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Edited Transcript of BZH earnings conference call or presentation 2-May-19 9:00pm GMT

Q2 2019 Beazer Homes USA Inc Earnings Call

ATLANTA May 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Beazer Homes USA Inc earnings conference call or presentation Thursday, May 2, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Allan P. Merrill

Beazer Homes USA, Inc. - CEO, President & Director

* David I. Goldberg

Beazer Homes USA, Inc. - VP of IR & Treasurer

* Robert L. Salomon

Beazer Homes USA, Inc. - Executive VP, CFO & CAO

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Conference Call Participants

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* Alan S. Ratner

Zelman & Associates LLC - MD

* Alex Barrón

Housing Research Center, LLC - Founder and Senior Research Analyst

* James C McCanless

Wedbush Securities Inc., Research Division - SVP of Equity Research

* Margaret Jane Wellborn

JP Morgan Chase & Co, Research Division - Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Beazer Homes Earnings Conference Call for the quarter ended March 31, 2019. Today's call is being recorded and a replay will be available on the company's website later today. In addition, the 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 time, I will turn the call over to David Goldberg, Vice President and Treasurer.

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David I. Goldberg, Beazer Homes USA, Inc. - VP of IR & Treasurer [2]

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Thank you, Michelle. Good afternoon, and welcome to the Beazer Homes conference call discussing our results for the second quarter of fiscal 2019.

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, which are described in our SEC filings, including our Form 10-Q for the quarter, 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 and 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. New factors emerge from time to time and it is simply not possible to predict all such factors.

Joining me today are Allan Merrill, our President and Chief Executive Officer; and Bob Salomon, our Executive Vice President and Chief Financial Officer. On our call today, Allan will review highlights from the second quarter and provide insights into the impairments we took this quarter. Bob will cover our second quarter results in greater depth as well as our expectations for the third quarter of fiscal 2019. I will then come back to provide more details about our land spend, community count and our updated capital allocation priorities followed by a wrap-up by Allan.

After our prepared remarks, we will take questions in the time remaining.

I will now turn the call over to Allan.

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [3]

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Thanks, David, and thank you for joining us on our call this afternoon. Our second quarter results were at or above the expectations we expressed on last quarter's earnings call. This reflected better conditions for sales across our markets as well as the benefit of our quick response to the demand weakness we experienced in the first quarter.

The improvement in the sales environment resulted from a combination of lower mortgage rates, accelerating wage growth and more competitive home pricing. At the same time, our strategy to deliver extraordinary value at an affordable price led to changes in our product and pricing that enhanced affordability. Encouragingly, the sequential sales improvements that occurred during the quarter continued into April.

In terms of operational and financial metrics, in the second quarter, we did what we said we were going to do. Orders declined less than we'd expected as our growing community count offset a decline in our sales pace. Sales per community per month rebounded nicely from the first quarter and reflected a healthy pace, in line with our second quarter results in recent years.

Homebuilding revenue also surpassed our expectation, driven by higher closings. Our operating margin was better than we anticipated as we benefited from a higher gross margin and lower SG&A as a percentage of revenue. And finally, land spending was nearly identical to last year just as we guided.

As it relates to capital allocation, we returned more than $10 million to investors during the quarter with $7.5 million of share buybacks and $5 million in debt retirement. As a reminder, our board has authorized a $50 million share repurchase program. To date, we have completed approximately $24 million. We have also said that by year-end, our debt retirements will exceed our share buybacks and that continues to be our expectation.

In short, operationally and financially, we have continued to execute our balanced growth strategy, which targets improving returns and less leverage.

Of course, the other big news in the second quarter was the impairments on certain California assets. These noncash impairments totaled $148 million on a pretax basis and $107 million on an after-tax basis. The impairments related to 15 assets, all of which were currently or previously classified as land held for future development. 14 of these assets were acquired before 2007.

The impairments occurred in 2 categories: the first related to 9 projects that are under development or are actively selling. Assets that fell into this category contributed $109 million of the pretax impairment and were spread across Southern California. The second category related to 6 communities that we have decided to sell that were still classified as land held for future development. The pretax impairment related to these assets was $39 million split between Northern and Southern California. After these adjustments, we have no remaining land held for future development in California.

We have discussed the underlying characteristics of our land held assets many times. We have consistently said that when these assets began delivering homes, they would carry margins below the company's average. Nonetheless, as market conditions improved over the past several years, we've been gradually activating them allowing us to begin to recover the capital that was previously tied up.

As has been widely noted, demand for new homes slowed considerably in the last 3 months of calendar 2018. This was especially true in California, where affordability is particularly challenging. As we assessed the underlying reasons for the slowdown and observed the market reactions of competitors, we concluded that we needed to lower prices to achieve acceptable sales momentum. The pricing actions we took brought us in line with the broader market and have stimulated a higher level of demand for those communities that are open for sale.

From an accounting standpoint, these price reductions had the effect of flipping certain assets below the impairment line.

Slide 7 is an illustration of how this impairment process works. The easiest way to think about this impairment line is do the undiscounted future cash flows for our community add up to its current book value. If they do, even if the margins are below market norms, the asset is above the impairment line and no accounting adjustment is allowed. However, if those cash flows add up to an amount below its current book value, the asset must be impaired. The price reductions we took to align with the market led to aggregate cash flows below the line for the assets we impaired.

At that point, the accounting is straightforward. We have to record a loss for the difference between the present value of those same cash flows in the current book value. The present value of those cash flows ended up averaging just under 50% of the previous book value, but varied considerably based on the duration of each community.

The second category of the impairments related to the assets that we decided to sell instead of develop. This decision was based on the market condition for each asset, our longer-term California strategy and our intent to improve ROA. These assets are now carried at their expected realizable value.

With these impairments behind us, we are positioned to accelerate our recovery of cash, allowing us to reallocate capital in ways that benefit shareholders. Whether that is into new communities, debt reduction or share repurchases, this capital can be put to better use. And with a lower cost basis, these communities will generate better gross margins, leading to higher EBITDA and EPS in the next few years.

At this point, I'll turn the call over to Bob to walk through the results in more detail.

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Robert L. Salomon, Beazer Homes USA, Inc. - Executive VP, CFO & CAO [4]

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Thanks, Allan, and good afternoon, everyone.

Looking at our second quarter results compared to the prior year. New home orders decreased 4.8% to 1,598 with sales per community per month of 3.3. Homebuilding revenue dropped 5% to $421 million, driven by a 10% decrease in closings, partially offset by a 7% increase in ASP to $371,000. Our backlog conversion ratio was over 74%, up nearly 800 basis points as the number of homes sold and closed in the quarter increased.

Our average community count rose to 163, an increase of 12 communities from the previous year, and we ended the quarter with 166 active communities.

Our second quarter gross margin, excluding amortized interest, impairments and abandonments was 19.8%, which is ahead of our expectations, primarily related to nonrecurring benefits which added about 60 basis points to our results.

SG&A as a percentage of total revenue was 12.7%, an improvement of 10 basis points. This led to adjusted EBITDA of $33 million.

Finally, driven by the impairments taken on certain California assets, our net loss from continuing operations was $101 million. Excluding these impairments, we were profitable on an operating basis.

Turning now to our expectations for the third quarter. Our sales were up strongly in April and we're continuing to take advantage of this improvement to drive higher margins. Accordingly, we expect orders to be up 5% to 10% year-over-year off a similar increase in our average community count.

Speaking of gross margin, based on what we've closed thus far in the third quarter and the margins in backlog, we expect gross margin to be about 19%. Of course, the mix of our additional sales that closed in the quarter could influence that by a 0.25 point in either direction.

Regardless, the third quarter gross margin should represent a trough for the year as we work through the heightened incentives from earlier in the year and because to-be-built homes will represent a higher percentage of closings in the fourth quarter. Our ASP should be about $375,000, up versus the prior year and the second quarter.

We expect the backlog conversion ratio above 60%. SG&A expense should be below last year on a dollar basis. And finally, the cash component of land spend should be above $100 million.

At this point, I'll turn it over to David.

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David I. Goldberg, Beazer Homes USA, Inc. - VP of IR & Treasurer [5]

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Thanks, Bob. In the quarter, we spent $140 million on land and development, relatively flat versus the prior year. Following our change in strategy with respect to our long-held California assets, we have now reduced our land held for future development balance to less than $29 million, this is down from a peak of $420 million in 2009, and as Allan noted, we no longer have any land held for future development in California.

Looking to the second half of this fiscal year, we expect our land spending to be down approximately $100 million to $150 million versus the prior year driven by 2 factors. First, we're continuing to improve the efficiency of our balance sheet through increasing our use of options and discouraging large bulk purchases. Second, our land spending in the second half of last year included our Venture Homes acquisition.

On Slide 11, we outlined the components of our expected community count growth for the coming quarters. Our land spending over the past 18 months has positioned us for a growing community count. The majority of these new communities will have ASPs below our current average selling price. We continue to expect to end fiscal 2019 with more than 170 active communities, though forecasting exact quarterly trends is challenging.

The objective of our balanced growth strategy is to drive higher returns on our assets by improving our EBITDA without inefficiently increasing our asset base. You can see the success we've achieved thus far at the top of Slide 12.

In previous quarters, we've discussed the continued improvement we expected in ROA as nonearning assets on our balance sheet started producing revenue. While the impairment we took this quarter reduced the carrying value of these assets, the underlying story is unchanged. Over the next 12 months, we expect that virtually all of the former land held assets that are nonearning today will start producing revenue contributing to better returns.

We have made a great deal of progress with the execution of our share and debt repurchase programs following their announcement in November. Since completing our ASR in the first quarter, we have continued to repurchase shares, bringing our total buybacks to more than $24 million or 2.2 million shares representing more than 6% of the company. In addition, during the second quarter, we began our debt repurchases and through March 31, we retired more than $5 million of our outstanding 2023 and 2025 senior notes.

Over the last 11 years, we've made significant strides in improving our leverage, having reduced our total indebtedness by more than $500 million. Since fiscal 2015, our net debt to adjusted EBITDA has declined to 6.2x, and we're targeting a net debt to adjusted EBITDA on the 4s by improving our profitability, including through the monetization of previously nonearning capital and further reducing debt.

With that, let me turn the call back over to Allan for his conclusion.

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [6]

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Thanks, David. We're encouraged by the resumption of healthier demand trends this spring and we remain confident that our balanced growth strategy is right for this environment. Over the next quarter, our activities in support of this strategy will include growing our community count with more affordably priced homes, extending our mortgage choice platform and technology and expanding our Gatherings footprint.

In terms of allocating capital, we'll continue to invest in our business, accelerate our debt repurchases and opportunistically repurchase shares.

I want to thank our team for their ongoing efforts. I'm confident that we have the people, the strategy and the resources to execute on our plan over the coming years.

And with that, I'll turn the call over to the operator to take us into Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from Jay McCanless with Wedbush.

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James C McCanless, Wedbush Securities Inc., Research Division - SVP of Equity Research [2]

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I guess the first one I had is, with the 6 assets that you guys are looking to sell, do you have any of that under contract? Any timing of when that cash is going to hit the balance sheet?

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David I. Goldberg, Beazer Homes USA, Inc. - VP of IR & Treasurer [3]

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No. Jay, none of it's under contract yet. The decision was just made in this quarter, but it'll be a high priority for us to convert it to cash, but I can't commit to a timing at this point.

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James C McCanless, Wedbush Securities Inc., Research Division - SVP of Equity Research [4]

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I guess, maybe it was -- was it just slower sales pace, was it maybe some price deceleration in those markets? Could you maybe walk through some of the factors that pushed you all to go ahead and do it this quarter?

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David I. Goldberg, Beazer Homes USA, Inc. - VP of IR & Treasurer [5]

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Sure. So we're not breaking any news by remembering and pointing out that, that October, November, December time period was pretty uneven and that's a nice euphemism for tough sledding from a new home sales perspective and particularly in California. And it really led us to deep dive each of our communities, what our competitors were doing, the structural issues in the market. And I think we have all benefited from a level of price appreciation in that market over the last number of years and we realized that we were at a point where that was over. Affordability is paramount and in any context of rising rates, home prices simply were too high to sustain an acceptable level of sales.

So we made a reset decision about those active communities and the ones that we are bringing active, but it also gave us a chance to think about geography and within the markets Northern and Southern California, where is our power [alley,] what are we good at, which submarkets do we really want to be committed to, which products, which buyer profiles. And as I pointed out in my comments, 14 of the 15 assets we dealt with here have been on the books for more than 12 years. So we said we've had these assets, are we really going to go to those locations to build these assets out or is now the time to acknowledge that we've got a focused strategy, we can build a growing business in California, but let's build it on our terms, in the places we want to be. And really it all kind of came together like that and we said well, this is the time, the trigger was clearly the reduction in prices and velocity in that first fiscal quarter, but it led to this bigger, deeper analysis that we did.

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James C McCanless, Wedbush Securities Inc., Research Division - SVP of Equity Research [6]

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Okay. And I was impressed to see that the gross margin looks like it's going to be up a little bit sequentially from Q2 to Q3, which is not in line, I think, with what we've seen from some of your competitors. Maybe can you talk about the levels of discounting in Q2 this year versus last year? And how have discounts moved as you've gone into April?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [7]

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So a couple of things. Just clarification, our Q2 gross margin of 19.8%, we acknowledge that we had some benefits in that and it was really more like 19.2%. We have said based on backlog and based on what we've already closed in the quarter, 19-percent-ish looks about right. We're still in the heat of the spring selling season. We've got specs, we're going to sell them. Depending on the mix of those specs that are sold and closed, we think the margin in the third quarter will oscillate around that 19% and we gave a bracket range up or down 25 basis points around 19%. So I would say, it’s fair to characterize flatness kind of from Q3 -- or Q2 to Q3.

Let me get to the more structural part of your question, though. If you think about -- not if you think about it, if we talk about what happened from a selling perspective, January was better than December in the sense that it was down less year-over-year and February was better than January because it was almost but not quite flat year-over-year. March was flat year-over-year and April was frankly up double digits.

So what you would reasonably expect and, in fact, what has happened is that selling environment has manifested itself is a reduction in incentives over that period of time. But we're going to deal with. We dealt in the second quarter and we will deal in the third quarter with some of the heightened incentives that we pushed in January and February to stimulate activity. I think we will largely work through that in that third quarter, but that's kind of the dynamic of what's going on with incentives.

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James C McCanless, Wedbush Securities Inc., Research Division - SVP of Equity Research [8]

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Okay, and thank you for straightening me out on the gross margin.

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David I. Goldberg, Beazer Homes USA, Inc. - VP of IR & Treasurer [9]

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Yes, Jay, to be clear, and I want to make sure we get this out properly, we also said the third quarter would be the trough for margins and that we see improvement in Q4, and so maybe that's where the confusion was, but clearly, Q3, as Allan said, and Q4 some improvement as we head into next year.

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James C McCanless, Wedbush Securities Inc., Research Division - SVP of Equity Research [10]

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And I guess, the only other question I had was if you guys could talk -- I think Allan, I think you said double-digit growth for April, was that -- can you talk more about that? And also, we've heard from other builders that the active adult buyer all of a sudden came back to life in March and April, so if you guys could comment on those 2 things and that will be it for me.

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [11]

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Well, I don't really have a segment differentiation comment for you. I would say, we've seen strength across our footprint at every price point and in each market as February turned into March and March turned into April. So I wouldn't try and distinguish so much particular buyer profiles, that hasn't been our experience.

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James C McCanless, Wedbush Securities Inc., Research Division - SVP of Equity Research [12]

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Okay. And then orders for April versus last year?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [13]

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Yes. So they were up more than community count was up. We had an actual increase in pace for 1 month. But I think Bob correctly established, the thing that we want to do in the face of that strength is regain margin. So it's 1 month, 1 month is helpful, but we've guided to up 5% or 10% in orders because we're going to be using that environment, that better environment we're in, we've already been using it, we used it in April and we'll keep doing it in May to push margins. And I'm interested in driving those margins and order improvements, not just one or the other.

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Operator [14]

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Our next question will come from Michael Rehaut from JPMorgan.

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Margaret Jane Wellborn, JP Morgan Chase & Co, Research Division - Analyst [15]

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This is actually Maggie on for Mike. Just a kind of follow-up to the last question. You said that orders trended better throughout the quarter and that April was up double digits, and that you saw strength at every price point in every market, but are there any specific markets that you'd like to call out or give more color on?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [16]

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Sure. I mean, there were a few places that for us and let me -- I will answer your question pretty directly, but let me just make sure that the record is clear. Any time that we or any other builder talks about strength in the market, it's always a little bit dangerous because you may be looking at macro data at a market and say well, gee, that's not what others are saying. So oftentimes, the mix of communities between one year and another can be a little bit distorting. And I'll give you just a quick example, our highest sales pace division is Las Vegas in the second quarter. We're really proud of what they did, big numbers. But guess what, it was down in pace 20% year-over-year. So is the story it was down or is the story -- it's the best in the country for us. And so that's where I just want to be careful as we comment about individual markets. That is an area of great strength. We saw strength in the Mid-Atlantic and in Raleigh to pick some examples of places where year-over-year, we saw a nice tick up in sales pace.

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Operator [17]

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Our next question will come from Alan Ratner from Zelman & Associates.

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Alan S. Ratner, Zelman & Associates LLC - MD [18]

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So on the impaired projects, sounds like they've been on the books for a while, have they been previously impaired during the downturn? Or was this the first charge that you took on them?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [19]

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I would be a little reluctant to answer it definitively. One or more of them may have had an impairment, but they have not been impaired since 2007 or '08 because once they went into the land held category where the assessment was, they could be recovered, they weren't annually tested for impairment in the same way. So it's reasonably fair to assume they were largely untouched.

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Alan S. Ratner, Zelman & Associates LLC - MD [20]

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Got it. Okay. So we shouldn't necessarily extrapolate that to other California assets that might have been purchased over the last several years as an indication that there could be some risk there?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [21]

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I agree with you, you should not make that extrapolation. That's why we were careful to point out the duration of these assets.

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Alan S. Ratner, Zelman & Associates LLC - MD [22]

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And I guess just more broadly when -- I know the bucket of land held for future development is small from a company standpoint, but I think you guys and others in the past have kind of -- in the past have given an indicator or like number of communities that had potential indicators of impairment. So I'm just curious if maybe you could just talk about for the company, are there other assets, other communities where maybe they're getting close to that ledge that you kind of walked us through?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [23]

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So couple of things, and Bob and I'll -- will kind of split this up. I think you're asking a question about communities that we are watching closely and we do have a process for that. The land held is such a small number of communities. They're really not in there from an impairment standpoint, they're there because there is some reason that it is not in our strategy to develop that asset, it may be entitlement related, it may be infrastructure related, it may be product or buyer profile related. So there are typically a variety of reasons why we don't have a current intention to develop and those sit in a different bucket, that land held bucket, that's down to $29 million and that's really around intent. I think your question gets to the rest of the business and Bob can do a better job than I can talking about our process with those assets.

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Robert L. Salomon, Beazer Homes USA, Inc. - Executive VP, CFO & CAO [24]

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Yes, we had a watch list process, where communities that have margins either actual or expected margins below a certain level [gone,] we call it watch list. And as you -- when you get our 10-Q, you'll notice that we had about 13 communities that we reviewed and 9 of them got impaired and the other 3 were reviewed, but for either mathematical reasons or other reasons, they do not fall into that category where we had to run it on discounted cash flow or discounted...

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Alan S. Ratner, Zelman & Associates LLC - MD [25]

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That's very helpful. If I could sneak in one last one just on California. I guess Allan, maybe just give a quick comment, you mentioned you're going to kind of recycle the capital and into deals that make more sense today, but what's your longer term commitment to California? We've heard a lot about just the general environment there and it's certainly a high cost area for you guys, requires a lot of investment. So is that still a market that you guys are committed to longer term?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [26]

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I'm glad you asked, because there are a lot of people who listen to this call and some are investors and some are employees and some are land sellers, so I appreciate very much you asking that. We took the chance or the opportunity through this assessment to ask really the fundamental questions about why be in California? And if so, to what extent? And in which sub markets? And we concluded that the demand imbalance is so great that it is a market that warrants our capital.

Now your points about our scale relative to others means we have to pick our spots. We have to know which submarkets, which product types, which buyer profiles we want to excel at and I think we can do that. Our ambition in the market, we'll have at least $200 million invested and probably more through cycles and I think we can have a 1,000 unit business out there, we don't right now. But we've got a very strong presence in the Sacramento market and we're going to be there for a long time. We've got the biggest master plan in Sacramento coming online this year. In Southern California, we're an I-215, I-10, I-5 builder in Oceanside. We like those submarkets. There is a whole bunch of real estate in Southern California that's not our buyer profile, not our appetite and I think being disciplined about knowing who we are gives us a really good chance to have California be important and a high return on asset business for us.

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Operator [27]

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(Operator Instructions) Our next question will come from Alex Barrón with Housing Research Center.

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Alex Barrón, Housing Research Center, LLC - Founder and Senior Research Analyst [28]

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So I heard you mention the assets that got impaired were in California, but I was hoping to get a bit more color on, were these more higher price move-up type communities? entry level? or can you comment on the more specific location?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [29]

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Alex, we don't talk about individual assets in this context. We said about the communities in the category of 9 that they were spread around Southern California and they were in a variety of product types, a variety of locations. And again, all but one of which was more than 12 years old. So I wouldn't say they really reflected some particular strategy, but I think the thing that they had in common is B locations. And what we've recognized is that we know for us what an A location is and we've kept the A and the B locations and we're going to sell the other ones.

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Alex Barrón, Housing Research Center, LLC - Founder and Senior Research Analyst [30]

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Yes, that was going to be my next question. So going forward, when you said you're going to pick your spots, what are you guys, I guess, identifying with the more new strategy going forward in California, what are you going to be doing there?

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Allan P. Merrill, Beazer Homes USA, Inc. - CEO, President & Director [31]

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Yes, we're an EVAP builder and I'm sorry to use that acronym, extraordinary value at an affordable price. We're not going to get down at the very, very lowest price point. There are things that we want to put in a home that we believe are important in terms of construction quality and materials and long-term livability and comfort and energy that we just don't compromise on. And that means, we can't be the absolute lowest price. But we think the decisions that we've made about the things that we include have demonstrable value for buyers.

Having said that, we are definitely not chasing into the first, second, third move-up market because there are other builders for whom that's really what their expertise is. So we're in that first time, first move-up buyer profile with an awful lot of single story product just for what it's worth, that is value-oriented, but isn't competing exclusively on the basis of price. And there are a handful of zip codes, a handful of school districts where we've got the DNA. We've been in California a very long time, we've got a legacy of a lot of successful communities and we've really studied what we've been good at and that's what we're going to keep doing.

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Alex Barrón, Housing Research Center, LLC - Founder and Senior Research Analyst [32]

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Got it. And then I thought I heard you say that next quarter you expect the margins to be the -- the low, I don't know if I missed -- like if you gave any basis points or is it roughly down a couple -- 20 basis points or like did you give any sense of range where the margins might be next quarter?

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Robert L. Salomon, Beazer Homes USA, Inc. - Executive VP, CFO & CAO [33]

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Yes, Alex, what we said in the script was I think we would be about 19%, but as we sell additional specs in the quarter that could oscillate 25 basis points up or down, but that would be the trough for the year. We would expect margins to improve in the fourth quarter as well.

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David I. Goldberg, Beazer Homes USA, Inc. - VP of IR & Treasurer [34]

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And Alex, to make sure that you've heard, we did put a 19.8% gross margin of this quarter, but it had to nonrecurring items, so on a more regular basis, it's about 19.2%, so relatively flat was what we talked about, 19% and in that range is the guidance that we gave.

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Operator [35]

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We have no further questions at this time.

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David I. Goldberg, Beazer Homes USA, Inc. - VP of IR & Treasurer [36]

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Okay. All right. Well, we want to thank everyone for participating in our second quarter earnings call. We look forward to talking to you in about 90 days. Thank you.

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Operator [37]

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This concludes today's conference. Thank you so much for your participation in today's call. All participants may disconnect at this time.