Beazer Homes USA Q2 2025 Earnings Report

Beazer Homes USA EPS Results

• Actual EPS: $0.42
• Consensus EPS: $0.26
• Beat/Miss: Beat by +$0.16
• One Year Ago EPS: $1.26

Beazer Homes USA Revenue Results

• Actual Revenue: $565.34 million
• Expected Revenue: $543.60 million
• Beat/Miss: Beat by +$21.74 million
• YoY Revenue Growth: +4.40%

Beazer Homes USA Announcement Details

• Quarter: Q2 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 5:00PM ET

Beazer Homes USA (NYSE:BZH) operates as a homebuilder in the United States. It designs, constructs, and sells single-family and multi-family homes under the Beazer Homes, Gatherings, and Choice Plans names. The company also sells its homes through commissioned new home sales counselors and independent brokers in Arizona, California, Nevada, Texas, Indiana, Delaware, Maryland, Tennessee, Virginia, Florida, Georgia, North Carolina, and South Carolina. Beazer Homes USA, Inc. was founded in 1985 and is headquartered in Atlanta, Georgia.

Beazer Homes USA Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Good afternoon, and welcome to the Beazer Homes Earnings Conference Call for the Second Quarter and Fiscal Year Ended 03/31/2025. 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.beazer.com. At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Thank you. Good afternoon and welcome to the Beazer Homes conference call discussing our results for the second quarter of fiscal twenty twenty five. 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.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

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. 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.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Thank you. Thank you, Dave, and

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

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 $38,800,000 and earnings per diluted share of $0.42 We also repurchased more than $20,000,000 of stock, bringing our total repurchases to 42,000,000 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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

So, 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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

During this period, we repaid about $700,000,000 of debt, dramatically reducing our leverage ratio. We also allocated 38,000,000 to share repurchases, buying back nearly 4,000,000 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 count 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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

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 2,000,000 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 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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Today, we announced that we have received board authorization to repurchase up to $100,000,000 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?

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

While 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 homebuilding profits.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

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 shortsighted.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Next, we cannot ignore peer comparisons around leverage.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Starting with growth, we're shifting the target date to exceed 200 communities to the end of fiscal twenty seven. This will allow us to temper the rate of land spending accommodate meaningful share repurchases 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 'twenty seven, aligning with our community count goal.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

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 twenty seven. 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.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

With that, I'll turn the call back over to Dave.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Thanks, Alan. This afternoon, I will concentrate on providing some more specifics on our third quarter guidance and our outlook for the fiscal year. I will then update our land spend expectations for the full year and conclude with a discussion of our liquidity and our framework for share repurchases. We have detailed our second quarter twenty twenty five results in our presentation, our press release and our 10 Q, and of course, we're happy to discuss them during the Q and A portion of this call. Let's start with our expectations for the third quarter.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

At a high level, we're not expecting any improvement in mortgage rates or consumer sentiment. We're also assuming that our mix of spec sales will remain exceptionally elevated, mirroring the 70% we experienced in the second quarter. We expect sales to be up 5% to 10% versus the same period last year with an average community count that should be up around 10%. We expect to end the third quarter with around 160 communities. We anticipate closing between ten fifty and eleven hundred homes in the quarter with an average ASP of around $525,000 The sequential increase in ASP is being driven by product and community mix shift.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Adjusted gross margin should be up slightly sequentially. SG and A as a percentage of revenue should be less than 12%. We remain focused on driving improving overhead leverage by tightly controlling spend to reflect current market conditions. We expect to generate about $40,000,000 in adjusted EBITDA. Interest amortized as a percentage of homebuilding revenue should be just over 3% and our effective tax rate should be approximately 8%.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

This should all lead to diluted earnings per share above $0.40 In light of the challenging market conditions and with a weaker than previously anticipated sales pace expected to persist, we are updating our outlook for the full year. Our average community count should be up between 12.515% versus the prior fiscal year. We expect to end the year with a community count in the 170s depending on the timing for new community activations and closeouts. We now expect our sales pace to remain between two point two five and two point five per month for the full year, well below our historical norm. As it relates to our gross margin, ASP and SG and A, we now expect adjusted gross margin for the full year to be around 18.5% reflecting better margins on more recent spec sales and in new communities.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Given our outlook for a heavier spec mix throughout this year, we anticipate our full year ASP should be around 520,000 Finally, our higher community count should lead to revenue growing faster than our overheads for the full year, driving down our SG and A percentage to be about 11%. Presented with both a slower sales environment and the opportunity to repurchase shares at a steep discount, we're reducing our expectations for full year land spending to a range of $750,000,000 to $800,000,000 We still expect to end the year with about 30,000 lots, up about 5% versus the prior year, positioning us for meaningful community count growth in the years ahead. Our balance sheet remains healthy with total liquidity exceeding $375,000,000 at the end of the quarter and no maturities until October 2027. As has been the case in recent years, we expect to use our revolver seasonally, but end fiscal years with no outstanding balances. Since we just announced a $100,000,000 share repurchase authorization, we know investors would appreciate understanding framework for allocating capital.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

First, we expect both community count growth and increased balance sheet efficiency as we further expand the percentage of our lots controlled through options. Second, we expect to continue delevering principally through retained earnings until we reach our low 30s leverage ratio goal at the end of fiscal twenty twenty seven. At that point, we will reassess whether further reductions are warranted. And third, when our shares are dramatically below book value like they are now, we believe repurchases likely represent a better risk reward opportunity than incremental land purchases. As our share price moves toward book value, growth oriented investments typically become more attractive.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

With that, I'll now turn the call back over to Alan.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Thanks, Dave. While we reported a profitable quarter, I think the bigger story is our reevaluation of our capital allocation priorities. Through our updated multi year goals, we're reaffirming our commitment to balancing growth, deleveraging, and growing book value per share. And with our new share repurchase authorization, we're also acknowledging that the current disparity between our market value and our book value represents a compelling risk reward opportunity. However, the macro environment evolves over time, we're excited about the opportunities and for our differentiated value proposition.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Our team has built a strong culture dedicated to creating value for customers, partners, shareholders, and each other. And I know that we have the strategy and the resources to do even more in the years ahead. With that, I'll turn the call over to the operator to take us into Q and A.

[Operator]

Thank you. If you would like to ask a question, please press 1. Unmute your phone and record your name clearly. If you need to withdraw your question, press 2. As a reminder, to ask a question, please press 1.

[Operator]

It will take a few moments for the questions to come through. Please stand by. Thank you. Our first question comes from Julio Romero Estadotti and Company. You may ask your question.

[Julio Romero, Equity Analyst at Sidoti & Company, LLC]

Great, thank you. Good afternoon, Alan and David. Thanks for taking the questions.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Good

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

afternoon.

[Julio Romero, Equity Analyst at Sidoti & Company, LLC]

My first one is just curious how the affordability challenge of today is considered in your updated multiyear goals and the adjusted community count timeline. Does that longer timeline for community count afford you any bargaining power with regards to your suppliers as they kind of try to push on price increases? Just your thoughts on how affordability is kind of considered into your updated goals.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Well, I mean, we've been dealing with a super constrained affordability environment for the last year and a half or two. And I don't think there is reason for us to expect it's gonna get dramatically better. I mean, we're obviously hopeful for wage growth, and maybe there will be some improvement in the rate structure, but we're, we have to kind of plan for what we know. And what we know right now is that while the underpinnings of demand are really good, affordability is a constraint. In terms of bargaining power, I feel pretty good about the fact that we've made the investments over the last several years to ensure a growing community count into twenty six and twenty seven.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Changing the slope a little bit just means that we have more choices and more discretion over the deployment of capital. And, you know, given how the market is valuing builders right now, and us in particular, that made a lot of sense.

[Julio Romero, Equity Analyst at Sidoti & Company, LLC]

Got it. That's helpful. Thinking about the newer goal about book value per share, some of that is driven by the deferred tax asset with book value.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Absolutely. I mean, tax assets are less than 10% of our book value. It really is reflecting earnings growth and some benefit, presumed, from share repurchases. But I think one of the things that we're hoping to remind investors, we've been growing book value per share pretty consistently at a very high rate. We've sustained, I think Dave said or I said, a 17% rate over the last five years and we have a line of sight with the capital that we have and the choices in front of us to be in the double digits in the next two and a half years.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

So, the idea of, like, we can continue to grow book value even if you change the amplitude of community count a little bit, we didn't want that to get lost in capital allocation priorities. That yes, we're going to be capital allocators, but we have every expectation for double digit book value growth.

[Julio Romero, Equity Analyst at Sidoti & Company, LLC]

Gotcha, understood. Just last one for me if I could, is just thinking about share repurchase of $20,000,000 in this quarter. The share release says that you are the new authorization of $100,000,000 is for over multiple years. So just thinking about that what you did this quarter, that longer term goal would kind of imply less quarterly repurchases, less of a pace than what was done this quarter. So how would you help us think about the expected cadence of repurchases?

[Julio Romero, Equity Analyst at Sidoti & Company, LLC]

And could we see you step in for something larger than what you did this quarter if you see a large enough disconnect?

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

So, you know, look, Julio, I would tell you there's when we think about it, there's kind of multiple things that we're trying to balance, right? One is what does the land market look like? What are the opportunities? What does the growth opportunity look like for us? What's available to us?

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

And then certainly what's happening with our stock and what are our share prices look like and what kind of returns that we generate from our share price. So instead of signaling, this is what we're going go do or giving you an exact number. I think the way to think about it is we have a history of being really good capital allocators, focusing on buying the stock back, frankly, when returns on the stock are very attractive. And then so based on what's happening in the market, what's happening in the land market, what the growth looks like. And frankly, talked about in the script, we're still focused on growth and deleveraging, maybe at a little bit slower rate that will dictate the kind of liquidity that we generate.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

And then we think about what the share price looks like and what returns look like from buying back the stock. So it's kind of those three things that go into it, and that's how we make the decision.

[Julio Romero, Equity Analyst at Sidoti & Company, LLC]

Very helpful. Exciting to see the new multiyear goals. I'll pass it on.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Thanks, Leo.

[Operator]

Thank you. Our next question comes from Tyler Batory of Oppenheimer. Your line is open.

[Tyler Batory, Executive Director at Oppenheimer & Co. Inc.]

Hey, good afternoon. Thanks for taking my questions here. I'll start with a couple on the guidance and then switch over to capital allocation. In terms of sales pace, can you talk a little bit about what you saw in April? Do you need to see a little bit of a better May or June to hit the order guide that you provided for Q3?

[Tyler Batory, Executive Director at Oppenheimer & Co. Inc.]

And then when you take a step back and you look at that sales pace and the adjustment that you made to the guide there, I mean, if you did just over Q1 in the first half, when you look at the back half of the year, you imply a little bit of a better than normal seasonal ramp. So is that the way that you're thinking about it? And kind of what gives you confidence that sales pace can grow a little bit from where it was in the second quarter?

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Totally a great question. So a couple things, April, I don't actually have the most recent week in front of me. I would say things don't have to be really different in May and June than they were in April. In our June, the comp is way easier relative to last year's sales pace than the first quarter was. Sorry, our fiscal second quarter, calendar first quarter.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

I should know better than that. And feel like that year over year comparison eases quite a bit, and we're going to have a 10% larger community count, which is kind of where the total order guide came from. In terms of seasonality, I mean, we're always going to see, or we have historically seen, but when you're in COVID that our Q1 is the weakest quarter, our Qs '2 and '3 are the strongest and then Q4 is a little light relative to Q2 and '3, but certainly better than Q4. So, just that mix would suggest we would normally see the back half of the year stronger than the first half of the year. And we've adjusted the guide for the balance of the year to kind of match exactly the environment that we've experienced and really no seasonal deviation from the pattern that we see in our third and fourth quarter normally.

[Tyler Batory, Executive Director at Oppenheimer & Co. Inc.]

Okay. Okay. Thank you for that. In terms of gross margin too, to bring that into the discussion here. In terms of what you reported in the second quarter, is that kind of what we should think of in terms of the lower bound on gross margin?

[Tyler Batory, Executive Director at Oppenheimer & Co. Inc.]

Because I look at where you were in terms of the sizable orders missed versus what you expected and perhaps I should read that as you really holding the line on margin. Somebody asked it another way. I mean, do you think you could have gotten a little bit more you know, maybe aggressive on on incentives and, you would have a little bit more more orders and you kind of chose to to pull to pull back? Is that, how I should interpret what what happened in terms of the results?

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

So Tyler, kind of two questions inherent in what you asked. And I want to start with the first question about, if we cut prices more, can we drive some more pace? Because I think that's a kind of fundamental question. I think you heard Alan say on the call and it was pretty clear. We think we have some great assets and some great land.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

And one of the reasons we're so comfortable doing share repurchases, we're confident in the value of our land, right? That's one of the reasons. And what goes kind of correlated to that is you don't want to burn through great land position. Could we cut prices more to drive some volume? Maybe, but the truth is we really like our land positions.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

We like where we sit and we want to preserve the value of the land that we have and lots that we have. And that's really the strategy. In terms of the gross margin question on the go forward, which was the other part of what you asked, obviously, there's a lot of puts and takes on the gross margin side. In terms of what's driving the sequential improvement in margin, we talked about a lot of this stuff in Q1 and it's coming to fruition. I want to go through it again just for folks on the call.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

We've seen some spec profitability improvement quarter over quarter. We think it's going to continue. Part of it is in the first half of the year, we were delivering, especially in Q1, maybe over specified spec, some of our prior series homes that weren't zero energy ready. As you get into Q2 and especially in Q3 and Q4, you're going to see some of our newer, better specified, more closely aligned with where the market is spec and also a greater percentage of zero ready spec and that's going to help margins. And frankly, saw that in Q1 to Q2, which is what drove some of the pickup and we think it's going to continue in Q3 and Q4.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

The other things that we talked about that are kind of giving us some confidence in margin pickup in the back half of the year, we talked about our cost reduction efforts, we talked about simplification and standardization of our product, right? We are on that really aggressively, whether it's zero energy ready costs. And I know you were out at the Vision House and got a chance to see that. How do we build it more efficiently, but also overall reductions in our home costs. We're pursuing and getting some of those and we see that coming through in our second half of the year.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

And then the last thing I would tell you kind of on the positive side, we talked about this, we're opening a lot of new communities in 2025 and the homes from the new communities that we're opening are starting to deliver, especially in the back half of the year. And that kind of further contributes to that margin sequential margin improvement. Look, we talked about slight margin improvement in Q3 and Q4 to get to the 18.5% guide that we talked about. Now look, what's weighing against margins a little bit and if we think about it is the spec mix is staying higher than we thought it was going to be, right? So we had really hoped in January that we'd be able to sell more to be built homes.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

We did some increased incentive on the mortgage side and introduced some really cool mortgage products to go do that. We're still seeing buyers opt more for spec products. 70% of our sales in Q2 were spec homes. And so the back half of the year is probably going be weighted more towards spec than we had kind of thought when we were in January. So look, all in all, the backlog tells us we got some sequential margin improvement and we feel good about the guide.

[Tyler Batory, Executive Director at Oppenheimer & Co. Inc.]

Okay, perfect. That's very helpful. Switching gears to the capital allocation side of things and you gave a lot of great detail there, but I just want to put a finer point on what you're thinking in terms of the land investment side of things. And you did bring down the expectation for what you're going to spend this year, but you're in a pretty fortunate situation where you already have a pretty robust land portfolio. You've got some pretty good community counts.

[Tyler Batory, Executive Director at Oppenheimer & Co. Inc.]

So is this going to be a multi year, maybe into next year in terms of pulling back on the land investment? What do you think about ramping things up? And just maybe give a little bit more detail just kind of where that fits in in terms of the decisions that you made today.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

I think Dave referred to the fact that the land prices matter and our stock price matters, right? We're looking at those and I, things are challenging in a lot of ways, but I agree with your characterization. We're in a pretty fortunate spot. We're gonna end the year with 30,000 lots or thereabouts with built in community count growth next year. So, it really gives us the opportunity not to pursue growth at any cost or share buybacks at any cost, but really to orient the capital in a way that's going to generate the best returns.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Now, the boundary condition is the and statement. We're going to grow, we are going to delever, and we are going to buy back stock, and in combination, that's gonna drive a double digit return on double digit growth in book value per share. I don't think next year you should expect land spend to be lower than this year, just as an observation. It could be higher, it could be quite a bit higher. We've got the capacity to do that.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

It probably won't be quite a bit higher unless we see some really significant change between our share price and land prices. But that could happen. We haven't seen the land market hasn't broken, terms have eased a little bit. And frankly, that helps drive more option deals, which we kind of like. We've driven that up into the low 60s and I see that growing over the next couple of years to a somewhat higher percentage.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

But that's really the dynamic as we're thinking about what's the share price, what are land prices, and we know what our objectives are on a multi year basis so that we can kind of make decisions in each quarter about what that allocation should be.

[Tyler Batory, Executive Director at Oppenheimer & Co. Inc.]

Okay, very good detail. I'll leave it there. Thank you.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Thanks, Howard.

[Operator]

Thank you. Our next question comes from Natalie Kulasekra of Zelman and Associates. Your line is open.

[Ivy Zelman, Executive Vice President at Zelman & Associates]

Hey, good afternoon and thanks for all the data so far. So what impact will the adjustments to your growth plans and capital allocation have on your overheads and, I guess, your interest expense leverage? With your SG and A running above 12% and your interest at 3% of revenue, would you still be able to post leverage on these line items at least in the near term if they're not growing at the rate you were previously expecting?

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Yes, look, Natalie, I mean, it's a fair question, but remember, we are talking about some significant growth and we did talk about in the script, really making sure that our overhead spend is matched with our growth and what we're doing from a business. So look, just like when as we thought we were going go a little bit faster, maybe we bulked up a little bit on overhead to prepare for the growth. If we're not accordingly. So the short answer is, yes, I still feel real comfortable to get some good overhead leverage. We're still going to have top line growth.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

We're still going to have community count growth, as I mentioned before, and that should drive some SG and A, improvement overhead leverage.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Yes. I would just add, the investments that we've made in overhead for the community count growth, those needed to happen because that community count growth is happening. Like we've made those investments, those communities are coming, that community count growth will occur and the revenue growth will follow shortly thereafter. So feel very good about being able to lever that. What we don't need to do is necessarily buttress those overheads at the same rate that we might have because we are going to grow that future community count a little bit more slowly.

[Ivy Zelman, Executive Vice President at Zelman & Associates]

Okay, that's fair. Have a follow-up to that. So, is it safe to assume that some of the land that is tied up, that was tied up before the market, like the demand started declining, that it may not make economic sense anymore? And will you be walking away from some of these deals? Or do you think this opens up an opportunity for renegotiating some of these contracts to lower prices?

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Absolutely. I think it opens up the door to try and renegotiate them, and we may have success doing that. We may not. It takes two to tango. I think there is pretty good opportunity for terms to change.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

I don't know how much prices will change. And if we don't like the prices, we can walk. Again, with pushing toward 30,000 lots and a growing community count next year, we have an awful lot of discretion. So, if we don't find and it's not every deal, but if there are a handful of deals that are in flight that we are looking at a little bit more skeptically today, if we don't see improvement in price or terms, we probably won't do them.

[Ivy Zelman, Executive Vice President at Zelman & Associates]

Okay, thanks. And, final question from me. So given the incentives that your competitors are offering, and I guess it's clearly ramped up since your last call. So do you still feel like you can earn a premium for your energy ready homes?

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Yeah, I think we can. I mean, the interesting thing for us is our zero energy ready homes in every quarter have had better margins than our non zero energy ready homes. Now that comparison starts to lose meaning going forward because we're just about done closing our prior series homes. And it's true that when you're closing something out, you may not be as aggressive on price. But I do think that as time goes by, we get better and better and our buyers and prospects and the realtors who influence them have more understanding of what makes our home different and better.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

And I think we've become even more adept at proving it. So, I think so. But honestly, Natalie, I think we're in the early days of truly getting paid for what we do. We are truly building the house from the future and I am optimistic that there is a lot more ahead of us in terms of pricing power.

[Ivy Zelman, Executive Vice President at Zelman & Associates]

All right, thank you so much.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Thanks, Natalie.

[Operator]

Thank you. Our next question comes from Jay McCanless of Wedbush. Your line is open.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Hey, guys. Thanks for taking my questions. I guess the first one, we've heard from some of your peers that labor market availability is loosening up. And just wondering if you guys have been seeing that, if it might be a tailwind for gross margin later this year, and then also maybe what you're seeing for the rest of the input costs into the house.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

On the labor side, Jay, I agree with that. Plenty of availability across trades, across submarkets. I think that is a possibility for a tailwind. I wouldn't take it to the bank yet, but the pressure is low enough that I think that opportunity does exist. Across the rest of the cost inputs, we've a bunch of Beezer specific initiatives, the standardization, simplification, and frankly working with trades now that we've got almost a year under our belt doing zero energy ready, really finding the efficiencies there, those are unique to us.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Those are opportunities for us. Those were challenges for us and we feel pretty good about that. More broadly, if you could explain to me in the next fifteen minutes what's going to happen with tariffs, I would love to answer more fully about all of the input costs. I mean, this point, and you didn't specifically ask, but I'll address it, we haven't really seen much impact from that. We've had some conversations.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

I think it plays out as a 2026 story more than a 2025. Certainly for us, we're at September year end, the last homes that will start that will be in our fiscal year will start here in the next thirty days. And at this point, there really isn't anything there. There could be, I don't know all of the way that those inputs could change. But to date, we haven't really seen any impact from that in our numbers.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Okay. And actually, you you stole my next question out about zero energy ready. It sounds like the process, the subs are trained, that part of it's getting better it sounds like.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

It is, and it's kind of a cool thing. Is maybe strange to say, but we knew and we told our teams, we know that the cost that we're going to incur to deliver this home are higher than they should be. But we gotta start somewhere. And as our trades have realized, wow, we can with the way we've got ducks in condition space, we can do two of your homes in a day, not one of your home in a day. Well, that's great.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Like, let's capture that savings. We've got a lot less job site waste because of some of the construction practices. Well, now I'm not pulling dumpsters every two days, I'm pulling them every two weeks. Well, there's savings there. So there are bits and pieces and it's really granular, but it's been exciting to kind of find all of those nickels and quarters and dollars.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

And frankly, there's still more there. And that's kind of where Dave alluded to, the Beezer specific initiatives that give us a little bit of confidence that we can ache out possibly a little sequential growth in gross margin in a pretty challenging environment.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Good. Could you tell us what percentage of your homes were sold and closed during the quarter?

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Jay, I can get back to you with the number. I don't have the data in front of me exactly, but I can certainly come back to you. We also show in the I don't have the I don't have have it right there.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Yes, sold and closed in the quarter was, three sixty seven homes. So out of, the closings, you can do that, Matt, quickly.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Yep.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

The way, in the it's page 23 in the appendix in the backlog.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

I

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

mean, you thinking for the rest of this year that that number is going to go up? Just you said earlier that the percentage of specs or sorry, the percentage of to be built is probably going to be less this year than what you thought it would be. Should we expect orders and closings to run a little more close together when we think about forecasting not only the rest of this year, but maybe even into fiscal twenty six if conditions keep up like they are.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Look, Jay, don't want to predict into '26 because there's a lot that goes into it. Like you said, it's very condition based. But certainly, I would think your assessment is correct. And what it's really translating into is a higher backlog conversion ratio, right? We've had significant improvement in the backlog conversion.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Naturally, what's happening is you're selling and delivering more specs in the quarter. And that should persist from what we've seen now in Q3 and Q4.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Okay. Mean, ideally, we'll sell specs. I mean, if we're going to sell specs, selling them and closing them in the quarter is The only downside is that means they were finished in the quarter. I'd really rather sell them in stage eight, nine, 10 of construction, so that they weren't available to deliver in the quarter that they were sold, but in the next quarter. But those two things together are definitely driving the backlog conversion higher.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Okay.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

And then, yeah, I like to see the share repurchase. I guess if it gets even worse from here, would you guys consider more aggressive measures, whether like an ASR like you did before, something else along those lines?

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

I think we'd say all the tools are in the toolkit. We've been super transparent about the magnitude of our ambition. I think the size of our authorization is quite large in relation not just to market cap, but across the industry as a percentage of market caps. And I'm pretty proud of the record we've got in terms of being a buyer of our shares at times that represented unusual value. And I think the extension of the two multi year goals gives us even more latitude to be opportunistic.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Okay, great. That's all I had. Thanks, guys.

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

Thanks, Jay.

[Operator]

Thank you. As a reminder, if you would like to ask a question, please press star one on your phone. Please ensure that your phone is unmuted and state your name clearly when prompted. Our next question comes from Alex Barron of Housing Research Center. Your line is open.

[Alex Barron, President at Housing Research Center, LLC]

Yes. Thank you. Yeah. I just wanted to congratulate you guys on the decision to shift towards share buybacks. I think it's a great decision.

[Alex Barron, President at Housing Research Center, LLC]

And also, I wanted to congratulate you on the energy efficient homes. I had an opportunity to go see one of your homes in the Texas markets and it was pretty pretty impressive. So that said, I think you guys don't are not building a commodity like other guys. So no. I don't think there's a need to follow them down the down the spiral in terms of price cuts.

[Alex Barron, President at Housing Research Center, LLC]

That said, what what is your general incentive at this point? Are you guys doing more of a rate buy down and closing costs? And if so, how much is your total, incentive as a percentage of price?

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

We don't give out the exact number, Alex, but I tell you, we have seen more buyers, opting for, especially in the last quarter rate buy downs than where we were the quarter before, and it's generally focused on perms. We have buyers doing temp certainly, it's generally focused on perms.

[Alex Barron, President at Housing Research Center, LLC]

Got it. Other than that, are all of your homes pretty much at this point super energy efficient or is it just a percentage?

[Allan Merrill, Chairman, President & CEO at Beazer Homes USA]

We have 30 starts left in, I think it's in two different communities that are in our prior series, that we will get started here before December. But, other than that, everything is zero energy ready.

[Alex Barron, President at Housing Research Center, LLC]

Alright. That's awesome. Thanks, guys.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

Thanks, Alex. Thank you. Thank you for visiting our community. It's always appreciated.

[Alex Barron, President at Housing Research Center, LLC]

Yep.

[Operator]

Thank you. At this time, I'm showing no further questions.

[David Goldberg, SVP , CFO & Treasurer at Beazer Homes USA]

I want to thank everybody for dialing into our call, and we'll talk in three months. Thank you very much. This concludes today's call.

[Operator]

Thank you. This does conclude today's conference. You may disconnect at this time. Thank you and have a good day.

Participants

Executives

• David Goldberg, SVP , CFO & Treasurer
• Allan Merrill, Chairman, President & CEO

Analysts

• Julio Romero, Equity Analyst at Sidoti & Company, LLC
• Tyler Batory, Executive Director at Oppenheimer & Co. Inc.
• Ivy Zelman, Executive Vice President at Zelman & Associates
• Jay McCanless, SVP - Equity Research at Wedbush Securities
• Alex Barron, President at Housing Research Center, LLC