Beazer Homes USA(BZH) - 2024 Q3 - Quarterly Results

Press Release Summary Overview of Q3 FY2024 performance, featuring CEO commentary and key financial highlights CEO Commentary The CEO highlighted healthy results, strategic progress in lot control and Zero Energy Ready homes, and an optimistic outlook despite market challenges - Despite challenges, the company generated $53.5 million in Adjusted EBITDA and $0.88 EPS, and repurchased approximately 450,000 shares[1] - Strategic progress includes a significant increase in the controlled lot position, primarily through options, enhancing visibility for community count growth[1] - Over 90% of quarterly starts met the Zero Energy Ready standard, with the company becoming the largest certifier of such homes under the DOE's national program[1] Third Quarter Fiscal 2024 Highlights Third-quarter fiscal 2024 saw homebuilding revenue increase by 3.3% to $589.6 million, despite declines in net income and Adjusted EBITDA due to a 290 basis point drop in gross margin Q3 FY2024 Key Financial Metrics vs. Q3 FY2023 | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Income from Continuing Operations | $27.2 million | $43.8 million | -37.9% | | Diluted EPS | $0.88 | $1.42 | -38.0% | | Adjusted EBITDA | $53.5 million | $72.8 million | -26.5% | | Homebuilding Revenue | $589.6 million | $570.5 million | +3.3% | | Home Closings | 1,167 | 1,117 | +4.5% | | Average Selling Price (ASP) | $505.3 thousand | $510.8 thousand | -1.1% | | Homebuilding Gross Margin | 17.3% | 20.2% | -290 bps | | Net New Orders | 1,070 | 1,200 | -10.8% | | Backlog Dollar Value | $1.05 billion | $1.01 billion | +3.6% | - The company repurchased $12.9 million of its common stock and increased land acquisition and development spending by 52.7% to $201.1 million[1] Detailed Financial and Operational Performance (Q3 FY2024) Detailed Q3 FY2024 financial and operational performance, covering profitability, orders, revenue, and capital management Profitability Third-quarter profitability declined year-over-year, with net income from continuing operations at $27.2 million, or $0.88 per diluted share, primarily due to a lower operating margin Q3 FY2024 Profitability vs. Q3 FY2023 | Metric | Q3 FY2024 | Q3 FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Income from Continuing Operations | $27.2 million | $43.8 million | -37.9% | | Diluted EPS | $0.88 | $1.42 | -38.0% | | Adjusted EBITDA | $53.5 million | $72.8 million | -26.5% | Orders and Backlog Net new orders for Q3 decreased by 10.8% to 1,070, as a 17.2% increase in average community count was offset by a 23.9% decrease in sales pace - Net new orders fell to 1,070 from 1,200 in the prior year, with the sales pace dropping to 2.4 from 3.2 orders per community per month[2] - The cancellation rate increased to 18.6% from 16.1% in Q3 2023[2] - Backlog dollar value stood at $1.05 billion (1,949 homes) with an ASP of $536.9 thousand, up from $1.01 billion (1,941 homes) with an ASP of $520.3 thousand a year ago[2][18] Homebuilding Revenue and Gross Margin Homebuilding revenue increased 3.3% to $589.6 million, driven by a 4.5% rise in home closings, though gross margin declined by 310 basis points to 20.3% - Homebuilding revenue rose to $589.6 million, driven by 1,167 home closings, up 4.5% year-over-year[3] - Homebuilding gross margin, excluding impairments, abandonments, and amortized interest, decreased to 20.3% from 23.4% year-over-year[3] - The margin decline was caused by a higher share of speculative home closings, changes in product/community mix, and an increase in closing cost incentives[3] SG&A Expenses Selling, general, and administrative (SG&A) expenses as a percentage of total revenue increased by 40 basis points year-over-year to 11.9%, primarily due to higher commissions and marketing costs - SG&A as a percentage of total revenue was 11.9%, up 40 basis points from the prior year[4] - The increase was driven by higher commissions and sales and marketing costs for new community activations[4] Land Position and Investment The company significantly increased its investment in future growth, with land acquisition and development spending rising 52.7% year-over-year to $201.1 million - Land acquisition and development spending was $201.1 million, a 52.7% increase year-over-year[4] - Total controlled lots grew 24.9% to 28,365, with 55.5% controlled via option agreements, up from 52.2% a year ago[4] Capital Management and Liquidity During the quarter, the company repurchased $12.9 million of its common stock, with total available liquidity at quarter-end standing at $328.2 million - Repurchased $12.9 million of common stock at an average price of $28.41 per share[4] - Total liquidity at quarter-end was $328.2 million, consisting of $73.2 million in unrestricted cash and $255.0 million in credit facility capacity[5] Debt Ratios | Ratio | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Total debt to total capitalization | 47.6% | 48.4% | | Net debt to net capitalization | 45.8% | 40.3% | Corporate Developments Recent corporate developments, including management and board changes, and ongoing ESG commitments Management and Board Changes The company announced key leadership changes, promoting Michael Dunn to Senior Vice President, General Counsel, and Corporate Secretary, and appointing John J. Kelley III to the Board of Directors - Michael Dunn was appointed SVP, General Counsel, and Corporate Secretary, succeeding Keith L. Belknap, who is retiring[5][6] - John J. Kelley III, Chief Legal Officer of Equifax Inc., was appointed to the Board of Directors[7][8] Commitment to ESG Initiatives Beazer Homes reaffirmed its commitment to ESG, highlighting its industry-first pledge to make every new home start Zero Energy Ready by the end of 2025 - The company is on track for its goal that by the end of 2025, every new home started will be Zero Energy Ready, with 93% of new home starts in Q3 meeting this standard[9] - Beazer Homes has certified more homes to the DOE's Single Family National Program requirements than any other home builder[9] - Key achievements from the 2023 Sustainability Report include being an 8-time EPA ENERGY STAR Partner of the Year, achieving 100% Indoor airPLUS qualification, completing its first GHG inventory, and receiving a 95% customer recommendation rating[10] Financial Statements and Supplemental Data Detailed financial statements and supplemental data, including summary tables, balance sheets, regional data, and non-GAAP adjustments Summary Financial Data Tables (Q3 & 9M FY2024) This section provides detailed comparative financial and operational data for the three and nine months ended June 30, 2024, versus the same periods in 2023 Q3 FY2024 vs Q3 FY2023 Summary | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | New home orders, net | 1,070 | 1,200 | -10.8% | | Total home closings | 1,167 | 1,117 | +4.5% | | Homebuilding revenue | $589.6 million | $570.5 million | +3.3% | | Homebuilding gross margin | 17.3% | 20.2% | -290 bps | | Diluted EPS from cont. ops | $0.88 | $1.42 | -38.0% | | Adjusted EBITDA | $53.5 million | $72.8 million | -26.5% | Nine Months FY2024 vs FY2023 Summary | Metric | 9M 2024 | 9M 2023 | Change | | :--- | :--- | :--- | :--- | | New home orders, net | 3,192 | 2,863 | +11.5% | | Total home closings | 2,954 | 3,013 | -2.0% | | Homebuilding revenue | $1,509.2 million | $1,556.6 million | -3.0% | | Homebuilding gross margin | 18.5% | 19.4% | -90 bps | | Diluted EPS from cont. ops | $2.84 | $3.36 | -15.5% | | Adjusted EBITDA | $150.3 million | $182.1 million | -17.5% | Condensed Consolidated Statements of Operations The statement of operations shows a total revenue of $595.7 million for Q3 2024, a slight increase from $572.5 million in Q3 2023, though net income decreased to $27.2 million Statement of Operations Highlights (in thousands) | Account | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $595,682 | $572,544 | $1,524,040 | $1,561,380 | | Gross profit | $103,304 | $116,744 | $282,887 | $305,408 | | Operating income | $28,524 | $47,900 | $84,780 | $115,194 | | Net income | $27,210 | $43,817 | $88,109 | $102,855 | Condensed Consolidated Balance Sheets As of June 30, 2024, the company's balance sheet shows total assets of $2.59 billion, an increase from $2.41 billion at September 30, 2023, driven by a significant increase in owned inventory Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $73,212 | $345,590 | | Owned inventory | $2,171,924 | $1,756,203 | | Total assets | $2,594,546 | $2,411,033 | | Total debt | $1,069,408 | $978,028 | | Total liabilities | $1,416,231 | $1,308,214 | | Total stockholders' equity | $1,178,315 | $1,102,819 | Selected Operating and Financial Data by Region Regional data for Q3 2024 shows the West region as the primary driver of performance, with the highest number of net new orders and closings, while the Southeast saw declines Q3 2024 Net New Orders by Region | Region | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | West | 715 | 705 | | East | 250 | 251 | | Southeast | 105 | 244 | | Total | 1,070 | 1,200 | Q3 2024 Closings by Region | Region | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | West | 728 | 634 | | East | 240 | 253 | | Southeast | 199 | 230 | | Total | 1,167 | 1,117 | Backlog Units by Region (as of June 30) | Region | 2024 | 2023 | | :--- | :--- | :--- | | West | 1,292 | 1,066 | | East | 417 | 433 | | Southeast | 240 | 442 | | Total | 1,949 | 1,941 | Reconciliation of Non-GAAP Financial Measures This section provides reconciliations of non-GAAP financial measures to their most comparable GAAP counterparts, including adjustments for homebuilding gross margin, EBIT, EBITDA, Adjusted EBITDA, and net debt to net capitalization Reconciliation of Homebuilding Gross Margin (Q3) (in thousands) | (in thousands) | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Homebuilding gross profit (GAAP) | $101,983 (17.3%) | $115,493 (20.2%) | | Homebuilding gross profit excluding I&A and interest (Non-GAAP) | $119,450 (20.3%) | $133,312 (23.4%) | Reconciliation of Net Income to Adjusted EBITDA (Q3) (in thousands) | (in thousands) | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net income (GAAP) | $27,210 | $43,817 | | Adjusted EBITDA (Non-GAAP) | $53,496 | $72,791 | Reconciliation of Debt to Capitalization Ratio | (as of June 30) | 2024 | 2023 | | :--- | :--- | :--- | | Total debt to total capitalization ratio (GAAP) | 47.6% | 48.4% | | Net debt to net capitalization ratio (Non-GAAP) | 45.8% | 40.3% |