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

Executive Summary Beazer Homes faced a challenging Q3 FY2025 with a net loss and revenue decline, yet made progress on multi-year goals, increasing community count and book value per share CEO Commentary CEO Allan P. Merrill highlighted progress on multi-year goals and a differentiated market position despite a challenging Q3 FY2025 sales environment - Company continued to take actions aligned with achieving Multi-Year Goals amidst a challenging sales environment[2] - Increased book value per share to over $41 through share repurchases[2] - Well-positioned to reach 200 active community count goal by end of fiscal 2027, with plans to direct discretionary capital towards achieving a net debt to net capitalization ratio in the low 30% range and double-digit book value per share growth[2] - Maintains confidence in its differentiated market position as America's 1 Energy-Efficient Homebuilder, offering utility cost savings, comfort, and healthy indoor air[2] Fiscal Third Quarter 2025 Highlights Q3 FY2025 saw a net loss of $0.3 million due to impairments, a 40.0% Adjusted EBITDA decrease, and a 9.2% decline in homebuilding revenue Fiscal Third Quarter 2025 Key Financial and Operational Highlights (YoY Change) | Metric | Q3 FY2025 Value | Q3 FY2024 Value | Change (%) / bps | | :------------------------------------------------ | :---------------- | :---------------- | :--------------- | | Net loss from continuing operations | $0.3 million | $27.2 million (income) | -101.2% | | Diluted loss per share | $0.01 | $0.88 (income) | -101.1% | | Inventory impairment and abandonment charges | $10.3 million | - | - | | Adjusted EBITDA | $32.1 million | $53.5 million | -40.0% | | Homebuilding revenue | $535.4 million | $589.6 million | -9.2% | | Home closings | 1,035 | 1,167 | -11.3% | | Average selling price (ASP) from closings | $517.3 thousand | $505.3 thousand | +2.4% | | Homebuilding gross margin (GAAP) | 13.5% | 17.3% | -380 bps | | Homebuilding gross margin (excl. I&A and interest) | 18.4% | 20.3% | -190 bps | | SG&A as a percentage of total revenue | 13.2% | 11.9% | +130 bps | | Net new orders | 861 | 1,070 | -19.5% | | Orders per community per month | 1.7 | 2.4 | -30.0% | | Average active community count | 167 | 146 | +14.9% | | Active community count at period-end | 167 | 146 | +14.4% | | Backlog dollar value | $742.5 million | $1,046.5 million | -29.0% | | Backlog units | 1,352 | 1,949 | -30.6% | | Land acquisition and development spending | $153.8 million | $201.1 million | -23.5% | | Controlled lots | 27,794 | 28,365 | -2.0% | | Unrestricted cash | $82.9 million | - | - | | Total liquidity | $292.3 million | $328.2 million | -11.0% | | Total debt to total capitalization ratio | 48.4% | 47.6% | +80 bps | | Net debt to net capitalization ratio | 46.6% | 45.8% | +80 bps | Third Quarter Fiscal 2025 Financial and Operational Review Q3 FY2025 review reveals a net loss, declining homebuilding revenue and orders, reduced land spending, and stable liquidity Profitability Overview Q3 FY2025 saw a net loss of $0.3 million, a significant decline from prior year income, primarily due to $10.3 million in inventory impairment charges Q3 FY2025 Profitability Metrics (YoY Comparison) | Metric | Q3 FY2025 | Q3 FY2024 | Change (%) | | :------------------------------------------------ | :-------- | :-------- | :--------- | | Net loss from continuing operations (in millions) | $(0.3) | $27.2 | (101.2)% | | Diluted loss per share from continuing operations | $(0.01) | $0.88 | (101.1)% | | Adjusted EBITDA (in millions) | $32.1 | $53.5 | (40.0)% | | Inventory impairments and abandonments (in millions) | $10.3 | $0.2 | 5,069.5% | Homebuilding Operations Q3 FY2025 homebuilding operations faced headwinds with decreased net new orders and closings, leading to revenue decline and pressured gross margins Net New Orders Net new orders decreased by 19.5% year-over-year due to a 30.0% lower sales pace, despite a 14.9% increase in average community count Q3 FY2025 Net New Orders Metrics (YoY Comparison) | Metric | Q3 FY2025 | Q3 FY2024 | Change (%) / bps | | :-------------------------- | :-------- | :-------- | :--------------- | | Net new orders | 861 | 1,070 | (19.5)% | | Orders per community per month | 1.7 | 2.4 | (30.0)% | | Average active community count | 167 | 146 | 14.9% | | Cancellation rates | 19.8% | 18.6% | 120 bps | Backlog Backlog dollar value decreased by 29.0% to $742.5 million, with units down 30.6%, while average selling price increased by 2.3% due to mix changes Backlog Metrics (As of June 30, YoY Comparison) | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | | Backlog units | 1,352 | 1,949 | (30.6)% | | Dollar value of backlog (in millions) | $742.5 | $1,046.5 | (29.0)% | | ASP in backlog (in thousands) | $549.2 | $536.9 | 2.3% | Homebuilding Revenue Q3 homebuilding revenue decreased by 9.2% to $535.4 million, driven by an 11.3% decline in closings, partially offset by a 2.4% ASP increase Q3 FY2025 Homebuilding Revenue Metrics (YoY Comparison) | Metric | Q3 FY2025 | Q3 FY2024 | Change (%) | | :-------------------------- | :-------- | :-------- | :--------- | | Homebuilding revenue (in millions) | $535.4 | $589.6 | (9.2)% | | Total home closings | 1,035 | 1,167 | (11.3)% | | ASP from closings (in thousands) | $517.3 | $505.3 | 2.4% | - Decrease in closings was primarily due to lower beginning backlog, partially offset by higher volume of spec homes sold and closed within the quarter and improved construction cycle times[7] Homebuilding Gross Margin Q3 FY2025 GAAP homebuilding gross margin was 13.5%, down 380 bps, primarily due to increased price concessions and a higher share of lower-margin spec home closings Q3 FY2025 Homebuilding Gross Margin (YoY Comparison) | Metric | Q3 FY2025 | Q3 FY2024 | Change (bps) | | :---------------------------------------------------------------- | :-------- | :-------- | :----------- | | Homebuilding gross margin (GAAP) | 13.5% | 17.3% | (380) bps | | Homebuilding gross margin, excluding I&A (Non-GAAP) | 15.2% | 17.3% | (210) bps | | Homebuilding gross margin, excluding I&A and interest (Non-GAAP) | 18.4% | 20.3% | (190) bps | - Gross margin decline primarily due to increased price concessions and closing cost incentives, increased share of spec home closings (generally lower margins), and changes in product and community mix[8] SG&A Expenses SG&A expenses as a percentage of total revenue increased by 130 basis points to 13.2% due to lower homebuilding revenue Q3 FY2025 SG&A Expenses (YoY Comparison) | Metric | Q3 FY2025 | Q3 FY2024 | Change (bps) | | :------------------------------------ | :-------- | :-------- | :----------- | | SG&A expenses as a percent of total revenue | 13.2% | 11.9% | 130 bps | Land Position and Capital Allocation Q3 FY2025 saw a 23.5% decrease in land spending, a slight decline in controlled lots, and an increased reliance on option agreements Land Position Total controlled lots decreased by 2.0% to 27,794, with 60.1% of active lots now controlled via option agreements, up from 55.5% Land Position Metrics (As of June 30, YoY Comparison) | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :------------------------ | :------------ | :------------ | :--------- | | Controlled lots | 27,794 | 28,365 | (2.0)% | | Active lots controlled | 26,944 | 27,830 | (3.2)% | | % of active lots via option | 60.1% | 55.5% | +4.6 pp | Land Acquisition and Development Spending Land acquisition and development spending for Q3 FY2025 decreased by 23.5% year-over-year to $153.8 million Q3 FY2025 Land Spending (YoY Comparison) | Metric | Q3 FY2025 (in millions) | Q3 FY2024 (in millions) | Change (%) | | :---------------------------------------- | :---------------------- | :---------------------- | :--------- | | Land acquisition and land development spending | $153.8 | $201.1 | (23.5)% | Liquidity and Capital Structure Q3 FY2025 ended with $292.3 million in total liquidity, a decrease from prior year, alongside share repurchases and slightly increased debt ratios Liquidity Total available liquidity at Q3 end was $292.3 million, a decrease from the prior year, comprising cash and revolving credit capacity Liquidity Metrics (As of June 30, YoY Comparison) | Metric | June 30, 2025 (in millions) | June 30, 2024 (in millions) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Unrestricted cash | $82.9 | - | - | | Remaining revolving credit capacity | $209.4 | - | - | | Total available liquidity | $292.3 | $328.2 | (11.0)% | Share Repurchases A new $100.0 million share repurchase program was approved, with $12.5 million of common stock repurchased during the quarter - New share repurchase program authorized for up to $100.0 million of outstanding common stock[12] Q3 FY2025 Share Repurchase Activity | Metric | Value | | :-------------------------------- | :------ | | Amount repurchased (in millions) | $12.5 | | Average price per share | $21.38 | Debt Ratios Both total debt to total capitalization and net debt to net capitalization ratios increased by 80 basis points year-over-year Debt Ratios (As of June 30, YoY Comparison) | Metric | June 30, 2025 | June 30, 2024 | Change (bps) | | :-------------------------------- | :------------ | :------------ | :----------- | | Total debt to total capitalization ratio | 48.4% | 47.6% | 80 bps | | Net debt to net capitalization ratio | 46.6% | 45.8% | 80 bps | Nine Months Ended June 30, 2025 Financial and Operational Review For the nine months ended June 30, 2025, net income significantly declined due to impairments, despite increased closings and revenue, while net new orders decreased Key Financial and Operational Metrics Nine-month income from continuing operations decreased by 82.3% to $15.6 million due to impairments, despite revenue growth, while net new orders declined by 9.4% Nine Months Ended June 30, 2025 Key Financial and Operational Metrics (YoY Comparison) | Metric | 9 Months FY2025 | 9 Months FY2024 | Change (%) / bps | | :------------------------------------------------ | :-------------- | :-------------- | :--------------- | | Net new orders, net of cancellations | 2,891 | 3,192 | (9.4)% | | Cancellation rates | 17.7% | 16.2% | 150 bps | | LTM orders per community per month | 2.0 | 2.5 | (19.8)% | | Land acquisition and land development spending (in millions) | $562.2 | $597.5 | (5.9)% | | Total home closings | 3,021 | 2,954 | 2.3% | | ASP from closings (in thousands) | $513.7 | $510.9 | 0.5% | | Homebuilding revenue (in millions) | $1,551.8 | $1,509.2 | 2.8% | | Homebuilding gross margin (GAAP) | 14.6% | 18.5% | (390) bps | | Homebuilding gross margin, excluding I&A (Non-GAAP) | 15.2% | 18.5% | (330) bps | | Homebuilding gross margin, excluding I&A and interest (Non-GAAP) | 18.3% | 21.4% | (310) bps | | SG&A expenses as a percent of total revenue | 13.0% | 12.4% | 60 bps | | Income from continuing operations before income taxes (in millions) | $14.8 | $98.5 | (84.9)% | | Income from continuing operations, net of tax (in millions) | $15.6 | $88.1 | (82.3)% | | Diluted income per share from continuing operations | $0.52 | $2.84 | (81.7)% | | Inventory impairments and abandonments (in millions) | $10.9 | $0.2 | 5,333.5% | | Adjusted EBITDA (in millions) | $94.0 | $150.3 | (37.5)% | Condensed Consolidated Financial Statements Condensed financial statements reveal a Q3 net loss and nine-month income decline, increased assets and debt, and varied regional operating performance Condensed Consolidated Statements of Operations Q3 FY2025 saw a net loss of $0.3 million, while nine-month net income decreased significantly to $15.6 million, primarily due to increased inventory impairments Condensed Consolidated Statements of Operations (Selected Items) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 9 Months Ended June 30, 2025 | 9 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 | | (Loss) income from continuing operations before income taxes | $(2,506) | $29,660 | $14,828 | $98,479 | | Net (loss) income | $(324) | $27,210 | $15,584 | $88,109 | | Diluted (loss) income per share | $(0.01) | $0.88 | $0.52 | $2.84 | | Capitalized interest in inventory, end of period | $137,759 | $126,562 | $137,759 | $126,562 | Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $2.71 billion, driven by inventory, while total debt rose to $1.14 billion and equity slightly decreased Condensed Consolidated Balance Sheets (Selected Items) | Metric (in thousands) | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :------------ | :----------------- | | 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 | | Inventory Breakdown: Homes under construction | $914,261 | $754,705 | | Inventory Breakdown: Land under development | $1,073,661 | $1,023,188 | Supplemental Operating and Financial Data Supplemental data shows varied regional performance in Q3 FY2025, with the West declining in closings and orders, East increasing, and Southeast decreasing across most metrics Q3 FY2025 Regional Operating Data (YoY Comparison) | Metric | Region | Q3 FY2025 | Q3 FY2024 | | :------------------------ | :------- | :-------- | :-------- | | Total closings | West | 647 | 728 | | | East | 256 | 240 | | | Southeast | 132 | 199 | | New orders, net of cancellations | West | 482 | 715 | | | East | 224 | 250 | | | Southeast | 155 | 105 | | Homebuilding revenue (in millions) | West | $322.9 | $365.9 | | | East | $145.6 | $121.2 | | | Southeast | $66.9 | $102.5 | | Total gross profit (in millions) | Homebuilding | $72.5 | $102.0 | | | Land sales and other | $0.1 | $1.3 | 9 Months FY2025 Regional Operating Data (YoY Comparison) | Metric | Region | 9 Months FY2025 | 9 Months FY2024 | | :------------------------ | :------- | :-------------- | :-------------- | | Total closings | West | 1,935 | 1,849 | | | East | 687 | 591 | | | Southeast | 399 | 514 | | New orders, net of cancellations | West | 1,736 | 2,108 | | | East | 708 | 685 | | | Southeast | 447 | 399 | | Homebuilding revenue (in millions) | West | $979.9 | $945.2 | | | East | $374.6 | $304.6 | | | Southeast | $197.3 | $259.4 | Non-GAAP Financial Measures Reconciliations This section provides reconciliations for non-GAAP measures, including homebuilding gross profit/margin, Adjusted EBITDA, and net debt to net capitalization ratio Homebuilding Gross Profit/Margin Reconciliation Non-GAAP homebuilding gross profit and margin are reconciled by excluding inventory impairments and amortized interest to provide a clearer view of core operating characteristics Homebuilding Gross Profit/Margin Reconciliation (Q3 FY2025 vs Q3 FY2024) | Metric (in thousands) | Q3 FY2025 | Q3 FY2025 % | Q3 FY2024 | Q3 FY2024 % | | :---------------------------------------------------------------- | :-------- | :---------- | :-------- | :---------- | | Homebuilding gross profit/margin (GAAP) | $72,474 | 13.5% | $101,983 | 17.3% | | Inventory impairments and abandonments (I&A) | $8,873 | | $200 | | | Homebuilding gross profit/margin excluding I&A (Non-GAAP) | $81,347 | 15.2% | $102,183 | 17.3% | | Interest amortized to cost of sales | $17,383 | | $17,267 | | | Homebuilding gross profit/margin excluding I&A and interest (Non-GAAP) | $98,730 | 18.4% | $119,450 | 20.3% | - Non-GAAP measures assist investors in comparing operating characteristics by eliminating differences in inventory impairments and debt levels[31] Adjusted EBITDA Reconciliation Adjusted EBITDA is a non-GAAP measure reconciling net (loss) income by adding back various non-cash and non-operating items to show core operating results Adjusted EBITDA Reconciliation (Q3 FY2025 vs Q3 FY2024 and LTM) | Metric (in thousands) | Q3 FY2025 | Q3 FY2024 | 9 Months FY2025 | 9 Months FY2024 | LTM FY2025 | LTM FY2024 | | :------------------------------------------------ | :-------- | :-------- | :-------------- | :-------------- | :--------- | :--------- | | Net (loss) income (GAAP) | $(324) | $27,210 | $15,584 | $88,109 | $67,650 | $143,865 | | (Benefit) expense from income taxes | $(2,182) | $2,453 | $(756) | $10,373 | $7,781 | $18,843 | | Interest amortized to home construction and land sales expenses and capitalized interest impaired | $18,974 | $17,267 | $50,642 | $44,528 | $74,347 | $64,447 | | EBIT (Non-GAAP) | $16,468 | $46,930 | $65,470 | $143,010 | $149,778 | $227,155 | | Depreciation and amortization | $4,571 | $3,892 | $13,273 | $9,698 | $18,442 | $13,456 | | EBITDA (Non-GAAP) | $21,039 | $50,822 | $78,743 | $152,708 | $168,220 | $240,611 | | Stock-based compensation expense | $1,817 | $2,474 | $5,442 | $5,536 | $7,297 | $7,564 | | Inventory impairments and abandonments | $9,243 | $200 | $9,771 | $200 | $11,567 | $225 | | Adjusted EBITDA (Non-GAAP) | $32,099 | $53,496 | $93,956 | $150,290 | $187,084 | $240,259 | - Adjusted EBITDA helps investors understand core operating results and underlying business trends by eliminating differences in capitalization, tax position, impairments, and non-recurring items[33] Net Debt to Net Capitalization Ratio Reconciliation The net debt to net capitalization ratio is a non-GAAP measure assessing leverage and financing ability by adjusting total debt for cash and cash equivalents Net Debt to Net Capitalization Ratio Reconciliation (As of June 30, YoY Comparison) | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Total debt (GAAP) | $1,143,173 | $1,069,408 | | Stockholders' equity (GAAP) | $1,217,031 | $1,178,315 | | Total capitalization (GAAP) | $2,360,204 | $2,247,723 | | Total debt to total capitalization ratio (GAAP) | 48.4% | 47.6% | | Less: cash and cash equivalents (GAAP) | $82,932 | $73,212 | | 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% | - Net debt to net capitalization ratio is useful for understanding leverage and financing ability, by adjusting for cash and cash equivalents[35] Company Information and Outlook This section provides an overview of Beazer Homes, details for its Q3 FY2025 conference call, and outlines key forward-looking statements and associated risk factors About Beazer Homes Beazer Homes, a large U.S. homebuilder, differentiates itself through energy-efficient homes, 'Choice Plans' for personalization, and a 'Mortgage Choice' program - Beazer Homes is one of the country's largest homebuilders, headquartered in Atlanta, operating in Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas, and Virginia[20][21] - Differentiates through 'Surprising Performance' homes, offering energy efficiency (America's 1 Energy-Efficient Homebuilder with an average HERS score of 42 in 2024), 'Choice Plans' for personalization, and 'Mortgage Choice' program for comparing loan options[20][22] Conference Call Information Beazer Homes will host a conference call on July 31, 2025, at 5:00 p.m. ET to discuss Q3 FY2025 results, accessible via webcast or telephone - Conference call to discuss results on July 31, 2025, at 5:00 p.m. ET[19] - Access via 'Investor Relations' page on www.beazer.com or by telephone (800-475-0542, pass code '8571348')[19] - Replay available until August 14, 2025 (866-491-2908, pass code '3740')[19] Forward-Looking Statements and Risk Factors Forward-looking statements are subject to risks including macroeconomic uncertainty, elevated mortgage rates, supply chain challenges, and factors affecting margins and land costs - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially[23] - Key risks include macroeconomic uncertainty (inflation, elevated interest rates, insurance costs), elevated mortgage interest rates, supply chain challenges, and the ability to meet sustainability goals[23][25] - Other risks include inaccurate backlog estimates, factors affecting margins (pricing adjustments, incentives), decreased revenues and land values, increased land development costs, availability and cost of land, capital raising ability, changes in tax laws, increased competition, natural disasters, labor shortages, cybersecurity issues, and governmental regulations[23][25]