Beazer Homes USA, Inc.

Good afternoon and welcome to the Beezer Homes Earnings Conference call for the second quarter ended March 31, 2026. 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 26. Joining me today is Alan Merrill, our Chairman and Chief Executive Officer. After our prepared commentary, we will open up the line, and Alan and I will be happy to take your questions. 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 this statement is made. We do not undertake any obligation to update or revise any forward-looking statements, 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. I will now turn the call over to Alan.

Thanks, Dave, and thank you for joining us. I'm going to organize my comments today around three topics. The highlights from our second quarter results, our responses to a challenging demand environment, and a review of our progress toward our multiyear goals. Relative to the second quarter, despite some new challenges in the macro environment, We were encouraged that our community count, sales pace, ASP, and gross margin all came in right around our expectations. Of particular note, getting our sales pace back over two per community per month was important, as was the improvement in our Houston business, which was up nicely year over year. Digging a little deeper into the quarter, we were able to drive to-be-built sales higher. to 43% of gross sales, the highest level since the first quarter of 2024. And our new communities, which we define as beginning sales after March of last year, represented 34% of gross sales, up sequentially from 24% last quarter. Both of these positive mix dynamics will contribute to higher ASPs and margins in the back half of the year. From a balance sheet perspective, we have maintained a robust lot pipeline, with a healthy 60% controlled by options. During the quarter, we increased liquidity by upsizing our revolver and we grew book value per share by buying back more than a million shares at about 60% of book. Bottom line, our results reflected solid execution in a challenging operating environment. Last quarter, we described the environment and operational results that would be necessary for us to grow EBITDA this year. Among other items, This included a sales pace above 2.5 in the second half of the year and 300 basis points of margin expansion by the fourth quarter. Several macro headwinds developed since then, notably higher mortgage rates and surging energy costs. Both are readily evident to potential homebuyers and both undoubtedly contributed to the recent drop in consumer sentiment. While these challenges may prove temporary, they've left us more cautious and and reduce the likelihood of achieving sufficient pace and margin expansion to support full-year EBITDA growth. We now think a sales pace above 2 for the balance of the year and margin expansion between 200 and 300 basis points by the fourth quarter are more likely and achievable outcomes. With the additional benefit of a sizable mixed-driven increase in ASPs and a modest ramp in community counts, we are positioned to sequentially improve profitability and returns in the next two quarters. In this environment, we could probably achieve a higher sales pace by increasing spec starts and offering more incentives. But we think that would do little more than spike revenue for a few quarters and burn through our valuable lot position. More importantly, it would undermine the progress we are making in getting paid for delivering a more efficient home and the industry's highest rated customer experience. Our positive margin progression remains intact, but it is built on more than just lower construction costs. It also reflects a growing share of closings from both our newer and our higher-priced existing communities, where we are effectively competing on quality and value. While our sales pace isn't where we want it yet, we are actively building awareness with buyers, realtors, and appraisers that our homes are different, perform better, and cost a lot less to operate. We believe this approach will yield greater and more durable returns than simply putting more low feature specs on the ground. Beyond improving margins, we believe the capital allocation decisions we are making will also improve our returns. Land prices remain quite resilient, and yet Our share price implies our existing assets are worth a lot less than we paid for them, which we know is not the case. That's why our 2026 capital allocation approach has been to improve the efficiency of our land spend, sell non-strategic assets at or above book value, and buy back stock at a meaningful discount to book value, all while preserving our growing community count. On our last call, we committed to completing our existing $72 million repurchase authorization this year, and we executed $30 million in the second quarter. Upon completion of the full authorization, we will have bought back nearly 20% of our shares since early fiscal 25. Taken together, growing profitability and efficiently allocating capital will increase book value per share this year. Looking further out, we are still heading toward our longer-term multiyear goals for growth, deleveraging, and book value per share accretion, a combination we believe produces the best path for shareholder value creation. While progress isn't easy to synchronize in a difficult environment, we continue to pursue each goal. With 169 communities at quarter end, we are still targeting more than 200 active communities by the end of fiscal 27. Sales paces in existing communities and the attractiveness of incremental land purchases will determine our path to reaching this goal. We remain focused on deleveraging to the low 30% range by the end of fiscal 27. However, as we indicated last quarter, we are prioritizing share repurchase activity in fiscal 26 and expect to make progress on our leverage goal next fiscal year. Growing book value per share into the 50s remains our goal. through both earnings and stock buybacks. At quarter end, book value per share was up versus last year, finishing at nearly $42 using weighted average shares and nearly $43 using period end shares.