Beazer Homes USA, Inc.

Good afternoon and welcome to the Beezer Homes Earnings Conference Call for the third fiscal quarter ended June 30, 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 third 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 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 today is Alan Merrill, our Chairman and Chief Executive Officer. On our call today, Alan will discuss highlights from our third quarter, the current operating environment, including a discussion about our product differentiation strategy, an update on our asset alignment efforts, including the two communities we impaired in the quarter, and end with the status of our multi-year goals. I will then provide an overview of our operational response to a weaker sales environment, detailed guidance for our fourth quarter results, and finish with updates on our balance sheet and liquidity including our outlook for land spending and share repurchases. Alan will conclude with a wrap-up, after which we will take any questions in the remaining time. Before turning the call over, I'd like to share that we've added a new Vice President of Investor Relations, Mark Chuckenow, who's in the room with us today. Mark just joined us about a month ago, and we're very pleased to have him on the team. I will now turn the call over to Alan.

Thank you, Dave, and thank you for joining us on our call this afternoon. Despite a particularly challenging sales environment in the third quarter, we were pleased with our progress toward our multi-year goals and the resilience of our gross margin. Relative to our goals, we grew our average community count 15% to 167, successfully activating 19 communities. And we grew book value per share to over $41 as we repurchased another $12.5 million of stock. We also generated an adjusted home building gross margin of 18.4%, up slightly versus Q2, as margins on our newer homes overcame higher incentives and an elevated spec mix. Weighing against these accomplishments were several headwinds that impacted our sales results. At a macro level, affordability concerns and rising new and used home inventories impacted both traffic and sales conversion. While it's impossible for us to know if or when mortgage rates may decline, we believe new home inventories will gradually be absorbed over the next several quarters because builders have already reduced start activity. Longer term, the structural housing shortage supports demand for new homes in our markets. Within our business, sales bases during the quarter vary greatly. In Texas, which represents approximately 40% of our active communities, our pace was disappointing at 1.3 sales per community per month, well below our recent third quarter absorption rates for the state, which have ranged from 1.9 to 3.1. These are among the markets that experienced the largest buildup of new home inventories during the spring. Despite near-term traffic and sales challenges in Texas, we remain bullish on the state. Dallas, Houston, and San Antonio are growing and economically vibrant. and we've got experienced teams and well-located communities in each city. And we're making product feature and incentive changes, which are showing early signs of success. Sales paces in our other markets were largely in line with our expectations for the quarter. We acknowledge that builders who have reduced home sizes, feature levels, or performance standards to be able to offer lower home prices have exceeded our sales paces this year. So I'd like to discuss the rationale for our commitment to a differentiated product and customer experience strategy. Today, we are both the number one energy efficient home builder in the country and the highest rated national home builder for customer service, according to TrustBuilder. Attaining these positions has taken time and commitment, but we believe they will lead to substantial returns to shareholders over time. Let's dig a little deeper into how we are building a unique energy efficiency position. First, we identified a pervasive consumer pain point around utility bills, namely their size and rate of growth. Then we had to create a solution. Committing to ENERGY STAR and then Zero Energy Ready across all product types and all climate zones meant specifying different materials and construction processes. from slab insulation to 2x6 framing to enhanced insulation and house wrap systems to HVAC equipment with advanced heat pumps and proprietary inverters. Our peers simply don't do these things, so we had to create a different supply chain and recruit a more technically advanced trade base to build these homes. Now, our efforts are focused on demonstrating to homebuyers and realtors that our homes are different, they're better, and we can prove it. I was in one of our model homes in Indianapolis recently and our team showed me a display of two movable wall sections demonstrating to buyers completely different construction methods. The picture is shown on the slide. One side is code built and the other is Beezer built. The sensation of swinging open each of these panels by hand and feeling the difference in the weight of our materials was kind of amazing. I'm convinced that anyone who feels that difference will intuitively understand that we're building something radically different and obviously better. Of course, to generate shareholder returns from our efforts, we must get paid for building a better home. And on that score, there's still room for improvement. So far, we've lowered the average construction cost premium to around $8,500 per home, or roughly $55 a month if we pass that entire cost on to buyers. But here's the thing. Our homes cost a lot less to operate, often by hundreds of dollars per month. That means these investments pay for themselves immediately before attributing any value to our home's comfort, durability, and health benefits. Unlike a race to the bottom on features and prices, super low utility bills is a unique market position and one that we are positioned to own. As we further reduce the cost to build these homes and continue to refine our sales process, we believe our profitability has a lot of upside. We've been clear about our intention to improve returns while we grow, which requires attention to both profitability and capital efficiency. We think about capital efficiency in terms of both the structure and the position of each community. We've had a lot of success on the structuring side. doubling our option lot percentage to 60% over the past five years. This improvement has allowed us to increase our active controlled lots by more than 55%, which will continue to fuel community account growth, even as we've reduced our owned lots. We're also improving the positioning of our communities to drive returns. This can mean selling excess lots, adjusting product types or features, or changing pricing strategies. We own or control more than $3 billion of land, and we remain convinced we couldn't replace it at our cost basis. Still, we actively manage the portfolio to improve returns. Over the past 12 months, we've sold $45 million of land that was not core to our strategy, generating about $8 million in gross profit. In other cases, we've changed plans, elevations, or features to better fit customer needs. And of course, sometimes we change our intentions based on market conditions. Two such cases arose during the third quarter, resulting in modest impairments. The first is a community in the Maricopa submarket of Phoenix, which has become increasingly price sensitive since our initial investment. As such, we decided to aggressively reprice our remaining homes and sell the balance of our finished lots. We have no other investments in Maricopa. The second is a condo community in Orlando. The condo market in Florida has become quite challenging, largely due to rising insurance and HOA costs for homeowners. During the quarter, we decided these conditions were likely to persist indefinitely, so we adjusted pricing to accelerate our return of capital. We have no other active or planned condo communities in Florida. We conduct a robust review of the entire portfolio every quarter with a consistent methodology that we detail in our 10Qs and 10Ks. While these two instances led to impairment, our review process this quarter did not identify any material risk of further impairments. Shifting now to our multi-year goals, we remain on track to achieve each of these objectives. Reaching our goal of exceeding 200 communities by the end of fiscal 2027 would result in a double-digit five-year compound annual growth rate in community count creating a platform for significant top and bottom line growth. With 167 active communities and nearly 27,000 active lots under control, we have a clear path to reaching this goal over the next two years. While additional investments could enhance this growth, given current market conditions, we're deliberately slowing land spend so that we can allocate more capital toward our two other goals. Our leverage goal remains to reach a net debt to net capitalization ratio in the low 30% range by the end of fiscal 2027. An increase in community count and slowing land spend should contribute to an accelerated rate of deleveraging in fiscal 2026. Our final goal is to generate a double-digit compound annual growth rate in book value per share through the end of fiscal 2027. This would equate to a book value in the mid-50s. We expect to achieve this goal through a combination of profitability and share repurchases. We've been actively repurchasing our shares at a discount to book in recent quarters, with a year-to-date spend of $33 million at an average price just over $22. With $87 million remaining on our authorization, we have ample capacity to continue our buyback. With that, I'll turn the call over to Dave. Thanks, Alan.