle times and cost reduction initiatives, and end with a look at our balance sheet. We will conclude with a wrap-up by Allen. After our prepared remarks, we will take questions during the time remaining. I will now turn the call over to Allen.

Thank you, Dave, and thank you for joining us this afternoon. We had a very productive third quarter, highlighted by continued strength in new home orders and further recovery in our construction cycle times. These factors and the great work of our team allowed us to exceed the expectations we outlined in April. On new home orders, we generated a pace of 3.2 homes per community per month, up nearly 30% from the prior year. The resurgence in demand we experienced starting in January continued through the spring, with buyers interested in both to-be-built and move-in ready homes. Closings exceeded our expectations, both from improvements in cycle times and higher than anticipated sales of move-in ready homes. Home building gross margins were also better than anticipated as we needed fewer incentives to secure our backlog and to make new sales. Higher closings and gross margins allowed us to generate adjusted EBITDA of nearly $73 million and net income of just under $44 million. From a balance sheet perspective, we celebrated yet another important milestone with shareholders' equity exceeding $1 billion, or nearly $34 per share. Just over a year ago, mortgage rates began to move sharply higher, pushing mortgage payments as a percentage of income substantially above their long-term average. Predictably, this lack of affordability led to a big drop in new and used home sales that persisted through the end of 2022. During this time period, home prices reversed direction and wage growth continued, which slightly improved the picture. Then in January, demand returned to more normal levels, even though affordability was still strained. On a macro level, we attribute this strength to two primary factors. First, there are both long-term and short-term housing deficits. In prior calls, we have noted the structural shortage of housing, potentially as great as 4 million homes. I think of this as a long-term deficit and believe it will underpin demand for new homes for many years. But right now, we're seeing a different deficit, and that's a shortage of used homes listed for sale. While this is likely more of a short-term issue, homeowners may remain reluctant to list their home for sale until interest rates are substantially lower. Second, the overall economy remains quite strong. Unemployment levels remain very low, with job growth and wage gains continuing through the quarter. Over time, one of the most reliable indicators of housing demand has been employment and wage conditions. Both are in a pretty good place right now. But we're not just relying on these macro dynamics to address affordability. As a company, we have positioned ourselves to compete in an affordability challenged environment. We are invested in markets with demonstrated new home demand, we have targeted the largest home buyer segments, and we've developed three valuable differentiators, mortgage choice, surprising performance, and choice plans. Taken together, these efforts allow us to deliver extraordinary value at an affordable price to new home buyers. For shareholders, we remain committed to a long-term strategy we call balanced growth. It is characterized by growing profitability, improving balance sheet efficiency, and generating returns above our cost of capital. We're proud of the progress we've made so far, and we expect to do even more in the years ahead. Last quarter, we provided a roadmap for our longer term goals, specifically those related to growth, leverage, and the energy efficiency of our homes. As it relates to our growth, We expect to have more than 200 active communities by the end of 2026 with excellent visibility into year-over-year growth in each quarter for at least the next 18 months. As it relates to our balance sheet, we expect to reduce our net debt to net cap ratio to below 30% over the next three years, a measured pace that will allow us plenty of flexibility to invest in our business. And finally, as it relates to the homes we build, By the end of 2025, we expect that every home we start will meet the Department of Energy's zero energy ready standard. In December of 2020, we became the first, and still today the only, public builder to commit to achieve that standard. In Q3, 11% of our starts were zero energy ready and included homes in every one of our divisions. Overall, I'm very proud of what we were able to accomplish in the third quarter, and I'm excited about where we're going. With that, I'll turn the call over to Dave. Thanks, Alan.