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Good afternoon, and welcome to the Beazer Homes Earnings Conference Call for the First Quarter Ended December 31, 2025. Today's call is being recorded, and 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.

Thank you. Good afternoon, and welcome to the Beazer Homes conference call discussing our results for the first quarter of fiscal '26. 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 the statement is made. We do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 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.

Thank you, Dave, and thank you for joining us on our call this afternoon. We began fiscal '26 in a stubbornly soft demand environment, but stayed focused on actions within our control that can drive timely and measurable progress toward our 2026 and multiyear goals. Our efforts were concentrated on proving the value of our differentiation, reducing direct construction costs and enhancing balance sheet efficiency. While most metrics came in at or below our expectations, the December quarter is always our slowest and we have plenty of time to make up for the shortfall. While caution is certainly warranted, we have paths to grow both full year EBITDA and book value per share. Here's how. First, since mid-December, we've seen better traffic and buyer engagement. In fact, January sales pace has been in line with the prior year after 8 quarters of year-over-year pace compression. Second, we have tangible catalysts in place that will drive higher homebuilding margins in the back half of the year. And third, we're managing our balance sheet and land spend to accelerate highly accretive share repurchases. Let's take these one at a time. On sales, we're not just hoping market conditions continue to improve. We're also benefiting from the new branding and lead generation efforts we launched in the fall. The focus of our Enjoy the Great Indoors message is a more comfortable and healthier home and dramatically lower utility bills. This is a message other builders can't deliver and it amounts to thousands of dollars in savings per year for most customers. We're also extending our leadership in utility savings by introducing solar included homes in many communities. This makes the full potential of 0 energy ready homes and easy reality for our buyers. No complicated sizing decisions, no cumbersome leases or guessing at payback periods. From day 1, our solar included homes reduce monthly utility bills to a little more than a basic service charge. Now there are two keys for making solar work for homeowners without tax credits or incentives. First, you must significantly reduce a home's energy consumption in order to shrink the size of the system. All of our homes do this. Second, you have to eliminate the many inefficiencies that have existed in residential solar business models. Working with our partners, we've been able to reduce installation costs for more than $4 per kilowatt hour to less than $2, and we know we can drive it even lower. Results thus far are promising. Homebuyer enthusiasm has been strong and margins in our fully solar communities are among the very best in the company. This is exactly the kind of offering that separates us from other builders in meeting the affordability challenge. On profitability, last quarter, we laid out a series of specific catalysts for about 300 basis points of margin expansion between the first quarter and year-end. And these remain firmly intact. So far, we've reduced labor and material construction costs by more than $10,000 per home or nearly 200 basis points, which should be reflected in our third and fourth quarter results. By the fourth quarter, we expect another 100 basis points of margin expansion from the combination of positive mix shifts within our existing communities and the increase in contributions of new communities. These newer communities, which we have defined as those that started selling in or after April 2025 were just over 10% of first quarter revenue, but are projected to account for about 50% of fourth quarter revenue. ASPs and margins on sales in these communities are both substantially above existing communities. Finally, we're seeing a modest shift toward to-be-built sales so far this year, which if sustained would be another margin catalyst. Turning to capital allocation. Our strategy remains disciplined and aligned with our multiyear goals. Within our portfolio, we continue to sell nonstrategic assets in submarkets that no longer match our differentiated product strategy or were intended for sale when we bought them. We now expect around $150 million in proceeds, increasing balance sheet efficiency and freeing up capital for higher return uses, particularly share repurchases. During the first quarter, we bought back $15 million of stock, bringing our trailing 12-month total to $48 million or about 7% of our shares. We have $72 million remaining on our share repurchase authorization, and we expect to fully execute it this year. Selling land above book value to fund share buybacks below book value is obviously highly accretive for shareholders. Of course, we evaluate all of our actions through the lens of achieving our multiyear goals for growth, deleveraging and book value per share accretion. With 168 communities at quarter end and 23,500 active lots under control, we remain on track to reach our greater than 200 community count goal by the end of fiscal '27 even accounting for the impact of our planned asset sales. We are committed to deleveraging to the low 30% range by the end of fiscal '27. With our plan to accelerate share repurchase activity, however, net leverage is likely to be flat year-over-year at or just under 40% at our fiscal year-end. Finally, book value per share finished the quarter above $41, up versus last year. Our goal remains to generate a double-digit CAGR in book value per share through the end of fiscal '27 through both profitability and share repurchases. Allocating $72 million to share repurchases through the rest of this year will certainly drive book value per share growth. Even in a challenging market, we're determined to move profitability and returns higher, by capitalizing on our differentiated product strategy, reducing labor and material costs, driving toward a higher-margin community mix and allocating capital to maximize shareholder value. With that, I'll turn the call to Dave.

Thanks, Allan. During the first quarter, we sold 763 homes with a pace of 1.5 sales per community per month. While part of this weakness reflected a continued tough market, we also chose not to chase volume as many of our peers discounted homes into their year-end. Our average active community count continued to grow, reaching 167, up 4% year-over-year. Our homebuilding revenue was $359.7 million with 700 homes closed at an average selling price of $514,000. Homebuilding gross margin was reported at 14%, though this included a litigation-related charge arising from an attached product community that began in 2014. Excluding the charge, which represented about 180 basis points, our homebuilding gross margin would have been about -- would have been 15.8% in line with our guidance. Looking at our mix, specs represented 70% of our closings, but only 61% of our sales. If the trend toward more to-be-built homes continues, it would add to margin in the back half of the year. SG&A was $65 million, in line with our expectations. Taxes represented a $1.5 million expense despite our pretax loss. This reflected our projected annual effective tax rate applied to our quarterly results. All told, first quarter adjusted EBITDA was negative $11.2 million and the diluted loss per share was $1.13, which again included a $6.4 million pretax or $0.23 per share impact of litigation-related charge. Now let's walk through our second quarter expectations. We expect to sell approximately 1,100 homes comparable to last year. We expect to finish Q2 with about 165 active communities, another quarter with a year-over-year increase. We anticipate closing about 800 homes with an ASP around $520,000 to $525,000. Adjusted homebuilding gross margin should be relatively flat sequentially, excluding the impact of the litigation-related charge. SG&A total dollar spend should be about flat versus the prior year quarter. From a land sale perspective, we expect to generate about $30 million of revenue. This should result in total adjusted EBITDA of around $5 million, including gains from land sales. Interest amortized as a percent of homebuilding revenue should be about 3%. Taxes are projected to be an expense of approximately $1 million, similar to Q1. This should result in a net loss of about $0.75 per diluted share. Depending on the prices paid for repurchase shares, we ought to be able to offset most, if not all, of the loss in book value per share by quarter end. Last quarter, we established the goal of generating growth in EBITDA for the full year. While the sales miss in our seasonally slowest first quarter certainly didn't help, we are still working to achieve this goal, excluding the impact of a litigation-related charge. Operationally, here's what needs to happen in the back half of the year. I'll start with the factors where we have higher visibility and more control of our outcomes. First, our average selling price will need to reach $565,000 in the second half, which is in line with our current backlog ASP propelled by our newer communities. Second, the direct cost actions and positive mix shifts Allan outlined will need to materialize and drive 3 points of adjusted homebuilding gross margin expansion by the fourth quarter. Third, we need to keep growth in SG&A under $25 million for the full year. And fourth, we'll need to execute the $150 million of land sales we've discussed. We have very good visibility on these transactions and anticipate they will generate a double-digit EBITDA margin in the aggregate. There are two other factors that will determine whether we can achieve EBITDA growth both of which depend on market conditions and competitive activity. Incentives will need to remain consistent with current levels for each community type, and we need to deliver a sales pace above 2.5% in Q3 and Q4 on a gradually increasing community count. Admittedly, we have not achieved this pace in the last 2 years, but it's a level well below historical trends. It's not going to be easy, but we do have a path to achieving EBITDA growth this year. Independent of whether we reach our EBITDA growth goal in 2026, we still expect to grow book value per share at year-end by 5% to 10% as we execute the remaining $72 million of our buyback authorization. At current prices, our full repurchase capacity represents more than 10% of the company, which would bring our total buyback to nearly 20% over an 18-month period. Because of the strength of our land position, we expect to do this and still finish fiscal '26 with a net leverage at or below 40%. We are focused on maintaining a strong balance sheet. At quarter end, we had more than $340 million of total liquidity, including $121 million of unrestricted cash and $222 million of revolver availability and no maturities until October 2027. As we said, net leverage will be flat this year as we balance our allocation of capital against our multiyear goals. During the first quarter, we spent $181 million on land acquisition and development and generated $3 million in land sale proceeds. At quarter end, our active controlled lot position was approximately 23,500 with 61% of our lots under option contracts. Over the last several years, we built a very strong land position, allowing us to maintain our growth poster even while selling nonstrategic assets. We anticipate our land sales will be above book value in the aggregate demonstrating that even if assets that no longer fit our strategy are worth more than what we paid for them. With that, I'll now turn the call back over to Allan.

Thanks, Dave. To wrap up, I just want to reiterate two key takeaways. First, it was a slower start to fiscal '26 than we would have liked. But the first quarter is a small piece of the picture, and we still have a path to full year EBITDA growth. We're seeing green shoots for the spring selling season, and we've got very good visibility on margin catalysts, ASP growth and profitable land sales into the back half of the year. Whether we're able to achieve our goal will depend on stability and normalization in market conditions, but we're working very hard to make it happen. Second, we're fully committed to driving book value per share growth this year, independent of EBITDA growth. By realigning our land portfolio to accelerate share repurchases, we know we can create significant shareholder value. Let me just finish by thanking our team for their ongoing efforts to create value for our customers, partners, shareholders, and, of course, each other. With that, I'll turn the call over to the operator to take us into Q&A.

[Operator Instructions] Our first question is from Alex Rygiel of Texas Capital Securities.

Is your repurchase plan contingent on the timing of the $150 million profitable land sales?

No, I mean, not really, Alex. I mean, obviously, we're not going to do all at once. We talked about that we would be over the timing of the year, but it's not contingent on specifically the timing of the land sales.

Helpful. And then generally speaking, sort of what is that gross margin spread between a build-to-order versus a spec home?

It depends widely, but it has always been in the 4% or 5% range, and I would say that's probably gotten a little wider in the last year. I don't have the exact percentage because, of course, you're comparing apples and oranges between geographies and communities. But it's 400- or 500-plus.

And then lastly, as it relates to sort of the favorable commentary about traffic in kind of the latter half of December and January. Do you see there -- is that kind of solely based upon interest rates sort of pulling back a little bit here? Or is it just because of a better mix? What are some of the reasons that you believe are driving that improved traffic?

I think there are a couple of things going on. The very last slide in the appendix of our slides is a chart that we've shown for years, which is the affordability math looking at monthly mortgage payments as a percentage of income. And what's been happening slowly, I mean, imperceptibly looked at day-to-day, but it's very obvious when you look at it over years is rates have moved down a little bit. Home prices have stabilized or on a net basis have come down. Incomes have kept moving forward, so we're a lot closer to that low 20% affordability band that has characterized really healthy housing demand. So I think that we shouldn't overlook that is going on in the background. And we can get excited about rates doing this or that on a day-to-day basis, but the trend that has been underway over the last year has been very positive and improving affordability. It's still elevated, but it's getting a lot closer. Then I think the second part is just what you said, as we go from 10% of our revenue in the first quarter to 50% of our revenue in our newest communities just the demand patterns. And we talked about it before we launched them. We've talked about it since we've launched them. We've seen very good traction with communities that were purpose-built with our super high efficiency, our zero energy ready homes and an increasing share with solar included. A combination of things I think we're doing in this improving affordability backdrop, is, I think, what's contributing to what we've seen from a traffic and sales progression over the last month.

Our next question comes from Julio Romero of Sidoti & Company.

On your introduction of solar included homes, when do you expect those homes to begin to flow through orders and closings? And then any color you can provide and how accretive those homes are expected to be to either sales or profitability?

Well, right now, they're not a huge percentage of our closings, but we've got a couple of markets, and I'd highlight Las Vegas. There is some risk, I'll be wrong by a single community, but we basically had solar included across our attached and detached product in Las Vegas for the last couple of years. And that's really where we've been able to get after the supply chain and the installation protocols and sort of ring out what I call some of the excesses from the traditional solar residential solar business models. We've expanded that into Phoenix. And of course, we've got our big greenhouse community here in Georgia, the largest solar included community in the state. We've got it in a very big community in South Carolina that we're launching next month. So I think we're trending towards 20% of our business at the end of the year will be in solar included communities, but it's in our sales and closings now. In terms of the mix, all I would say is that solar included communities definitely have higher margins than not just the average, but even of similar generation communities, like they are accretive. But it's a small enough sample size that I think we start getting into basis points and they could get dangerous, but this has helped. I wanted -- having been enthused about this, and I am, I want to be a little cautious about the fact that this is also a function, the adoption of this is going to relate to utility providers and their posture vis-a-vis rooftop solar. What we've seen in the last year or 2 is kind of a 180 in some municipalities and with some public power companies where electricity demand has surged and we've all heard about data centers. And as that's happened, it has changed the dialogue with these utility providers, where all of a sudden, what had looked like competition becomes a little bit of a savior for them because now they have an opportunity for new communities to be much more self-sufficient or closer to self-sufficient, which takes some of the pressure off of the demands that they're experiencing. Now we all know that the rate of growth in electricity demand is not evenly spread, but in markets where you're seeing significant growth in demand for power, and I would point out Western markets, including Arizona, we have definitely benefited from and are changing the conversation with utility providers because that's one of the bottlenecks, right? They have to be willing and they are not just net metering things. We don't really worry about net metering, but what are the hookup charges? What are the barriers to getting your permits. And I think we are finding a more and more receptive environment, but it isn't going to be everything all at once.

Very helpful. And you noted that your to-be-built mix was trending favorably in 1Q orders relative to the mix in your closings. Can you talk about the drivers of that positive mix trend and if that's expected to continue trending towards...

I think, a, it has to do with some of our newer communities that are drawing a lot of attention. I also think the fact that inventory is coming down is creating some buyers who are willing to wait because it's not everything about get me the house immediately. I think it's probably a combination of those two factors more than anything else.

The next question comes from Natalie Kulasekere of

So last quarter, you mentioned that you're looking at a closings growth of 5% to 10% for fiscal 2026. And pardon me if I missed this on the call, but how exactly are you looking at it now? Are you still expecting to grow closings this year? And if so, what does it depend on?

Yes. Nate, what I would say is, obviously, some of it will depend on what happens in the selling season and what happens in the next 90 days. But our focus is really about our path to executing growth in EBITDA and book value per share. And we know that we have a path to go do so. And as I said in my comments, we're kind of independent of what happens from the EBITDA growth perspective. We're going to go and grow book value per share and it's to increase land sales and a little less spend, and we think that's really accretive for our shareholders.

Okay. And I guess my next -- just one quick follow-up. I'm just trying to figure out what happened in the first quarter. Was it particular markets that were underperforming? Or did you just see weakness across all your divisions as a whole?

So we had two or three divisions where sales pace was up in the first quarter, but it means we had a dozen or more of that sales pace was flat or down. So it was pretty broad-based. But I want to put it in a little bit of context. We're probably between 100 and 150 sales short of where we thought we would be, which is less than one home per community over the course of the quarter. The other thing, and it's why I said what I said about a path, first quarter normally represents about 15% of our order volume and 10 or 15 whatever percent miss on that, it's 2% or 3% of our total orders for the year. And we know that. We know this every December, in particular, we get into this dynamic where people are discounting like crazy to hit their fiscal year-end goals. . And I understand it, but this was a year where we just decided this was not the time to be particularly aggressive and go toe to toe. And honestly, based on how the December traffic and the sales environment has changed, I'm pretty glad we didn't go ultra low in December to try and get an extra 100 sales because the repercussion across communities over the balance of the year would have been pretty significant.

[Operator Instructions] Our next question comes from Tyler Batory of Oppenheimer & Company.

I wanted to circle back on the guide and really the commentary about sales pace in particular in the back half in terms of the 2.5% there. Do you think that's achievable in the current backdrop? Do you think there needs to be a little bit of an improvement in the macro to hit that? And just kind of remind us what gives you confidence that there's going to be this ramp in the second half of the year versus the first half?

Well, look, Tyler, we certainly think it's achievable. I mean Allan kind of talked about what was happening in January and late December and improving buyer engagement, seeing more traffic, the receptivity to our Enjoy the Great Outdoors messaging. Is it what we did in '24 and '25? No. You're absolutely correct. It would be -- the last years haven't shown that. But if you look at historical trends, that's actually below what we used -- what we've done in Q3, Q4. So we think in a more normalized market with inventory levels coming down, some improvement in buyer demand that we've seen already into January, if that persists, it certainly is an achievable level. Look, I said in my remarks, and I think it's clear to say we have a path. It's not easy. It's not an easy path, but we clearly have a path. But our focus is on how we grow book value per share and get that EBITDA growth.

Okay. And then my follow-up, thinking about the gross margin progression here, you're flat quarter-over-quarter, Q2 versus Q1, and Q1 was a little short of what you had guided to previously. So just talk a little bit about the shortfall in Q1 and the moving pieces sequentially into Q2? And then just remind us and help us think about the progression in terms of the ramp in gross margin in the back half?

So let's talk about it. First, I don't need to pick a bone, but I would tell you, we said we'd be about 16.8 -- we've got 16%, excuse me. Ex the litigation charge was 15.8%. So it feels pretty close to about 16%. I mean that feels pretty close to me. In terms of queue, what's really happening in the back half of the year that's causing that change we tried to outline it. And look, it's not about incentives going down or us assuming the market gets better. Incentives do go down because of mix shift because we have newer communities coming online. We have some higher-priced existing communities that are delivering more homes, and we have those direct cost savings that we have very good visibility to in our new starts. So it's very similar to what we said last year -- last quarter, excuse me, Tyler, last quarter about the 300 basis points. We still have good visibility into it. We obviously aren't trying to make a prediction on incentives of what happens in the back half of the year. But if incentives on like products stay the same, we've got some good improvement coming through in the back half.

Okay. And then last one for me. In terms of some of these newer communities, 10% of revenue in Q1, just remind us the ASP or margin premium on those communities compared with the other 90% of revenue that was coming through in Q1?

Well, you're starting to see it in the backlog ASP. I think backlog ASP is around $560 thousand. And that backlog are to be built from those newer communities. So that's giving you a flavor for what is going to happen to ASP in the back half of the year as those newer communities represent 50% or more of our revenue. On the margin progression, it's a couple of hundred basis points. I mean it is definitely material. And so moving from 10% to 50% on our revenue, picking up that kind of margin lift in addition to what we're seeing on the direct cost side, that's where our confidence in the movement of 300 basis points in margin comes from.

I would just add to that, Tyler. We don't give out specific ASP and backlog on new versus existing, but I would tell you, it is significantly higher.

Our next question comes from Rohit Seth of B. Riley Securities.

Just on the litigation expense, was that a onetime charge or is it ongoing?

That is a onetime charge. As we mentioned in the remarks and had to do with the community that we started construction in 2014, it's not our current product. It's not a repeating charge. It is a onetime charge.

Okay. And where do you guys stand now on incentives? What was the change into the...

Yes. We don't give the exact incentive numbers out. It's not something we publish. But I think it's safe to say that the margin degradation that you saw from Q4 to Q1 was in part because of higher incentives around mix.

Okay. And with the industry looking at clear inventory in the December quarter, you guys opted not to go that route. How is your inventory position heading into the new year?

It's very healthy. We've got a combined spec position of in the 6s per community, down from in the 7s. So it's a little bit lighter like everybody else's. The finished inventory, I think, is in great spot for the spring selling season. So it's lower, but I think it gives us an opportunity. I mean we really focus on what our production universe is as we think about tracking down profitability for the year. And I think the combination of better cycle times and the inventory position we have today give us the unit inventory that -- or the unit universe that can drive the EBITDA growth path that we described.

Okay. And if demand were to snap back, what are your cycle times now? Are you guys are well positioned to ramp back up pretty quickly?

Yes. In the first quarter, we added a little over 2 calendar weeks or reduced our cycle time by about 2 calendar weeks. And I think in the starts in this next quarter, we'll get a little bit more. And when I think about that year-over-year, I really think about what's the last day of our fiscal year that we can sell a to-be-built home and still get it started and closed by the end of our fiscal year. And gosh, in the middle of COVID, that cutoff date was like in January. And we've been slowly pushing it further out as we've been reducing cycle time. And in most of our markets now, we're in April or May. And that really helps, right? That's the way -- it's maybe not a perfect way to think about it, but it's like adding 2 weeks to your fiscal year if you compress cycle time by 2 weeks because you've got the opportunity for that additional period to make those sales that you can get started and closed.

Okay. And then final question, with the government talking about intervening in the housing market. For you guys and your customers, what do you think would be more impactful, something on the rate side or the down payment side?

That's an interesting question. I mean every buyer has got their own environment. We've been really focused on affordability, this math on the slide that I referred to. So I think a combination of wage growth and monthly payment reduction, and that's why we're so focused on utility savings and mortgage rate savings and all of the things that we do, I think that's probably more important for our buyers than down payment assistance.

I show no further questions.

Okay. I want to thank everybody for joining us on our call this quarter, and we will talk to you in 3 months. Thank you very much. This concludes today's call.