Q4 2019 Earnings Call

Available at no additional cost and it's it's not crazy stuff. It's it's sensible stuff. So think about for example, a kitchen you might have a sink available under a window, that's looking out into a yard where that sink may alternatively being the layout of the kitchen in an island. So that's a choice plan. It's a selection at no cost that a customer can.

Make and we're proud of it it's actually quite hard to do we've been at it for a number of years, but one of the things that we realized during the course of this year is we still had an awful lot of other structural options elevation variation and a level of complexity in our design center that we could streamline so what we've been working on.

And and we'll continue into 2020.

Is the elimination of unpopular structural options the elimination of elevations that don't sell well <unk>. An example, you know shrinking basement alternatives that are available instead of five alternative basement configurations in a basement market there now too.

Then really adapting what I call good better best with our our cabinets or flooring, our plumbing, where the customer can really pick what level of of feature they want in their home well those things are are not stripping homes, they're not d., featuring they're creating a more cultivated group.

Of choices for customers to make but this bill over effects. It's a lot less work for our purchasing team. It makes us a lot easier to do business with in the field from a trade perspective. So the combination of an easier decision, making process is better for the customer the trades like it better and we have seen benefit from that in bidding on our jobs. So <unk>.

Cost benefit and it means our superintendents are able to get our homes built more quickly. So the combination of those things is really been the the the thing that I was alluding to in the in 2019 that we'll see more than 2020 and it absolutely plays a role in in in the cycle times that have come down and we expect for their progress this year.

Greets here I guess kinda falling on that.

If you think about your your cost and put it <unk> one of your larger competitors talking about labor costs moderating a little bit I guess, if he's thinking about your inputs now versus last year How're you feeling about.

<unk> going up, but maybe talk a little bit about labor in materials and how those are run in verses last year. Yeah. J. you know I think overall, we've had a little bit of a a benefit from lumber and and you look at random length like everybody else does there's been some benefit on the lumber side generally speaking you know cost pressures haven't been that significant.

From labor or material perspective out you know outside of on what we've seen but I would get back to Allen's point, which is really about simplification. That's really how you address and how we're going to address as we move forward the direct costs side, because it's simpler product is easier to bid.

And frankly makes us a better partner.

Okay sounds kind of get back into thank you.

<unk>.

Painkillers. Our next question comes from Susan Maclary with Goldman Sachs. Your mind is open.

Thank you Hello, everyone.

So so my question is just a round some of the demand trends that we saw in the corner.

Way that rate find out then you have the way that demand came together do you think that there was any pull forward that we saw.

Are you thinking about the implications of that as you look to the first quarter of of 2020, and then maybe even to the early parts of next year.

Well, let me take easier part of that which is what we saw on what we're experiencing it's a little harder when we get to q. too, but I would say that the improvement in the operating environment. The sales environment really build kind of slowly we sigh elements of it and certain communities in certain markets in February and a little bit more in March and a little bit more in April and a little bit.

More in May and and is that sort of progressed. It has given us confidence that what we did is we kind of reset to a more normalize level of demand. After what was really a a dislocation in our fiscal Q1. So I guess a shorter way of answering that is it hasn't felt like there was some kind of.

Euphoria that has Poland for pulled forward demand as much as we return to a steady or state and I think our ability to to kind of look into the Q1 and see a double digit rate of growth and orders, which is similar to what we were able to do and the fourth quarter is evidence of that you know as we get into next year I don't know.

But at this point there there does not seem to be a a fleeting nature to the improved demand that we've experienced okay. That's encouraging so it sounds like seasonality for your fiscal first quarter, then she'd be pretty much in line with what normal expectations are.

Exactly I mean, there with seasonality, we we definitely sell fewer homes in October November and December than we do and other foreigners studied feels like it resumption of more traditional and patterns and of course, you know whether can play a role this time of year, but in terms of the traffic, we're saying the confidence that our team in the field as it it has it is content.

I knew that a pace similar to what we were experiencing that through the summer. Okay. That's got to here and then my next question is just on gatherings do you know is that grows and it sounds like you've got some our communities that are <unk> projects that are coming on line and they're in fiscal 2020, how should we think about that relative to some other goals you have in terms of margins in <unk>.

<unk>.

I think we believed in and continue to believe in gatherings as being a creative the margin in a creative to returns it is more capital intensive but it sells at a better pace and and the margin profile. When we get it exactly right is is pretty good. So I don't think there's anything inconsistent with growing gatherings.

And are balanced growth objectives.

Alright, great. Thank you.

Thanks.

If you would like ask the question at this time you can press styling on your phone entry Court. Your name when prompted our next question comes from Alex bearing with housing Research Centre. Your line is open.

Yeah, Hey, guys. Thanks.

If you.

What your orders look like in in October .

You know, Alex we really don't do monthly trends, but and and monthly disclosures I would simply say we've had a pretty constructive October which has put us in a position to feel good about about 10% plus growth in the corridor.

Okay Yeah.

I mean, a number of other peers have reported quite a bit higher than 10%. So I would have assumed maybe you guys were.

You know would would be seen something along those lines <unk>. The challenge the the challenge from our perspective is and and we've been very consistent about this one month is just one month, we are in a season only slower period of time. So we don't want to extrapolate entirely from you know 30 or 40 trading days so far this quarter.

But as I said, an answer to prior question. The the resumption of demand that we start saw and the the stability and demand that we've been experiencing is is fairly consistent.

<unk> I think you know you've got to keep in mind is and I think it's important about beazer, we're sticking to products and some markets that we know we're not expanding the different product categories are trying to drive a lot of community count by doing something that we haven't done before so I think you might use computers that are putting up bigger numbers as certainly possible, but you know you gotta take that would the grants.

Solved that there's some.

There's some different you know product categories and and also frankly margins. We're we're looking to rebuild our <unk> to build back margin to get back as Bob said into the 20, So I need you put it all together the the more than 10% growth.

Just a very healthy housing market.

Yeah, no and I'm I'm, not saying you know necessarily less growth is as bad in in your case, if you're using its generate cash and paying down debt I actually think that that's a good thing and obviously the the margin improvement came through this quarter. So that was good can you comments on your.

Order trends as far as you know how what percentage of of the orders made me were first time buyers were entry level this quarter versus a year ago as well as what percentage every ordinance came from gatherings versus a year ago. Just found we stand those as we don't we don't break out orders Bye Bye bye market segment that way on on a quarterly basis, what I would.

Tell you is we've been about 55% entry level builder, historically, maybe a little bit more in the years before but it's been pretty consistent over time active adults about 20% of our business give or take including the gatherings piece and then the rest is kind of others. So that really hasn't changed much overtime as I mentioned in my response to the question Yeah.

Before we've been very consistent from a product focus we're not trying to be something different than what we are or do something different it's been a very consistent focused on that but frankly hasn't changed.

Okay, great. Thanks.

Thanks.

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Okay, well look what to think of any that concludes today's call what to think ready for dial in and we will talk at the end first quarter. Thank you very much for your participation.

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