Beazer homes reports strong second quarter fiscal 2022 results
Atlanta--(business wire)--beazer homes usa, inc. (nyse: bzh) (www.beazer.com) today announced its financial results for the three and six months ended march 31, 2022. “we generated very strong second quarter financial results,” said allan p. merrill, the company’s chairman and chief executive officer. “increases in both home prices and margins allowed us to significantly improve profitability despite continuing supply chain challenges. we also increased our lot position and reduced leverage as we continued to demonstrate positive results from our balanced growth strategy.” commenting on market conditions and updated fiscal 2022 full-year expectations, mr. merrill said, “while supply chain challenges are expected to continue to impact the level of housing starts and construction cycle times, the larger issue is worsening home affordability as both home prices and mortgage rates have moved higher this year. although new home orders have not been significantly impacted to date, we expect future periods to present a more challenging sales environment. however, with the size of our backlog, we have excellent visibility into full year financial results. we now expect to generate fiscal year 2022 earnings per share of at least $6.00, inclusive of previously disclosed tax benefits of approximately $0.40 per share. we also expect to reduce debt below $1 billion by year end, even as we further expand our active lot position.” looking further out, mr. merrill concluded, “we remain confident in the multi-year growth of our business and the new home industry. the fundamental disconnect between the demand for homes and the likely supply of homes – which has given rise to a multimillion home deficit over the past decade – remains in place. as such, we expect to be able to work through affordability challenges to deliver improving profitability and returns from our less leveraged and more efficient balance sheet, while expanding our esg activities to create durable value for all of our stakeholders.” beazer homes fiscal second quarter 2022 highlights and comparison to fiscal second quarter 2021 net income from continuing operations of $44.7 million, or $1.45 per diluted share, compared to net income from continuing operations of $24.6 million, or $0.81 per diluted share, in fiscal second quarter 2021 adjusted ebitda of $77.4 million, up 20.5% homebuilding revenue of $507.2 million, down 7.3% on a 22.3% decrease in home closings to 1,078, partially offset by a 19.3% increase in average selling price to $470.5 thousand homebuilding gross margin was 23.5%, up 570 basis points. excluding impairments, abandonments and amortized interest, homebuilding gross margin was 26.8%, up 460 basis points sg&a as a percentage of total revenue was 12.2%, up 120 basis points year-over-year net new orders of 1,291, down 30.4% on a 9.2% decrease in average community count to 119 and a 23.4% decrease in orders/community/month to 3.6 backlog dollar value of $1,583.5 million, up 14.2% on a 20.9% increase in average selling price of homes in backlog to $507.4 thousand, partially offset by a 5.5% decrease in backlog units to 3,121 controlled lots of 23,516, up 24.7% from 18,851 land acquisition and land development spending was $132.6 million, up 36.3% from $97.3 million repurchased a total of $6.0 million of debt unrestricted cash at quarter end was $163.9 million; total liquidity was $413.9 million the following provides additional details on the company's performance during the fiscal second quarter 2022: profitability. net income from continuing operations was $44.7 million, generating diluted earnings per share of $1.45. this included the impact of energy efficiency tax credits of $3.0 million, or $0.10 per share. second quarter adjusted ebitda of $77.4 million was up $13.2 million, or 20.5%, year-over-year. the increase in profitability was primarily driven by higher homebuilding gross margin. orders. net new orders for the second quarter decreased to 1,291, down 30.4% from 1,854 in the prior year period. the decrease in net new orders was driven by a 9.2% decrease in average community count to 119 and a 23.4% decrease in sales pace to 3.6 orders per community per month, down from 4.7 in the prior year period, as the company proactively limited sales pace to align with the pace of production, manage lot supply, optimize margins and ensure a positive customer experience. sales pace remained strong compared to the historical average of 3.4 over the last 10 years for the second quarter. the cancellation rate for the quarter was 12.2%, up from 10.0% in the prior year period. backlog. the dollar value of homes in backlog as of march 31, 2022 increased 14.2% to $1,583.5 million, representing 3,121 homes, compared to $1,386.4 million, representing 3,303 homes, at the same time last year. the average selling price of homes in backlog was $507.4 thousand, up 20.9% versus the previous year. homebuilding revenue. second quarter homebuilding revenue was $507.2 million, down 7.3% year-over-year. the decrease in homebuilding revenue was driven by a 22.3% decrease in home closings to 1,078 homes, partially offset by a 19.3% increase in the average selling price to $470.5 thousand. homebuilding gross margin. homebuilding gross margin (excluding impairments, abandonments and amortized interest) was 26.8% for the second quarter, up 460 basis points year-over-year, driven primarily by pricing increases and lower sales incentives. sg&a expenses. selling, general and administrative expenses as a percentage of total revenue was 12.2% for the quarter, up 120 basis points year-over-year primarily due to decreases in closings and revenue. sg&a on an absolute dollar basis increased by $1.5 million, or 2.4%, year-over-year primarily due to increased personnel expense. land position. controlled lots increased 24.7% to 23,516, compared to 18,851 in the prior year. excluding land held for future development and land held for sale lots, active controlled lots were 22,728, up 24.7% year-over-year. the company had 11,551 lots, or 50.8% of its total active lots, under option contracts compared to 8,381 lots, or 46.0% of its total active lots, under option contracts a year ago. debt repurchases. the company repurchased $6.0 million of its outstanding 5.875% unsecured senior notes due october 2027 at an average price of $101.888 per $100 principal amount. liquidity. at the close of the second quarter, the company had approximately $413.9 million of available liquidity, including $163.9 million of unrestricted cash and a fully undrawn revolving credit facility capacity of $250.0 million. imagine homes acquisition the company also announced today that it had entered into an agreement to acquire substantially all of the assets of imagine homes, a private san antonio-based homebuilder. imagine homes, a champion of green building practices since its inception in 2006, has been recognized as a leader in energy efficient new construction, earning local and national accolades including the epa’s energy star certified homes market leader award and six nahb green building awardstm. terms of the transaction were not disclosed. for the past 16 years, beazer has held a one-third ownership stake in imagine homes. the transaction reiterates beazer’s commitment to leading the industry in energy efficiency initiatives and expands the company’s footprint in texas, which already includes the dallas and houston markets. commitment to esg in december 2021, the company published its inaugural esg summary, which contains detailed disclosures of environmental, social and governance (esg) initiatives, as well as metrics that are responsive to sustainability accounting standards promulgated by the sustainability accounting standards board (sasb) for companies within the homebuilding industry. the esg summary represents another step forward in the company's commitment to increased esg accountability and provides a foundation to build increased transparency by directly reporting on relevant sustainability issues, risks and opportunities that impact the business. demonstrating recognition for the company's efforts to create and sustain a strong reputation among employees, shareholders, customers and other partners, beazer homes was ranked first among construction companies in newsweek's inaugural list of america's most trusted companies 2022. this award was presented to the company in april 2022 by newsweek and statista inc. america's most trusted companies 2022 were identified based on an independent survey of approximately 50,000 u.s. residents who rated companies they knew from the perspective of customers, investors and employees. summary results for the three and six months ended march 31, 2022 are as follows: three months ended march 31, 2022 2021 change* new home orders, net of cancellations 1,291 1,854 (30.4 )% orders per community per month 3.6 4.7 (23.4 )% average active community count 119 131 (9.2 )% actual community count at quarter-end 119 132 (9.8 )% cancellation rates 12.2 % 10.0 % 220 bps total home closings 1,078 1,388 (22.3 )% average selling price (asp) from closings (in thousands) $ 470.5 $ 394.4 19.3 % homebuilding revenue (in millions) $ 507.2 $ 547.4 (7.3 )% homebuilding gross margin 23.5 % 17.8 % 570 bps homebuilding gross margin, excluding impairments and abandonments (i&a) 23.6 % 17.8 % 580 bps homebuilding gross margin, excluding i&a and interest amortized to cost of sales 26.8 % 22.2 % 460 bps income from continuing operations before income taxes (in millions) $ 54.8 $ 32.3 69.3 % expense from income taxes (in millions) $ 10.1 $ 7.7 30.7 % income from continuing operations, net of tax (in millions) $ 44.7 $ 24.6 81.3 % basic income per share from continuing operations $ 1.46 $ 0.82 78.0 % diluted income per share from continuing operations $ 1.45 $ 0.81 79.0 % net income $ 44.7 $ 24.5 82.1 % land and land development spending (in millions) $ 132.6 $ 97.3 36.3 % adjusted ebitda (in millions) $ 77.4 $ 64.2 20.5 % ltm adjusted ebitda (in millions) $ 293.4 $ 238.9 22.8 % * change and totals are calculated using unrounded numbers. "ltm" indicates amounts for the trailing 12 months. six months ended march 31, 2022 2021 change* new home orders, net of cancellations 2,432 3,296 (26.2 )% ltm orders per community per month 3.3 3.8 (13.2 )% cancellation rates 12.0 % 11.0 % 100 bps total home closings 2,097 2,502 (16.2 )% asp from closings (in thousands) $ 454.9 $ 388.3 17.2 % homebuilding revenue (in millions) $ 953.9 $ 971.6 (1.8 )% homebuilding gross margin 22.3 % 17.7 % 460 bps homebuilding gross margin, excluding i&a 22.3 % 17.8 % 450 bps homebuilding gross margin, excluding i&a and interest amortized to cost of sales 25.6 % 22.2 % 340 bps income from continuing operations before income taxes (in millions) $ 96.1 $ 48.5 98.1 % expense from income taxes (in millions) $ 16.5 $ 11.8 39.8 % income from continuing operations, net of tax (in millions) $ 79.6 $ 36.7 116.9 % basic income per share from continuing operations $ 2.61 $ 1.23 112.2 % diluted income per share from continuing operations $ 2.59 $ 1.22 112.3 % net income $ 79.6 $ 36.5 117.8 % land and land development spending (in millions) $ 263.3 $ 206.9 27.2 % adjusted ebitda (in millions) $ 138.5 $ 107.8 28.5 % * change and totals are calculated using unrounded numbers. "ltm" indicates amounts for the trailing 12 months. as of march 31, 2022 2021 change backlog units 3,121 3,303 (5.5 )% dollar value of backlog (in millions) $ 1,583.5 $ 1,386.4 14.2 % asp in backlog (in thousands) $ 507.4 $ 419.7 20.9 % land and lots controlled 23,516 18,851 24.7 % conference call the company will hold a conference call on april 28, 2022 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 may 5, 2022 at 866-511-1891 (for international callers, dial 203-369-1946) with pass code “3740.” about beazer homes headquartered in atlanta, beazer homes (nyse: bzh) is one of the country’s largest homebuilders. every beazer home is designed and built to provide surprising performance, giving you more quality and more comfort from the moment you move in – saving you money every month. with beazer's choice plans™, you can personalize your primary living areas – giving you a choice of how you want to live in the home, at no additional cost. and unlike most national homebuilders, we empower our customers to shop and compare loan options. our mortgage choice program gives you the resources to easily compare multiple loan offers and choose the best lender and loan offer for you, saving you thousands over the life of your loan. we build our homes in arizona, california, delaware, florida, georgia, indiana, maryland, nevada, north carolina, south carolina, tennessee, texas, and virginia. for more information, visit beazer.com, or check out beazer on facebook, instagram and twitter. this press release contains forward-looking statements. these forward-looking statements represent our expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. these forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things: (i) the cyclical nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions; (ii) increases in mortgage interest rates and reduced availability of mortgage financing due to, among other factors, recent and likely continued actions by the federal reserve to address sharp increases in inflation; (iii) other economic changes nationally and in local markets, including changes in consumer confidence, wage levels, declines in employment levels, and an increase in the number of foreclosures, each of which is outside our control and affects the affordability of, and demand for, the homes we sell; (iv) potential negative impacts of the covid-19 pandemic, which, in addition to exacerbating each of the risks listed above and below, may include a significant decrease in demand for our homes or consumer confidence generally with respect to purchasing a home, an inability to sell and build homes in a typical manner or at all, increased costs or decreased supply of building materials, including lumber, or the availability of subcontractors, housing inspectors, and other third-parties we rely on to support our operations, and recognizing charges in future periods, which may be material, for goodwill impairments, inventory impairments and/or land option contract abandonments; (v) supply chain challenges negatively impacting our homebuilding production, including shortages of raw materials and other critical components such as windows, doors, and appliances; (vi) shortages of or increased costs for labor used in housing production, and the level of quality and craftsmanship provided by such labor; (vii) 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; (viii) 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; (ix) 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; (x) market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital); (xi) terrorist acts, protests and civil unrest, political uncertainty, natural disasters, acts of war or other factors over which the company has no control; (xii) inaccurate estimates related to homes to be delivered in the future (backlog), as they are subject to various cancellation risks that cannot be fully controlled; (xiii) changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes; (xiv) increased competition or delays in reacting to changing consumer preferences in home design; (xv) 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; (xvi) the potential recoverability of our deferred tax assets; (xvii) increases in corporate tax rates; (xviii) 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; (xix) the results of litigation or government proceedings and fulfillment of any related obligations; (xx) the impact of construction defect and home warranty claims; (xxi) the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred; (xxii) the impact of information technology failures, cybersecurity issues or data security breaches; (xxiii) the impact of governmental regulations on homebuilding in key markets, such as regulations limiting the availability of water; and (xxiv) the success of our esg initiatives, including our ability to meet our goal that every home we build will be net zero energy ready by 2025 as well as the success of any other related partnerships or pilot programs we may enter into in order to increase the energy efficiency of our homes and prepare for a net zero future. 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 six months ended march 31, march 31, in thousands (except per share data) 2022 2021 2022 2021 total revenue $ 508,506 $ 549,889 $ 962,655 $ 978,428 home construction and land sales expenses 387,821 451,963 744,570 804,744 inventory impairments and abandonments 935 — 935 465 gross profit 119,750 97,926 217,150 173,219 commissions 16,578 20,884 32,391 37,391 general and administrative expenses 45,530 39,741 83,297 77,717 depreciation and amortization 3,031 3,683 5,912 6,805 operating income 54,611 33,618 95,550 51,306 equity in income of unconsolidated entities 163 186 451 111 loss on extinguishment of debt, net (164 ) (563 ) (164 ) (563 ) other income (expense), net 140 (894 ) 271 (2,346 ) income from continuing operations before income taxes 54,750 32,347 96,108 48,508 expense from income taxes 10,072 7,704 16,535 11,829 income from continuing operations 44,678 24,643 79,573 36,679 loss from discontinued operations, net of tax (6 ) (115 ) (16 ) (154 ) net income $ 44,672 $ 24,528 $ 79,557 $ 36,525 weighted-average number of shares: basic 30,594 29,953 30,464 29,862 diluted 30,823 30,215 30,772 30,150 basic income (loss) per share: continuing operations $ 1.46 $ 0.82 $ 2.61 $ 1.23 discontinued operations — — — (0.01 ) total $ 1.46 $ 0.82 $ 2.61 $ 1.22 diluted income (loss) per share: continuing operations $ 1.45 $ 0.81 $ 2.59 $ 1.22 discontinued operations — — — (0.01 ) total $ 1.45 $ 0.81 $ 2.59 $ 1.21 three months ended six months ended march 31, march 31, capitalized interest in inventory 2022 2021 2022 2021 capitalized interest in inventory, beginning of period $ 110,516 $ 119,148 $ 106,985 $ 119,659 interest incurred 18,253 19,345 36,564 39,247 interest expense not qualified for capitalization and included as other expense — (969 ) — (2,569 ) capitalized interest amortized to home construction and land sales expenses (16,083 ) (24,110 ) (30,863 ) (42,923 ) capitalized interest in inventory, end of period $ 112,686 $ 113,414 $ 112,686 $ 113,414 beazer homes usa, inc. condensed consolidated balance sheets (unaudited) in thousands (except share and per share data) march 31, 2022 september 30, 2021 assets cash and cash equivalents $ 163,905 $ 246,715 restricted cash 33,343 27,428 accounts receivable (net of allowance of $290 and $290, respectively) 24,289 25,685 income tax receivable 9,866 9,929 owned inventory 1,676,972 1,501,602 investments in unconsolidated entities 4,667 4,464 deferred tax assets, net 190,876 204,766 property and equipment, net 23,168 22,885 operating lease right-of-use assets 11,301 12,344 goodwill 11,376 11,376 other assets 10,241 11,616 total assets $ 2,160,004 $ 2,078,810 liabilities and stockholders’ equity trade accounts payable $ 147,257 $ 133,391 operating lease liabilities 12,912 14,154 other liabilities 147,583 152,351 total debt (net of debt issuance costs of $8,151 and $8,983, respectively) 1,049,895 1,054,030 total liabilities 1,357,647 1,353,926 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, 31,457,627 issued and outstanding and 31,294,198 issued and outstanding, respectively) 31 31 paid-in capital 864,074 866,158 accumulated deficit (61,748 ) (141,305 ) total stockholders’ equity 802,357 724,884 total liabilities and stockholders’ equity $ 2,160,004 $ 2,078,810 inventory breakdown homes under construction $ 838,139 $ 648,283 land under development 619,385 648,404 land held for future development 19,879 19,879 land held for sale 14,167 9,179 capitalized interest 112,686 106,985 model homes 72,716 68,872 total owned inventory $ 1,676,972 $ 1,501,602 beazer homes usa, inc. consolidated operating and financial data – continuing operations three months ended march 31, six months ended march 31, selected operating data 2022 2021 2022 2021 closings: west region 665 757 1,268 1,399 east region 252 321 497 544 southeast region 161 310 332 559 total closings 1,078 1,388 2,097 2,502 new orders, net of cancellations: west region 832 1,116 1,487 1,898 east region 284 357 520 677 southeast region 175 381 425 721 total new orders, net 1,291 1,854 2,432 3,296 as of march 31, backlog units: 2022 2021 west region 1,872 1,864 east region 634 757 southeast region 615 682 total backlog units 3,121 3,303 aggregate dollar value of homes in backlog (in millions) $ 1,583.5 $ 1,386.4 asp in backlog (in thousands) $ 507.4 $ 419.7 in thousands three months ended march 31, six months ended march 31, supplemental financial data 2022 2021 2022 2021 homebuilding revenue: west region $ 302,887 $ 277,843 $ 559,379 $ 510,783 east region 128,424 151,993 242,711 249,957 southeast region 75,897 117,581 151,847 210,906 total homebuilding revenue $ 507,208 $ 547,417 $ 953,937 $ 971,646 revenue: homebuilding $ 507,208 $ 547,417 $ 953,937 $ 971,646 land sales and other 1,298 2,472 8,718 6,782 total revenue $ 508,506 $ 549,889 $ 962,655 $ 978,428 gross profit: homebuilding $ 119,402 $ 97,456 $ 212,706 $ 172,293 land sales and other 348 470 4,444 926 total gross profit $ 119,750 $ 97,926 $ 217,150 $ 173,219 reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable gaap measure, is provided for each period discussed below. management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and level of debt. these measures should not be considered alternative to homebuilding gross profit and gross margin determined in accordance with gaap as an indicator of operating performance. three months ended march 31, six months ended march 31, in thousands 2022 2021 2022 2021 homebuilding gross profit/margin $ 119,402 23.5 % $ 97,456 17.8 % $ 212,706 22.3 % $ 172,293 17.7 % inventory impairments and abandonments (i&a) 495 — 495 465 homebuilding gross profit/margin excluding i&a 119,897 23.6 % 97,456 17.8 % 213,201 22.3 % 172,758 17.8 % interest amortized to cost of sales 16,083 24,110 30,863 42,670 homebuilding gross profit/margin excluding i&a and interest amortized to cost of sales $ 135,980 26.8 % $ 121,566 22.2 % $ 244,064 25.6 % $ 215,428 22.2 % reconciliation of adjusted ebitda to total company net income, the most directly comparable gaap measure, is provided for each period discussed below. management believes that adjusted ebitda assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, tax position, and level of impairments. these ebitda measures should not be considered alternatives to net income determined in accordance with gaap as an indicator of operating performance. three months ended march 31, six months ended march 31, ltm ended march 31, (a) in thousands 2022 2021 2022 2021 2022 2021 net income $ 44,672 $ 24,528 $ 79,557 $ 36,525 $ 165,053 $ 75,391 expense from income taxes 10,071 7,672 16,531 11,786 26,246 25,508 interest amortized to home construction and land sales expenses and capitalized interest impaired 16,083 24,110 30,863 42,923 75,230 96,256 interest expense not qualified for capitalization — 969 — 2,569 212 7,667 ebit 70,826 57,279 126,951 93,803 266,741 204,822 depreciation and amortization 3,031 3,683 5,912 6,805 13,083 15,391 ebitda 73,857 60,962 132,863 100,608 279,824 220,213 stock-based compensation expense 2,424 2,549 4,532 6,060 10,639 12,886 loss on extinguishment of debt 164 563 164 563 1,626 563 inventory impairments and abandonments (b) 935 — 935 465 1,323 2,576 restructuring and severance expenses — — — (10 ) — 1,307 litigation settlement in discontinued operations — 120 — 120 — 1,380 adjusted ebitda $ 77,380 $ 64,194 $ 138,494 $ 107,806 $ 293,412 $ 238,925 (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."
