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Beazer Homes USA's (BZH) Allan Merrill on Q2 2016 Results - Earnings Call Transcript

Q2 2016 Earnings Conference Call

April 28, 2016 10:00 AM ET

Executives

David Goldberg - VP, Treasurer and IR

Allan Merrill - President and CEO

Bob Salomon - EVP, CFO

Analysts

Michael Rehaut - JP Morgan Chase

Ivy Zelman - Zelman and Associates

Susan McClary - UBS

Susan Berliner - JPMC

Jay McCanless - Sterne Agee

Operator

Good morning and welcome to the Beazer Homes Earnings Conference Call for the Quarter Ended March 31, 2016. 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, Vice President and Treasurer. David, you may begin.

David Goldberg

Thank you. Good morning and welcome to the Beazer Homes conference call discussing our results for the second quarter of fiscal year 2016.

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-K, which may cause actual results to differ materially from our projections. Any forward-looking statements speaks only as of the date on which such statement is made, and except as required by law, 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 not possible for management 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. Following our prepared remarks, we will take questions in the time remaining.

I will now turn the call over to Allan.

Allan Merrill

Good morning and thank you for joining us. We are pleased to report our second quarter results, which reflected our continued progress towards both our 2B-10 targets and our deleveraging goals. We significantly increased revenue and EBITDA and paid down debt, here are the highlights.

We reported $26.2 million of adjusted EBITDA up more than 30% versus the prior year. On a trailing 12-month basis our adjusted EBITDA is now over $160 million up 24%. We closed 1,150 homes in the quarter which was up almost 23%. This equated to 60% backlog conversion ratio as our focus on spec sales and improving construction cycle times both prove successful.

We entered into $140 million two-year term loan and used the proceeds to retire our 2016 notes and reflecting our focus on generating liquidity, we ended the quarter with $135 million of unrestricted cash, even after paying off more than $18 million in debt. This brings our year-to-date repurchases to over $41 million and leaves us on track to retire at least $100 million of debt, during this fiscal year.

Conditions in the housing market improved as we moved through the quarter. While it is very difficult for us to directly link our sales activity to macro issues. Elevated concerns about the direction of the economy and the potential risk of a near-term recession, appear to weigh on home buyers early in the quarter.

As those concerns veined and we entered the selling season in February, home buyers seemed a bit more enthusiastic and optimistic. This led us to better sales, later in the quarter with good geographic breadth across all our markets.

In terms of our balance sheet, last quarter we expanded, the deleveraging objective we outlined in the fall. This reflected our view that, poor conditions in the high yield market would make it [indiscernible] for us to refinance our 2016 debt maturity. So instead, we raised our target for debt reduction for this fiscal year from $50 million to $100 million and we noted some of the strategies, we had already implemented to retire the 2016s on our own.