Beazer Homes USA Inc (BZH) 2021 Q4 法說會逐字稿

Good afternoon, and welcome to the Beazer Homes earnings call -- conference call for the quarter and fiscal year ended September 30, 2021. 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'll 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 fourth quarter and full year of fiscal '21. 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's simply not possible to predict all such factors.

Joining me today is Allan Merrill, our Chairman and Chief Executive Officer. On our call today, Allan will review highlights from fiscal '21, outline our objectives for fiscal '22 and provide an update on our ESG initiatives. I will then cover our full year results in greater depth, our expectations for the first quarter and the full fiscal year and update our outlook for continued growth in our land position in community count. My comments will be 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.

Thank you, Dave, and thank you for joining us on our call this afternoon. In the beginning of last year, we established 3 strategic objectives for fiscal '21 related to our profitability, lot position and balance sheet. As we progress through the year, our performance continued to improve. Now that the year is over, I'm happy to report that we far exceeded our expectations for all 3 objectives.

First, we expected to slightly increase EBITDA and generate double-digit earnings per share growth. In fact, our EBITDA increased by nearly 30% and EPS more than doubled. We were able to capitalize on a strong demand environment while managing through the impacts of cost increases and supply chain disruptions, and earnings further benefited from lower interest expense and energy-efficient tax credits.

Second, we expected to grow our lot position. At year-end, our active lot position was up more than 25% versus the prior year. Importantly, we also grew our share of lots controlled by option from about 35% to nearly 50%. And third, we expected to reduce debt. Over the course of the year, we retired more than $80 million of debt, substantially improving our credit profile. These outcomes are a result of our long-standing balanced growth strategy, which is our multiyear plan to grow profitability faster than revenue from a less leveraged and more efficient balance sheet.

Over the past 5 years, we have grown EBITDA at a double-digit compound annual growth rate, substantially faster than our revenue growth; reduced net debt-to-EBITDA from over 7x to about 3x; and increased return on equity by more than 15 points.

As we look forward to fiscal '22, there are industry and company-specific factors that provide the basis for our confidence and highlight the risks which are influencing our operational priorities and expectations. At an industry level, we believe the favorable conditions for housing are likely to endure beyond this year. Strength in demand is supported by demographics, a growing economy and rising household incomes. But the supply of new homes is seriously constrained by entitlement restrictions, supply chain challenges and labor shortages. While this backdrop is generally positive, it also creates several risks.

First, supply constraints make us quite cautious about the likelihood of improvements to cycle times in fiscal '22. In fact, we've pulled forward our cutoff dates for home starts scheduled to be closed this year. Second, there are clearly affordability risks posed by rising home prices and the potential for higher mortgage rates. To address this, we are obsessively committed to delivering extraordinary value to home buyers through innovation, simplification and choice, among other strategies.

At a company level, we are encouraged by the dollar value and embedded profitability of our backlog, the continuing strength in our online and in-person traffic and our ability to leverage overheads and further reduce interest expense. With that background, I'd like to highlight some of our expectations for fiscal '22.

First, we expect to grow EBITDA by more than 10%, leading to earnings per share above $5. We are beginning fiscal '22 with approximately half of our expected closings for the year already in backlog, giving us visibility into profitability growth driven by higher ASPs and better margins. Our deleveraging results will also contribute to lower interest expense.

Second, we expect double-digit growth in our lot position with lots controlled by options remaining around 50%. Land spending is expected to increase again this year, although we remain highly disciplined in our underwriting. Third, we expect to deliver a return on total equity of about 20% or nearly 25%, excluding our deferred tax assets. And finally, we fully expect to achieve our long-standing goal of reducing debt below $1 billion. Looking beyond this year, we believe that we are positioning the company for more growth and more profitability, leading to higher returns and shareholders' equity.

As we improve our financial and operational performance, we are also focused on creating additional value for stakeholders by extending our leadership position in ESG. On the environmental side, we were pleased to be named an ENERGY STAR Partner of the Year for the sixth consecutive year. And importantly, we continue to make improvements in our designs, materials and construction practices in support of our industry-first pledge to have every home we build designated as Net Zero energy ready by the end of 2025.

As part of this effort, in fiscal '21, we committed to meeting the EPA's rigorous standards for their Indoor airPLUS program. On the social side, we've made significant progress on the rollout of Charity Title, our title business committed to contributing 100% of its profits to charity. In fiscal '22, we expect this expansion will allow us to donate more than $1 million, allocated between our national philanthropic partner, Fisher House and other charities in the communities we serve. Our process of partnering with charities aligns our financial contributions with opportunities for both employee engagement and wellness. These philanthropic efforts have added to employee satisfaction and have been very well received by our trade partners and homebuyers.

Finally, on the governance side, our diverse and highly engaged Board has earned high ratings from third-party rating services, but we aren't resting there. Later this calendar year, we will publish our first ever tearsheet where we will provide substantial new ESG disclosures pursuant to the SASB framework for homebuilders. If you're familiar with SASB and the types of metrics and disclosure topics they favor, you'll know this has taken a significant effort to prepare, and it won't just be a glossy marketing report. The bottom line is that we believe extending our ESG leadership position will provide real value for each of our stakeholders, and we are excited about adopting new processes and products to enhance the sustainability and resiliency of our business.

With that, I'll turn the call over to Dave to walk through our results and expectations in more detail.

Thanks, Allan, and good afternoon, everyone. Turning to Slide 9, we've outlined the detailed results for fiscal '21. In the appendix, we included a comparable slide highlighting results for the fourth quarter. For the full fiscal year, we generated net income of $122 million or just over $4 of earnings per share, which benefited from $12 million of energy-efficient tax credits. Excluding these tax credits, our earnings per share would have been $3.61, more than double the prior year. Adjusted EBITDA was about $263 million, up nearly 30% versus the prior year. Homebuilding revenue remained relatively flat versus the prior year as the benefit from higher ASPs offset a modest decline in closings.

Gross margin, excluding amortized interest, impairments and abandonments, was up about 200 basis points to 23%. SG&A as a percentage of total revenue decreased 50 basis points to 11.4%. Interest amortized as a percentage of homebuilding revenue was 4.1%, down 40 basis points as we benefited from lower interest incurred, and our tax expense was about $22 million for an average annual tax rate of 15%. This rate was lowered by energy-efficient tax credits primarily related to homes closed between fiscal '18 and fiscal '20.

Turning now to our expectations for the first quarter of this fiscal year. Average monthly sales pace should be in the high 2s, which represents an increase relative to our historical first quarter average over the past 5 years. Community count is expected to be around 115, essentially flat sequentially. Closings should be between 1,000 and 1,050, reflecting extended cycle times and our emphasis on delivering a spectacular customer experience. ASP should be in the high $430,000 range. Gross margin should be up between 125 and 150 basis points versus the same period last year. SG&A on an absolute dollar basis should be up about $4 million. Land sale and other revenue should be about $7 million with a margin of about 50%.

Within the ranges we provided for closings and margins, EBITDA should be above $50 million or up around 15%. Interest amortized as a percentage of homebuilding revenue should be in the mid-3s, and our tax rate should be approximately 25%. While precision and EPS forecasting is difficult, we expect earnings per share to be up at least 50% versus the same period last year.

Looking forward to the full fiscal year, we expect to grow EBITDA by more than 10% in fiscal '22 and earn more than $5 per share. Our improved profitability will be driven by the following factors: A significant increase in our average sales price to about $450,000, up over 10% versus fiscal '21; more than 100 basis points of operating margin improvement arising from a combination of increased gross margin and lower SG&A as a percentage of total revenue; and interest amortized as a percentage of homebuilding revenue in the low 3% range as the benefit from our efforts to lower our cash interest expense continue to materialize.

We ended the fourth quarter with nearly $500 million of liquidity comprised of unrestricted cash of approximately $250 million and nothing outstanding on our revolver. We have no significant maturities until 2025 and a clear path to bring debt below $1 billion in fiscal '22. Our substantial deleveraging, combined with higher earnings, has led to significantly better credit metrics for our business. This trend should continue as we move through fiscal '22. And by year-end, we anticipate our net debt to EBITDA will be in the low 2s and our net debt to net cap in the 40s. In the appendix of this presentation, we provided a longer-term view of our improvement in these statistics, which we've accomplished while growing the profitability of our business.

We spent over $245 million on land and development in the quarter, bringing our full year total spend to almost $600 million, up from less than $450 million in fiscal 2020. This increased land spending, combined with our efforts to increase the percentage of our lots controlled through options, has allowed us to grow our active lot position to over 21,000 lots. Looking forward, we expect to again increase our spend on land acquisition and development in fiscal '22, which should generate at least 10% growth in our total lot position.

As you can see on Slide 12, we've already driven our total active lot position back to a level that supported a much higher community count. To further demonstrate the relationship between growth in our lot position and our community count, on Slide 13, we've shown this data on an index basis. In addition, we've also lagged our community count by 1 year to roughly reflect the normal timing difference between controlling new lots and opening communities.

As we plan for where community count is headed, there are a couple important things to consider. In fiscal '21, the growth in our lot position was driven by the approval of more than 100 communities for acquisition. This was about double the run rate of new community approvals in fiscal '19 and '20 and did not reflect any material change in community size. But as you would expect, the supply chain disruptions that we're experiencing are also impacting the timing of land development activity. As such, the lag we typically experience from the time of controlling new lots to activating new communities has extended and become less predictable. Accordingly, we have very good visibility into a substantial lift in our community count, which will start later this year and accelerate during fiscal '23. On a final note, our profitability expectations for fiscal '22 are not meaningfully dependent on new community openings.

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

Thanks, again, Dave. Fiscal '21 was a very successful year, but it's in the rearview mirror. And in fact, I'm even more excited about fiscal '22. Here's why. The housing market remains quite strong, with demographically driven demand confronting structural supply constraints. We have a terrific backlog to jump-start our year, giving us visibility into improvements in pricing and margins to be realized in the near term. We're also investing for the future with a growing but risk balanced land position, creating longer-term growth opportunities.

We have the best balance sheet we've had in more than a decade with far less debt and plenty of liquidity. And we're expanding our capabilities across the entire spectrum of ESG, resulting in clear, easily observed achievements. Taken together, these factors have us better positioned than ever to create growing and durable value for shareholders, customers, partners and employees, and positively impact every community where we operate. Ultimately, credit for our results and our optimism about our future prospects is attributable to our team. I am sincerely grateful for their dedication, their efforts, their resiliency and their success. That's why I remain confident we have the people, the strategy and the resources to accomplish our goals in the coming years.

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

(Operator Instructions) Our first question comes from Julio Romero from Sidoti & Company.

So just to start off on the land spend. Can you just talk about that fourth quarter sizable deployment? It was really impressive. I mean, talk about maybe how much was in options versus traditional land spend? How much was in land that's maybe further along in the development process versus earlier on? And then secondly, I'm not sure if I missed a land spend target for '22.

I'll take the second one first. We did not give a dollar amount. We said we expect land spending to go up in 2022, but we don't have a hard and fast dollar amount associated with that. Turning to the first question. It's sort of interesting that what we struggled a little bit with 2021 was in the first, second and third quarters, deals seem to slip a little bit. And it's amazing. Deadlines create activity, and we were able to realize a lot of what had slipped for a week or a month or a quarter during the course of the year.

So the bulking up of that spend was really just idiomatic -- or idiosyncratic results of individual transaction details. So there wasn't some fourth quarter, we're going to go spend $0.25 billion. It was really related to individual deals. And it really was a good mix across bulk deals, option takedowns. So there really is nothing unusual in the mix. It's just clearly, the dollar amount was quite significant.

Understood. And I guess thinking a little bit longer term, you're obviously set up for a very, very strong growth in fiscal '22. As the backlog -- as with strong backlog you have now as the -- maybe the margin levels kind of level off beyond '22, does the benefit you'll see from improved community count at '23 and SG&A leverage and lower interest expense, does that have enough of a base that's kind of large enough to offset any normalization in current backlog levels?

That is -- it's a great question. It's a really complicated question because you articulated about 6 different variables, a year plus from now. But the truth is, I think so. I think there's enough volume. I think there's enough normalization on the cost side that even if as new communities open, they have a higher land cost basis, which they will, and that creates a different comparison from a gross margin perspective. I think there are enough other things going on, and you listed them fairly effectively that I'm not concerned about running out of opportunity for profit growth in 2022.

Our next question comes from Susan Maklari with Goldman Sachs.

Congratulations on a great quarter and a great year.

Thank you, Sue.

My first question, Allan, is going back to the land market. Obviously, all the builders are out there expanding their lot count, really trying to position for the growth that they see coming through the market in the next several years or so. But do you have any concerns or any signs that the industry is at all repeating some of the things that we saw that contributed to the last housing downturn? How do you think about walking the line between having a certain level of risk management and conservatism relative to wanting to capture the growth that's out there?

Another really great question, Sue. The truth is that I don't see any scenario or any evidence that there is a community count opportunity even with all of our growth ambitions that put us back in the context of producing or attempting to produce 1.7 million to 2 million homes a year. So when we talk about the last time there was a big downturn, we were at production levels that were double where we are right now. And I just -- I don't think, despite community count growth, we all burn through so much of our inventory or our land position over the last 18 months, we're having to run fast just to replenish, let alone grow.

But I do think a slightly more nuanced question is, is it a submarket level? And that's where the walking the line as you put it, that we're trying to do is to be really, really focused in existing submarkets, existing lot widths, existing product types. And I can have very good visibility on 40-foot lots for front-loaded product, single-story ranch plans in a submarket. And I can know really at a high degree of confidence what the competitive scenario looks like in '23 and '24.

If I drive 4 exits out of town, land's cheaper, but I have almost no visibility into how many communities I'm going to be competing with in '23 and '24. So for us, sort of the balance of risk and opportunity is to do what we know how to do, where we know how to do it.

Okay. That's very helpful. And then my next question is going back to your commentary around your ESG efforts and your Net Zero ready program. A lot of the materials that go into these homes in order to make them more energy efficient and to achieve these targets inherently end up costing more. There are higher costs relative to some of the alternatives that are in there. How do you think about weighing that relative to affordability just given the focus that's inherent on that as well?

Yes. It's another excellent question. Dave, we got lucky today. We're getting great questions. So the first thing I would tell you, and this may be controversial, but the fact is it resonates with our homebuyers. Some of our homebuyers, probably a minority of them are focused on emissions and carbon. And so they really like the fact that it's a home that has a different energy contribution or a different greenhouse gas contribution. A larger share look at it and say, "You know what, I'm going to have $50, $60, $70 electric bills instead of $150 electric bills," and they see value in that. Another group of our buyers looks at the home and says, "One of the things we worry about is buying a home and it being functionally obsolete the day we bought it." Buying a Beazer home, you're not at any risk of that because you're buying next year's home or '23's home this year because we are doing things that other people aren't doing. And that does resonate with homebuyers.

The other part of it is, and again, people may roll their eyes, it has energized our team. Our team knows that tackling this is difficult but it is something that is different and it is better and it excites them. And let me tell you, there's nobody in our industry or any industry for that matter, who doesn't want an engaged, enthused employee population who's really committed culturally to achieving things that are awesome. And I think those 2 reasons stand on their own and are wholly supportive of what we're doing. I will tell you there's a third piece to it, and it's a little bit more prosaic and that is, I like getting there first.

The things that we are doing are ultimately going to roll through building codes and energy codes over the next 5 to 10 years. And rather than waiting until the 11th hour and then being in a panic to figure out how to qualify, I much prefer to be early, to be able to experiment, to practice, to substitute different products, to figure out what works at scale in different climate zones rather than having standards dictated to us. And frankly, finding ourselves not first in line to accommodate those adoptions. So that's another practical reason. But I would tell you, it's enough for me that our customers like it and our employees love it.

Our next question comes from Tyler Batory from Janney.

I appreciate all the commentary so far here. Just first one for me on the guidance side of things, above $5 of EPS in fiscal '22, multiple-part question here. I think quite a bit above some of the guidance or the commentary you had provided in terms of 2022 previously. So I just wanted to understand a little bit more the delta in terms of what you're expecting now versus what you're expecting perhaps a couple of months ago. And then I'm also curious, the supply chain is such a key topic of discussion. To hit that $5 target, are you expecting that things remain relatively consistent in terms of the supply chain cycle times? Or you're perhaps expecting things to get a little bit better as we move through the year?

So Tyler, let me handle the first question first, and thank you for it. I wouldn't say that anything has changed in terms of our expectations. We've tried to lay out kind of the high-level guidance for how you get there in terms of ASP growth and some margin accretion that we talked about between gross margin and SG&A. I would say we have continuing better visibility as we go, and that's part of the reason for the guidance.

But I think what you can see, and I'm sure you'll see this as you go through your own model, a little bit on the top line, some ASP growth and some significant ASP growth, some margin expansion, some lower interest expense, it has a significant impact on the EPS line as we kind of talked about. So really no change in terms of what we're seeing in the market, but still very good overall.

In terms of the second question, which was the supply chain and where we are from that perspective, we basically baked in no improvement in the supply chain in our numbers. And Allan talked about that changing the cutoff dates for starts to be very clear that we're baking in what we're currently seeing in terms of cycle times and not improvement as we move through the year.

Okay. Very helpful. And then also, interested on the gross margin side of things. If my math is right in terms of the guidance, you're looking at some sequential progression from the fourth quarter to the fiscal first quarter there. So just interested in what your expectations are in terms of input costs and also interested in your perspective on the lumber side of the equation as well.

Yes. So we've talked about this a little bit, the price/cost mix in the fourth quarter of this year and the kind of sequential change that had. And you can see from the guidance that we have, some improvement as we move into Q1, as we benefit from the lower lumber costs that we experienced as we moved through last year. So you can see lumber cost improvement rolling through and certainly some price appreciation, driving some of the margin guidance that we have for Q1.

Q4 is really -- Tyler, where we -- Tyler, Q4 is really where we experienced the run-up last spring. Didn't affect us last spring and affected us through the summer and into the fourth quarter. So we knew in Q3 that Q4 was going to be the point where we were carrying the heaviest lumber cost. But as we roll into Q1, we were careful. We were pretty long in terms of days before prices spiked. And then we got ultra short. We didn't panic and we didn't get long again. So as prices came down, we were able to capture that improvement pretty quickly.

Okay. And just last one for me, if I could. On the pricing side of things, I think last quarter, you had talked about perhaps expecting some moderation in the market. So I'm curious if that's something that's playing out. And then also interested, your perspective on incentives out there just from either yourselves or from competitors as well.

So I don't know, I'm reading from right to left today for some reason. I'll take the second question first. Tyler, and Dave is about to make a face at me, the thing about the incentive question that I think is a little tricky is that incentives by themselves tell you a little bit, but you've really got to put them in a context of base prices and included features. I mean, we've seen diminution in incentives. So there isn't anything that we're seeing as an early warning indicator that is a great concern. But it's really the aggregation of base price, included features and incentives. And I would tell you, it's played out as we thought last quarter. It is definitely not as euphoric from a price action standpoint. And seasonally, it wouldn't normally be either but it's very stable. Demand is strong, both online and offline, and I feel like the pricing environment is good.

I mean we're cautious about this. We understand there is a very important tether between incomes and house prices, and that is at a more taut relationship than it was 12 months ago. And so for that reason alone, we're just not allowing ourselves to assume, hope for, plan for, or underwrite any price appreciation because we understand that relationship.

Our next question comes from Alan Ratner with Zelman & Associates.

Nice job in a tough operating environment out there. So I appreciate all the guidance. I know it's not an easy environment to give us a lot of visibility into. But Dave, I guess my first question on the $5 per share number guidance and all the inputs that go along with it. I'm curious if you could just kind of talk through the areas where you feel like if things were to go sideways, where there could be some risk to that. And on the flip side, maybe which inputs you feel like you're being conservative given the environment where if things ultimately do improve, there could be some upside. So just curious kind of how you think about the -- maybe the conservative and perhaps more aggressive inputs there?

Yes. Alan, I would tell you in terms of the forecast, with more than or approximately half the closings already in backlog and the margin confidence that we have, it feels pretty good. I mean, in terms of risks of the forecast, we still have sales to make. There's still a production environment. Allan talked about, and I mentioned the question before about assuming that we have kind of flat cycle times. I think that's a concern and a risk but one that we think we've managed and incorporated properly into the forecast as we move through the year.

So I would tell you, to me, that's probably the biggest risk. But again, I think we've properly captured the risk, and we've incorporated kind of the current environment looking forward. In terms of upside, I think we'll see as we play through the year. I think it's a tough question to answer right now kind of at this point in the year. Allan talked about prices being stable, and I think that's a good way to think about it. I think as we move through the year, we'll talk about kind of how things are faring. And if there's potential upside from the actual operating results, we'll have a better sense as we move through the selling season.

Got it. That's very helpful, Dave. Second question, Allan. You've been, I think, one of the more pragmatic CEOs that I've heard at least as far as recognizing the potential affordability constraints that are out there, especially if rates were to rise at all from current levels, given how much home prices have gone up. And over the last month or 2, we have seen some volatility in mortgage rates for a while. We got a little bit of a head fake. Looked like rates might be starting to creep higher. I think they actually climbed 30, 40 basis points or so in the back half of your quarter into October, moderated a little bit here in the last few weeks.

But I'm curious if you can ascertain any interesting consumer behavioral trends when rates were starting to creep higher. Did you see any activity that would suggest maybe buyers were perhaps jumping off the fence in anticipation that rates would continue going higher? Was it a fairly muted reaction? What are you hearing from the field in response to that?

It felt pretty muted, honestly, Alan. I mean we've certainly lived through environments before where a trajectory of rising rates pulls forward some demand. I don't think we saw that. I also didn't see any effect on our backlog. "Oh, geez, rates are higher, how is that going to affect me? Maybe this isn't the right time to become a homeowner." So I would say it was very muted.

And Alan, I would tell you 1 of the things that gives me a little bit maybe more comfort around that topic is we've essentially created a Hunger Games for lenders for every buyer. There is competition to win business from our buyers from multiple mortgage lenders, and that proves to be a pretty good buffer for small moves in rates. I'm certainly not suggesting we aren't exposed as everyone is to risks associated with higher rates, but having a consumer value proposition where there are multiple lenders trying to win that business, that's a help in a rising rate environment.

You might have to switch that reference to a Squid Games reference in the future there, Alan, but I appreciate the...

Yes. I haven't finished the series, so I'm a little afraid to quote it because I don't know how it ends yet. So I thought I'd better be careful, but I take your reference.

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

Great job. It's great to see where you guys ended up seeing where you started your guidance at $250 million for the year. So hopefully, this year will be a repeat of that. I wanted to focus in, I guess, on your DTA. Probably something you guys don't refer to much, but my understanding is that you won't be paying taxes for a while on some of the earnings. So can you give us a sense of if you've got other years like 2022, how many years out does your DTA cover you from paying taxes?

Well, look, the answer, Alex, is that you can kind of work on the pretax income and you can look at the federal tax rates and kind of do the math. What I would tell you is the deferred tax asset is very meaningful to us. And as the profitability is growing and the present value, if you think about it in those terms, is getting bigger because we're shielding more taxes more quickly. So it's still incredibly meaningful. We need to protect it. It is incredibly valuable, and the value is becoming more and more clear, given the profitability we're generating and the timing.

And in terms of your $5 number, what tax rate are you guys implying given that there's the proposal by the Democrats to raise taxes? Are you guys assuming last year's tax rate or a higher tax rate?

We're using a similar tax rate. We haven't assumed a different tax rate in the numbers.

Got it. And given that you guys are trading very near book value, has there been any thoughts to buying back stock rather than just paying down the debt?

Well, we've had a long-term focus on getting our leverage into a much healthier place. And when we start talking about where we'll be at the end of this year, we estimate to be down in the 2x debt-to-EBITDA range and in the 40s on debt to cap. That's a different environment than the one that we've been in historically. So I think that's probably a conversation for next year.

Right now, we've got a tremendous growth opportunity in front of us. We've got deal flow that is underwriting to our satisfaction. So I have to say right now, that doesn't seem to be the best allocation of capital. It's on the table. We've done it before. If there were serious dislocations in the share price or in share prices, generally, it would potentially be back on the table. We've got the capacity to do it.

But I think we've prioritized correctly to derisk the company substantially by getting debt down and then creating a growth trajectory for the future. I mean our shareholders have told us those 2 things are really valuable. And I think that's what we've emphasized from a capital allocation perspective.

Our next question comes from Jay McCanless with Wedbush.

David, at the end of your commentary, did you say that you believe -- or Beazer believes that you can get to the $5 without seeing meaningful community growth this year? Did I hear you correctly?

You did.

Okay. What amount -- number of closings are you anticipating to get to this $5?

Jay, we didn't give an exact number on the call and we're not going to give exact guidance. But we did say, as part of Alan's comments, that approximately half of our closings are in backlog currently. So you can do some math around that pretty easily.

And you all got rid of the old chart that was actually pretty helpful that -- where you showed the amount of communities coming open versus the ones that were closing out. I mean, what is plan B if you don't get -- if community development runs slow because that right now is what everybody is telling us, from your competitors, is that it's slower to get communities out of the ground. So I guess I'm just trying to back into -- if 2,800 back -- or number of units in backlog is about half of your production this year, I guess what's plan B if you can't get more communities open?

First of all -- Jay, it's Allan, we don't need to get a lot of communities open this year. We're going to have communities open, but our profitability is really not dependent on that. Our closings will come from our existing communities because if we get a community open in the spring, the likelihood it gets open for sales and we generate closings by September 30, the chances of that are essentially 0. So that's why Dave said what he said, which is our profitability forecast, it's not in any meaningful way dependent on new community openings.

We do still have the chart. It's in the appendix. It's chart 27, and it shows the number of communities we expect to get open in the next 6 months, the number that are going to be closing out, those that have been approved but not yet closed. So all that data is still in there just for your reference.

Apologies. I didn't flip far enough. Why set the bar so high this early in the year, Allan?

Well, honestly, in most years, taking the September 30 backlog multiplying it roughly by 2 and saying that's our closings forecast would be incredibly conservative. We normally turn that inventory a lot more quickly, and so there'd be a lot more operational risk from sales we've yet to make.

So when we talk about setting it high, we're actually -- relative to the year that we expect to deliver, we've got a much larger share of it already contracted. So high, I guess, is a matter of opinion, and I appreciate the characterization. But the fact is there's less risk in that number than there would normally be at this time during the year because of the things we've said that we've assumed about the cycle times not improving.

And understanding that it is not crucial for you to hit for your guidance or it's not necessarily to hit for your guidance, but when do you think the community counts going to inflate?

I think we'll see growth back in the spring. For sure, we'll see some growth in the spring. And I just -- the amount of growth, the specific number of communities, you said it, our peers have said it, it's tough, though it's nice to not have a year where we're hanging by a thread based on, gosh, we think we'll get it open in March. And if we do, we can get some specs out there and we could close those by September. We're not wrapped up in that drama for 2022.

Our next question comes from [Vince Foley].

My question relates to liability management and how you're thinking about your cap structure. I know in the prepared remarks, you talked about having a nice runway to 2025 in terms of your next maturity. But when I look out to '25, the debt is fairly expensive, at least from a coupon perspective. And then when I look at where your bonds are currently trading, we're probably talking 200 to 300 basis points inside of where the coupon is for your '25s. These bonds are callable now and they step down a bit in March. So how are you thinking about addressing those in the future?

Look, I would tell you the math you're doing is the same math we're doing. We're making sure that we're being thoughtful and timely with the market. But the math you said is not lost on us. We get it. We just want to make sure we make a timely and good decision.

There are no further questions in queue at this time.

I want to thank everybody for joining us on the call, and we'll see you next quarter. Thank you very much for your time, and this concludes today's call.

That does conclude today's conference. You may disconnect at this time, and thank you for joining.