Beazer Homes USA, Inc.

Good afternoon and welcome to the Beezer Homes Earning Conference call for the second quarter and fiscal year ended March 31st, 2025. 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 2025. 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 our second quarter, changes to our capital allocation priorities, and our updated multi-year goals. I will then provide detailed guidance for our third quarter results, an update on our outlook for the full fiscal year, and end with a discussion of our land position, liquidity, and capital allocation framework. Alan will conclude with a wrap-up, after which we will take any questions in the remaining time. I will now turn the call over to Alan. Thank you.

Thank you, Dave, and thank you for joining us on our call this afternoon. Our second quarter results reflected better than anticipated earnings, benefiting from our growing community count, improving construction cycle times, a modest sequential increase in gross margin, and strong overhead discipline. This resulted in adjusted EBITDA of $38.8 million and earnings per diluted share of 42 cents. We also repurchased more than $20 million of stock, bringing our total repurchases to 42 million over the past three years. While we're proud of these results, the second quarter was also characterized by a slower than anticipated selling environment, reflecting ongoing challenges with affordability, weakening consumer sentiment, and increased economic uncertainty. And as investors know, These factors have been profoundly impactful on share prices in our sector, including ours. So today, in light of both the weaker demand environment and the substantial reduction in our share price, we are announcing updates to both our capital allocation priorities and our multi-year goals. The balance of my comments this afternoon will focus on those two topics. Let's start with a quick refresher on how our approach to capital allocation has changed over time. For a number of years, our capital allocation decisions were quite simple. We needed to reduce risk to the enterprise by deleveraging. During this period, we repaid about $700 million of debt, dramatically reducing our leverage ratio. We also allocated $38 million to share repurchases, buying back nearly 4 million shares, or more than 10% of the company, at an average price below $11. These actions were entirely appropriate, but they meant we couldn't invest in community account growth. About five years ago, when we had our total debt down to a sustainable level, we announced that we were expanding our capital allocation priorities to emphasize profitable growth. We believed attractive, risk-adjusted returns could be generated by investing in growing our community count while we incrementally deleveraged through retained earnings. This mirrored what we heard from investors, namely that we weren't growing like our peers and that we were still too levered. Since adopting this growth posture, we have increased our total lot position by nearly 60%, reduced our leverage ratio by another 20 percentage points, and have still been able to repurchase 2 million shares at roughly 60% of our book value. Together, these actions have led to significant growth in book value per share with a five-year CAGR of over 17%. That brings us to the present. While we remain committed to both growth and deleveraging, The current macro environment and our share price have caused us to reevaluate our capital allocation priorities. Presented with the opportunity to buy back stock at less than half of book value, we think it is appropriate to slow the rate of growth in our community count and the rate at which we are deleveraging. Today, we announced that we have received board authorization to repurchase up to $100 million of our stock. That's nearly 20% of our current market cap. But I want to point out this is not going to be executed all at once. That's because we intend to continue growing community count and reducing leverage, although somewhat more slowly. The obvious question that arises when balancing these competing capital priorities is how much to do of each and when. Well, I can't predict our share price or the trajectory of demand for new homes. I can share three perspectives that have informed our updated multi-year goals. First, I think growth matters a lot to shareholders and to share prices, but sometimes it's more valuable than others. Right now, with anxiety about nearly every aspect of housing, it would be easy to stop investing for growth. The challenge is that land investments typically take a couple of years to turn into home building profits, so the decisions we make now will really impact 2027 and beyond, when the environment is likely to be different. Because we remain optimistic about the fundamentals for new homes and our differentiated strategy, we think pulling back too sharply would be short-sighted. Next, we cannot ignore peer comparisons around leverage. I think we'll get our net debt to net capitalization into the high 30s this year, which feels great considering where we started. But many of our peers are in the 10s or 20s. While we could debate the perfect leverage ratio for a homebuilder, We don't want to fail to earn a fair multiple on our earnings or book value because of perceived balance sheet risk. Finally, I cannot imagine a more prudent investment for us to make on behalf of shareholders than buying our own stock at a substantial discount to book value. As challenging as conditions are right now, we own great assets in great locations and we've fully underwritten them. We do not believe we could replace them at our current cost basis, let alone at a significant discount. In light of these perspectives, we've updated our multi-year goals. Two of them will look very familiar, though we are replacing our zero energy ready goal with a new goal related to book value per share growth. That's not a change in direction. It simply reflects the fact that we have all but achieved the zero energy ready goal with just 30 homes left to start from our prior product series. Starting with growth, we're shifting the target date to exceed 200 communities to the end of fiscal 27. This will allow us to temper the rate of land spending to accommodate meaningful shareware purchases without sacrificing our pro-growth posture. We ended the second quarter with 162 communities, up nearly 12% versus the prior year, and we now expect to end the year with a community count in the 170s. Based on the investments we've already made, we're positioned to have meaningful growth in community count next year and into 2027. Our balance sheet goal remains getting to a net debt to net capitalization ratio in the low 30s. Now, by the end of fiscal 27, aligning with our community account goal. As I mentioned, we expect to be in the high 30s at the end of this year and to make additional progress next year. Finally, we're adding a new multi-year goal today, designed to reflect the creation of shareholder value. Specifically, we're targeting a double-digit compound annual growth rate in our book value per share from the end of last fiscal year through fiscal 27. Achieving the low end of this goal equates to reaching a book value per share in the mid-50s. Overall, our updates to our multi-year goals are designed to reflect our commitment to allocate capital in ways that benefit shareholders, now and in the future, despite operating in a more challenging environment. With that, I'll turn the call back over to Dave.