Beazer Homes USA, Inc. (BZH) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows mixed signals: strong liquidity, community growth plans, and share repurchases are positives, but sales shortfalls and flat leverage are concerns. The Q&A reveals cautious optimism with improved traffic and solar homes, yet lacks detail on key metrics. Despite a positive outlook on solar and community mix, macro challenges and a sales shortfall temper expectations. The absence of clear guidance and reliance on market conditions further neutralize sentiment.
Key Financial Performance
Homebuilding Revenue $359.7 million with 700 homes closed at an average selling price of $514,000. This represents a 4% year-over-year increase in the average active community count, which contributed to the revenue.
Homebuilding Gross Margin 14%, including a litigation-related charge. Excluding the charge, the margin would have been 15.8%. The litigation-related charge reduced the margin by 180 basis points.
SG&A Expenses $65 million, in line with expectations. No specific year-over-year change or reasons for change were mentioned.
Adjusted EBITDA Negative $11.2 million. This includes a $6.4 million pretax litigation-related charge, which significantly impacted the results.
Diluted Loss Per Share $1.13, which includes a $0.23 per share impact from the litigation-related charge.
Book Value Per Share Above $41, up versus last year. Growth attributed to profitability and share repurchases.
Land Sale Proceeds $3 million in the first quarter. These sales are part of a strategy to sell nonstrategic assets and fund share repurchases.
Share Repurchases $15 million in the first quarter, bringing the trailing 12-month total to $48 million or about 7% of shares. This is part of a strategy to enhance shareholder value.
Net Leverage Flat year-over-year at or just under 40%. This is due to balancing capital allocation with multiyear goals.
Liquidity More than $340 million, including $121 million of unrestricted cash and $222 million of revolver availability. This strong liquidity position supports ongoing operations and strategic initiatives.
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Operating Highlights
Solar-Included Homes: Introduced solar-included homes in many communities, reducing monthly utility bills significantly. This initiative enhances affordability and differentiates Beazer Homes from competitors.
Community Expansion: Increased active community count to 167, up 4% year-over-year, with a goal to exceed 200 communities by fiscal '27.
Cost Reduction: Reduced labor and material construction costs by over $10,000 per home, contributing to a 200 basis point margin improvement.
Land Sales: Plan to sell nonstrategic assets for $150 million, reallocating capital to share repurchases and higher-return uses.
Share Repurchase Strategy: Repurchased $15 million in stock during Q1, with $72 million remaining in authorization, aiming to enhance book value per share.
Profitability Focus: Targeting EBITDA growth through higher ASPs, cost reductions, and improved community mix.
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Risk or Challenges
Soft Demand Environment: The company began fiscal '26 in a stubbornly soft demand environment, which could impact sales and revenue growth.
Litigation-Related Charge: A litigation-related charge from an attached product community that began in 2014 negatively impacted homebuilding gross margin by 180 basis points.
Market Conditions and Competitive Activity: Achieving EBITDA growth depends on stable market conditions and consistent competitive activity, which are outside the company's control.
Sales Pace Challenges: The company needs to achieve a sales pace above 2.5% in Q3 and Q4, a level not achieved in the last two years, to meet EBITDA growth goals.
Incentive Levels: Maintaining current incentive levels for each community type is critical for achieving financial targets, but this depends on market conditions.
Land Sales Execution: The company needs to execute $150 million in land sales to meet financial goals, which requires favorable market conditions and successful transactions.
Net Leverage: Net leverage is expected to remain flat at or below 40%, which could limit financial flexibility if market conditions worsen.
Seasonal Weakness: The first quarter is seasonally the slowest, and the company experienced a sales miss during this period, impacting overall performance.
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Guidance & Outlook
Sales and Market Conditions: The company has observed better traffic and buyer engagement since mid-December, with January sales pace aligning with the prior year after eight quarters of year-over-year pace compression. They are not solely relying on market improvements but are also leveraging new branding and lead generation efforts to drive sales.
Homebuilding Margins: The company expects higher homebuilding margins in the back half of the year, driven by reduced labor and material costs (over $10,000 per home or nearly 200 basis points) and positive mix shifts within existing and new communities. By the fourth quarter, they anticipate an additional 100 basis points of margin expansion.
Community and Revenue Growth: Newer communities, which started selling in or after April 2025, are projected to account for about 50% of fourth-quarter revenue, with higher ASPs and margins compared to existing communities. The company aims to reach over 200 communities by the end of fiscal 2027.
Capital Allocation and Share Repurchases: The company plans to sell nonstrategic assets, expecting $150 million in proceeds, to fund share repurchases. They have $72 million remaining in their share repurchase authorization and aim to fully execute it this year, which is expected to drive book value per share growth.
EBITDA Growth: The company has set a goal of achieving EBITDA growth for fiscal 2026, contingent on factors such as achieving an average selling price of $565,000 in the second half, realizing 3 points of adjusted homebuilding gross margin expansion by Q4, and maintaining SG&A growth under $25 million for the year.
Land Sales and Leverage: The company plans to execute $150 million in land sales, expected to generate a double-digit EBITDA margin. They aim to maintain net leverage at or below 40% by the end of fiscal 2026, balancing capital allocation with multiyear goals.
Book Value Per Share: The company expects to grow book value per share by 5% to 10% by year-end fiscal 2026, supported by share repurchases and profitability.
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Shareholder Return Plan
Share Repurchase Authorization: During the first quarter, the company repurchased $15 million worth of stock, bringing the trailing 12-month total to $48 million, which represents about 7% of the company's shares. The company has $72 million remaining on its share repurchase authorization and plans to fully execute it within the year.
Capital Allocation Strategy: The company is selling nonstrategic assets to fund share repurchases. Approximately $150 million in proceeds from these sales are expected, which will be used to enhance balance sheet efficiency and fund share buybacks. Selling land above book value to fund share repurchases below book value is considered highly accretive for shareholders.
Book Value Per Share Growth: The company aims to grow book value per share by 5% to 10% by year-end fiscal '26 through profitability and share repurchases. Allocating $72 million to share repurchases is expected to significantly contribute to this growth.
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Key Q&A
Q:Is your repurchase plan contingent on the timing of the $150 million profitable land sales?
A:No, the repurchase plan is not contingent on the timing of the land sales. It will be executed over the year but not specifically tied to the timing of the land sales.
Q:What is the gross margin spread between a build-to-order versus a spec home?
A:The gross margin spread has historically been in the 4% to 5% range and has widened slightly in the past year. Exact percentages vary due to differences in geographies and communities.
Q:What are the reasons driving improved traffic in December and January?
A:Improved traffic is attributed to better affordability due to slightly lower rates, stabilized or reduced home prices, and increased incomes. Additionally, new communities with high efficiency and solar-included homes have gained traction.
Q:When do you expect solar-included homes to flow through orders and closings, and how accretive are they to sales or profitability?
A:Solar-included homes are already in sales and closings, with an expected 20% of business in solar-included communities by year-end. These homes have higher margins and are accretive, but the sample size is small. Adoption depends on utility providers' receptiveness to rooftop solar.
Q:What are the drivers of the favorable to-be-built mix trend in 1Q orders?
A:The favorable trend is driven by newer communities attracting attention and reduced inventory, which encourages buyers to wait for to-be-built homes.
Q:Are you still expecting to grow closings this year, and what does it depend on?
A:Closings growth depends on the selling season and the next 90 days. The focus is on growing EBITDA and book value per share through increased land sales and reduced spending.
Q:What caused the sales shortfall in the first quarter?
A:The shortfall was broad-based across divisions, with sales pace flat or down in most areas. The shortfall was less than one home per community and was influenced by a decision not to aggressively discount in December.
Q:Is the 2.5% sales pace in the back half achievable, and what gives confidence in this ramp?
A:Management believes the 2.5% sales pace is achievable due to improving buyer engagement, reduced inventory levels, and historical trends. However, it is acknowledged as a challenging but possible path.
Q:What caused the Q1 gross margin shortfall, and what is the expected progression in Q2 and the back half?
A:The Q1 shortfall was due to higher incentives and mix. Q2 is expected to see improvements due to newer communities, higher-priced existing communities, and direct cost savings. The back half is expected to benefit from a 300 basis point margin improvement driven by these factors.
Q:What is the ASP or margin premium on newer communities compared to others?
A:Newer communities have significantly higher ASPs and margins, contributing to a couple of hundred basis points in margin improvement as they represent a larger share of revenue.
Q:Was the litigation expense a one-time charge?
A:Yes, the litigation expense was a one-time charge related to a community started in 2014 and is not expected to recur.
Q:What is the current position on incentives?
A:Exact incentive numbers are not disclosed, but higher incentives contributed to margin degradation from Q4 to Q1.
Q:What is the inventory position heading into the new year?
A:The inventory position is healthy, with a combined spec position in the 6s per community, down from the 7s. Finished inventory is well-positioned for the spring selling season.
Q:Are cycle times well-positioned to ramp up if demand increases?
A:Cycle times have been reduced by about two calendar weeks, allowing for a later cutoff date for to-be-built homes to be started and closed within the fiscal year. This positions the company well to ramp up if demand increases.
Q:What would be more impactful for customers: rate reductions or down payment assistance?
A:Rate reductions and monthly payment reductions are considered more impactful for customers than down payment assistance, as they align with the company's focus on affordability.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact gross margin spread between build-to-order and spec homes, the exact incentive numbers, and the precise ASP or margin premium on newer communities. Additionally, responses on solar-included homes' profitability and the 2.5% sales pace in the back half were cautious and lacked detailed numerical backing.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ASP homebuilding
ASPs sale
CFO Treasurer
Homebuyer enthusiasm
Taxes expense
VP CFO
activity
authorization
basis point
buyback
catalyst
community increase
control
end lot
expense loss
home community
home utility
homebuilding margin
labor material
land position
land sale
litigation charge
loss share
margin expansion
margin litigation
message
path
point margin
price repurchase
sale community
sale proceeds
selling price
sheet efficiency
trend
utility bill
visibility
BZH Transcript
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The earnings call presents mixed signals: while there are improvements in loan unit and dollar volumes, adjusted EPS growth, and a stable dealer network, there are also challenges such as declining market share, increased provisions, and a conservative lending approach. The Q&A reveals management's cautious stance and lack of specific guidance, which may temper investor enthusiasm. Overall, the sentiment appears balanced, leading to a neutral stock price prediction.
Beazer Homes USA, Inc. (BZH) Q1 2026 Earnings Call Transcript
Unknown1-29
The earnings call summary shows mixed signals: strong liquidity, community growth plans, and share repurchases are positives, but sales shortfalls and flat leverage are concerns. The Q&A reveals cautious optimism with improved traffic and solar homes, yet lacks detail on key metrics. Despite a positive outlook on solar and community mix, macro challenges and a sales shortfall temper expectations. The absence of clear guidance and reliance on market conditions further neutralize sentiment.
Beazer Homes USA, Inc. (BZH) Q4 2025 Earnings Call Transcript
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The earnings call summary shows mixed signals: stable financial performance with flat sales and positive community growth, but concerns over gross margins due to higher incentives and specs. The Q&A reveals management's optimism about land sales and energy efficiency but also highlights uncertainties in cost savings and market-specific data. Given the lack of significant positive catalysts and potential headwinds in margins and order trends, the stock reaction is likely to be neutral.
Beazer Homes USA, Inc. (BZH) Q3 2025 Earnings Call Transcript
Positive7-31
The earnings call summary and Q&A indicate strong financial performance with expected sales growth, a solid liquidity position, and a robust shareholder return plan through stock repurchases. The management's focus on cost reduction and innovative product differentiation strategies, along with optimistic guidance, suggest a positive outlook. Despite some margin pressures and elevated spec home levels, the overall sentiment remains positive due to strategic initiatives and financial health improvements.
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