Beazer Homes USA (NYSE:BZH) opened fiscal 2026 facing what management described as a “stubbornly soft” demand environment, but executives said the company is focused on controllable levers that can support its multi-year goals, including differentiated product offerings, direct construction cost reductions, and balance sheet efficiency.
Management cites improving buyer engagement and product differentiation
Chairman and CEO Allan Merrill said traffic and buyer engagement improved starting in mid-December, with January sales pace “in line with the prior year” after eight quarters of year-over-year pace compression. Merrill attributed the improvement to a combination of gradually improving affordability trends—rates down modestly, home prices stabilizing, and incomes rising—and demand patterns in newer communities designed around Beazer’s energy-efficiency positioning.
According to Merrill, Beazer has worked with partners to reduce solar installation costs from more than $4 per kWh to less than $2, and early results have been encouraging. He said buyer enthusiasm has been strong and margins in fully solar communities are “among the very best in the company.” Merrill cautioned, however, that adoption and scaling can be influenced by utility providers’ policies and permitting dynamics, though he noted utilities in some growth markets have become more receptive given increasing electricity demand.
First-quarter results affected by demand and a litigation-related charge
CFO David Goldberg reported first-quarter sales of 763 homes, equating to a pace of 1.5 sales per community per month. Goldberg said the company did not “chase volume” during the December quarter as some peers discounted heavily into year-end.
Beazer generated homebuilding revenue of $359.7 million, with 700 closings at an average selling price (ASP) of $514,000. Homebuilding gross margin was 14% as reported, but included a litigation-related charge tied to an attached product community that began in 2014. Excluding the charge, which represented about 180 basis points, homebuilding gross margin would have been approximately 15.8%, which management said was in line with guidance.
SG&A expense was $65 million. The company recorded a $1.5 million tax expense despite a pretax loss, reflecting the projected annual effective tax rate applied to quarterly results. First-quarter adjusted EBITDA was negative $11.2 million, and diluted loss per share was $1.13, including a $6.4 million pretax impact (or $0.23 per share) from the litigation-related charge.
In Q&A, management characterized the litigation charge as a one-time item and not reflective of current product.
Margin catalysts tied to cost reductions and a shift toward newer communities
Merrill reiterated that the company still expects catalysts totaling about 300 basis points of margin expansion between the first quarter and year-end. Management said it has already reduced labor and material construction costs by more than $10,000 per home—nearly 200 basis points—which is expected to be reflected in third- and fourth-quarter results.
By the fourth quarter, Merrill said the company expects another 100 basis points of margin expansion from a mix shift and increased contributions from newer communities, defined as those that began selling in or after April 2025. Those communities represented just over 10% of first-quarter revenue but are projected to account for about 50% of fourth-quarter revenue. Management said ASPs and margins in these newer communities are “substantially above” existing communities.
Executives also noted a modest shift toward more to-be-built sales. Goldberg said specs represented 70% of closings but only 61% of sales, and management said if the trend continues it could support margins in the back half of the year. In Q&A, Merrill said build-to-order homes have historically carried a 4% to 5% gross margin advantage versus specs, and suggested the spread may have widened over the last year.
Second-quarter outlook and requirements to achieve full-year EBITDA growth
For the second quarter, Goldberg guided to approximately 1,100 homes sold, about 165 active communities, and roughly 800 closings with an ASP of $520,000 to $525,000. Adjusted homebuilding gross margin is expected to be relatively flat sequentially (excluding the litigation charge), and SG&A dollars are expected to be about flat versus the prior-year quarter.
The company expects about $30 million of land sale revenue in the quarter, contributing to total adjusted EBITDA of around $5 million, including gains from land sales. Interest amortized as a percentage of homebuilding revenue is expected to be about 3%. Taxes are projected to be an approximately $1 million expense, and management expects a net loss of about $0.75 per diluted share. Goldberg said share repurchases could offset “most, if not all,” of the loss in book value per share by quarter-end, depending on repurchase prices.
Goldberg outlined what management said needs to occur in the back half of the year to achieve full-year EBITDA growth (excluding the litigation charge):
- Second-half ASP reaching $565,000, in line with current backlog ASP driven by newer communities.
- Three points of adjusted homebuilding gross margin expansion by the fourth quarter from direct cost actions and mix shift.
- Full-year SG&A growth kept under $25 million.
- Execution of the planned $150 million of land sales, which management said has good visibility and should generate a double-digit EBITDA margin in aggregate.
- Stability in incentives and a sales pace above 2.5 in Q3 and Q4, which management acknowledged it has not achieved in the last two years.
Management said the path is achievable but “not easy,” and depends on market stability and competitive activity.
Capital allocation: land sales, share repurchases, and leverage targets
Beazer said it is continuing to sell non-strategic assets and sub-markets and now expects approximately $150 million in proceeds, with the goal of reallocating capital toward share repurchases. The company repurchased $15 million of stock in the first quarter, bringing trailing 12-month repurchases to $48 million, or about 7% of shares. Management said $72 million remains on the authorization and expects to fully execute it this year. In Q&A, management said the repurchase plan is not contingent on the timing of the land sales, though it will be executed over time.
At quarter-end, the company had more than $340 million of liquidity, including $121 million of unrestricted cash and $222 million of revolver availability, with no maturities until October 2027. Net leverage is expected to be flat year-over-year and “at or just under 40%” at fiscal year-end as the company balances share repurchases with deleveraging goals. Management reiterated a longer-term goal of deleveraging to the low 30% range by the end of fiscal 2027.
On operations, the company spent $181 million on land acquisition and development in the first quarter and generated $3 million of land sale proceeds. The controlled lot position totaled approximately 23,500 lots, with 61% under option contracts, and the company ended the quarter with 168 communities.
Merrill said book value per share finished the quarter above $41 and reiterated a goal of double-digit CAGR in book value per share through fiscal 2027, driven by profitability and repurchases. Goldberg added that, independent of EBITDA performance, the company still expects book value per share to grow 5% to 10% by fiscal 2026 year-end as it completes the remaining buyback authorization.
About Beazer Homes USA (NYSE:BZH)
Beazer Homes USA, Inc is a national homebuilder specializing in the design, construction and sale of single-family homes. The company serves a diverse range of buyers, offering product lines that span from entry-level homes to move-up and active adult communities. In addition to its core homebuilding operations, Beazer provides mortgage financing, title and closing services through its subsidiaries, aiming to simplify the home-buying process and manage risk across the transaction.
Operating in key growth markets across the United States, Beazer Homes maintains a presence in more than a dozen metropolitan areas, including select markets in the Southeast, Southwest and West.
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