BZH

Allan P. Merrill organized comments around three topics: second quarter results highlights, responses to challenging demand environment, and progress toward multiyear goals. Second quarter had community count, sales pace, ASP, and gross margin in line with expectations. To-be-built sales at 43% (highest since 2024) and new communities at 34% of gross sales. Macro headwinds led to adjusted sales pace and margin expansion expectations. Focus on quality and value competition over short-term spec spikes. Long-term goals include over 200 active communities by end of fiscal 2027, deleveraging to low-30% range by 2027, and book value per share accretion

Q3 expected to sell over 1,000 homes, ~170 active communities, close ~900 homes with ASP $535,000 - $540,000. Adjusted homebuilding gross margins up over 50 bps sequentially. SG&A flat y-o-y. Land sales revenue ~$30 million in Q3, $150 million full year. Q3 adjusted EBITDA $5M - $10M. Full year energy efficiency tax credits expected to drive net tax benefit over $10M. Book value per share expected to grow further in Q3

Second quarter saw 1,048 homes sold with a sales pace of 2.1 per community per month. Spec sales mix was 57%, down from 61% in Q1 and mid-to-high 70% in 2025. Homebuilding revenue was $397.7 million with 757 homes closed at an average price of $525,000. Homebuilding gross margin was 15.6%. SG&A was $64 million. Taxes provided nearly an $18 million benefit. Diluted loss per share was $0.03 and adjusted EBITDA was $2.6 million

Risks include higher mortgage rates and surging energy costs which have impacted consumer sentiment and may affect sales pace and margin expansion

Q: Natalie Kulasekere asks about targeted share of to-be-built sales in the long run and if 43% will climb higher, past four quarters' share, and margins in backlog and Q4 margin expansion guidance.

A: Allan P. Merrill answers long-term goal is majority to-be-built, up from thirties a year ago to 43% now, margins in backlog supportive of guidance.

Q: Tyler Anton Batory asks about March and April sales vs normal seasonality, EBITDA guide and full-year EBITDA, and sales process and consumer adoption.

A: Allan P. Merrill says March and April were not seeing normal seasonal lift in traffic and leads. David I. Goldberg talks about EBITDA guide and no full-year EBITDA guide. Allan P. Merrill discusses energy efficiency resonating with consumers.

Q: Julio Alberto Romero asks about margin levers if demand worsens and 2027 to-be-built sales mix.

A: Allan P. Merrill says will evaluate tools varying by market, hopeful for year-over-year improvements in to-be-built sales mix.

Q: Alexander Rygiel asks about incentives and cancellation rate trends.

A: David I. Goldberg says incentives down sequentially, mix-driven. Allan P. Merrill mentions higher rates affecting buy downs. David I. Goldberg says cancellation rate not a big factor