Q2 2026 Beazer Homes USA Inc Earnings Call

April 30, 2026

David Brow: Good afternoon. Welcome to the Beazer Homes Earnings Conference Call for Q2 ended 31 March 2026. Today's call is being recorded. A replay will be available on the company's website later today. In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company's website at www.beazer.com. At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer.

Speaker #1: Good afternoon and welcome to the Beazer Homes Earnings Conference Call for the second quarter ended March 31st, 2026. Today's call is being recorded and a replay will be available on the company's website later PowerPoint slides intended to accompany this call are available in the investor relations section of the company's website at www.beazer.com.

Operator: Good afternoon. Welcome to the Beazer Homes Earnings Conference Call for Q2 ended 31 March 2026. Today's call is being recorded. A replay will be available on the company's website later today. In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company's website at www.beazer.com. At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer.

Speaker #1: At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer.

Speaker #2: Thank you. Good afternoon and welcome to the Beazer Homes Conference Call, discussing our results for the second quarter of fiscal 26. Joining me today is Allan Merrill, our Chairman and Chief Executive Officer.

David Goldberg: Thank you. Good afternoon. Welcome to the Beazer Homes conference call discussing our results for Q2 of fiscal 2026. Joining me today is Allan Merrill, our Chairman and Chief Executive Officer. After our prepared commentary, we will open up the line, and Allan and I will be happy to take your questions. Before we begin, you should be aware that during this call we will be making forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors described in our SEC filings, which may cause actual results to differ materially from our projections. Any forward-looking statement speaks only as of the date this statement is made. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Speaker #2: After our prepared commentary, we will open up the line and Allan and I will be happy to take your questions. Before we begin, you should be aware that during this call, we will be making forward-looking statements.

Speaker #2: Such statements involve known and unknown risks, uncertainties, and other factors described in our SEC filings which may cause actual results to differ materially from our projections.

Speaker #2: Any forward-looking statement speaks only as of the date this statement is made. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Speaker #2: New factors emerge from time to time, and it is simply not possible to predict all such factors. I will now turn the call over to Allan.

David Goldberg: New factors emerge from time to time, and it is simply not possible to predict all such factors. I will now turn the call over to Allan Merrill.

Speaker #3: Thanks, Dave. And thank you for joining us. I'm going to organize my comments today around three topics. The highlights from our second quarter results, our responses to a challenging demand environment, and a review of our progress toward our multi-year goals.

Allan Merrill: Thanks, Dave. Thank you for joining us. I'm going to organize my comments today around three topics: the highlights from our Q2 results, our responses to a challenging demand environment, and a review of our progress toward our multi-year goals. Relative to Q2, despite some new challenges in the macro environment, we were encouraged that our community count, sales pace, ASP, and gross margin all came in right around our expectations. Of particular note, getting our sales pace back over 2 per community per month was important, as was the improvement in our Houston business, which was up nicely year-over-year. Digging a little deeper into the quarter, we were able to drive to be built sales higher to 43% of gross sales, the highest level since Q1 2024.

Speaker #3: Relative to the second quarter, despite some new challenges in the macro environment, we were encouraged that our community count, sales pace, ASP, and gross margin all came in right around our expectations.

Speaker #3: Of particular note, getting our sales pace back over two per community per month was important, as was the improvement in our Houston business, which was up nicely year over year.

Speaker #3: Digging a little deeper into the quarter, we were able to drive to-be-built sales higher to 43% of gross sales, the highest level since the first quarter of 2024.

Speaker #3: And our new communities, which we define as beginning sales after March of last year, represented 34% of gross sales up sequentially from 24% last quarter.

Allan Merrill: In our new communities, which we define as beginning sales after March of last year, represented 34% of gross sales, up sequentially from 24% last quarter. Both of these positive mix dynamics will contribute to higher ASPs and margins in the H2 of the year. From a balance sheet perspective, we have maintained a robust lot pipeline with a healthy 60% controlled by options. During the quarter, we increased liquidity by upsizing our revolver, and we grew book value per share by buying back more than 1 million shares at about 60% of book. Bottom line, our results reflected solid execution in a challenging operating environment. Last quarter, we described the environment and operational results that would be necessary for us to grow EBITDA this year.

Speaker #3: Both of these positive mixed dynamics will contribute to higher ASPs and margins in the back half of the year. From a balance sheet perspective, we have maintained a robust lot pipeline with a healthy 60% controlled by options.

Speaker #3: During the quarter, we increased liquidity by upsizing our revolver, and we grew book value per share by buying back more than a million shares at about 60% of book.

Speaker #3: Bottom line, our results reflected solid environment. Last quarter, we described the environment and operational results that would be necessary for us to grow EBITDA this year.

Speaker #3: Among other items, this included a sales pace above two and a half in the second half of the year, and 300 basis points of margin expansion by the fourth quarter.

Allan Merrill: Among other items, this included a sales pace above 2.5 in the H2 of the year and 300 basis points of margin expansion by the Q4. Several macro headwinds developed since then, notably higher mortgage rates and surging energy costs. Both are readily evident to potential homebuyers, and both undoubtedly contributed to the recent drop in consumer sentiment. While these challenges may prove temporary, they've left us more cautious and reduced the likelihood of achieving sufficient pace and margin expansion to support full-year EBITDA growth. We now think a sales pace above 2 for the balance of the year and margin expansion between 200 and 300 basis points by the Q4 are more likely and achievable outcomes.

Speaker #3: Several macro headwinds developed since then, notably higher mortgage rates and surging energy costs. Both are readily evident to potential homebuyers and both undoubtedly contributed to the recent drop in consumer sentiment.

Speaker #3: While these challenges may prove temporary, they've left us more cautious and reduced the likelihood of achieving sufficient pace and margin expansion to support full-year EBITDA growth.

Speaker #3: We now think a sales pace above two for the balance of the year and margin expansion between 200 and 300 basis points by the fourth quarter are more likely and achievable outcomes.

Speaker #3: With the additional benefit of a sizable mixed-driven increase in ASPs and a modest ramp in community counts, we are positioned to sequentially improve profitability and returns in the next two quarters.

Allan Merrill: With the additional benefit of a sizable mix-driven increase in ASPs and a modest ramp in community counts, we are positioned to sequentially improve profitability and returns in the next 2 quarters. In this environment, we could probably achieve a higher sales pace by increasing spec starts and offering more incentives. We think that would do little more than spike revenue for a few quarters and burn through our valuable lot position. More importantly, it would undermine the progress we are making in getting paid for delivering a more efficient home and the industry's highest-rated customer experience. Our positive margin progression remains intact, but it is built on more than just lower construction costs. It also reflects a growing share of closings from both our newer and our higher-priced existing communities, where we are effectively competing on quality and value.

Speaker #3: In this environment, we could probably achieve a higher sales pace by increasing spec starts and offering more incentives. But we think that would do little more than spike revenue for a few quarters and burn through our valuable lot position.

Speaker #3: More importantly, it would undermine the progress we are making in getting paid for delivering a more efficient home and the industry's highest-rated customer experience.

Speaker #3: Our positive margin progression remains intact, but it is built on more than just lower construction costs. It also reflects a growing share of closings from both our newer and our higher-priced existing communities, where we are effectively competing on quality and value.

Speaker #3: While our sales pace isn't where we want it yet, we are actively building awareness with buyers, realtors, and appraisers that our homes are different, perform better, and cost a lot less to operate.

Allan Merrill: While our sales pace isn't where we want it yet, we are actively building awareness with buyers, realtors, and appraisers that our homes are different, perform better, and cost a lot less to operate. We believe this approach will yield greater and more durable returns than simply putting more low-feature specs on the ground. Beyond improving margins, we believe the capital allocation decisions we are making will also improve our returns. Land prices remain quite resilient, yet our share price implies our existing assets are worth a lot less than we paid for them, which we know is not the case. That's why our 2026 capital allocation approach has been to improve the efficiency of our land spend, sell non-strategic assets at or above book value, and buy back stock at a meaningful discount to book value, all while preserving our growing community count.

Speaker #3: We believe this approach will yield greater and more durable returns than simply putting more low-feature specs on the ground. Beyond improving margins, we believe the capital allocation decisions we are making will also improve our returns.

Speaker #3: Land prices remain quite resilient. And yet, our share price implies our existing assets are worth a lot less than we paid for them, which we know is not the case.

Speaker #3: That's why our 2026 capital allocation approach has been to improve the efficiency of our land spend, sell non-strategic assets at or above book value, and buy back stock at a meaningful discount to book value, all while preserving our growing community count.

Speaker #3: On our last call, we committed to completing our existing $72 million repurchase authorization this year. And we executed $30 million in the second quarter.

Allan Merrill: On our last call, we committed to completing our existing $72 million repurchase authorization this year. We executed $30 million in Q2. Upon completion of the full authorization, we will have bought back nearly 20% of our shares since early fiscal 2025. Taken together, growing profitability and efficiently allocating capital will increase book value per share this year. Now, looking further out, we are still heading toward our longer-term multi-year goals for growth, deleveraging, and book value per share accretion, a combination we believe produces the best path for shareholder value creation. While progress isn't easy to synchronize in a difficult environment, we continue to pursue each goal. With 169 communities at quarter end, we are still targeting more than 200 active communities by the end of fiscal 2027.

Speaker #3: Upon completion of the full authorization, we will have bought back nearly 20% of our shares since early fiscal '25. Taken together, growing profitability and efficiently allocating capital will increase book value per share this year.

Speaker #3: Now, looking further out, we are still heading toward our longer-term multi-year goals for growth, deleveraging, and book value per share accretion, a combination we believe produces the best path for shareholder value creation.

Speaker #3: While progress isn't easy to synchronize in a difficult goal. With 169 communities at quarter end, we are still targeting more than 200 active communities by the end of fiscal '27.

Speaker #3: Sales pace in existing communities and the attractiveness of incremental land purchases will determine our path to reaching this goal. We remain focused on deleveraging to the low 30% range by the end of fiscal '27.

Allan Merrill: Sales paces in existing communities and the attractiveness of incremental land purchases will determine our path to reaching this goal. We remain focused on deleveraging to the low 30% range by the end of fiscal 2027. However, as we indicated last quarter, we are prioritizing share repurchase activity in fiscal 2026 and expect to make progress on our leverage goal next fiscal year. Growing book value per share into the 50s remains our goal through both earnings and stock buybacks. At quarter end, book value per share was up versus last year, finishing at nearly $42 using weighted average shares and nearly $43 using period-end shares. With that, I'll turn the call over to Dave.

Speaker #3: However, as we indicated last quarter, we are prioritizing share repurchase activity in fiscal '26 and expect to make progress on our leverage goal next fiscal year.

Speaker #3: Growing book value per share into the $50s remains our goal, through both earnings and stock buybacks. At quarter end, book value per share was up versus last year, finishing at nearly $42 using weighted average shares, and nearly $43 using period-end shares.

Speaker #3: With that, I'll turn the call over to Dave.

Speaker #2: Thanks, Allan. During the second quarter, we sold 1,048 homes with a pace of 2.1 sales per community per month, with pace increasing from January to February and plateauing in March.

David Goldberg: Thanks, Allan. During Q2, we sold 1,048 homes with a pace of 2.1 sales per community per month, with pace increasing from January to February and plateauing in March. On a positive note, our spec sales mix continued to move lower at 57% in the quarter. This is down from 61% in Q1 and well below the mid to high 70% range we saw in H2 of fiscal 2025. This shift toward more to-be builds supports our margin expansion opportunities in H2. Of note, the impact of the headwinds we mentioned earlier has not been an increase in cancellation rates. Instead, we simply didn't see our normal seasonal lead in traffic lift in March. Our average active community count was 167, representing 3% year-over-year growth.

Speaker #2: On a positive note, our spec sales mix continued to move lower at 57% in the quarter, this is down from 61% in the first quarter and well below the mid to high 70% range we saw in the back half of fiscal '25.

Speaker #2: This shift toward more to-be-builts supports our margin expansion opportunities in the second half. Of note, the impact of the headwinds we mentioned earlier has not been an increase in cancellation rates.

Speaker #2: Instead, we simply didn't see our normal seasonal lead in traffic lift in March. Our average active community count was 167, representing 3% year-over-year growth.

Speaker #2: Our homebuilding revenue was $397.7 million, with 757 homes closed at an average price of $525,000. As anticipated, our ASP continues to move higher, given the positive mix shifts we have referenced.

David Goldberg: Our homebuilding revenue was $397.7 million, with 757 homes closed at an average price of $525,000. As anticipated, our ASP continues to move higher given the positive mix shifts we have referenced. In fact, with an ASP in backlog over $580,000, this trend should accelerate. Home building gross margin was 15.6%, essentially in line with our Q1 results. SG&A was $64 million, approximately $4 million below last year. Surprisingly, taxes represented nearly an $18 million benefit. This reflected an adjustment in our quarterly interim tax treatment. Interim taxes are definitely not intuitive in GAAP, so we've added disclosure in our Q discussing this change. All told, the Q2 diluted loss per share was $0.03, and adjusted EBITDA was $2.6 million.

Speaker #2: In fact, with an ASP in backlog over 580,000, this trend should accelerate. Homebuilding gross margin was 15.6%, essentially in line with our first quarter results.

Speaker #2: SG&A was 64 million dollars, approximately $4 million below last year. Surprisingly, taxes represented nearly an 18 million dollar benefit. This reflected an adjustment in our quarterly interim tax treatment.

Speaker #2: Interim taxes are definitely not intuitive in GAAP, so we've added disclosure in our queue discussing this change. All told, the second quarter diluted loss per share was 3 cents and adjusted EBITDA was 2.6 million dollars.

Speaker #2: Now, let's walk through our third quarter expectations. We expect to sell more than 1,000 homes, up nearly 20% versus last year's third quarter, this implies a sales pace roughly in line with the second quarter.

David Goldberg: Now let's walk through our Q3 expectations. We expect to sell more than 1,000 homes, up nearly 20% versus last year's Q3. This implies a sales pace roughly in line with the Q2. We expect to finish Q3 with about 170 active communities, flat to slightly up sequentially. We anticipate closing about 900 homes with an ASP between $535,000 to $540,000 as our newer communities contribute a larger share of closings. Adjusted home-building gross margin should be up more than 50 basis points sequentially, reflecting both direct cost savings and mix benefits. SGA dollars should be about flat with last year's Q3.

Speaker #2: We expect to finish Q3 with about 170 active communities, flat to slightly up sequentially. We anticipate closing about 900 homes with an ASP between 535 to 540 thousand dollars, as our newer communities contribute a larger share of closings.

Speaker #2: Adjusted homebuilding gross margin should be up more than 50 basis points sequentially, reflecting both direct cost savings and mixed benefits. SG&A dollars should be about flat, with last year's third quarter.

Speaker #2: From a land sale perspective, we expect to generate about $30 million of revenue in the quarter and still expect 150 million dollars for the full year.

David Goldberg: From a land sale perspective, we expect to generate about $30 million of revenue in the quarter and still expect $150 million for the full year. Altogether, this should result in total adjusted EBITDA of $5 to 10 million in Q3. Interest amortized as a percentage of home building revenue should be about 3%. Given the variability of our interim tax rate, we're not giving tax or earnings guidance for the quarter. For the full year, we expect our energy efficiency tax credits will drive a net tax benefit of over $10 million. More importantly, we expect to pay minimal cash taxes for several years as a result of these credits. Finally, we expect further growth in book value per share in Q3.

Speaker #2: Altogether, this should lead this should result in total adjusted EBITDA of 5 to 10 million dollars in the third quarter. Interest amortizes a percentage of homebuilding revenue should be about 3%.

Speaker #2: Given the variability of our interim tax rate, we're not giving tax or earnings guidance for the quarter. For the full year, we expect our energy efficiency tax credits will drive a net tax benefit of over $10 million.

Speaker #2: And more importantly, we expect to pay minimal cash taxes for several years as a result of these credits. Finally, we expect further growth in book value per share in the third quarter.

Speaker #2: Coming into the year, we had two goals related to land spend. First, we wanted to sustain an investment level that supports community count growth.

David Goldberg: Coming into the year, we had two goals related to land spend. First, we wanted to sustain an investment level that supports community count growth. At the same time, we wanted to make our balance sheet more efficient to facilitate share repurchases. We feel pretty good about both. Our total land spend this year, net of land sale proceeds, should be roughly in line with the dollar value of what we're delivering. That would typically lead to a flat community count, but we've been able to improve deal structure and timing and carefully grow our use of developer and land bank options. The resulting balance sheet and land spend efficiencies are helping us to turn our assets more quickly and supporting both our growth outlook and buyback activity. Finally, our balance sheet remains strong with approximately $400 million of total liquidity.

Speaker #2: At the same time, we wanted to make our balance sheet more efficient to facilitate share repurchases. We feel pretty good about both. Our total land spend this year, net of land sale proceeds, should be roughly in line with the dollar value of what we're delivering.

Speaker #2: That would typically lead to a flat community count, but we've been able to improve deal structure and timing, and carefully grow our use of developer and land bank options.

Speaker #2: The resulting balance sheet and land spend efficiencies are helping us to turn our assets more quickly, and supporting both our growth outlook and buyback activity.

Speaker #2: Finally, our balance sheet remains strong, with approximately $400 million of total liquidity. This includes 116 million dollars of unrestricted cash and 285 million dollars of a revolver availability, and we have no maturities until October 2027.

David Goldberg: This includes $160 million of unrestricted cash and $285 million of revolver availability, and we have no maturities until October 2027. During the quarter, we expanded our revolver by $160 million to $525 million and extended its maturity by 2 years to March 2030. With that, I'll turn the call back over to Allan Merrill.

Speaker #2: During the quarter, we expanded our revolver by 160 million dollars to 525 million dollars, and extended its maturity by two years to March 2030.

Speaker #2: With that, I'll turn the call back over to Allan.

Speaker #3: Thank you, Dave.

Allan Merrill: Thank you, Dave. To wrap up, I'd like to summarize the reasons we're so confident we'll create substantial value for our investors. We have a clear and differentiated strategy. We have chosen to compete by offering a home built to lower homeownership costs as their key attribute. This is different from other builders, and we think that's a good thing, and a lot less risky than trying to outmuscle all of the companies building lower-feature homes. We are building momentum toward greater profitability. Our sales pace improved this quarter. Our gross margins are headed in the right direction. Our average sales prices are trending higher, and our community count is growing. Together, this creates a powerful setup for operational leverage. Our balance sheet is strong.

Speaker #2: To wrap up, I'd like to summarize the reasons we're so confident we'll create substantial value for our investors. We have a clear and differentiated strategy.

Speaker #2: We have chosen to compete by offering a home built to lower homeownership costs as their key attribute. This is different from other builders, and we think that's a good thing.

Speaker #2: And a lot less risky than trying to outmuscle all of the companies building lower-feature homes. We are building momentum toward greater profitability. Our sales pace improved this quarter.

Speaker #2: Our gross margins are headed in the right direction. Our average sales prices are trending higher, and our community count is growing. Together, this creates a powerful setup for operational leverage.

Speaker #2: Our balance sheet is strong. We have plenty of liquidity, no looming maturities, ready access to the capital markets, and lots of tax credits that will shield a significant amount of our future profitability.

Allan Merrill: We have plenty of liquidity, no looming maturities, ready access to the capital markets, and lots of tax credits that will shield a significant amount of our future profitability. Finally, we have been disciplined capital allocators. Prior to and during the pandemic, we grew our active land portfolio significantly, setting us up for sustained community count growth. In recent quarters, we have improved the efficiency of our balance sheet to facilitate substantial share repurchases. We aren't spending time worrying about the macro or hoping for a turn in the market. We're executing against a differentiated strategy that is poised to deliver growing profitability and shareholder returns. Let me finish, as always, by thanking our team for their ongoing efforts to create value for our customers, our partners, our shareholders, and each other. With that, I'll turn the call over to the operator to take us into Q&A.

Speaker #2: Finally, we have been disciplined, capital allocators. Prior to and during the pandemic, we grew our active land portfolio significantly, setting us up for sustained community count growth.

Speaker #2: In recent quarters, we have improved the efficiency of our balance sheet to facilitate substantial share repurchases. We aren't spending time worrying about the macro or hoping for a turn in the market.

Speaker #2: We're executing against a differentiated strategy that is poised to deliver growing profitability and shareholder returns. Let me finish, as always, by thanking our team for their ongoing efforts to create value for our customers, our partners, our shareholders, and each other.

Speaker #2: With that, I'll turn the call over to the operator to take us into Q&A.

Speaker #1: Thank you. At this time, if you would like to ask a question, please press star, followed by the number one. To withdraw your question, you may press star, followed by the number two.

David Brow: Thank you. At this time, if you would like to ask a question, please press star followed by the number 1. To withdraw your question, you may press star followed by the number 2. Please unmute your phones and state your name when prompted. Once again, that is star 1. Our first caller is Natalie Kulasekere with Zelman & Associates. Your line is open.

Operator: Thank you. At this time, if you would like to ask a question, please press star followed by the number 1. To withdraw your question, you may press star followed by the number 2. Please unmute your phones and state your name when prompted. Once again, that is star 1. Our first caller is Natalie Kulasekere with Zelman & Associates. Your line is open.

Speaker #1: Please unmute your phones and state your name when prompted. Once again, that is star one. Our first caller is Natalie Calista Carrera with Zelman & Associates.

Speaker #1: Your line is open.

Speaker #4: Hey, good evening, and thank you for taking my question. Could you tell us—hey, could you tell us what your targeted share of to-be-built sales is in the long run, and can you expect this 43% to climb higher over the coming quarters? And if so, what are some changes that you've made in the business to accommodate this? And, yeah, any detail around that would be helpful.

Natalie Kulasekere: Hey, good evening, and thank you for taking my question.

David Goldberg: Hey, Natalie.

Natalie Kulasekere: Could you tell us what your targeted share of to-be-built sales is in the long run? Can you expect this 43% to climb higher over the coming quarters? If so, you know, what are some changes that you made in the business to accommodate this? Yeah, any detail around that would be helpful.

Speaker #3: Sure. Natalie, it's Allan. I guess I'd answer that a few ways. When I think longer term, we would like a majority of the homes that we sell to be to be built.

Allan Merrill: Sure, Natalie, it's Allan. I guess I'd answer that a few ways. When I think longer term, we would like a majority of the homes that we sell to be to-be-built. That is not going to happen over the next several quarters. That's a longer-term goal, to be a majority to-be-built company like we were, frankly, before the pandemic. In terms of the next couple of quarters, we're gonna keep working to drive that percentage. Typically what has happened in Q4 is we have a slight increase in spec sales close to fiscal year-end.

Speaker #3: That is not going to happen over the next several quarters. So that's a longer-term goal to be a majority to be built company like we were frankly before the pandemic.

Speaker #3: In terms of the next couple of quarters, we're going to keep working to drive that percentage, but typically what has happened in the fourth quarter is we have a slight increase in spec sales, close to fiscal year-end.

Speaker #3: So it's not a straight line, but I think we'll be able to do period-over-period comparisons over the next year and see just slow, steady progress comparing quarters to one another, year over year, where I think we will be able to show increases in to be built sales.

Allan Merrill: It's not a straight line, but I think we'll be able to do period-over-period comparisons over the next year and see just slow, steady progress comparing quarters to one another, year over year, where I think we will be able to show increases in to-be-built sales.

Speaker #1: Got it. And what has this share been trending over, let's say, the past four quarters?

Natalie Kulasekere: Got it. What has the share been trending over like, let's say, the past 4 quarters?

Speaker #3: Well, I mean, it was a year ago it was in the 30s. Now it's 43. It's the highest it's been since early '24. But it's and frankly, it's held in nicely this spring.

Allan Merrill: Well, I mean, it was. A year ago, it was in the 30s, now it's 43. It's the highest it's been since early 2024. Frankly, it's held in nicely this spring. Rather than going back to every quarter, 'cause I don't have that off the top of my head, but it's up over 10 points year over year.

Speaker #3: So rather than going back to every quarter because I don't have that off the top of my head, but it's up over 10 points year over year.

Speaker #1: Okay. Got it. That's helpful. And just one more from me. What are the margins you see in your backlog right now? And also, is your guidance of 300 basis points of margin expansion in the fourth quarter, is that based on what you're seeing in the backlog and the kind of interest you're seeing with your to be built sales?

Natalie Kulasekere: Okay. Got it. That's helpful. Just one more from me. Where are the margins you see in your backlog right now? Also, is your guidance of 300 basis points of, you know, margin expansion in Q4, is that based on what you're seeing in the backlog and, you know, the kind of interest you're seeing, you know, with your to-be-built sales?

Speaker #3: Yeah, Natalie, it's Dave. Look, I would tell you the margins in the backlog are supportive of the guidance that we've given for the next two quarters.

David Goldberg: Natalie, it's Dave. Look, I would tell you the margins in backlog are supportive of the guidance that we've given for the next 2 quarters. Obviously, we have a lot more visibility on Q3, just given that we're kind of middle of Q3 now. Where we end up and the reason we went to 200 to 300 is based on what happens with specs and the specs that we sell and close in the next 2 quarters.

Speaker #3: Obviously, we have a lot more visibility on Q3, just given that we're kind of in the middle of Q3 now. Where we end up and the reason we went to 2 to 300 is based on what happens with specs and the specs that we sell and close in the next two quarters.

Natalie Kulasekere: All right. Thank you.

Speaker #3: Thank you.

David Goldberg: Thank you.

Speaker #1: And our next question is Tyler Batory with Oppenheimer. Your line is open, sir.

David Brow: Our next question is Tyler Batory with Oppenheimer. Your line is open, sir.

Operator: Our next question is Tyler Batory with Oppenheimer. Your line is open, sir.

Speaker #5: Oh, hey, good afternoon, everyone. Thanks for taking my questions. So first one for me, interested if you can get some more detail on what you saw in March and April, how sales in those months compared with normal seasonality.

Tyler Batory: Hey, good afternoon, everyone. Thanks for taking my questions. First one for me. Interested if you can give some more detail on what you saw in March and April, how sales in those months compared with normal seasonality.

Speaker #3: So March was fine. But it wasn't great. I would tell you January was kind of normal. February was up a little bit. We were feeling reasonably optimistic.

Allan Merrill: March was fine, but it wasn't great. I would tell you January was kind of normal. February was up a little bit. We were feeling reasonably optimistic. I mean, there was weather here and there, but it felt pretty good. I have to say in March it was fine, but we didn't see that we normally see is an increase sequentially from February and March in traffic and leads. It held, it didn't collapse, it didn't go anywhere, but it didn't move up. That's one of the things that's made us just a little bit more cautious as we look at the next couple of months. April has been very similar to March.

Speaker #3: I mean, there was weather here and there, but it felt pretty good. And I have to say, in March, it was fine, but we didn't see what we normally see, which is an increase sequentially from February to March.

Speaker #3: In traffic and leads, it held. It didn't collapse. It didn't go anywhere. But it didn't move up. And that's one of the things that's made us just a little bit more cautious as we look at the next couple of months.

Speaker #3: And April has been very similar to March.

Speaker #5: Okay, perfect. And then I'm really trying to understand the EBITDA guide here. On your $5 million to $10 million in Q3, I think there was some talk earlier about EBITDA perhaps being pretty close to where you were in the prior year for the full year.

Tyler Batory: Okay, perfect. I'm really trying to understand the EBITDA guide here and your $5 to 10 million in Q3. You know, I think there was some talk earlier about EBITDA perhaps being pretty close to where you were in the prior year for the full year. Certainly if that were still the case, would imply a pretty significant ramp in Q4. I'm assuming there's some moving pieces, perhaps on the land side of things. I understand that the environment is a little bit weaker than when we came into the year. Just still trying to understand perhaps some of the one-time items that might be moving around Q3, Q4, and just kind of how you see EBITDA for the full year playing out.

Speaker #5: So certainly, if that were still the case, would imply a pretty significant ramp in Q4. So I'm assuming there's some moving pieces perhaps on the land side of things.

Speaker #5: I understand that the environment is a little bit weaker than what we came into the year. But just still trying to understand perhaps some of the one-time items that might be moving around Q3, Q4, and just kind of how you see EBITDA for the full year playing out.

Speaker #3: Yeah. Look, Tyler, we're not given a full-year EBITDA guide, but I really want to start with what we did last quarter was all about trying to create a path and show people what a path could look like to get to growth and EBITDA year over year.

David Goldberg: Yeah. Look, Tyler, we're not giving a full-year EBITDA guide, but I really want to start with what we did last quarter was all about trying to create a path and show people what a path could look like to get to growth in EBITDA year over year. Allan said in his opening comments, in a tougher sales environment, not doing the 2.5 sales pace in Q3 and Q4, that becomes more difficult. There's not really a significant change beyond what we just talked about. Our land sale guidance is still, you know, somewhere $150 million of land sales. You know, when you compound having lower sales paces in Q3 and Q4, it has an impact on EBITDA, and there's a lot of, there's a lot of operating leverage.

Speaker #3: And now I'm setting this opening comments, and the tougher sales environment, not doing the two-and-a-half sales base in Q3 and Q4, that becomes more difficult.

Speaker #3: So there's not really a significant change beyond what we just talked about. Our land sale guidance is still somewhere 150 million dollars of land sales.

Speaker #3: But when you compound having lower sales bases in Q3 and Q4, it has an impact on EBITDA. And there's a lot of there's a lot of operating leverage.

Speaker #3: The good news is, and Allan talked about this in his scripted remarks, there's also a lot of operating leverage the other way, right? So I'm happy to take it more offline if you want to, but there's really no change other than what we outlined in the script.

David Goldberg: The good news is, Allan talked about this in his scripted remarks, there is also a lot of operating leverage the other way, right? I'm happy to take it more offline if you want to, but there's really no change other than what we outlined in the script.

Speaker #5: Okay. And then last one for me, just thinking strategically about how you sell your homes, kind of getting fair value, if you will, in the markets.

Tyler Batory: Okay. Last one for me, just thinking strategically about how you sell your homes, kind of getting fair value, if you will, in the markets, for what you offer. I know you've made some changes to marketing and whatnot. Just talk about the sales process, consumer adoption, if people are really appreciating, or starting to appreciate even more, the value that you provide in your homes?

Speaker #5: For what you offer, I know you've made some changes to marketing and whatnot. Just talk about the sales process, consumer adoption, if people are really appreciating or starting to appreciate even more, the value that you provide in your homes.

Speaker #3: Sure. So I think you'd have to be not you personally, but any of us would have to be living under rocks to not be aware of the fact that energy costs are much higher in consumers' minds than they have been in many years.

Allan Merrill: Sure. I think you'd have to be, not you personally, but any of us would have to be living under rocks to not be aware of the fact that energy costs are much higher in consumers' minds than they have been in many years. That actually is great for us. I think the thing that is really resonating, there's some science, there's a proof statement as to how. One of our new home counselors explained this to me, and I thought, you know, it's got great benefit of both being true and being simple. She said, you know, if we save somebody $100 a month, or $200 a month in their utility bills. We can look at homes in the community, we can look at the third party ratings that we get.

Speaker #3: And that actually is great for us. I think the thing that is really resonating is there's some science. There's a proof statement as to how.

Speaker #3: One of our new home counselors explained this to me, and I thought, "That's got great benefit to both being true and being simple." She said, "If we save somebody $100 a month or $200 a month in their utility bills, and we can look at homes in the community, we can look at the third-party ratings that we get, the purchasing power that that creates for them, is enormous.

Allan Merrill: The purchasing power that that creates for them is enormous. She said she likes to tell people, and I like this, I mean, it's obviously a little self-serving, but she said, You know, $10,000 in price costs $50 a month. If we save you $200 a month, how does that $50 a month feel? I think that the idea about energy efficiency that has been kind of elusive for most consumers is either they think they have to sacrifice something. I always joke about low-flow showers. You know, nobody I know has ever enjoyed a low-flow shower. Having an energy-efficient home is not a sacrifice.

Speaker #3: And she said she likes to tell people, and I like this—I mean, it's obviously a little self-serving—but she said, '$10,000 in price costs $50 a month.' So if we save you $200 a month, how does that $50 a month feel?

Speaker #3: And I think the idea about energy efficiency that has been kind of elusive for most consumers is either they think they have to sacrifice something, and I always joke about low-flow showers.

Speaker #3: Nobody I know has ever enjoyed a low-flow shower. Having an energy-efficient home is not a sacrifice. The second thing that is challenging with energy efficiency to talk about is people think, "Well, what's the payback?" And the way we like to talk about it is the payback is in weeks.

Allan Merrill: The second thing that is challenging with energy efficiency to talk about is people think, Well, what's the payback? The way we like to talk about it is the payback is in weeks. Like, literally any difference in monthly payment is less than the savings that we're generating on the utility line. When you get it that simple for folks, I think it is real easy. Now, there are a group of people who will say, Well, how did you do that? That gives us a great chance to nerd out. I think what we've gotten better at is not nerding out first and then explaining what the benefit is, but talking about the math, and then when they wanna say, Well, tell me how you did that, then we've got lots of stuff to talk about.

Speaker #3: Literally, any difference in monthly payment is less than the savings that were generating on the utility line. And when you get it that simple for folks, I think it is real easy.

Speaker #3: Now, there are a group of people who will say, "Well, how did you do that?" And that gives us a great chance to nerd out.

Speaker #3: But I think what we've gotten better at is not nerding out first and then explaining what the benefit is, but talking about the math.

Speaker #3: And then when they want to say, "Well, tell me how you did that," then we've got lots of stuff to talk about.

Speaker #5: Okay. That's good detail. That's all from me. Thank you.

Tyler Batory: Okay. That's good detail. That's all for me. Thank you.

Speaker #3: Thanks, Tyler.

Allan Merrill: Thanks, Alec.

Speaker #2: Thank you. And once again, if you would like to ask a question, you may press star one. Our next caller is Julio Romero with Sadoti Capital Company.

David Brow: Thank you. Once again, if you would like to ask a question, you may press star one. Our next caller is Julio Romero with Sidoti & Company. Your line is open.

Operator: Thank you. Once again, if you would like to ask a question, you may press star one. Our next caller is Julio Romero with Sidoti & Company. Your line is open.

Speaker #2: Your line is open.

Speaker #6: Yes. Hey, good afternoon. My first question is just thinking about if demand were to worsen at all in the second half, what levers you have to pull on the margin front.

Julio Romero: Yes. Hey, good afternoon. My first question is just, you know, thinking about if demand were to worsen at all in H2, what levers you have to pull on the margin front. Allan, you mentioned you can likely increase sales pace through incentives and increasing spec starts, but are there any other levers that you might have additional runway as potential offsets to help with margins?

Speaker #6: Allan, you mentioned you can likely increase sales pace through incentives and increasing spec starts. But are there any other levers that you might have additional runway as potential offsets to help with margins?

Speaker #3: Well, obviously, those are things that would go the wrong way in margins. And we've decided that, in this environment, that's not really what we want to do.

Allan Merrill: Well, obviously, those are things that would go the wrong way in margins. We've decided that, you know, in this environment, that's not really what we wanna do. If the market gets a lot tougher, we're going to evaluate, like, I think any builder would tell you, everything. Are there changes we need to make to our product? Do we need to restructure the way we do our incentives? I feel like we've got a full suite of tools available to us, and, you know, we've proved, I think, reasonably resilient over the last couple of years trying to match what the sentiment in the market is. I wish I could give you, like, a here's the exact thing that we would do.

Speaker #3: But if the market gets a lot tougher, we're going to evaluate I think any builder would tell you everything. Are there changes we need to make to our product?

Speaker #3: Do we need to restructure the way we do our incentives? I feel like we've got a full suite of tools available to us. And we've proved, I think, reasonably resilient over the last couple of years trying to match what the sentiment in the market is.

Speaker #3: I wish I could give you a, "Here's the exact thing that we would do," the trick is you know this. I mean, Southern California is different from Indianapolis.

Allan Merrill: The trick is, you know this, I mean, Southern California is different from Indianapolis is different from Maryland. The things that you would do to adjust in the market would also be a little bit different.

Speaker #3: It's different from Maryland. And so the things that you would do to adjust in the market would also be a little bit different.

Speaker #6: Got it. Understood. And just wanted to circle back on the two B-built questions from earlier. How do you envision the fiscal '27 mix of two B-built to look like in your view?

Julio Romero: Got it. Understood. You know, just wanted to circle back on the to-be-built questions from earlier. How do you envision the fiscal 2027 mix of to-be-built to look like in your view?

Speaker #3: Look, it's not a guide, but my belief is that we are building with a new communities and with the enthusiasm around what we're doing.

Allan Merrill: Look, it's not a guide, but my belief is that we are building with the new communities and with the enthusiasm around what we're doing. I'm pretty hopeful that we will be able to have year-over-year improvements in the mix of to-be-built sales. There will be quarter-to-quarter sequential volatility because we do typically have a higher share of spec sales in our Q4. I would just say year-over-year, our goal is to try and be higher than we were the year in the same quarter the year earlier. That's the plan over the next year or two.

Speaker #3: I'm pretty hopeful that we will be able to have year over year improvements in the mix of two B-built sales. There will be quarter-to-quarter sequential volatility because we do typically have a higher share of spec sales in our fourth quarter.

Speaker #3: But I would just say, year over year, our goal is to try and be higher than we were in the same quarter the year earlier.

Speaker #3: And that's the plan over the next year or two.

Speaker #6: it. I'll pass it on. Thank you.

Julio Romero: Got it. I'll pass it on. Thank you.

Speaker #3: Thanks, Julio.

Allan Merrill: Thanks, Julio.

Speaker #2: Thank you. And our last question comes from Alex Riggle with Texas Capital. Your line is open, sir.

David Brow: Thank you. Our last question comes from Alex Rygiel with Texas Capital. Your line is open, sir.

Operator: Thank you. Our last question comes from Alex Rygiel with Texas Capital. Your line is open, sir.

Speaker #7: Thank you. Good evening, David Allan. A couple of quick questions here. Can you talk to incentives and just directionally where they were in the first quarter versus prior periods and directionally where you feel like they're going in the fiscal third quarter?

Alex Rygiel: Thank you. Good evening, Dave and Allan. A couple of quick questions here. Can you talk to incentives and just directionally where they were in Q1 versus prior periods and directionally where you feel like they're going in the fiscal Q3?

Speaker #3: Sure. Sure. Out, Steve. Look, I would tell you on an overall basis, incentives were down sequentially in the quarter, but a lot of that had to do with mix.

David Goldberg: Sure. Sure. Alex, it's Dave. Look, I would tell you on an overall basis, incentives were down sequentially in the quarter, but a lot of that had to do with mix, and kind of what was coming through from a spec perspective. We would expect, and we've talked about this on a go, on our go-forward guidance, I think incentives are gonna be down a little bit, but again, not at the house level. It's gonna have to do with mix. We think we kind of peaked in Q4, and we've seen some improvement since then, but not a big expectation that house-level incentives are gonna change or community level. It's more mix related.

Speaker #3: And kind of what was coming through from a spec perspective, we would expect, and we've talked about this on a go, on our go-forward guidance, I think incentives are going to be down a little bit.

Speaker #3: But again, not at the house level. It's going to have to do with mix. So we think we kind of peaked in Q4, and we've seen some improvements since then.

Speaker #3: But not a big expectation that house-level incentives are going to change or community level. It's more mix-related. Oh, and let me just add. I think it's fair to say that at the house level, as I think about March and April, there was definitely a little higher cost to buy downs as rates ticked up.

Allan Merrill: Well, let me just add, I think it's fair to say that at the house level, as I think about March and April, there was definitely a little higher cost.

Alex Rygiel: Yeah

David Goldberg: Yeah

Allan Merrill: ... to buy downs as rates ticked up. That's one of the reasons why, like, we don't control the mortgage rate or what a buy down costs. I feel very good about the pull-through of the things that we can control to drive margins higher. I think there is a little bit of a headwind from higher rates.

Speaker #3: And that's one of the reasons why we don't control the mortgage rate or what a buy down could feel very good about the pull-through of the things that we can control to drive margins higher.

Speaker #3: But I think there is a little bit of a headwind from higher rates in the cost of buy downs that will affect that third and fourth quarter.

Alex Rygiel: Yeah

David Goldberg: Yeah

Allan Merrill: ... in the cost of buy downs that will affect that Q3 and Q4, and that is baked into, you know, what we've talked about for the rest of the year.

Speaker #3: And that is baked into what we've talked about for the rest of the year.

Speaker #7: And then secondly, it appears that your cancellation rate declined quite a bit. I suspect that's also due to mix. But are you seeing any other positive trends from that?

Alex Rygiel: Secondly, it appears that your cancellation rate declined quite a bit. I suspect that's also due to mix, but are you seeing any other positive trends from that?

Allan Merrill: I wouldn't tell you, Alex, there's a big change in cancellation behavior. The number does look pretty good. It hasn't really concerned us in the last couple quarters, even being a little bit higher. We typically run the business between 15% and 20% cancellation rates. I don't see that being a big factor on a go-forward basis.

Speaker #3: I wouldn't tell you, Alex, there's a big change in cancellation behavior. The number does look pretty good. It hasn't really concerned us in the last couple of quarters, even being a little bit higher.

Speaker #3: We typically run the business between 15% and 20% cancellation rates. So I don't see that being a big factor on a go-forward basis.

Speaker #7: Great. Thank you.

Alex Rygiel: Great. Thank you.

Speaker #3: Thank you.

Allan Merrill: Thank you.

Speaker #2: And at this time, I am showing no further questions, sir.

David Brow: At this time, I am showing no further questions, sir.

Operator: At this time, I am showing no further questions, sir.

Speaker #3: I want to thank everybody for joining us on our second quarter call and look forward to speaking to everyone for our third quarter call in a few months.

Allan Merrill: I wanna thank everybody for joining us on our Q2 call and look forward to speaking to everyone for our Q3 call in a few months. Thank you very much. This concludes today's call.

Speaker #3: Thank you very much. This concludes today's call.

David Brow: Thank you. Thank you for participating on today's conference call. You may go ahead and disconnect at this time.

Operator: Thank you. Thank you for participating on today's conference call. You may go ahead and disconnect at this time.

Q2 2026 Beazer Homes USA Inc Earnings Call

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