Good morning and welcome to the Beazer Homes’ Earnings Conference Call for the Quarter Ended September 30, 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.

Thank you, Nicole. Good morning and welcome to the Beazer Homes conference call discussing our results for the fourth quarter of fiscal year 2016 and the full year. 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. Allan will start by providing our perspective on market conditions and then review to our current positioning and strategic plan. Bob will then discuss fourth quarter highlights where we stand relative to our 2B-10 goals and our expectations for the first quarter of fiscal 2017. I will come back on the line to review the capital market transactions we completed during the quarter and provide an update on our balance sheet and liquidity, followed by warp up by Allan. After our prepared remarks, we will take questions in the time remaining. I will now turn the call over to Allan.

Thanks, David and thank you for joining us on our call this morning. Our fourth quarter and fiscal 2016 results reflected the initial implementation of our balanced growth strategy, which we introduce to investors at this time last year. For the full year, we generated both revenue growth and higher EBITDA while substantially reducing our debt and improving our return on capital. This represented progress on each of the goals we established and we expect further improvements in each of these areas in 2017. The broader environment for housing remains supportive, underscored by consistent job growth, low interest rates and a limited supply of new and used homes. And healthfully, wage growth seems to be accelerating a factor that has been notably absent so far this recovery. Although there are hurdles that may prevent the industry from meeting the underlying demand for new homes, we remain fundamentally bullish about the prospects for our sector and especially our company over the next several years. Before I turn the call over to Bob and Dave, I want to expand on our operational expectations for 2017, and explain how these connect with our longer term strategic objectives. In 2017, we expect another year of top line growth driven by an improving sales pace and higher average selling prices more than compensating for a lack of community count growth. At the same time, we expect to grow EBITDA even faster than revenue arising from both an uptick and gross margin and a lower SG&A ratio moving us toward our 2B-10 profitability target. While we are well aware of the various cost pressures on the industry’s gross margins, the improvements we’ve made to our balance sheet mean we won’t have the same focus on selling lower margin specs that we did in 2016. On the…

Thanks, Allan and good morning, everyone. In the fourth quarter, our sales absorption rate was 2.8 sales per community per month up more than 16% year-over-year, and ahead of our expectation leading to 15% growth in orders. Importantly, our sales pace remained balanced across our markets with notable improvements in Phoenix, Charleston, Las Vegas and Maryland. Homebuilding revenue grew 1.4% year-over-year to $620 million, our highest fourth quarter since 2007. Although closings declined slightly compared to the fourth quarter of 2015, this was more than offset by a 3.5% increase in the average selling price. Our backlog conversion ratio of 77% was in line with our expectations and significantly higher year-over-year. Our ASP for the quarter was $334,000, up 3.5% versus the same time last year. Each of our regions experienced price improvement on a year-over-year basis. Nevertheless, the prices were up 6%. Our average price in backlog as of September 30 was more than $340,000 suggesting further ASP growth moving forward. On our second quarter call, we explain how we intended to expand our gross margins by rebalancing our mix of to be built in spec sales. The fourth quarter showed further results from these efforts with a gross margin of 20.8%, up 10 basis points sequentially and 60 basis points from the second quarter. SG&A as a percentage of total revenue including both homebuilding revenue and land sales was 10.6%. Our fourth quarter adjusted EBITDA was $66 million. Our total GAAP interest expense which includes both direct interest expense and interest amortized through cost of goods sold was $34.3 million in the fourth quarter, $3.7 million higher than last year. Although retiring debt leads to an immediate reduction in our cash interest expense. It takes time for this benefit to materialize on our income statement as we worked…

Thanks, Bob. In the fourth quarter, we spent $70 million on land and land development, which was below our expectations. The difference was attributable to two factors, both of which are positive. First, we were able to accelerate the recovery of a $14 million reimbursement from a utility district, which we treat as an offset to our net land spending figures. Second, we ended up land banking two extra transactions, which meant we only contributed a deposit instead of spending the entire purchase price. For the full year, our land spending also came in below our expectations from the beginning of the year in part because we elected to triple our deleveraging goal from $50 million to $150 million. But that isn’t the whole story with our land spending. We also shipped a higher percentage of our purchases into option arrangements with our ratio of option lots up to 35% of the total and we were able to activate nearly $60 million in land held for future development bringing that category down to 14% of our total inventory. As we’ve touched on in our comments this morning, we expect a decline in our community count through March, with growth returning in the balance of the year and into 2018. As you can see on the slide, we have 30 near-term closeout communities and 32 under active development. While we managed through the timing differences this year, you can see that we also have 46 communities under contract providing visibility into community count growth in 2018 even before considering our investment activities this year. From a strategic perspective, when planning for land spending, we have three objectives. First, to ensure that the transactions we consummate individually meet our unleveraged return criteria. Second, to continue driving improvements in our return on capital…

Thanks, David. I want to conclude the call by summarizing what we accomplished last year and what we are planning to do this year. In 2016, we generated significant EBITDA growth for the fifth consecutive year. We reduced both debt and interest expense while extending our maturity schedule and eliminating most of our secured debt and we greatly improved our return on assets. In 2017, we’re focused on delivering top-line growth, an improved operating margin and larger investments to accelerate our growth in 2018 and beyond. I’d like to thank our team for their continued efforts. With their talent, I’m confident we have the people, the strategy and the resources to reach our goals. And with that, I’ll turn the call over to the operator to take us into Q&A.

Thank you. We will now being the question-and-answer session. [Operator Instructions] Our first question is coming from the line of Michael Rehaut of JPMorgan. Your line is now open.

This is Neal on for Mike. I guess, could you review the regions a bit? I mean what’s trending better than expected and are you seeing continued growth in the east with your move up price points or where else?

Good morning and, by the way, thank you. The year-over-year improvement for us in the fourth quarter was pretty broad-based. It was interesting. I mean we had divisions in each of the segments that showed real progress and we did well in the Carolinas including in Charleston. In the west, both Phoenix and Las Vegas were up and we did see a tick-up in activity in Maryland as well. So, I wouldn’t say it was really price-point driven as much as in each of our regions, there were areas where we saw strength.

Okay. That’s helpful. And I guess you mentioned, in the southeast, is that kind of where you see winning the incremental investment dollar, I guess aside from deleveraging?

Well, I actually expect our land spending over the course of this year will, in fact, be allocated into each of our markets, obviously to varying degrees. That competition for capital is ongoing. I do see a lot of opportunity to grow in the southeast. But adding Gatherings communities is something that has allowed us to target locations and markets as well. So I think I wouldn’t be too geographically focused in thinking about our land spending.

Okay. That’s helpful.

Thank you. Our question is coming from the line of Alan Ratner of Zelman & Associates. Your line is now open.

Hey, guys. Good morning and nice job with all the balance sheet actions taken during the quarter. Allan, you guys are the first builder that we’ve heard from since the election and it sounds like you still have a pretty optimistic view of the world and increasing your land spend and gearing up for community count growth in 2018 and beyond. But just curious if the move in mortgage rates since the election and just the general uncertainty about the mortgage market and what the Republican sweep has in store for the housing market in general. Has that changed your view, in terms of underwriting standards, criteria, which segments of the market you are looking to gain exposure to, which markets, et cetera? Or from your perspective, is it all kind of status quo as it was before the election?

Good moring, Alan. It’s obviously early to say. But let’s break it into kind of a regulatory piece and an interest rate piece. On the regulatory side, we are clearly in favor of common sense regulations. We value safety at the absolute highest possible level, so don’t take this the wrong way. I do think that there will be an opportunity for relief in a number of areas, at least the rate of tightening or the expansion of the regulatory regimen in lots of different ways that I think have had an impact on pushing affordability or creating affordability challenges and, frankly, restricting the supply side, which obviously contributes to affordability. I don’t have explicit and specific policy expectations, but I do think that we are likely to see, over the next couple of years, some change in the direction of that regulatory environment. And I think that may be positive. That hasn’t changed our underwriting and, clearly, we intend to comply and are complying with all of those. On the interest rate side, I don’t think you’ll get anyone to say that they’ve embraced or are super excited about higher rates. But, the point we tried to make is we are not principally a price-driven builder and I think there is a big message in that. We believe that, on that price-only or price-focused price segment, or market segment, there are location risks, there are construction risks, and clearly, there are some interest rate or payment risks. That’s why being focused on the value oriented first-time buyer and the value oriented move-down buyer I think gives us a little bit of insulation from that rise in rates. But let’s see how it shakes out. I mean it’s been a week and, obviously, we are not going to try and dramatically spend our land allocation in the first 30 or 60 days. So, we’ll go through this year and we’ll watch closely. But I think our view is that the underlying demand characteristics remain intact. Supply remains constrained and affordability for our buyers remains very, very good.

That’s very helpful, Allan. Thank you for that. And a second question, if I could. You guys have had some nice success in finding option deals out there, as well as land banking. And I guess, generally, we think about those deals as being higher return, higher turn assets, but perhaps lower gross margin and I know you are guiding for margin expansion next year. But presumably, a lot of these deals are probably 2018 and beyond opening. So is the way to think about the long-term trajectory that maybe you see some slippage on the margin excluding interest, but that offset as the benefits from the deleveraging begin to filter through on the P&L in 2018 and beyond?

Well, it’s complicated. There are a lot of moving parts. You’re absolutely right. Option deals typically do generate higher return on invested capital by turning faster and generating a little lower gross margin. But our options are a result of land banking and, I guess, traditional option arrangements with land developers. And I don’t think that the percentage of those is dramatically increasing from here. We really had to absorb in 2016 both that step-up in options and our activation of our land-held assets and we’ve done that. And I think that’s kind of reflected in our numbers now. So we don’t see that as an incremental headwind in 2017. We don’t give full-year guidance, so I sure can’t go out to 2018. But I would tell you we’re looking at that mix balancing risk and returns to our shareholder benefit.

Great. I appreciate that. Thanks and good luck.

Thanks.

Thank you. Our next question coming from Yaman Tasdivar of Private [ph] Investment Management. Your line is now open.

Thank you very much. Good morning, everyone. Congrats on your continued progress on your 2B-10 goals. Looks like it’s down today a little bit but I think the market has more so much foresighted for usual and I’d like to focus on my question on the longer-term. I expect home prices to continue to increase in the coming years at an increasing rate and to that effect, I would like to understand how does that trend affect your income statement and balance sheet? My first look at it, I would expect the balance sheet – your inventories to be understated because the GAAP rules do not allow for adjustment upward. First of all, is that correct?

Yes.

And secondly, on the income statement, I would expect your gross margin, if the home prices let’s say, go up 5% in 2017, I would expect the gross margin, all else equal, to increase. But I would like to understand, is that a one-to-one increase? I’m not saying a 5% increase in gross margin, but if you could just talk us through how that flows through an income statement and balance sheet, I would appreciate that. Thank you.

Okay. Well, I appreciate your positive sentiment. We don’t make price projections. But in the context of rising home prices, which was your premise, you are right about that accounting for assets on the balance sheet. They do not get written up. As it relates to the income statement, I think your question – it was a sophisticated question and it touches the income statement a lot of different ways. Clearly, there is a revenue benefit from higher home prices, but we would expect in that environment, that labor rates in our construction would also be somewhat higher. And we would clearly expect to see commissions, which are variable in relation to revenue, be higher. So, there would be some offsets that the price appreciation wouldn’t flow directly through to the bottom line. There are no structural reasons why overheads would go up with higher home prices. So if we really look at the variable cost like commissions and you look at some of the inputs that are labor or wage related, I think those would be areas where you would see some offset to the price gains.

Thank you. And just a quick follow-up. Could you maybe talk about the percentage offset from labor cost and sales commission? Sales commission, especially. Is that a one-to-one relationship to revenues? And then labor, I would think it would be more of an indirect impact. So overall, is it 100% offset or 50% offset or 20%? Just, I’m talking more longer-term trends, not quarter-by-quarter.

It’s really hard. I can’t predict labor rates. But let’s try and get at it this way. Commissions are in the range of 4% of revenue. And so when I say it goes up, if our revenue goes up, you are going see that commission expense go up. I don’t think that commissions as a percentage of revenue would decline. Those are going to be purely variable. I think when you look at the labor side, labor and materials are obviously in our cost of goods sold. It depends on the trade market conditions, how much wage rate gain they could claim. Where there are areas that have shortages of particular labor at particular times of year, you would clearly expect to see more wage pressure. There are other trade categories, and at different times of the year, where you wouldn’t necessarily expect to see much, if any, wage because of the supply and demand characteristics of the labor. And I’m sorry, it’s a very hard question to answer. I think that the fact is that there would be some offsets over time, but it’s almost impossible to estimate what that would be.

Okay. Thank you very much and good luck with the coming years.

Thank you.

Thank you. Our next question is coming from Alex Barron of Housing Research. Barron your line is now open.

Good morning, Alex. Nicole, can we skip to the next question? We will let Alex get back in the queue and maybe something’s – he might be on mute maybe.

At this time, there are no further questions in queue.

All right. Well, Nicole, thank you and thank you to those that dialed in this morning. We appreciate your support and we will look forward to talking to you next quarter. Thank you.