Beazer Homes USA Inc (BZH) Q2 2024 Earnings Call Transcript Highlights: Strategic Growth and ...
New Orders: 1,299, up 10% year-over-year.
Active Communities: 145, up from 136 at end of December and 121 year ago.
Land Spend: Nearly $200 million this quarter, total 12-month spending over $740 million.
EBITDA: $58 million this quarter.
Gross Margin: 21.7%, excluding amortized interest, impairments, and abandonments.
Net Income: $39.2 million, or $1.26 per share.
Homebuilding Revenue: $539 million from 1,044 home closings.
Average Sales Price (ASP): $516,000.
SG&A: 11.5% of total revenue.
Effective Tax Rate: 14.7%.
Full Year Home Deliveries Forecast: Over 4,750 homes, reflecting more than 10% annual growth.
Full Year Gross Margin Forecast: Above 21%.
Full Year EBITDA Forecast: Greater than $260 million.
Full Year EPS Forecast: At least $4.50.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
New home orders increased by 10% compared to the previous year, driven by a 14% increase in average active community count.
EBITDA reached over $58 million, supported by better-than-expected gross margins and effective overhead management.
Community count grew to 145 active communities, up from 136 at the end of December and 121 a year ago.
Successfully issued a senior note and extended the revolver, strengthening the balance sheet and supporting capital allocation flexibility.
Progressed significantly towards the goal of having 100% of starts as zero energy ready homes by the end of calendar 2025, achieving 77% in the second quarter.
Negative Points
Mortgage rates increased by about 20 basis points during the quarter, which could impact future affordability and sales pace.
Anticipated short-term financial consequences in the third quarter due to aggressive pricing and incentives to accelerate the transition to Ready Series homes.
Gross margins are expected to be lower sequentially in the third quarter due to a higher share of spec home sales and efforts to move through older series homes.
Net debt to net cap ratio increased slightly to 43.4% from the previous year due to the timing of land spending.
Orders in the Southeast region were down by 30%, potentially due to community sell-outs and phase timing issues.
Q & A Highlights
Q: How confident are you that the financial impact of the accelerated close-out of Storm Plus series homes is only centered around the third quarter? A: Allan Merrill, CEO, expressed high confidence that the margins in the Ready Series homes are higher, both on the specs and to-be-built, compared to the Plus and Star series. He emphasized that the company is very confident about the financial outlook for the fourth quarter, assuming no drastic changes in the rate environment.
Q: Can you discuss the cadence of new order activity throughout the quarter and into May? A: Allan Merrill, CEO, noted that January was weak, February improved, and March was better than February. April was similar to March, with some markets performing slightly better and others slightly weaker. He highlighted that it's challenging to draw conclusions from monthly order numbers due to the company's size.
Q: What is the primary difference between the Ready Series homes and the older series, and how does this impact margins? A: Allan Merrill, CEO, explained that Ready Series homes have a different building envelope, better insulation, and include energy recovery ventilators among other features. These homes are more expensive to build but command higher prices, which contributes to better margins. He also mentioned ongoing efforts to reduce build costs and improve the explanation of these homes' benefits to buyers.
Q: How are you managing the impact of higher mortgage rates on buyer behavior? A: Allan Merrill, CEO, observed a shift towards more temporary rate buydowns as rates increased. He also noted a heightened interest in specs, particularly as the company aims to phase out the Star and Plus series homes.
Q: What are your expectations for share buybacks given the current valuation? A: David Goldberg, CFO, indicated that with a $40 million authorization outstanding and considering the stock's current trading level relative to its book value, share repurchases are viewed as an attractive use of capital. Allan Merrill, CEO, added that the company plans to execute some share buybacks when their trading window opens.
Q: What drove the increase in specs and process from the first to the second quarter? A: David Goldberg, CFO, attributed the increase primarily to community count growth. He clarified that on a per-community basis, the number of specs has not significantly changed; it's the increase in community count that has led to more specs overall.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
