• Land and Land Development Investment: Over $750 million, up nearly 36% from the prior year.
• Active Communities: Ended the year with 162 active communities, up about 20% year over year.
• Adjusted EBITDA: $243 million.
• Earnings Per Share (EPS): $4.53.
• Community Count Growth Expectation: Full year average community count expected to increase by 18 to 22 communities.
• Revenue Growth Expectation: More than 10% top line growth anticipated.
• Spec Sales: Expected to represent more than 60% of closings, the highest level in a decade.
• First Quarter Home Closings: Expected to close more than 925 homes with an average selling price (ASP) of around $515,000.
• Adjusted Gross Margin: Expected to be around 19% for the first quarter.
• SG&A as Percentage of Revenue: Expected to be around 13% for the first quarter.
• Adjusted EBITDA for First Quarter: Expected to be about $30 million.
• Effective Tax Rate: Approximately 15% for the first quarter.
• Full Year Gross Margin Expectation: Between 19.5% and 20.5%.
• Average Selling Price (ASP) Expectation: Over $530,000 for the full year.
• SG&A Percentage for Full Year: Expected to be about 11%.
• Total Liquidity: Exceeding $500 million at the end of the fiscal year.
• Net Debt to Net Capitalization: Expected to be in the low to mid-30s by the end of fiscal 2025.
• Land Spend Expectation for 2025: Around $850 million.
• Owned and Option Lot Position: Expected to exceed 30,000 lots in 2025.

• Warning! GuruFocus has detected 8 Warning Signs with BZH.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Beazer Homes USA Inc (NYSE:BZH) invested over $750 million in land and land development, increasing active communities by 20% year-over-year.
• The company achieved $243 million in adjusted EBITDA and earnings per share of $4.53, delivering double-digit returns on both capital employed and equity.
• Beazer Homes USA Inc (NYSE:BZH) accelerated its adoption of Zero Energy Ready building practices, becoming a leader in the DOE's national single-family program.
• The company reached the top spot for customer experience among homebuilders according to TrustBuilder.
• Beazer Homes USA Inc (NYSE:BZH) maintained its position as an employer of choice, receiving recognition for culture and employee engagement from multiple organizations.

Negative Points

• The macro environment for new home sales was challenging, with stretched affordability and high mortgage rates impacting sales.
• The company had to lower prices and increase incentives in certain markets to improve sales pace, which affected margins.
• Beazer Homes USA Inc (NYSE:BZH) anticipates that spec sales, which carry lower margins, will represent more than 60% of closings, the highest level in a decade.
• The company does not expect significant reductions in mortgage rates over the fiscal year, which could impact sales and profitability.
• The first quarter of fiscal 2025 is expected to represent a trough for gross margin due to increased spec sales and incentives.

Q & A Highlights

Q: Could you discuss your confidence in the community count ramp and the path for growth? A: David Goldberg, CFO, expressed confidence in the ramp, citing growth in the land position and visibility on communities coming online. They expect to add 18 to 22 net new communities, ending the year around 180.

Q: What are your expectations for sales pacing, particularly in October compared to September? A: Allan Merrill, CEO, noted that sales improved in September and continued to be strong in October, even as incentives were reduced. This was attributed to a pickup in to-be-built sales, not just discounted specs.

Q: Can you elaborate on the expected absorption rates for fiscal 2025, given the challenging macro environment? A: Allan Merrill explained that the previous year's absorption rate was low due to high mortgage rates and competitive pressures. They have adjusted their strategy and expect to return to historical absorption rates, between 2.5 and 3 sales per community per month.

Q: Are you considering renegotiating land deals given the current macro environment and margin pressures? A: Allan Merrill stated that they have re-underwritten deals and renegotiated pricing on some, but their fiscal 2025 and 2026 plans are largely in place. They believe land prices are slightly elevated but not substantially different from pre-COVID levels.

Q: Could you explain the benefits of Zero Energy Ready homes and their impact on margins? A: Allan Merrill highlighted that Zero Energy Ready homes offer higher margins due to energy savings, which can equate to a mortgage rate reduction of over 1 point. They are confident in reducing costs and improving sales processes to further enhance margins.

Q: What are your expectations for incentives in fiscal 2025, and how do they impact margins? A: Allan Merrill indicated that while incentives were increased in some markets to boost sales, they expect to reduce them as sales improve. The outlook assumes a higher percentage of spec sales, which typically have lower margins.

Q: How do you view the potential impact of the upcoming administration change on your business? A: Allan Merrill acknowledged potential impacts from regulatory changes and immigration policies but noted that details are unclear. They expect mortgage rates to remain elevated, which could affect housing demand.

Q: Are there any plans for share buybacks given the current stock valuation? A: David Goldberg mentioned that while share buybacks are considered, the primary focus remains on land spending and growth. They evaluate risk-adjusted returns when considering capital allocation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.