Beazer Homes USA(BZH) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Beazer Homes USA, Inc. for the periods ended June 30, 2025, and September 30, 2024 Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed notes Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show total assets increased to $2.71 billion as of June 30, 2025, from $2.59 billion, driven by owned inventory | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :-------------------------------- | | Cash and cash equivalents | $82,932 | $203,907 | | Owned inventory | $2,292,063 | $2,040,640 | | Total assets | $2,712,324 | $2,591,527 | | Total debt | $1,143,173 | $1,025,349 | | Total liabilities | $1,495,293 | $1,359,416 | | Total stockholders' equity | $1,217,031 | $1,232,111 | Condensed Consolidated Statements of Operations The statements of operations show a net loss for Q3 fiscal 2025 due to decreased revenue, increased inventory impairments, and higher expenses | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $545,367 | $595,682 | $1,579,659 | $1,524,040 | | Gross profit | $72,580 | $103,304 | $230,656 | $282,887 | | Operating (loss) income | $(3,710) | $28,524 | $11,797 | $84,780 | | Net (loss) income | $(324) | $27,210 | $15,584 | $88,109 | | Basic (loss) income per share | $(0.01) | $0.89 | $0.52 | $2.88 | - Inventory impairments and abandonments significantly increased to $10.3 million for the three months ended June 30, 2025, from $0.2 million in the prior year quarter, contributing to the operating loss[11] Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $1.217 billion as of June 30, 2025, from $1.232 billion, primarily due to share repurchases | Metric (in thousands) | Nine Months Ended June 30, 2025 | | :-------------------- | :------------------------------ | | Balance as of September 30, 2024 | $1,232,111 | | Net income | $15,584 | | Share repurchases | $(33,077) | | Balance as of June 30, 2025 | $1,217,031 | - The company repurchased 1.491 million shares for $33.076 million during the nine months ended June 30, 2025[13] Condensed Consolidated Statements of Cash Flows Net cash decreased for the nine months ended June 30, 2025, primarily from operating and investing activities, partially offset by financing | Cash Flow Activity (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(218,196) | $(322,981) | | Net cash used in investing activities | $(12,656) | $(23,875) | | Net cash provided by financing activities | $78,664 | $69,003 | | Net decrease in cash, cash equivalents, and restricted cash | $(152,188) | $(277,853) | | Cash, cash equivalents, and restricted cash at end of period | $90,422 | $108,436 | Notes to Condensed Consolidated Financial Statements These notes provide detailed disclosures on the company's business, accounting policies, inventory, debt, leases, contingencies, and other financial information (1) Description of Business Beazer Homes USA, Inc. is a geographically diversified homebuilder operating in 13 states, focusing on value-driven homes and strategic differentiators - Beazer Homes operates in 13 states across three geographic regions: West, East, and Southeast[18] - The company's strategic differentiators include Mortgage Choice, Choice Plans, and Surprising Performance, aiming to maximize investment returns[19] (2) Basis of Presentation and Summary of Significant Accounting Policies Financial statements are unaudited and prepared under GAAP, with revenue recognized upon home transfer, and new pronouncements are being evaluated - The company's fiscal year 2025 began on October 1, 2024, and ends on September 30, 2025[22] | Revenue Stream (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Homebuilding revenue | $535,390 | $589,643 | $1,551,844 | $1,509,198 | | Land sales and other revenue | $9,977 | $6,039 | $27,815 | $14,842 | | Total revenue | $545,367 | $595,682 | $1,579,659 | $1,524,040 | - New accounting pronouncements (ASU 2023-07, 2023-09, 2024-03) will impact segment reporting, income tax disclosures, and income statement expense disaggregation, with effective dates ranging from fiscal year 2025 to 2028[30][31][32] Share Repurchase Program A new $100.0 million share repurchase program was approved in April 2025, with $87.5 million remaining capacity as of June 30, 2025 - A new share repurchase program for up to $100.0 million was approved in April 2025, replacing a prior $50.0 million program[24] | Period | Shares Repurchased (in thousands) | Value (in millions) | Average Price Per Share | | :----- | :-------------------------------- | :------------------ | :---------------------- | | 3 months ended June 30, 2025 | 586 | $12.5 | $21.38 | | 9 months ended June 30, 2025 | 1,500 | $33.1 | $22.20 | | 3 months ended June 30, 2024 | 455 | $12.9 | $28.41 | - As of June 30, 2025, $87.5 million remained available under the share repurchase program[25] (3) Supplemental Cash Flow Information Supplemental cash flow information details non-cash and cash activities, including interest payments of $67.6 million and income tax payments of $9.9 million | Metric (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Increase in operating lease right-of-use assets | $1,493 | $4,114 | | Increase in operating lease liabilities | $1,493 | $4,114 | | Interest payments | $67,645 | $60,715 | | Income tax payments | $9,930 | $10,321 | | Total cash, cash equivalents, and restricted cash at end of period | $90,422 | $108,436 | (4) Owned Inventory Owned inventory increased to $2.29 billion as of June 30, 2025, with $10.9 million in impairment and abandonment charges for the nine months | Inventory Component (in thousands) | June 30, 2025 | September 30, 2024 | | :--------------------------------- | :------------ | :----------------- | | Homes under construction | $914,261 | $754,705 | | Land under development | $1,073,661 | $1,023,188 | | Capitalized interest | $137,759 | $124,182 | | Total owned inventory | $2,292,063 | $2,040,640 | - As of June 30, 2025, the company had 2,539 homes under construction, including 1,376 speculative homes totaling $490.5 million[34] | Impairment/Abandonment Charges (in thousands) | Three Months Ended June 30, 2025 | Nine Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------ | :------------------------------- | :------------------------------ | | Projects in Progress | $8,642 | $8,642 | $0 | $0 | | Land Held for Sale | $1,466 | $1,466 | $0 | $0 | | Abandonments | $231 | $759 | $200 | $200 | | Total | $10,339 | $10,867 | $200 | $200 | (5) Interest Capitalized interest in inventory increased to $137.8 million as of June 30, 2025, with $64.2 million in interest incurred for the nine months | Interest Metric (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :----------------------------- | :------------------------------ | :------------------------------ | | Capitalized interest in inventory, beginning of period | $124,182 | $112,580 | | Interest incurred | $64,219 | $58,510 | | Capitalized interest impaired | $(1,096) | $0 | | Capitalized interest in inventory, end of period | $137,759 | $126,562 | (6) Borrowings Total debt, net, increased to $1.14 billion as of June 30, 2025, primarily due to increased borrowings under the Senior Unsecured Revolving Credit Facility | Debt Type (in thousands) | June 30, 2025 | September 30, 2024 | | :----------------------- | :------------ | :----------------- | | Total Senior Notes, net | $950,219 | $948,945 | | Junior Subordinated Notes | $77,954 | $76,404 | | Senior Unsecured Revolving Credit Facility | $115,000 | $0 | | Total debt, net | $1,143,173 | $1,025,349 | - The available borrowing capacity under the Senior Unsecured Revolving Credit Facility was increased from $300.0 million to $365.0 million on January 28, 2025[56] - As of June 30, 2025, the company had $115.0 million in borrowings and $40.6 million in letters of credit outstanding under the Unsecured Facility, with a remaining capacity of $209.4 million[58] (7) Operating Leases Operating lease expense for the nine months ended June 30, 2025, was $3.5 million, with a weighted-average remaining lease term of 6.2 years | Lease Metric (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | | Operating lease expense | $3,481 | $3,207 | | Cash payments on lease liabilities | $3,435 | $3,393 | | Lease Term/Rate | June 30, 2025 | June 30, 2024 | | :---------------- | :------------ | :------------ | | Weighted-average remaining lease term | 6.2 years | 6.7 years | | Weighted-average discount rate | 6.43% | 6.26% | (8) Contingencies Warranty reserves decreased to $10.9 million, while litigation accruals increased to $9.8 million, with $330.2 million in surety bonds outstanding | Warranty Reserve (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------ | :------------------------------ | :------------------------------ | | Balance at beginning of period | $12,717 | $13,046 | | Warranty provision | $4,766 | $6,499 | | Warranty expenditures | $(6,570) | $(7,710) | | Balance at end of period | $10,913 | $11,835 | - Litigation accruals were $9.8 million as of June 30, 2025, up from $9.3 million as of September 30, 2024[77] - Outstanding letters of credit and surety bonds totaled $41.0 million and $330.2 million, respectively, as of June 30, 2025, primarily for obligations to local governments[78] (9) Fair Value Measurements The company measures assets and liabilities at fair value using a hierarchy, with deferred compensation at Level 1 and Senior Notes at Level 2 | Asset/Liability (in thousands) | Fair Value Hierarchy Level | June 30, 2025 Carrying Amount | June 30, 2025 Fair Value | | :----------------------------- | :------------------------- | :---------------------------- | :----------------------- | | Deferred compensation plan assets | Level 1 | $8,288 | $8,288 | | Senior Notes | Level 2 | $950,219 | $964,995 | | Junior Subordinated Notes | Level 3 | $77,954 | $77,954 | (10) Income Taxes The company recognized an income tax benefit of $0.8 million for the nine months ended June 30, 2025, driven by energy efficiency tax credits - Income tax benefit from continuing operations was $0.8 million for the nine months ended June 30, 2025, compared to an expense of $10.4 million in the prior year[83] - The benefit was driven by energy efficiency tax credits and stock-based compensation activity[83] - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, repeals energy efficiency tax credits for homes closing after June 30, 2026, which the company is evaluating for future financial impact[106][159] (11) Stock-Based Compensation Stock-based compensation expense was $5.4 million for the nine months ended June 30, 2025, with $10.3 million in unrecognized costs remaining | Stock-Based Compensation (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------ | :------------------------------ | | Stock-based compensation expense | $5,442 | $5,536 | | Restricted Stock Activity (shares) | Nine Months Ended June 30, 2025 | | :--------------------------------- | :------------------------------ | | Beginning of period | 719,499 | | Granted | 285,789 | | Vested | (295,928) | | Forfeited | (32,189) | | End of period | 677,171 | - Total unrecognized compensation costs related to unvested restricted stock awards were $10.3 million as of June 30, 2025, to be recognized over a weighted average period of 1.9 years[88] (12) Earnings Per Share Basic and diluted loss per share from continuing operations was $(0.01) for the three months ended June 30, 2025, a significant decrease from $0.89 | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Basic (loss) income per share (Continuing operations) | $(0.01) | $0.89 | $0.52 | $2.88 | | Diluted (loss) income per share (Continuing operations) | $(0.01) | $0.88 | $0.52 | $2.84 | - All common stock equivalents were excluded from diluted loss per share computation for the three months ended June 30, 2025, due to their anti-dilutive effect resulting from the reported net loss[90] (13) Other Liabilities Total other liabilities remained stable at $148.8 million as of June 30, 2025, including accrued compensations, customer deposits, and warranty reserves | Other Liabilities (in thousands) | June 30, 2025 | September 30, 2024 | | :------------------------------- | :------------ | :----------------- | | Accrued compensations and benefits | $32,344 | $45,335 | | Customer deposits | $20,730 | $18,669 | | Accrued interest | $16,562 | $23,369 | | Warranty reserves | $10,913 | $12,717 | | Litigation accruals | $9,844 | $9,297 | | Other | $58,425 | $38,114 | | Total | $148,818 | $149,900 | (14) Segment Information Total revenue decreased for the three months ended June 30, 2025, with operating income declining across all segments, and the Southeast reporting a loss | Revenue by Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | West | $329,149 | $369,359 | $1,001,921 | $953,790 | | East | $149,160 | $123,565 | $379,898 | $310,186 | | Southeast | $67,058 | $102,758 | $197,840 | $260,064 | | Total revenue | $545,367 | $595,682 | $1,579,659 | $1,524,040 | | Operating (Loss) Income by Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | West | $27,402 | $45,582 | $94,291 | $119,951 | | East | $14,473 | $9,158 | $28,702 | $27,796 | | Southeast | $(2,561) | $12,755 | $3,797 | $32,848 | | Corporate and unallocated | $(43,024) | $(38,971) | $(114,993) | $(95,815) | | Total operating (loss) income | $(3,710) | $28,524 | $11,797 | $84,780 | | Capital Expenditures by Segment (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--------------------------------------------- | :------------------------------ | :------------------------------ | | West | $7,627 | $9,132 | | East | $2,274 | $1,829 | | Southeast | $3,753 | $756 | | Corporate and unallocated | $7,373 | $4,974 | | Total capital expenditures | $21,027 | $16,691 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an executive overview of market conditions, strategic responses, and a detailed analysis of the company's financial performance and liquidity Executive Overview and Outlook The sales environment remained challenging in Q3 fiscal 2025 due to high mortgage rates, with the company focusing on disciplined land spend and share repurchases - The sales environment in Q3 fiscal 2025 was challenging due to elevated mortgage rates, weak consumer sentiment, and macroeconomic uncertainties[101] - The company repurchased approximately 586,000 shares for $12.5 million during Q3 fiscal 2025[101] - Multi-Year Goals (updated Q2 fiscal 2025) include reducing net debt to net capitalization to the low 30% range by end of fiscal 2027, achieving double-digit compound annual growth in book value per share from fiscal 2024 through fiscal 2027, and reaching over 200 active communities by end of fiscal 2027[102] Overview of Results for Our Fiscal Third Quarter Q3 fiscal 2025 saw a 14.9% increase in active community count but a 19.5% decrease in net new orders and a decline in homebuilding gross margin | Metric | Q3 Fiscal 2025 | Q3 Fiscal 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Average active community count | 167 | 146 | 14.9% | | Net new orders | 861 | 1,070 | (19.5)% | | Orders per community per month | 1.7 | 2.4 | (30.0)% | | ASP for homes closed (in thousands) | $517.3 | $505.3 | 2.4% | | Homebuilding gross margin | 13.5% | 17.3% | (380 bps) | | SG&A as % of total revenue | 13.2% | 11.9% | 130 bps | - Land acquisition and development investment decreased to $153.8 million in Q3 fiscal 2025 from $201.1 million in Q3 fiscal 2024[103] - Homebuilding gross margin, excluding impairments, abandonments, and interest, was 18.4% in Q3 fiscal 2025, down from 20.3% in Q3 fiscal 2024, primarily due to increased price concessions, closing cost incentives, and higher share of spec home closings[105] Seasonal and Quarterly Variability Homebuilding operations typically show escalating new order activity in Q2 and Q3 and increased closings in Q3 and Q4, but market volatility can impact these patterns - Homebuilding operating cycle historically reflects escalating new order activity in Q2 and Q3, and increased closings in Q3 and Q4[104] - Seasonal patterns can be impacted by market volatility and changes in mortgage interest rates, affecting new orders and closings[104] RESULTS OF CONTINUING OPERATIONS This section details financial performance from continuing operations, highlighting decreased total revenue, gross profit, and operating income for the three and nine months ended June 30, 2025 Revenue, Gross Profit, Gross Margin Total revenue decreased by 8.4% to $545.4 million for the three months ended June 30, 2025, with homebuilding gross margin falling to 13.5% | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $545,367 | $595,682 | $1,579,659 | $1,524,040 | | Total gross profit | $72,580 | $103,304 | $230,656 | $282,887 | | Homebuilding gross margin | 13.5% | 17.3% | 14.6% | 18.5% | | SG&A as % of total revenue | 13.2% | 11.9% | 13.0% | 12.4% | - Homebuilding gross margin, excluding impairments, abandonments, and interest, was 18.4% for the three months ended June 30, 2025, down from 20.3% in the prior year quarter[106] Reconciliation of Net (Loss) Income (GAAP) to Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased to $32.1 million for the three months ended June 30, 2025, from $53.5 million, reflecting lower net income and increased impairments | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net (loss) income (GAAP) | $(324) | $27,210 | $15,584 | $88,109 | | Adjusted EBITDA (Non-GAAP) | $32,099 | $53,496 | $93,956 | $150,290 | - Adjusted EBITDA is used to understand core operating results by eliminating differences in capitalization, tax position, impairments, and non-recurring items[107] Reconciliation of Total Debt to Total Capitalization Ratio (GAAP) to Net Debt to Net Capitalization Ratio (Non-GAAP) The net debt to net capitalization ratio increased to 46.6% as of June 30, 2025, from 45.8% a year prior, indicating a slight increase in leverage | Metric (in thousands) | As of June 30, 2025 | As of June 30, 2024 | | :-------------------- | :------------------ | :------------------ | | Total debt (GAAP) | $1,143,173 | $1,069,408 | | Total capitalization (GAAP) | $2,360,204 | $2,247,723 | | Total debt to total capitalization ratio (GAAP) | 48.4% | 47.6% | | Net debt (Non-GAAP) | $1,060,241 | $996,196 | | Net capitalization (Non-GAAP) | $2,277,272 | $2,174,511 | | Net debt to net capitalization ratio (Non-GAAP) | 46.6% | 45.8% | Homebuilding Operations Data Net new orders decreased by 19.5% for the three months ended June 30, 2025, to 861, driven by a 30.0% decrease in sales pace | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Net New Orders | 861 | 1,070 | (19.5)% | | Cancellation Rates | 19.8% | 18.6% | 1.2 ppt | | Backlog Units | 1,352 | 1,949 | (30.6)% | | Aggregate dollar value of homes in backlog (in millions) | $742.5 | $1,046.5 | (29.0)% | | ASP in backlog (in thousands) | $549.2 | $536.9 | 2.3% | - The decrease in net new orders was primarily due to a 30.0% decrease in sales pace (from 2.4 to 1.7 orders per community per month), partially offset by a 14.9% increase in average active community count[111] - The West segment experienced the largest decline in net new orders (32.6%) and sales pace (37.4%) for the three months ended June 30, 2025[113] Homebuilding Revenue, Average Selling Price, and Closings Homebuilding revenue decreased by 9.2% to $535.4 million for the three months ended June 30, 2025, due to an 11.3% decrease in closings | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Homebuilding Revenue | $535,390 | $589,643 | $1,551,844 | $1,509,198 | | Average Selling Price | $517.3 | $505.3 | $513.7 | $510.9 | | Closings | 1,035 | 1,167 | 3,021 | 2,954 | - The East segment saw a 20.1% increase in homebuilding revenue for the three months ended June 30, 2025, driven by a 12.6% increase in ASP and 6.7% increase in closings[122] - The Southeast segment experienced a 34.8% decrease in homebuilding revenue for the three months ended June 30, 2025, due to a 33.7% decrease in closings[123] Homebuilding Gross Profit and Gross Margin Homebuilding gross profit decreased by $29.5 million to $72.5 million for the three months ended June 30, 2025, with gross margin falling to 13.5% | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Homebuilding Gross Profit (GAAP) | $72,474 | $101,983 | $226,581 | $278,700 | | Homebuilding Gross Margin (GAAP) | 13.5% | 17.3% | 14.6% | 18.5% | | Homebuilding Gross Profit excluding I&A and Interest (Non-GAAP) | $98,730 | $119,450 | $284,501 | $323,428 | | Homebuilding Gross Margin excluding I&A and Interest (Non-GAAP) | 18.4% | 20.3% | 18.3% | 21.4% | - The decrease in gross margin (excluding impairments and interest) for the three months ended June 30, 2025, was due to increased price concessions, closing cost incentives, higher spec home closings, and changes in product/community mix[132] - The East segment's homebuilding gross margin (excluding impairments) increased to 17.8% from 16.3% in the prior year quarter, driven by higher margin communities[134] Land Sales and Other Revenue and Gross Profit Land sales and other revenue increased to $10.0 million for the three months ended June 30, 2025, but gross profit decreased due to a $1.5 million impairment charge | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Land Sales and Other Revenue | $9,977 | $6,039 | $27,815 | $14,842 | | Land Sales and Other Gross Profit | $106 | $1,321 | $4,075 | $4,187 | - A $1.5 million land held for sale impairment charge was recognized during the three and nine months ended June 30, 2025, due to a strategic decision to sell a portion of lots in the Phoenix market[143] Operating (Loss) Income Operating income resulted in a loss of $3.7 million for the three months ended June 30, 2025, primarily due to lower gross profit and increased impairments | Operating (Loss) Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | West | $27,402 | $45,582 | $94,291 | $119,951 | | East | $14,473 | $9,158 | $28,702 | $27,796 | | Southeast | $(2,561) | $12,755 | $3,797 | $32,848 | | Corporate and unallocated | $(43,024) | $(38,971) | $(114,993) | $(95,815) | | Total Operating (loss) income | $(3,710) | $28,524 | $11,797 | $84,780 | - The $32.2 million decrease in operating income for the three months ended June 30, 2025, was primarily due to decreased gross profit and $10.3 million in inventory impairments and abandonments[146] - Corporate and unallocated net expenses increased by $4.1 million for the three months and $19.2 million for the nine months, driven by higher G&A, depreciation, amortization, and impairment of capitalized interest/indirect costs[151][155] Income Taxes The company recorded an income tax benefit of $2.2 million for the three months and $0.8 million for the nine months ended June 30, 2025, primarily due to tax credits - Income tax benefit from continuing operations was $2.2 million for the three months and $0.8 million for the nine months ended June 30, 2025[158] - The benefit was primarily driven by energy efficiency tax credits and stock-based compensation activity[158] - The One Big Beautiful Bill Act (OBBBA) will repeal energy efficiency tax credits for homes closing after June 30, 2026, which may impact future tax provisions[159] Liquidity and Capital Resources The company's liquidity sources include cash from operations, Senior Notes, and its Senior Unsecured Revolving Credit Facility, with $82.9 million in cash and $209.4 million remaining credit capacity Net Changes in Cash Flows For the nine months ended June 30, 2025, the company experienced a net decrease in cash, cash equivalents, and restricted cash of $152.2 million | Cash Flow Activity (in thousands) | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(218,196) | $(322,981) | | Net cash used in investing activities | $(12,656) | $(23,875) | | Net cash provided by financing activities | $78,664 | $69,003 | | Net decrease in cash, cash equivalents, and restricted cash | $(152,188) | $(277,853) | Operating Activities Net cash used in operating activities was $218.2 million for the nine months ended June 30, 2025, primarily due to a $258.9 million increase in inventory - Net cash used in operating activities was $218.2 million for the nine months ended June 30, 2025[162] - Primary drivers included a $258.9 million increase in inventory and a $3.5 million increase in non-inventory working capital balances[162] Investing Activities Net cash used in investing activities was $12.7 million for the nine months ended June 30, 2025, mainly for capital expenditures and investment securities purchases - Net cash used in investing activities was $12.7 million for the nine months ended June 30, 2025[164] - This was primarily driven by capital expenditures and purchases of investment securities, offset by proceeds from maturities[164] Financing Activities Net cash provided by financing activities was $78.7 million for the nine months ended June 30, 2025, primarily from net borrowings under the Unsecured Facility - Net cash provided by financing activities was $78.7 million for the nine months ended June 30, 2025[166] - This was primarily driven by net borrowings from the Unsecured Facility, partially offset by common stock repurchases ($33.1 million) and tax payments for stock-based compensation awards ($3.1 million)[166] Financial Position As of June 30, 2025, liquidity included $82.9 million in cash and $209.4 million remaining capacity under the Unsecured Facility - As of June 30, 2025, liquidity consisted of $82.9 million in cash and cash equivalents and $209.4 million remaining capacity under the Unsecured Facility[168] - The company may engage in capital markets, bank loans, or other financial transactions to support business needs[170] Debt The company's short-term cash needs are met by operations and available borrowings, with $115.0 million outstanding under the $365.0 million Unsecured Facility - The Unsecured Facility provides $365.0 million in working capital and letter of credit capacity[171] - As of June 30, 2025, $115.0 million was borrowed and $40.6 million in letters of credit were outstanding under the Unsecured Facility, with $209.4 million remaining capacity[171] Supplemental Guarantor Information Substantially all subsidiaries provide full and unconditional guarantees for certain debt agreements, making them jointly and severally liable - Substantially all significant subsidiaries are full and unconditional guarantors of the company's debt obligations[174] Credit Ratings S&P reaffirmed the B+ corporate credit rating but revised the outlook to negative in February 2025, while Moody's reaffirmed B1 with a stable outlook - S&P reaffirmed B+ corporate credit rating but revised outlook from stable to negative in February 2025[175] - Moody's reaffirmed B1 issuer corporate family rating and stable outlook in October 2024[175] - Negative changes to credit ratings could result in more stringent covenants and higher interest rates on new debt[175] Stock Repurchases and Dividends Paid A new $100.0 million share repurchase program was approved in April 2025, with no dividends paid during the three and nine months ended June 30, 2025 or 2024 - A new $100.0 million share repurchase program was approved in April 2025[176] - 586 thousand shares were repurchased for $12.5 million during the three months ended June 30, 2025[176] - No dividends were paid during the three and nine months ended June 30, 2025 or 2024[177] Off-Balance Sheet Arrangements and Aggregate Contractual Commitments The company controls 27,794 lots through option agreements, with $322.6 million in non-refundable deposits and $1.65 billion in remaining purchase price - As of June 30, 2025, the company controlled 27,794 lots, with 16,195 (60.1% of active lots) under option agreements[178] - Non-refundable deposits and pre-acquisition costs for lot options totaled $322.6 million, with a remaining purchase price of $1.65 billion as of June 30, 2025[179] - Outstanding letters of credit and surety bonds were $41.0 million and $330.2 million, respectively, as of June 30, 2025, mainly for local government development obligations[182] Critical Accounting Estimates Critical accounting policies include inventory valuation, warranty reserves, and income tax valuation allowances, with no significant changes during the nine months ended June 30, 2025 - Critical accounting policies include inventory valuation of projects in progress, warranty reserves, and income tax valuation allowances[183] - No significant changes to critical accounting policies and estimates occurred during the nine months ended June 30, 2025[183] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations, with $78.0 million in variable rate debt, where a one percent increase would raise interest expense by $1.0 million - Primary market risk exposure is to interest rate fluctuations[184] - As of June 30, 2025, variable rate debt totaled approximately $78.0 million[184] - A one percent increase in interest rates on variable debt would increase interest expense by approximately $1.0 million over the next twelve months[184] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[185] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[187] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, other information, and exhibits for the company Item 1. Legal Proceedings The company is involved in various legal proceedings, primarily related to construction defects, with timing and financial impact remaining uncertain - For a discussion of legal proceedings, refer to Note 8 of the condensed consolidated financial statements[188] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - No material changes to risk factors were disclosed compared to the Annual Report on Form 10-K for fiscal year ended September 30, 2024[189] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the quarter ended June 30, 2025, the company repurchased 585,959 shares for $12.5 million under its new $100.0 million share repurchase program | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :----------------------- | :------------------------------- | :--------------------------- | :--------------------------------------------------------------------------- | | April 1 - April 30, 2025 | — | $— | $100,000,000 | | May 1 - May 31, 2025 | 100,000 | $21.74 | $97,826,070 | | June 1 - June 30, 2025 | 485,959 | $21.31 | $87,472,259 | | Total | 585,959 | $21.38 | $87,472,259 | - A new share repurchase program authorizing up to $100.0 million was approved in April 2025, replacing the prior program[190] Item 5. Other Information No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans for company securities during the fiscal quarter ended June 30, 2025 - No Rule 10b5-1 trading plans were adopted or terminated by directors or executive officers during the quarter ended June 30, 2025[191] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, guarantor subsidiaries list, and Inline XBRL financial statements - Exhibits include certifications of CEO and CFO (31.1, 31.2, 32.1, 32.2), List of Guarantor Subsidiaries (22.1), and Inline XBRL financial statements (101, 104)[191] SIGNATURES The report is duly signed on behalf of Beazer Homes USA, Inc. by David I. Goldberg, Senior Vice President and Chief Financial Officer, on July 31, 2025 - The report was signed by David I. Goldberg, Senior Vice President and Chief Financial Officer, on July 31, 2025[195][196]