Beazer Homes USA, Inc. Q4 FY2025 earnings call

• Fiscal '25 was productive but challenging, with community count growth, balance sheet management. Fourth quarter saw improved sales base, home closings, and profitability. • Over fiscal '25, rebid material and labor costs for savings of ~$10,000 per home, completed reduction in force for run rate savings of ~$12M/year, made product and sales leadership changes. • Portfolio realignment led to asset sales of $63M with $7M profit, increased lot position controlled by options to 62%, completed model home sale leasebacks. • Introduced 'Enjoy the Great Indoors' campaign highlighting cost savings for homebuyers. • David Goldberg discussed fourth quarter results, first quarter fiscal '26 guidance, full year fiscal '26 expectations, balance sheet/liquidity, land spend, and shareholder rights agreement.

No specific product segment financial performance with absolute terms and revenue contribution % provided in the transcript.

• First quarter fiscal '26: Expect to sell ~900 homes, ~800 closings, ASP ~$515,000, adjusted gross margin ~16%, adjusted EBITDA between breakeven and $5M, net loss ~$0.50 per diluted share. • Full year fiscal '26: Goal to meet or exceed fiscal '25 adjusted EBITDA with margin improvement from rebid savings, mix shift, and new communities. • Land spend: Full year fiscal '25 net land spend ~$600M, fiscal '26 to be disciplined in land spending. • Stock repurchase: Expect to repurchase at least 1.5 million shares in fiscal '26.

• Macro environment challenges affecting home sales, including affordability and excess inventory. • Uncertainty in market conditions impacting sales pace, margins, and profitability. • Risk of unintended ownership change limiting realization of deferred tax assets, including ~$84M related to energy tax credits.

Q: Just on the gross margin, you got a 7.2% -- 20.3% in the fourth quarter. You're [guiding] to 16% in Q1, a little bit of a decline there, but you got the cost savings coming through. So just curious, you said you mentioned incentives are going up. Just curious when the rebate benefits start to hit, is that in Q2, Q3?

A: Well, yes, Rohit. Look, we really talked about three things. So you put it correctly in Q1, obviously, going in, we have incentives, higher and specs have been a higher percentage of our sales closings and backlog, frankly. So that you're going to see in Q1 and close in Q1. But as we go through the year, we didn't give an exact timing, but we talked about being able to pick up three points and those are really the three points that we talked about, right? The direct costs, which are nearly two points of margin improvement with the $10,000 of rebid we've got so far. And frankly, what we continue to work on. And then you think about the mix shift that we discussed in some of our existing communities, we went into some depth about lower-priced communities and what that means and the shift away from lower-priced communities, that's going to add some margin accretion as we move through the year. And then finally, and we talked about it pretty in-depthly, we've got a lot of new communities that have come online. The margin profile of our new communities is better than our existing communities. And frankly, as those constitute a higher percentage of our overall closings that will be accretive to margins. So look, we try to make it pretty clear. We're not waiting for the market to get better. This isn't about assuming incentives are going to come down or that something is going to change in the macro environment. If those things happen, great, but what we're really trying to do is control what we can control.

Q: Thanks, as always, for all the thoughtful comments, and I know it's not easy to give a '26 outlook right now, but I think you walk through the moving piece as well. Dave, just on -- or Allan, on the margin improvement for the year, I think you certainly walked through the tailwinds. One thing I didn't hear mentioned is land costs. And I would be surprised if your land, flowing through the P&L, at least is not somewhat of a headwind relative to '25. So how should we think about that as a at least a partial offset to the tailwinds you have on the material and labor side and mix?

A: So I understand the question entirely. You always ask very good ones. What I've seen and what we've seen, Alan, is that the newest communities that are starting to hit the P&L. They've referenced 48 that have opened since April have across the board had better margins than existing communities. Now they're very, very low impact in closings in Q1. And that grows. So I mean, there's got to be -- you're right about the fact that having bought later, they may have a per lot cost that is higher, but it appears to date that the mix of product and price is still allowing us to show margin improvement on those new communities. I realize that's a little contrary to some other narratives, but that's the experience we've had since April.

Q: Just following up on the direct cost savings. You talked to that $10,000. It sounds like it's labor and material. I was wondering if you could just bucket those savings a little bit in greater detail. Some of your peers have called out some nice savings on the labor side, and we've heard anecdotally some nice savings on the material side, too, but just would love to see -- hear what you're seeing and the drivers behind that $10,000 number.

A: Sam, I appreciate the question, but we don't really bucket out the individual labor versus material cost. I don't know, Allan, if you have other thoughts.

A: Well, I can help you in one way and then it's something that's a little bit different for us, and we kind of committed to it last year that we would do it, and that is drive down the cost of delivering a Zero Energy Ready Home. And I think of that $10,000 probably it's not half, but probably several thousand dollars relate to finding efficiencies but maintaining the performance of our homes. Again, I come back to we're the first builder at scale to do Zero Energy Ready. And so some of the trades, some of the material providers we weren't getting discounts as we were doing that for the first time. And I think we've been able to use our experience in the construction science that we have to reduce those costs. So that's a piece of that $10,000 but the larger share of it, as Dave said, is a combination of things. We've got some turnkey trades. We've got some piecemeal trades. So I kind of distrust people talking about labor and materials as they can completely bucket it because, again, in a turnkey market, if you've got a cost reduction, it's a combination of both, and you can't really know that.