Beazer Homes Reports Strong First Quarter Fiscal 2021 Results

January 28, 2021 4:15 PM EST

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ATLANTA--(BUSINESS WIRE)-- Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the three months ended December 31, 2020.

“We finished the first quarter of our fiscal year with very strong operational and financial results,” said Allan P. Merrill, the company’s Chairman and Chief Executive Officer. “We generated a significantly higher sales pace relative to the same quarter last year, more than offsetting a temporary reduction in our community count. At the same time, we increased the number of lots we own or control as we position for enhanced growth in the coming years. On the financial side, profitability expanded meaningfully with notable improvements in both gross margin and overhead cost efficiency leading to higher Adjusted EBITDA and Net Income.”

Commenting on Fiscal 2021 full year expectations, Mr. Merrill said, “With the strong results we generated in the first quarter, a healthy demand environment and a dollar value of backlog of sold homes up nearly 60% compared to this time last year, we have confidence that we will generate substantial growth in book value while continuing to reduce leverage.”

Looking beyond Fiscal 2021, Mr. Merrill concluded, “Our pivot to growth this year, supported by our differentiated and comprehensive ESG program, has positioned us to create durable and growing value for our customers, employees, partners and shareholders in the years ahead.”

Beazer Homes Fiscal First Quarter 2021 Highlights and Comparison to Fiscal First Quarter 2020

  • Net income from continuing operations of $12.0 million, compared to net income from continuing operations of $2.8 million in fiscal first quarter 2020
  • Adjusted EBITDA of $43.6 million, up 48.5%
  • Homebuilding revenue of $424.2 million, up 1.6% on a 1.4% increase in average selling price to $380.8 thousand and a 0.2% increase in home closings to 1,114
  • Homebuilding gross margin was 17.6%, up 250 basis points. Excluding impairments, abandonments and amortized interest, homebuilding gross margin was 22.1%, up 230 basis points
  • SG&A as a percentage of total revenue was 12.7%, down 60 basis points year-over-year
  • Net new orders of 1,442, up 15.3% on a 42.4% increase in orders/community/month to 3.5 and a 19.0% decrease in average community count to 136
  • Dollar value of backlog of $1,162.4 million, up 58.8%
  • Unrestricted cash at quarter end was $244.6 million; total liquidity was $494.6 million

The following provides additional details on the Company's performance during the fiscal first quarter 2021:

Profitability. Net income from continuing operations was $12.0 million, generating diluted earnings per share of $0.40. First quarter adjusted EBITDA of $43.6 million was up $14.2 million year-over-year. The increase in profitability was primarily driven by higher homebuilding gross margin and improved SG&A leverage.

Orders. Net new orders for the first quarter increased to 1,442, up 15.3% from the prior year, achieving the highest first quarter level in more than a decade. The increase in net new orders was driven by a 42.4% increase in the absorption rate to 3.5 sales per community per month, up from 2.5 in the previous year, partially offset by a 19.0% decrease in average community count to 136. The cancellation rate for the quarter was 12.3%, down 260 basis points year-over-year.

Backlog. The dollar value of homes in backlog as of December 31, 2020 increased 58.8% to $1,162.4 million, representing 2,837 homes, compared to $732.1 million, representing 1,847 homes, at the same time last year. The average selling price of homes in backlog was $409.7 thousand, up 3.4% year-over-year.

Homebuilding Revenue. First quarter homebuilding revenue was $424.2 million, up 1.6% year-over-year. The increase in homebuilding revenue was driven by a 1.4% increase in the average selling price to $380.8 thousand and a 0.2% increase in home closings to 1,114 homes.

Homebuilding Gross Margin. Homebuilding gross margin (excluding impairments, abandonments and amortized interest) was 22.1% for the first quarter, up 230 basis points year-over-year, driven primarily by lower sales incentives and pricing increases. Gross margin was up across each of our geographic segments.

SG&A Expenses. Selling, general and administrative expenses as a percentage of total revenue was 12.7% for the quarter, down 60 basis points year-over-year as a result of our continued focus on overhead cost management.

Liquidity. At the close of the first quarter, the Company had approximately $494.6 million of available liquidity, including $244.6 million of unrestricted cash and $250.0 million remaining capacity on its secured revolving credit facility.

Commitment to Net Zero Energy Ready

During the quarter, we took an important step forward in our leadership position around energy efficiency. In December, we became the first national builder to publicly commit to ensuring every home we build is Net Zero Energy Ready by the end of 2025. We calculate the energy performance of our homes using the industry standard Home Energy Rating System (HERS), which measures energy efficiency on an easy to understand scale: the lower the number, the more energy efficient the home. Net Zero Energy Ready means that every home we build will have a gross HERS index score (before any benefit of renewable energy production) of 45 or less, and homeowners will be able to achieve net zero energy by attaching a properly sized renewable energy system. Reaching our Net Zero Energy Ready target represents a significant improvement in energy efficiency and will lead to a reduction in greenhouse gas emissions.

Summary results for the three months ended December 31, 2020 are as follows:

 

Three Months Ended December 31,

 

2020

 

2019

 

Change*

New home orders, net of cancellations

1,442

 

 

1,251

 

 

15.3

%

Orders per community per month

3.5

 

 

2.5

 

 

42.4

%

Average active community count

136

 

 

168

 

 

(19.0)

%

Actual community count at quarter-end

134

 

 

166

 

 

(19.3)

%

Cancellation rates

12.3

%

 

14.9

%

 

-260 bps

 

 

 

 

 

 

Total home closings

1,114

 

 

1,112

 

 

0.2

%

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

$

380.8

 

 

$

375.4

 

 

1.4

%

Homebuilding revenue (in millions)

$

424.2

 

 

$

417.4

 

 

1.6

%

Homebuilding gross margin

17.6

%

 

15.1

%

 

250 bps

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

17.8

%

 

15.1

%

 

270 bps

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

22.1

%

 

19.8

%

 

230 bps

 

 

 

 

 

 

Income from continuing operations before income taxes (in millions)

$

16.2

 

 

$

2.6

 

 

$

13.6

 

Expense (benefit) from income taxes (in millions)

$

4.1

 

 

$

(0.2)

 

 

$

4.3

 

Income from continuing operations (in millions)

$

12.0

 

 

$

2.8

 

 

$

9.2

 

Basic income per share from continuing operations

$

0.40

 

 

$

0.09

 

 

$

0.31

 

Diluted income per share from continuing operations

$

0.40

 

 

$

0.09

 

 

$

0.31

 

 

 

 

 

 

 

Income from continuing operations before income taxes (in millions)

$

16.2

 

 

$

2.6

 

 

$

13.6

 

Inventory impairments and abandonments (in millions)

$

(0.5)

 

 

$

 

 

$

(0.5)

 

Income from continuing operations excluding inventory impairments and

abandonments before income taxes (in millions)

$

16.7

 

 

$

2.6

 

 

$

14.1

 

Income from continuing operations excluding inventory impairments and

abandonments after income taxes (in millions)+

$

12.6

 

 

$

2.8

 

 

$

9.8

 

 

 

 

 

 

 

Net income

$

12.0

 

 

$

2.7

 

 

$

9.3

 

 

 

 

 

 

 

Land and land development spending (in millions)

$

109.6

 

 

$

146.0

 

 

$

(36.3)

 

 

 

 

 

 

 

Adjusted EBITDA (in millions)

$

43.6

 

 

$

29.4

 

 

$

14.2

 

LTM Adjusted EBITDA (in millions)

$

218.6

 

 

$

182.7

 

 

$

35.9

 

* Change and totals are calculated using unrounded numbers.

+ For the three months ended December 31, 2020, inventory impairments and abandonments were tax-effected at the effective tax rate of 24.7%. For the three months ended December 31, 2019, there were no inventory impairments and abandonments.

"LTM" indicates amounts for the trailing 12 months.

 

 

 

As of December 31,

 

 

2020

 

2019

 

Change

Backlog units

 

2,837

 

 

1,847

 

 

53.6

%

Dollar value of backlog (in millions)

 

$

1,162.4

 

 

$

732.1

 

 

58.8

%

ASP in backlog (in thousands)

 

$

409.7

 

 

$

396.4

 

 

3.4

%

Land and lots controlled

 

18,801

 

 

19,742

 

 

(4.8)

%

Conference Call

The Company will hold a conference call on January 28, 2021 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 (for international callers, dial 517-308-9429). 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 5, 2021 at 800-879-6115 (for international callers, dial 402-220-4742) 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, which will save 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 a potential deterioration in homebuilding industry conditions; (ii) economic changes nationally or in local markets, changes in consumer confidence, wage levels, declines in employment levels, inflation or increases in the quantity and decreases in the price of new homes and resale homes on the market; (iii) the potential negative impact 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 contract abandonments; (iv) shortages of or increased prices for labor, land or raw materials used in housing production, and the level of quality and craftsmanship provided by our subcontractors; (v) 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; (vi) factors affecting margins, such as 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 production and overhead cost structure; (vii) 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; (viii) market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital); (ix) terrorist acts, protests and civil unrest, political uncertainty, natural disasters, acts of war or other factors over which the Company has little or no control; (x) estimates related to homes to be delivered in the future (backlog) are imprecise, as they are subject to various cancellation risks that cannot be fully controlled; (xi) increases in mortgage interest rates, increased disruption in the availability of mortgage financing, changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes or an increased number of foreclosures; (xii) increased competition or delays in reacting to changing consumer preferences in home design; (xiii) 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; (xiv) the potential recoverability of our deferred tax assets; (xv) 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; (xvi) the results of litigation or government proceedings and fulfillment of any related obligations; (xvii) the impact of construction defect and home warranty claims; (xviii) the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred; (xix) the impact of information technology failures, cybersecurity issues or data security breaches; or (xx) the impact on homebuilding in key markets of governmental regulations limiting the availability of water.

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)

2020

 

2019

Total revenue

$

428,539

 

 

$

417,804

 

Home construction and land sales expenses

352,781

 

 

354,667

 

Inventory impairments and abandonments

465

 

 

 

Gross profit

75,293

 

 

63,137

 

Commissions

16,507

 

 

16,065

 

General and administrative expenses

37,976

 

 

39,699

 

Depreciation and amortization

3,122

 

 

3,427

 

Operating income

17,688

 

 

3,946

 

Equity in loss of unconsolidated entities

(75)

 

 

(13)

 

Other expense, net

(1,452)

 

 

(1,340)

 

Income from continuing operations before income taxes

16,161

 

 

2,593

 

Expense (benefit) from income taxes

4,125

 

 

(211)

 

Income from continuing operations

12,036

 

 

2,804

 

Loss from discontinued operations, net of tax

(39)

 

 

(58)

 

Net income

$

11,997

 

 

$

2,746

 

Weighted average number of shares:

 

 

 

Basic

29,771

 

 

29,746

 

Diluted

30,086

 

 

30,138

 

 

 

 

 

Basic income (loss) per share:

 

 

 

Continuing operations

$

0.40

 

 

$

0.09

 

Discontinued operations

 

 

 

Total

$

0.40

 

 

$

0.09

 

Diluted income (loss) per share:

 

 

 

Continuing operations

$

0.40

 

 

$

0.09

 

Discontinued operations

 

 

 

Total

$

0.40

 

 

$

0.09

 

 

Three Months Ended

 

December 31,

Capitalized Interest in Inventory

2020

 

2019

Capitalized interest in inventory, beginning of period

$

119,659

 

 

$

136,565

 

Interest incurred

19,902

 

 

21,556

 

Interest expense not qualified for capitalization and included as other expense

(1,600)

 

 

(1,442)

 

Capitalized interest amortized to home construction and land sales expenses

(18,813)

 

 

(19,669)

 

Capitalized interest in inventory, end of period

$

119,148

 

 

$

137,010

 

 

 

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

in thousands (except share and per share data)

December 31, 2020

 

September 30, 2020

ASSETS

 

 

 

Cash and cash equivalents

$

244,628

 

 

$

327,693

 

Restricted cash

17,420

 

 

14,835

 

Accounts receivable (net of allowance of $348 and $358, respectively)

18,599

 

 

19,817

 

Income tax receivable

9,203

 

 

9,252

 

Owned inventory

1,413,990

 

 

1,350,738

 

Investments in unconsolidated entities

3,928

 

 

4,003

 

Deferred tax assets, net

221,168

 

 

225,143

 

Property and equipment, net

22,111

 

 

22,280

 

Operating lease right-of-use assets

13,592

 

 

13,103

 

Goodwill

11,376

 

 

11,376

 

Other assets

8,459

 

 

9,240

 

Total assets

$

1,984,474

 

 

$

2,007,480

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Trade accounts payable

$

120,863

 

 

$

132,192

 

Operating lease liabilities

15,560

 

 

15,333

 

Other liabilities

110,264

 

 

135,983

 

Total debt (net of debt issuance costs of $10,483 and $10,891, respectively)

1,131,725

 

 

1,130,801

 

Total liabilities

1,378,412

 

 

1,414,309

 

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, 31,253,816

issued and outstanding and 31,012,326 issued and outstanding, respectively)

31

 

 

31

 

Paid-in capital

857,360

 

 

856,466

 

Accumulated deficit

(251,329)

 

 

(263,326)

 

Total stockholders’ equity

606,062

 

 

593,171

 

Total liabilities and stockholders’ equity

$

1,984,474

 

 

$

2,007,480

 

 

 

 

 

Inventory Breakdown

 

 

 

Homes under construction

$

625,296

 

 

$

525,021

 

Development projects in progress

563,285

 

 

589,763

 

Land held for future development

23,068

 

 

28,531

 

Land held for sale

10,045

 

 

12,622

 

Capitalized interest

119,148

 

 

119,659

 

Model homes

73,148

 

 

75,142

 

Total owned inventory

$

1,413,990

 

 

$

1,350,738

 

 

 

BEAZER HOMES USA, INC.

CONSOLIDATED OPERATING AND FINANCIAL DATA – CONTINUING OPERATIONS

 

 

Three Months Ended December 31,

SELECTED OPERATING DATA

2020

 

2019

Closings:

 

 

 

West region

642

 

 

694

 

East region

223

 

 

192

 

Southeast region

249

 

 

226

 

Total closings

1,114

 

 

1,112

 

 

 

 

 

New orders, net of cancellations:

 

 

 

West region

782

 

 

737

 

East region

320

 

 

233

 

Southeast region

340

 

 

281

 

Total new orders, net

1,442

 

 

1,251

 

 

 

As of December 31,

Backlog units at end of period:

 

2020

 

2019

West region

 

1,505

 

 

1,025

 

East region

 

721

 

 

382

 

Southeast region

 

611

 

 

440

 

Total backlog units

 

2,837

 

 

1,847

 

Dollar value of backlog at end of period (in millions)

 

$

1,162.4

 

 

$

732.1

 

 

in thousands

Three Months Ended December 31,

SUPPLEMENTAL FINANCIAL DATA

2020

 

2019

Homebuilding revenue:

 

 

 

West region

$

232,940

 

 

$

254,398

 

East region

97,964

 

 

77,645

 

Southeast region

93,325

 

 

85,356

 

Total homebuilding revenue

$

424,229

 

 

$

417,399

 

 

 

 

 

Revenue:

 

 

 

Homebuilding

$

424,229

 

 

$

417,399

 

Land sales and other

4,310

 

 

405

 

Total revenue

$

428,539

 

 

$

417,804

 

 

 

 

 

Gross profit:

 

 

 

Homebuilding

$

74,837

 

 

$

63,108

 

Land sales and other

456

 

 

29

 

Total gross profit

$

75,293

 

 

$

63,137

 

Reconciliation of homebuilding gross profit and the related gross margin before 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.

 

Three Months Ended December 31,

in thousands

2020

 

2019

Homebuilding gross profit/margin

$

74,837

 

17.6

%

 

$

63,108

 

15.1

%

Inventory impairments and abandonments (I&A)

465

 

 

 

 

 

Homebuilding gross profit/margin before I&A

75,302

 

17.8

%

 

63,108

 

15.1

%

Interest amortized to cost of sales

18,560

 

 

 

19,669

 

 

Homebuilding gross profit/margin before I&A and interest amortized to cost

of sales

$

93,862

 

22.1

%

 

$

82,777

 

19.8

%

Reconciliation of Adjusted EBITDA to total company net income (loss), 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 (loss) determined in accordance with GAAP as an indicator of operating performance.

The reconciliation of Adjusted EBITDA to total company net income (loss) below differs from prior year, as it reclassifies stock-based compensation expense from an adjustment within EBITDA to an adjustment within Adjusted EBITDA in order to accurately present EBITDA per its definition.

 

Three Months Ended December

31,

 

LTM Ended

in thousands

2020

 

2019

 

2020

 

2019

Net income (loss)

$

11,997

 

 

$

2,746

 

 

$

61,477

 

 

$

(84,085)

 

Expense (benefit) from income taxes

4,114

 

 

(228)

 

 

22,006

 

 

(33,549)

 

Interest amortized to home construction and land sales expenses

and capitalized interest impaired

18,813

 

 

19,669

 

 

94,806

 

 

111,172

 

Interest expense not qualified for capitalization

1,600

 

 

1,442

 

 

8,626

 

 

4,309

 

EBIT

36,524

 

 

23,629

 

 

186,915

 

 

(2,153)

 

Depreciation and amortization

3,122

 

 

3,427

 

 

15,335

 

 

15,416

 

EBITDA

39,646

 

 

27,056

 

 

202,250

 

 

13,263

 

Stock-based compensation expense

3,511

 

 

2,311

 

 

11,236

 

 

10,723

 

Loss on extinguishment of debt

 

 

 

 

 

 

24,920

 

Inventory impairments and abandonments (b)

465

 

 

 

 

2,576

 

 

133,819

 

Restructuring and severance expenses

(10)

 

 

 

 

1,307

 

 

 

Litigation settlement in discontinued operations

 

 

 

 

1,260

 

 

 

Adjusted EBITDA

$

43,612

 

 

$

29,367

 

 

$

218,629

 

 

$

182,725

 

(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.”

Beazer Homes USA, Inc.
David I. Goldberg
Sr. Vice President & Chief Financial Officer
770-829-3700
investor.relations@beazer.com

Source: Beazer Homes USA, Inc.



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