Beazer Homes USA Inc
NYSE:BZH
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Beazer Homes USA Inc
Earnings Call Analysis
Q4-2023 Analysis
Beazer Homes USA Inc
Beazer Homes faced a challenging sales environment but managed to achieve growth and meet its fiscal 2023 expectations. The company ended the year with significant operational and financial accomplishments, including generating over $150 million in net income and investing $600 million in land and development. They reduced leverage below 40% and increased stockholders' equity to above $1 billion. Furthermore, the enterprise boosted its active community count by 9%, reclaimed more than 2 months of construction cycle time, and expanded its leadership in energy efficiency. Despite the tough housing market conditions and interest rates, Beazer Homes demonstrated resilience and appears poised for future growth.
In fiscal 2023, Beazer Homes set three specific multiyear targets: to increase active community count, strengthen the balance sheet, and enhance energy efficiency. The company plans to grow its active communities from 134 in fiscal 2023 to over 200 by fiscal 2026, a strategic step in increasing annual closings. The net debt to net capitalization ratio decreased 9 points to 36% and is expected to reach the low 30s by the end of fiscal 2024, with a goal to go below 30% by fiscal 2026. In energy efficiency, the share of DOE Zero Energy Ready home starts increased from 2% to 28% within the year and is projected to surpass half of all starts by the end of fiscal 2024. The overarching confidence in market dynamics fortifies the company's resolve to tackle the ongoing affordability challenge for new homebuyers.
The company earned homebuilding revenue of $2.2 billion, a decrease of roughly 5% due to a decline in closings offset by higher average selling prices (ASPs). They achieved a gross margin of 23.1%, the second-highest in the past decade, while maintaining SG&A at 11.5% of total revenue amid investments in growth. Adjusted EBITDA was recorded at $272 million, with a flat interest amortization rate of 3.1% of homebuilding revenue compared to the previous year. Noteworthy is the effective tax rate of 13.1%, reduced due to energy efficiency tax credits, culminating in net income of $159 million, or $5.16 per share.
Beazer Homes capitalized on improved construction cycle times and cost reduction, especially with lower lumber costs contributing to increased gross margins. Despite a sluggish uptick in sales when mortgage rates hit 8%, the company forecasts at least 650 sales for the first quarter of fiscal 2024, an increase of over 30% compared to the previous year. The active community count is expected to be consistent sequentially while rising 10% year over year. However, the firm anticipates a potential adverse impact on conversion rates due to transformer issues, projecting around 50 unfinished homes.
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Good afternoon, and welcome to the Beazer Homes Earnings Conference Call for the Fourth Quarter and Fiscal Year Ended September 30, 2023. Today's call is being recorded, and a replay will be available on the company's website later today.
In addition, presentation slides intended to accompany this call are available within 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, Senior Vice President and Chief Financial Officer.
Thank you. Good afternoon, and welcome to the Beazer Homes conference call for our fourth quarter and full year of fiscal 2023.
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 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 is Allan Merrill, our Chairman and Chief Executive Officer. Today, Alan will discuss highlights from our fiscal 2023 results, an update on our multiyear goals how we are navigating the affordability challenges for homebuyers and our growth expectations for fiscal 2024.
I'll then provide details on our fiscal 2023 full year results updates on our cycle time and cost reduction initiatives, additional details on our expectations for the first quarter and full year and end with a look at our balance sheet and book value. We will conclude with a wrap-up by Allan. After our prepared remarks, we will take questions during the remaining time.
I will now turn the call over to Alan.
Thank you, Dave, and thank you for joining us on our call today. I'm extremely proud of our team's efforts and results for fiscal '23. We overcame an exceptionally difficult sales environment in the first quarter of last year. Which allowed us to make significant progress against our balanced growth and multiyear goals.
With a strong finish in the fourth quarter, we delivered both financial and operational results that met or exceeded our expectations.
From a financial perspective, we generated more than $150 million of net income, resulting in healthy returns on both assets and equity. We invested almost $600 million in land and land development and at the same time, we strengthened our balance sheet with leverage now below 40% and stockholders' equity above $1 billion.
From an operational perspective, we positioned ourselves for growth by increasing our community count and controlled lot position. We reclaimed more than 2 months of construction cycle time, and we expanded our leadership in energy efficiency.
We were also recognized as a top workplace, reflecting our efforts to sustain an exceptional level of employee engagement. Against a very difficult interest rate and housing backdrop, FY '23 challenged us in many ways, and we came through in very good shape.
In the middle of fiscal '23, we laid out 3 multiyear goals intended to define specific targets and timelines as part of our long-standing balanced growth strategy. These targets represent our highest priorities and are centered around community count growth, balance sheet strength and the energy efficiency of our homes.
As it relates to our growth, we ended the year with 134 active communities, up 9% versus the prior year as we successfully activated 60 new communities. In FY '24, we expect year-over-year growth in our active community count each quarter. Further out, we have excellent visibility to more than 200 active communities by the end of fiscal 2026.
As it relates to our balance sheet, we finished the year with our net debt to net capitalization ratio at 36%, representing a 9-point decline versus the prior year. Our profitability expectations for fiscal '24 should allow us to reduce that ratio into the low 30s by the end of this year, putting our multiyear goal of net debt to net cap below 30%, well within reach by the end of fiscal '26.
Finally, as it relates to the homes we built, we remain the only public builder with a commitment to building 100% of our homes to the Department of Energy's Zero Energy Ready standard. In 2023, we greatly expanded our production of these homes with the share of 0 energy-ready starts jumping from 2% in Q1 to 28% in the fourth quarter. By the end of fiscal '24, we expect well over half our starts will meet the DOE standard positioning us to have every home we start 0 energy ready by the end of 2025.
We remain confident in the longer-term supply and demand dynamics that underpin our strategy and our industry. But affordability has been is and is likely to remain the central challenge for new home sales.
Part of the challenge is consumer psychology. with buyers daunted by monthly payments larger than they're accustomed to. But the other part is math. Many prospects simply don't have the income to afford the payments for the home or the location they desire. To help combat this, structure -- we have structured our incentives to allow customers to direct dollars between home price discounts and closing costs, which often include buy-downs. This allows different buyers to make different choices.
In a rising rate environment, builder financing incentives typically increase, at least initially, and our experience confirms this. As the 30-year mortgage rate moved from about 7% at the end of June, to just over 8% in October. Our contribution towards closing costs increased about 1 point on new sales. As part of our mortgage choice program, our lenders also contribute to closing costs and rate buy-downs, which leverages our contributions.
Of course, our mortgage strategy is about more than just buy downs. It's about choice. We have multiple choice lenders available to provide loan estimates to every buyer which incentivizes our lenders to compete on loan programs, closing costs, buy-downs and service levels in addition to rates.
We have two other differentiators for homebuyers, both of which directly target affordability concerns. Surprising performance encompasses our construction quality and energy efficiency efforts with measurable monthly savings on utility bills for our buyers. Choice plans enables buyers of to-be-built homes to select floor plan elements to match their lifestyle at no additional cost. We are laser focused on affordability and believe we have created a differentiated strategy to address it.
While the year ahead undoubtedly holds both opportunities and challenges, we continue to expect growth on many fronts. Our larger community count provides the basis for our expectations for more closings leading to higher revenue and profitability in 2024 as we aggressively pursue our multiyear goals.
Overall, I'm very pleased with what we were able to accomplish in fiscal '23 and remain excited about where we're going in fiscal '24 and beyond.
With that, I'll turn the call back to Dave.
Thanks, Allan. I'm going to focus my comments this afternoon on our annual results. You can find our detailed fourth quarter performance in our press release.
For the full year, we generated an average pace of 2.6 sales per community per month with a cancellation rate of 20%. Homebuilding revenue was $2.2 billion, down about 5% as the benefit from higher ASPs largely offset a decline in closings.
Gross margin, excluding amortized interest, impairments and abandonments, was 23.1%. This was the second highest annual gross margin over the last 10 years. SG&A as a percentage of total revenue was 11.5% as we continued to invest in our growth. This all led to adjusted EBITDA of $272 million.
Interest amortized as a percentage of homebuilding revenue was 3.1%, flat compared to the prior year. Our GAAP effective tax rate was 13.1% as we benefited from energy efficiency tax credits. This led to net income of $159 million or $5.16 of earnings per share.
Land and land development spending accelerated in the fourth quarter allowing us to grow our controlled lot position both sequentially and year-over-year, while also increasing our percentage of of lot controlled under option.
In the beginning of fiscal 2023, we set forth cycle time and cost reduction objectives as we targeted regaining ground lost during COVID. I'm happy to report -- I'm happy to report we made significant gains on both fronts during the year.
In the fourth quarter, cycle times on closings were down more than 2 months versus the prior year. In fiscal year '24, we expect further improvements as we drive cycle times closer to prepandemic levels.
Turning to cost reductions. We are pleased with our ability to recognize significant savings in the back half of the year primarily through lower lumber costs. This contributed to gross margins increasing sequentially from Q2 through Q4 on an average sales price that was declining primarily due to product and feature changes implemented to address affordability.
Looking forward to the fiscal first quarter Quarter-to-date sales are up year-over-year, but were more sluggish when mortgage rates reach 8%. Although we are encouraged by the recent move down in rates, our guidance today does not assume this will translate into a meaningful improvement in sales pace this quarter. We are currently expecting at least 650 sales, which will be up more than 30% of last year's very low base.
Our ending active community count should be flat sequentially and up 10% year-over-year. On the income statement, transformer issues are likely to adversely impact our conversion rate as we anticipate having about 50 finished homes awaiting power at quarter end. We still expect a backlog conversion ratio above 45% as we benefit from improved cycle times, resulting in year-over-year revenue growth. Our ASP should be around $510,000. We expect adjusted homebuilding gross margin to be 23% or higher.
Our absolute dollars spent on SG&A should be up approximately $2 million versus the same quarter last year. We expect this to result in adjusted EBITDA around $40 million. Interest amortized as a percentage of homebuilding revenue should be in the low 3s, and our effective tax rate to be approximately 11% and as we continue to benefit from energy efficiency tax credits. This should lead to diluted earnings per share around $0.70.
Turning to our full year. Our expectations assume the economy, housing conditions and mortgage rates remain relatively stable. In this environment, we expect to spend at least $700 million on land acquisition and development as we position for future growth. We are targeting double-digit growth in community count by year-end.
Revenue growth will be a result of higher community count and year-over-year gains in backlog conversions. This should more than offset a decline in our ASP, which we anticipate to average $500,000 for the full year. We expect to generate adjusted homebuilding gross margins in the range of 22% to 23% and with a large share of new communities in our mix.
Our effective tax rate to be near the midpoint of the 15% to 20% range we provided during last quarter's call. Taken together, we expect to generate double-digit returns and continue to grow book value significantly.
Achieving our target for double-digit returns will lead our book value per share over $40 by the end of the fiscal year. The chart on Slide 15 shows the progress we've made thus far in growing our stockholders' equity, having more than doubled our book value since the end of fiscal year '19. At the same time, the quality of our book has improved, as our DTA as a percentage of book has gone from about 40% 3 years ago to nearly 10% at the end of this year and will continue to decline.
On to the balance sheet. Total liquidity at the end of the year was over $610 million comprised of $346 million of unrestricted cash and $265 million available on our fully undrawn revolver. Reducing our net debt to net cap translated into net debt to LTM adjusted EBITDA of 2.3x.
Our 2025 senior notes represent our nearest maturity, and we anticipate using a combination of repayment and refinancing to address it.
Subsequent to the end of the quarter, there were three noteworthy developments. First, we expanded our revolver equipments to $300 million. Second, Moody's Investor Services increased our rating from B2 to B1. And finally, we repurchased $4 million of our 2025 senior notes, bringing the total outstanding principal below $200 million.
With that, I'll turn the call back over to Allan.
Thank you, Dave. 2023 was a highly successful year for the company. We overcame the challenges associated with much higher mortgage rates and delivered excellent financial and operational results. Equally important, we entered FY '24 with a differentiated strategy and attractive geographic footprint and expectations for growth across most financial metrics. .
Looking beyond this year, we have provided investors with 3 specific multiyear goals to track our progress, growing our community count, strengthening our balance sheet and extending our leadership in building energy-efficient homes. I'm confident that we have the team and the resources to create growing and durable value for our stakeholders in the years ahead.
And with that I will 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.
Thanks. Good afternoon, Alan and David. So it was impressive to see that 42% year-over-year jump in land investment in the fourth quarter. You talked about the full year expectation, I believe, about $700 million. Just how do you expect that to trend from a cadence perspective throughout the year? And how much does the reduced construction cycle times you've achieved to free up some free cash flow for that increased land spend?
Julio, I think we'll probably avoid talking about the cadence on land spend at this point in the year. It's still a little bit early. Obviously, we've got our pipeline in front of us, and we talked about kind of what we expect to spend for the full year. I would tell you the increase in the cash flow, frankly, does help, but we have plenty of liquidity on the balance sheet. You can see we ended the year with more than $600 million of liquidity.
So I think the other thing, Julio, we're looking at now, and you can kind of look at what we did in 2023, the spend in '23 was relatively backloaded to the fourth quarter. And we talked about that on previous calls. We spent time early in Q1 renegotiating land deals. And the impact of that was better terms and better deals in many cases, but it also pushed land spend largely into Q4, and you can see the acceleration that we had that shouldn't frankly be the case in 2024. We should have land spend more evenly distributed quarter-to-quarter. But I don't want to get too far into the details of that until we kind of go through the year.
That's fair. And I appreciate the color you gave there for sure. And then just maybe if you could speak to -- you obviously have your expectation for community count ramp-up. Maybe can you speak to the confidence in that community count ramp you've outlined in that path for growth? And while certainly, mortgage rates will have an effect. Maybe just talk about how Beazer might be on a relative basis a little bit less affected than others?
Well, sure. I'll take a stab at it, and then Dave will fix it up, Julio. I think that during '24, we feel very confident about the ramp. Those are deals that are locked and loaded under development, and they're going to get to the market this year kind of regardless of where rates are. A lot of '25 is in a similar category. Clearly, we've got some discretion. If we decided that things were really tough we could slow up a little bit, but we've got the owned and controlled lot position to have multiple years of community count growth. So what we committed to last year, we're still on that track.
In terms of being in a little different position and look, sales this week, this month, this quarter, 6 months has an influence on land activity, but you know there's a 2-year or so latency between buying a deal and activating a deal. And so those things are always going to be a little bit asynchronous.
From a sales perspective, our view is pretty clearly that having mortgage choice and surprising performance and choice plans gives us ways of meeting the customer where they are from an affordability standpoint and trying to find ways that they can get into the home of their dreams as opposed to having to compromise. But that's a little different context than the cadence of community count growth because the community count growth for '24 decisions we made in '21, '22 and '23.
Next, we'll go to the line of Alan Ratner from Zelman & Associates.
Congrats all the progress this year would love to drill in first on just kind of some of the more recent commentary you had, which I appreciate the color there. So if I look at the guidance, and I fully appreciate you're extrapolating out maybe a tougher few weeks here. But 650 orders would be down about 35% sequentially. That's much more severe than you guys typically see in your fiscal first quarter.
And you mentioned the 100 basis point increase, I believe, in incentives for October. We've heard things from other builders kind of similar trajectory there. So how are you thinking about that interplay between kind of the current incentive environment, maybe what some of your competitors are doing versus the order side because that seems like it's a pretty significant drop-off. And my interpretation is maybe you guys are taking a bit of a backseat towards the calendar year-end companies that might be a bit more aggressive in the near term.
Well, there's a lot in that question, Alan. And you're right on just about every front. For sure, this is a strange time of year. Dealing with November and December year-end companies that have positions, and they're trying to make not just sales but closings in a relatively compressed period of time. And we typically lay a little bit lower during what is our fiscal first quarter and try not to get caught up in it. So that is the case, but that's the case every year. the case this year.
I think it's also true that there's just been so much volatility in mortgage rates in the last 60 days, I mean that run up to 8 and then the easing, there's no question that run up to 8 affected traffic and it affected sales. October into the early part of November wasn't great.
But it's also true that what's happened in the last 10 days has definitely stimulated a level of activity that we weren't seeing 3 or 4 weeks ago. So we find ourselves an awkward point for the earnings call because I could feel really good about 7 days where I could look at the last month or 2 and say, well, it's sort of mixed or as you did, you can look at it over years and look at, well, what's the normal sort of progression. So I think we've given a fairly cautious estimate of where sales may land in the first quarter.
And it's influenced a little bit by what you said. I don't think we're in a place where we feel like we have to go chase unit activity right now. We've got compressing cycle times working in our favor. We've got a rock-solid balance sheet. We've got a lot of runway left in the fiscal year. So this just doesn't feel like a window where we needed to win the day, win the week, in order to set ourselves up for the year.
So I've touched on 3 or 4 different ideas there, but I mean each of them sort of come back to definitely not giving a guide on orders at super ambitious. We're giving a guide that's very rooted in some of the tougher weeks of the last 2 months.
You answered every part of my multipart question, Allan. Second -- second topic would love to discuss our mortgage rate buy-downs. You've talked a lot about the mortgage choice program that you guys have. there's a lot of focus being spent on mortgage rate buy-downs right now across the industry, there other homebuilders devoted a lot of time on their calls talking to their national programs. They're offering what the exact rate is. And I know your situation is different. So is there any way for you to give us a little bit of data or insight into kind of what the average rate your buyer actually is getting based on the incentives you're providing or what percentage of your buyers actually are choosing to put the dollars into a rate buydown just to kind of give us a little bit of a comparison point to where you guys stack up versus the rest of the industry?
Yes. I can give you a little bit of color. I can't give you the same granular data because obviously, we don't have a mortgage company. But couple of interesting things, I think.
First of all, we are obviously well aware that many competitors offer on a finite number of home for a short period of time, a specific incentive in their mortgage rate. We tend to operate a little bit differently, which is which is the community in the home. Now let's talk to 2 or 3 of our choice lenders. And what's fascinating is talking to our sales consultants and actually personally talking to some of our buyers, they go through a fairly elaborate and it's maybe an elongated sales cycle, but they go through a long process of really thinking about, "Hey, do I want the 321, do I want a permanent buy down? How do I feel about where rates are going to be in the future? Importantly, can I qualify at the fully indexed rate. So a temporary buydown is really the focus, and I want to save the cash or am I more interested in the permanent?"
And I think seeing different programs and different offerings from different lenders, and each lender knows that other lenders are also talking to that buyer, it's interesting. It isn't as simple as, hey, we have an X percent rate on this home for that price. It is more dynamic than that. But what ends up happening as a result is I think we get customers feeling a little bit more comfortable that they're not getting jammed and they're not missing something. It's not like, oh, there was an obvious trick to the whole thing that we didn't understand because they're getting that transparency across multiple lenders.
I can tell you that more of our buyers opt for permanent buy-downs than temporary buy-downs a larger share due. But I can also tell you that in that October time period as rates pushed up 2 and through 8, we actually saw that start to move more towards the temporary buy-downs from which I can surmise that buyers had a more higher degree of confidence that this is a little bit of a -- if not a top, it's a high watermark or a higher watermark and there's a higher probability. I'm going to be able to refinance this rate. And so the temporary makes more sense than the permanent buy-down.
But I mean that's kind of the type of thing I can tell you, getting into specific rates. I mean, for sure, I mean, we can -- we've got rate sheets from all of vendors and we can talk about what a quarter point on a permanent buy-down relates to. But then what's the credit characteristic of that buyer, what's the loan to value, there's just too many variables to get into it at that granular level.
I will just tell you, I'm so happy every day to know that every one of our buyers is seeing multiple proposals and they go back and forth. "hey, show me your 321s. " All right, show me your 1 by 3. Show me your 1 by 2s, Show me what your permanent would be. Well, hey, I got a better permanent over here. Can you match this permanent? That dynamic is awesome in an environment like this.
Next, we'll go to the line of Alex Rygiel from B. Riley.
Your ASPs have been trending right around this 510 level. I appreciate the thoughts about the first quarter. But as we look beyond that, is there any thoughts or commentary that you can add to directionally where that ASP could go a little bit further out based upon the new communities that you're bringing on and whether or not there could be a mix shift there?
Alex, it's Dave. I don't really want to go beyond 2024 and the kind of initial conversation that we've had on that. But I remind you, in the prepared remarks, we talked about kind of a full year ASP. And frankly, that's down from where it is right now, around $500,000. Really, a lot of that is kind of choices we're making, right? It's what we're offering, it's community choice, it's product choice. It's included features. So it's not saying assumption as you would imagine, on price declines or lower prices, but rather choices we're making to address affordability and still keep value high for the buyer.
That's very helpful. And then you talked about in the past some certain geographies that maybe you had an interest in accelerating growth in I think Florida might have been one of the states. Can you give us a little bit of an update there?
Sure. First of all, we love our footprint. We can grow in every single market that we're in. I don't think people love it when I say dumb taxes, but I say it anyway. We paid them in a number of places. And so now it's the point to benefit from the learnings that we've had along the way. And there's no question. We want to be where the jobs are. jobs are in Florida, jobs are in Atlanta, jobs are in the Carolina's, jobs are in Nashville, jobs are in Indie. I mean, those are places that we see great growth opportunities.
And then, of course, the West has been very good to us. Phoenix is obviously a little bit more challenging. It's a tough land market. There are water issues. I don't think that's going to be a big growth engine. I do think our business will become a bit bigger there. But I think the larger amount of growth for us is going to be in Texas, our recently acquired San Antonio business will play a big role in that, Florida, up the East Coast.
[Operator Instructions] And currently, our last question in queue is from Jay McCanless from Wedbush.
So when I look at the fiscal '24 guidance on Page 14, it looks like the adjusted gross margin range, all are thinking it's going to be down anywhere from 50 to 110 basis points versus what you put up in fiscal '23. I guess, could you talk about, one, what type of mortgage rate assumptions are built into that? And then maybe two, is that a function of some of the discounting and price cuts that we're seeing from some of your competitors right now?
So a few things going on there, Jay, and I think Dave and I both have things to say. The first thing is it assumes -- and Dave's comments made this point, we assume that rates are roughly in the range where they are now, call it, 0.25% point, 0.38% of a point either way. We don't assume that they're following. We don't assume that they're going to be sustainably over 8%. So that's kind of the framing for how we thought about our full year guidance.
If you think about the margin, it's actually got less to do with discounting and it has more to do with mix shift. I think either Dave or I said in our comments, we opened 60 communities in 2023. We're going to open a bunch of communities in '24. So the mix of communities that we have generating closings in '24 is going to be tilted to a very young vintage. And it's been our experience, and I think you can channel check this across the industry.
You're typically not getting your highest gross margins out of the community in the first 3, 6, 9 months. So I think that's a significant factor in the margin guide. It does reflect a little bit of the increase that we've had since June in the financing cost, but it's not like we've leaned into that and assume that, that gets worse. It's more kind of a normal or normalized at the current level of mortgage rate and it's a mix issue are really driven by that mix of new communities.
And I have to say, I'm really excited to have a bunch of new communities that were tied up, renegotiated, brought to the market in a much different interest rate environment than when they were originally envisioned, able to generate margins that are above our 10-year average. Like that's a pretty good place to be.
Absolutely. I guess the second question I had, the homes that you're selling now that will need to get finished or even just a straight up to be built. I guess what's the range of delivery times that you're giving out now? And I know you said cycle times are down 2 months in the fourth quarter, I guess, from what you're selling now, where do those cycle times compared to where they were pre-COVID?
We're still probably 30 days wide of the pre-COVID, and I'd like to get about half of that back this year. I don't know that we'll get it all back because I think there's some structural delays built into the municipal processes. They haven't staffed back up. The flip side is there's not a lot of multifamily or commercial start activity.
So I think on the trade side, number of crews, quality of crews, I think that's where the opportunity is. But targeting to get back at least a couple of weeks this year.
And our final question in queue comes from Alex Barron from Housing Research Center.
Yes, I wanted to ask about the DTA and expected tax rate. Maybe Dave, do you still expect it will take a few more years before you completely use this up? In other words, I'm trying to figure out if the tax rate is going to stay low for another 2, 3 years before it resets back up.
Alex, good question. We do have a slide in the presentation in the appendix that kind of go over GAAP tax expectations and cash tax payments for some detail. But I would tell you yes, we think we're going to be using our tax benefits for '24, '25 and potentially into '26. And then what you'll see as you get into we'll start to use the tax benefits that we're generating for energy efficiency tax credits as we're closing the home. So it will be much more simultaneous like most builders.
So yes, I think we'll have a lower tax rate. We talked about the midpoint of the 15% to 20% range in '24. And quite frankly, I think from a statutory perspective on an ongoing basis, we'll be below kind of normal factory levels because we're generating tax credits and using them in '26 kind of real time.
Got it. And then I was hoping you could comment on thoughts around share buybacks given your stock is still trading below 1x book. .
Absolutely, Jay. I would tell you, and we've kind of talked about this before, we're confident in our balanced growth strategy and the ability to generate sufficient liquidity to really support our growth aspirations and continue to delever our balance sheet. As it relates to share repurchase, I would tell you, share repurchases are clearly an attractive use of capital depending on share price. But right now, our highest priority is clearly growth and debt repurchasing.
And currently, I'm showing no other questions in queue.
Okay. I want to thank everybody for joining us on our fiscal fourth quarter call, and look forward to talking to everybody in 3 months on our first quarter call. Thank you very much for your time this evening. .
Thank you all for participating in today's conference. You may disconnect your line, and enjoy the rest of your day.