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Beazer Homes Reports First Quarter Fiscal 2023 Results

Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the three months ended December 31, 2022.

“Despite a challenging new home sales environment, we generated strong first quarter financial results,” said Allan P. Merrill, the company’s Chairman and Chief Executive Officer. “Year-over-year increases in home prices, healthy gross margins and careful management of overhead costs led to $24 million of net income, $47 million in Adjusted EBITDA and $0.80 of earnings per share.”

Commenting on current market conditions, Mr. Merrill said, “The environment for new home sales was extraordinarily challenging early in the first quarter as 30-year mortgage rates moved above 7%, worsening an already difficult affordability equation for most home buyers. Toward the end of the quarter, as mortgage rates fell modestly, we experienced improved online and in-person visits, which led to a meaningful acceleration in our new home orders in January. We will continue to make necessary adjustments to home pricing, incentives and included features to remain competitive, while pursuing our efforts to reduce cycle times and construction costs.”

Looking further out, Mr. Merrill concluded, “We remain confident in the multi-year growth of our business and the underlying strength of the new home industry. The gap between the structural demand for homes and the likely supply of homes - which has given rise to a multimillion home deficit over the past decade - remains in place. With a seasoned operating team, an ample supply of lots and a more efficient and less leveraged balance sheet, we remain confident that we will be able to create durable value for our stakeholders in the years ahead.”

Beazer Homes Fiscal First Quarter 2023 Highlights and Comparison to Fiscal First Quarter 2022

  • Net income from continuing operations of $24.4 million, or $0.80 per diluted share, compared to net income from continuing operations of $34.9 million, or $1.14 per diluted share, in fiscal first quarter 2022
  • Adjusted EBITDA of $47.1 million, down 22.9%
  • Homebuilding revenue of $444.1 million, down 0.6% on a 18.3% decrease in home closings to 833, partially offset by a 21.6% increase in average selling price to $533.1 thousand
  • Homebuilding gross margin was 19.2%, down 170 basis points. Excluding impairments, abandonments and amortized interest, homebuilding gross margin was 22.3%, down 190 basis points
  • SG&A as a percentage of total revenue was 12.3%, up 50 basis points
  • Net new orders of 482, down 57.8% on a 60.1% decrease in orders/community/month to 1.3, partially offset by a 5.8% increase in average community count to 121
  • Backlog dollar value of $940.9 million, down 33.0% on a 40.2% decrease in backlog units to 1,740, partially offset by a 11.9% increase in average selling price of homes in backlog to $540.8 thousand
  • Controlled lots of 24,735, up 7.3% from 23,049
  • Land acquisition and land development spending was $114.7 million, down 12.2% from $130.7 million
  • Unrestricted cash at quarter end was $120.7 million; total liquidity was $385.7 million

The following provides additional details on the Company's performance during the fiscal first quarter 2023:

Profitability. Net income from continuing operations was $24.4 million, generating diluted earnings per share of $0.80. This included the impact of energy efficiency tax credits of $3.0 million or $0.10 per share compared to $3.2 million of such credits or $0.10 per share in the prior year quarter. First quarter adjusted EBITDA of $47.1 million was down $14.0 million, or 22.9%, primarily due to lower gross margin.

Orders. Net new orders for the first quarter decreased to 482, down 57.8% from 1,141 in the prior year period. The decrease in net new orders was driven by a 60.1% decrease in sales pace to 1.3 orders per community per month, down from 3.3 in the prior year period. The cancellation rate for the quarter was 37.1%, up from 11.8% in the previous year, reflecting the weakening in housing demand as a result of elevated mortgage rates. Our cancellations as a percentage of fiscal 2023 first quarter beginning backlog was 13.6%.

Backlog. The dollar value of homes in backlog as of December 31, 2022 was $940.9 million, representing 1,740 homes, compared to $1.4 billion, representing 2,908 homes, at the same time last year. The average selling price of homes in backlog was $540.8 thousand, up 11.9% versus the previous year.

Homebuilding Revenue. First quarter homebuilding revenue was $444.1 million, relatively flat year-over-year on a 21.6% increase in the average selling price to $533.1 thousand, which was more than offset by an 18.3% decrease in home closings to 833 homes.

Homebuilding Gross Margin. Homebuilding gross margin (excluding impairments, abandonments and amortized interest) was 22.3% for the first quarter, down 190 basis points year-over-year. The reduction in gross margin reflected an increase in price concessions as demand weakened.

SG&A Expenses. Selling, general and administrative expenses as a percentage of total revenue was 12.3% for the quarter, up 50 basis points year-over-year primarily due to decreases in closings and revenue, while SG&A on an absolute dollar basis increased by $1.2 million, or 2.2%, year-over-year.

Land Position. Controlled lots increased 7.3% to 24,735, compared to 23,049 from the prior year. Excluding land held for future development and land held for sale lots, active lots controlled were 23,962, up 6.8% year-over-year. Compared to prior fiscal quarter, active controlled lots were down 435 lots, or 1.8%, as the Company continued to re-underwrite and re-negotiate land deals to reflect the current environment. As of December 31, 2022, the Company controlled 54.4% of its total active lots through option contracts compared to 54.6% a quarter ago and 49.2% a year ago. For the current fiscal quarter, land acquisition and land development spending was $114.7 million, down 12.2% year-over-year and down 24.0% sequentially from the prior fiscal quarter.

Liquidity. At the close of the first quarter, the Company had $385.7 million of available liquidity, including $120.7 million of unrestricted cash and $265.0 million of remaining capacity under the unsecured revolving credit facility.

Senior Unsecured Revolving Credit Facility. On October 13, 2022, the Company entered into a senior unsecured revolving credit facility with committed borrowing capacity of $265.0 million, which replaced a $250.0 million secured revolving credit facility.

Summary results for the three months ended December 31, 2022 are as follows:

 

 

Three Months Ended December 31,

 

2022

 

2021

 

Change*

New home orders, net of cancellations

 

482

 

 

 

1,141

 

 

(57.8

) %

Orders per community per month

 

1.3

 

 

 

3.3

 

 

(60.1

) %

Average active community count

 

121

 

 

 

114

 

 

5.8

%

Actual community count at quarter-end

 

119

 

 

 

116

 

 

2.6

%

Cancellation rates

 

37.1

%

 

 

11.8

%

 

2,530 bps

 

 

 

 

 

 

Total home closings

 

833

 

 

 

1,019

 

 

(18.3

) %

Average selling price (ASP) from closings (in thousands)

$

533.1

 

 

$

438.4

 

 

21.6

%

Homebuilding revenue (in millions)

$

444.1

 

 

$

446.7

 

 

(0.6

) %

Homebuilding gross margin

 

19.2

%

 

 

20.9

%

 

-170 bps

Homebuilding gross margin, excluding impairments and abandonments (I&A)

 

19.2

%

 

 

20.9

%

 

-170 bps

Homebuilding gross margin, excluding I&A and interest amortized to cost of sales

 

22.3

%

 

 

24.2

%

 

-190 bps

 

 

 

 

 

 

Income from continuing operations before income taxes (in millions)

$

28.6

 

 

$

41.4

 

 

(30.9

) %

Expense from income taxes (in millions)

$

4.2

 

 

$

6.5

 

 

(35.7

) %

Income from continuing operations, net of tax (in millions)

$

24.4

 

 

$

34.9

 

 

(30.1

) %

Basic income per share from continuing operations

$

0.81

 

 

$

1.15

 

 

(29.6

) %

Diluted income per share from continuing operations

$

0.80

 

 

$

1.14

 

 

(29.8

) %

 

 

 

 

 

 

Net income (in millions)

$

24.3

 

 

$

34.9

 

 

(30.3

) %

 

 

 

 

 

 

Land acquisition and land development spending (in millions)

$

114.7

 

 

$

130.7

 

 

(12.2

) %

 

 

 

 

 

 

Adjusted EBITDA (in millions)

$

47.1

 

 

$

61.1

 

 

(22.9

) %

LTM Adjusted EBITDA (in millions)

$

356.1

 

 

$

280.2

 

 

27.1

%

* Change and totals are calculated using unrounded numbers.

"LTM" indicates amounts for the trailing 12 months.

 

 

As of December 31,

 

2022

 

2021

 

Change

Backlog units

 

1,740

 

 

2,908

 

(40.2

) %

Dollar value of backlog (in millions)

$

940.9

 

$

1,405.2

 

(33.0

) %

ASP in backlog (in thousands)

$

540.8

 

$

483.2

 

11.9

%

Land and lots controlled

 

24,735

 

 

23,049

 

7.3

%

 

Conference Call

The Company will hold a conference call on February 2, 2023 at 5:00 p.m. ET to discuss these results. Interested parties may listen to the conference call and view the Company's slide presentation on the "Investor Relations" page of the Company's website, www.beazer.com. In addition, the conference call will be available by telephone at 800-475-0542. To be admitted to the call, enter the pass code “8571348". A replay of the conference call will be available, until 10:00 PM ET on February 9, 2023 at 800-876-4058 (for international callers, dial 203-369-3575) with pass code “3740.”

About Beazer Homes

Headquartered in Atlanta, Beazer Homes (NYSE: BZH) is one of the country’s largest homebuilders. Every Beazer home is designed and built to provide Surprising Performance, giving you more quality and more comfort from the moment you move in – saving you money every month. With Beazer's Choice Plans™, you can personalize your primary living areas – giving you a choice of how you want to live in the home, at no additional cost. And unlike most national homebuilders, we empower our customers to shop and compare loan options. Our Mortgage Choice program gives you the resources to easily compare multiple loan offers and choose the best lender and loan offer for you, saving you thousands over the life of your loan.

We build our homes in Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas, and Virginia. For more information, visit beazer.com, or check out Beazer on Facebook, Instagram and Twitter.

This press release contains forward-looking statements. These forward-looking statements represent our expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things: (i) the cyclical nature of the homebuilding industry and further deterioration in homebuilding industry conditions; (ii) continued increases in mortgage interest rates and reduced availability of mortgage financing due to, among other factors, recent and likely continued actions by the Federal Reserve to address sharp increases in inflation; (iii) other economic changes nationally and in local markets, including changes in consumer confidence, wage levels, declines in employment levels, and an increase in the number of foreclosures, each of which is outside our control and affects the affordability of, and demand for, the homes we sell; (iv) continued supply chain challenges negatively impacting our homebuilding production, including shortages of raw materials and other critical components such as windows, doors, and appliances; (v) continued shortages of or increased costs for labor used in housing production, and the level of quality and craftsmanship provided by such labor; (vi) inaccurate estimates related to homes to be delivered in the future (backlog), as they are subject to various cancellation risks that cannot be fully controlled; (vii) potential negative impacts of the COVID-19 pandemic, which, in addition to exacerbating each of the risks listed above and below, may include a significant decrease in demand for our homes or consumer confidence generally with respect to purchasing a home, an inability to sell and build homes in a typical manner or at all, increased costs or decreased supply of building materials, including lumber, or the availability of subcontractors, housing inspectors, and other third-parties we rely on to support our operations, and recognizing charges in future periods, which may be material, for goodwill impairments, inventory impairments and/or land option agreement abandonments; (viii) factors affecting margins, such as adjustments to home pricing, increased sales incentives and mortgage rate buy down programs in order to remain competitive; decreased revenues; decreased land values underlying land option agreements; increased land development costs in communities under development or delays or difficulties in implementing initiatives to reduce our cycle times and production and overhead cost structures; not being able to pass on cost increases (including cost increases due to increasing the energy efficiency of our homes) through pricing increases; (ix) the availability and cost of land and the risks associated with the future value of our inventory, such as asset impairment charges we took on select California assets during the second quarter of fiscal 2019; (x) our ability to raise debt and/or equity capital, due to factors such as limitations in the capital markets (including market volatility) or adverse credit market conditions, and our ability to otherwise meet our ongoing liquidity needs (which could cause us to fail to meet the terms of our covenants and other requirements under our various debt instruments and therefore trigger an acceleration of a significant portion or all of our outstanding debt obligations), including the impact of any downgrades of our credit ratings or reduction in our liquidity levels; (xi) market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital); (xii) changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes; (xiii) increased competition or delays in reacting to changing consumer preferences in home design; (xiv) natural disasters or other related events that could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas; (xv) the potential recoverability of our deferred tax assets; (xvi) increases in corporate tax rates; (xvii) potential delays or increased costs in obtaining necessary permits as a result of changes to, or complying with, laws, regulations or governmental policies, and possible penalties for failure to comply with such laws, regulations or governmental policies, including those related to the environment; (xviii) the results of litigation or government proceedings and fulfillment of any related obligations; (xix) the impact of construction defect and home warranty claims; (xx) the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred; (xxi) the impact of information technology failures, cybersecurity issues or data security breaches; (xxii) the impact of governmental regulations on homebuilding in key markets, such as regulations limiting the availability of water and electricity (including availability of electrical equipment such as transformers and meters); (xxiii) the success of our ESG initiatives, including our ability to meet our goal by 2025 that every home we build will be Net Zero Energy Ready, as well as the success of any other related partnerships or pilot programs we may enter into in order to increase the energy efficiency of our homes and prepare for a Net Zero future; and (xxiv) terrorist acts, protests and civil unrest, political uncertainty, acts of war or other factors over which the Company has no control.

Any forward-looking statement, including any statement expressing confidence regarding future outcomes, speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible to predict all such factors.

-Tables Follow-

 

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

Three Months Ended

 

December 31,

in thousands (except per share data)

2022

 

2021

Total revenue

$

444,928

 

 

$

454,149

 

Home construction and land sales expenses

 

358,970

 

 

 

356,749

 

Inventory impairments and abandonments

 

190

 

 

 

 

Gross profit

 

85,768

 

 

 

97,400

 

Commissions

 

14,105

 

 

 

15,813

 

General and administrative expenses

 

40,648

 

 

 

37,767

 

Depreciation and amortization

 

2,513

 

 

 

2,881

 

Operating income

 

28,502

 

 

 

40,939

 

Loss on extinguishment of debt, net

 

(515

)

 

 

 

Other income, net

 

576

 

 

 

419

 

Income from continuing operations before income taxes

 

28,563

 

 

 

41,358

 

Expense from income taxes

 

4,155

 

 

 

6,463

 

Income from continuing operations

 

24,408

 

 

 

34,895

 

Loss from discontinued operations, net of tax

 

(77

)

 

 

(10

)

Net income

$

24,331

 

 

$

34,885

 

Weighted-average number of shares:

 

 

 

Basic

 

30,219

 

 

 

30,336

 

Diluted

 

30,480

 

 

 

30,724

 

 

 

 

 

Basic income per share:

 

 

 

Continuing operations

$

0.81

 

 

$

1.15

 

Discontinued operations

 

 

 

 

 

Total

$

0.81

 

 

$

1.15

 

Diluted income per share:

 

 

 

Continuing operations

$

0.80

 

 

$

1.14

 

Discontinued operations

 

 

 

 

 

Total

$

0.80

 

 

$

1.14

 

 

Three Months Ended

 

December 31,

Capitalized Interest in Inventory

2022

 

2021

Capitalized interest in inventory, beginning of period

$

109,088

 

 

$

106,985

 

Interest incurred

 

17,830

 

 

 

18,311

 

Interest expense not qualified for capitalization and included as other expense

 

 

 

 

 

Capitalized interest amortized to home construction and land sales expenses

 

(13,775

)

 

 

(14,780

)

Capitalized interest in inventory, end of period

$

113,143

 

 

$

110,516

 

 

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

in thousands (except share and per share data)

December 31, 2022

 

September 30, 2022

ASSETS

 

 

 

Cash and cash equivalents

$

120,746

 

$

214,594

Restricted cash

 

35,899

 

 

37,234

Accounts receivable (net of allowance of $284 and $284, respectively)

 

24,866

 

 

35,890

Income tax receivable

 

9,597

 

 

9,606

Owned inventory

 

1,779,223

 

 

1,737,865

Deferred tax assets, net

 

152,769

 

 

156,358

Property and equipment, net

 

23,990

 

 

24,566

Operating lease right-of-use assets

 

8,914

 

 

9,795

Goodwill

 

11,376

 

 

11,376

Other assets

 

19,005

 

 

14,679

Total assets

$

2,186,385

 

$

2,251,963

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Trade accounts payable

$

106,824

 

$

143,641

Operating lease liabilities

 

10,187

 

 

11,208

Other liabilities

 

122,444

 

 

174,388

Total debt (net of debt issuance costs of $6,907 and $7,280, respectively)

 

984,330

 

 

983,440

Total liabilities

 

1,223,785

 

 

1,312,677

Stockholders’ equity:

 

 

 

Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, no shares issued)

 

 

 

Common stock (par value $0.001 per share, 63,000,000 shares authorized, 31,347,439 issued and outstanding and 30,880,138 issued and outstanding, respectively)

 

31

 

 

31

Paid-in capital

 

858,839

 

 

859,856

Retained earnings

 

103,730

 

 

79,399

Total stockholders’ equity

 

962,600

 

 

939,286

Total liabilities and stockholders’ equity

$

2,186,385

 

$

2,251,963

 

 

 

 

Inventory Breakdown

 

 

 

Homes under construction

$

759,545

 

$

785,742

Land under development

 

782,628

 

 

731,190

Land held for future development

 

19,879

 

 

19,879

Land held for sale

 

18,583

 

 

15,674

Capitalized interest

 

113,143

 

 

109,088

Model homes

 

85,445

 

 

76,292

Total owned inventory

$

1,779,223

 

$

1,737,865

 

BEAZER HOMES USA, INC.

CONSOLIDATED OPERATING AND FINANCIAL DATA – CONTINUING OPERATIONS

 

Three Months Ended December 31,

SELECTED OPERATING DATA

2022

 

2021

Closings:

 

 

 

West region

510

 

603

East region

155

 

245

Southeast region

168

 

171

Total closings

833

 

1,019

 

 

 

 

New orders, net of cancellations:

 

 

 

West region

248

 

655

East region

120

 

236

Southeast region

114

 

250

Total new orders, net

482

 

1,141

 

As of December 31,

Backlog units:

2022

 

2021

West region

 

995

 

 

1,705

East region

 

375

 

 

602

Southeast region

 

370

 

 

601

Total backlog units

 

1,740

 

 

2,908

Aggregate dollar value of homes in backlog (in millions)

$

940.9

 

$

1,405.2

ASP in backlog (in thousands)

$

540.8

 

$

483.2

in thousands

Three Months Ended December 31,

SUPPLEMENTAL FINANCIAL DATA

2022

 

2021

Homebuilding revenue:

 

 

 

West region

$

274,322

 

$

256,492

East region

 

86,031

 

 

114,287

Southeast region

 

83,731

 

 

75,950

Total homebuilding revenue

$

444,084

 

$

446,729

 

 

 

 

Revenue:

 

 

 

Homebuilding

$

444,084

 

$

446,729

Land sales and other

 

844

 

 

7,420

Total revenue

$

444,928

 

$

454,149

 

 

 

 

Gross profit:

 

 

 

Homebuilding

$

85,114

 

$

93,304

Land sales and other

 

654

 

 

4,096

Total gross profit

$

85,768

 

$

97,400

 

Reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and level of debt. These measures should not be considered alternative to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance.

 

 

Three Months Ended December 31,

in thousands

2022

 

2021

Homebuilding gross profit/margin

$

85,114

19.2

%

 

$

93,304

20.9

%

Inventory impairments and abandonments (I&A)

 

190

 

 

 

 

Homebuilding gross profit/margin excluding I&A

 

85,304

19.2

%

 

 

93,304

20.9

%

Interest amortized to cost of sales

 

13,775

 

 

 

14,780

 

Homebuilding gross profit/margin excluding I&A and interest amortized to cost of sales

$

99,079

22.3

%

 

$

108,084

24.2

%

 

Reconciliation of Adjusted EBITDA to total company net income, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, tax position, and level of impairments. These EBITDA measures should not be considered alternatives to net income determined in accordance with GAAP as an indicator of operating performance.

 

 

Three Months Ended December 31,

LTM Ended December 31, (a)

in thousands

2022

 

2021

2022

 

2021

Net income

$

24,331

 

$

34,885

$

210,150

 

$

144,909

Expense from income taxes

 

4,133

 

 

6,460

 

50,940

 

 

23,847

Interest amortized to home construction and land sales expenses and capitalized interest impaired

 

13,775

 

 

14,780

 

71,053

 

 

83,257

Interest expense not qualified for capitalization

 

 

 

 

 

 

1,181

EBIT

 

42,239

 

 

56,125

 

332,143

 

 

253,194

Depreciation and amortization

 

2,513

 

 

2,881

 

12,992

 

 

13,735

EBITDA

 

44,752

 

 

59,006

 

345,135

 

 

266,929

Stock-based compensation expense

 

1,580

 

 

2,108

 

7,950

 

 

10,764

Loss on extinguishment of debt

 

515

 

 

 

206

 

 

2,025

Inventory impairments and abandonments(b)

 

190

 

 

 

2,714

 

 

388

Severance expenses

 

111

 

 

 

111

 

 

Litigation settlement in discontinued operations

 

 

 

 

 

 

120

Adjusted EBITDA

$

47,148

 

$

61,114

$

356,116

 

$

280,226

 

(a) "LTM" indicates amounts for the trailing 12 months.

(b) In periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the line above titled "Interest amortized to home construction and land sales expenses and capitalized interest impaired."

 

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