Beazer homes reports second quarter fiscal 2020 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, 2020. “we generated strong second quarter results, highlighted by growth in revenue, margin and profitability, said allan p. merrill, chairman and chief executive officer of beazer homes. “of course, these results were overshadowed by the effects of the covid-19 pandemic beginning in mid-march. we have made significant operational changes to help protect the health and safety of our team, our customers and our trade partners and simultaneously taken steps to enhance our liquidity.” beazer homes fiscal second quarter 2020 highlights and comparison to fiscal second quarter 2019 net income from continuing operations of $10.6 million, compared to net loss from continuing operations of $100.8 million in fiscal second quarter 2019, which included an impairment charge of $147.6 million pre-tax adjusted ebitda of $43.9 million, up 34.7% homebuilding revenue of $488.0 million, up 15.9% on a 12.6% increase in home closings to 1,277 and a 2.9% increase in average selling price to $382.1 thousand homebuilding gross margin was 16.1%. excluding impairments, abandonments and amortized interest, homebuilding gross margin was 20.8%, up 100 basis points sg&a as a percentage of total revenue was 12.0%, down 70 basis points year-over-year unit orders of 1,661, up 3.9% on an increase in average community count to 167 and a slight increase in orders/community/month to 3.3 dollar value of backlog of $895.0 million, up 14.3% the following provides additional details on the company's performance during the fiscal second quarter 2020: profitability. second quarter net income from continuing operations was $10.6 million, generating diluted earnings per share of $0.35. net income was up $4.4 million year-over-year after adjusting for impairment charges and gain on debt extinguishment taken during the same period last year. adjusted ebitda of $43.9 million was up $11.3 million year-over-year. orders. net new orders for the second quarter increased 3.9% year-over-year, to 1,661. the increase in net new orders was primarily driven by a 2.2% increase in average community count to 167. the cancellation rate for the quarter was 15.8%, up 130 basis points year-over-year. homebuilding revenue. second quarter closings rose 12.6% to 1,277 homes. combined with a 2.9% increase in the average selling price to $382.1 thousand, homebuilding revenue was $488.0 million, up 15.9% year-over-year. backlog. the dollar value of homes in backlog as of march 31, 2020 increased 14.3% to $895.0 million, or 2,231 homes, compared to $783.3 million, or 1,989 homes, at the same time last year. the average selling price of homes in backlog was $401.2 thousand, up 1.9% year-over-year. homebuilding gross margin. homebuilding gross margin (excluding impairments, abandonments and amortized interest) was 20.8% for the second quarter, up 100 basis points year-over-year. sg&a expenses. selling, general and administrative expenses, as a percentage of total revenue, were 12.0% for the quarter, down 70 basis points year-over-year. liquidity update. at the close of the second quarter, total liquidity was $294.3 million including a fully drawn $250.0 million revolving credit facility. this compares to total liquidity of $221.4 million at march 31, 2019, including cash of $86.4 million and undrawn revolving credit facility capacity of $135.0 million. as we stated in our april 6th announcement of preliminary operating results, despite an increasingly challenging business environment as a result of the covid-19 pandemic, especially in the final weeks of march, we generated strong fiscal second quarter results. we also ended the quarter with substantially more liquidity than in the same period in the prior year. however, due to uncertainty surrounding this ongoing public health crisis and its continued impact on the u.s. economy, we cannot predict either the near-term or long-term effects that the pandemic will have on our business. we intend to provide further updates on the current impact of the pandemic on our operations during a conference call on april 30, 2020 at 5:00 p.m. et to discuss our second fiscal quarter results. information on the conference call is provided below. summary results for the three and six months ended march 31, 2020 are as follows: three months ended march 31, 2020 2019 change* new home orders, net of cancellations 1,661 1,598 3.9 % orders per community per month 3.3 3.3 1.7 % average active community count 167 163 2.2 % actual community count at quarter-end 166 166 — % cancellation rates 15.8 % 14.5 % 130 bps total home closings 1,277 1,134 12.6 % average selling price (asp) from closings (in thousands) $ 382.1 $ 371.2 2.9 % homebuilding revenue (in millions) $ 488.0 $ 420.9 15.9 % homebuilding gross margin 16.1 % (10.5 )% 2660 bps homebuilding gross margin, excluding impairments and abandonments (i&a) 16.1 % 15.4 % 70 bps homebuilding gross margin, excluding i&a and interest amortized to cost of sales 20.8 % 19.8 % 100 bps income (loss) from continuing operations before income taxes (in millions) $ 14.8 $ (139.0 ) $ 153.8 expense (benefit) from income taxes (in millions) $ 4.2 $ (38.2 ) $ 42.3 income (loss) from continuing operations (in millions) $ 10.6 $ (100.8 ) $ 111.4 basic income (loss) per share from continuing operations $ 0.36 $ (3.28 ) $ 3.64 diluted income (loss) per share from continuing operations $ 0.35 $ (3.28 ) $ 3.63 income (loss) from continuing operations before income taxes (in millions) $ 14.8 $ (139.0 ) $ 153.8 gain on debt extinguishment (in millions) $ — $ 0.2 $ 0.2 inventory impairments and abandonments (in millions) $ — $ (147.6 ) $ (147.6 ) income from continuing operations excluding gain on debt extinguishment and inventory impairments and abandonments before income taxes (in millions) $ 14.8 $ 8.4 $ 6.4 income from continuing operations excluding gain on debt extinguishment and inventory impairments and abandonments after income taxes (in millions)+ $ 10.6 $ 6.2 $ 4.4 net income (loss) $ 10.6 $ (100.9 ) $ 111.5 land and land development spending (in millions) $ 123.0 $ 139.9 $ (16.9 ) adjusted ebitda (in millions) $ 43.9 $ 32.6 $ 11.3 ltm adjusted ebitda (in millions) $ 194.0 $ 196.2 $ (2.1 ) * change and totals are calculated using unrounded numbers. + there were no debt extinguishment and inventory impairments and abandonments for the three months ended march 31, 2020. for the three months ended march 31, 2019, gain on debt extinguishment and inventory impairments and abandonments were tax-effected at the effective tax rate of 27.5%. six months ended march 31, 2020 2019 change* new home orders, net of cancellations 2,912 2,574 13.1 % ltm orders per community per month 2.9 2.8 3.6 % cancellation rates 15.4 % 16.6 % -120 bps total home closings 2,389 2,217 7.8 % asp from closings (in thousands) $ 379.0 $ 370.7 2.2 % homebuilding revenue (in millions) $ 905.4 $ 821.9 10.2 % homebuilding gross margin 15.7 % 2.0 % 1370 bps homebuilding gross margin, excluding impairments and abandonments (i&a) 15.7 % 15.4 % 30 bps homebuilding gross margin, excluding i&a and interest amortized to cost of sales 20.3 % 19.8 % 50 bps income (loss) from continuing operations before income taxes (in millions) $ 17.4 $ (135.6 ) $ 153.0 expense (benefit) from income taxes (in millions) $ 4.0 $ (42.1 ) $ 46.0 income (loss) from continuing operations (in millions) $ 13.4 $ (93.5 ) $ 106.9 basic and diluted income (loss) per share from continuing operations $ 0.45 $ (2.99 ) $ 3.44 income (loss) from continuing operations before income taxes (in millions) $ 17.4 $ (135.6 ) $ 153.0 gain on debt extinguishment (in millions) $ — $ 0.2 $ (0.2 ) inventory impairments and abandonments (in millions) $ — $ (148.6 ) $ (148.6 ) income from continuing operations excluding gain on debt extinguishment and inventory impairments and abandonments before income taxes (in millions) $ 17.4 $ 12.8 $ 4.6 income from continuing operations excluding gain on debt extinguishment and inventory impairments and abandonments (in millions)+ $ 13.4 $ 14.1 $ (0.7 ) net income (loss) $ 13.4 $ (93.6 ) $ 106.9 land and land development spending (in millions) $ 269.0 $ 260.9 $ 8.1 adjusted ebitda (in millions) $ 73.3 $ 59.4 $ 13.8 * change and totals are calculated using unrounded numbers. + there were no inventory impairments and abandonments for the six months ended march 31, 2020. for the six months ended march 31, 2019, gain on debt extinguishment and inventory impairments and abandonments were tax-effected at the effective tax rate of 27.5%. as of march 31, 2020 2019 change backlog units 2,231 1,989 12.2 % dollar value of backlog (in millions) $ 895.0 $ 783.3 14.3 % asp in backlog (in thousands) $ 401.2 $ 393.8 1.9 % land and lots controlled 19,654 22,383 (12.2 )% conference call the company will hold a conference call on april 30, 2020 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 5:00 pm et on may 10, 2020 at 888-566-0596 (for international callers, dial 203-369-3072) with pass code “3740.” 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 potential negative impact of the covid-19 pandemic, which, in addition to exacerbating each of the risks listed 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 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; (ii) 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, which have worsened and may continue to worsen as a result of the covid-19 pandemic, 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; (iii) market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital); (iv) the cyclical nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions; (v) economic changes nationally or in local markets, changes in consumer confidence, wage levels, declines in employment levels, inflation or increases in the quantity and decreases in the price of new homes and resale homes on the market; (vi) shortages of or increased prices for labor, land or raw materials used in housing production, and the level of quality and craftsmanship provided by our subcontractors; (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) estimates related to homes to be delivered in the future (backlog) are imprecise, as they are subject to various cancellation risks that cannot be fully controlled; (x) increases in mortgage interest rates, increased disruption in the availability of mortgage financing, changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes or an increased number of foreclosures; (xi) increased competition or delays in reacting to changing consumer preferences in home design; (xii) 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; (xiii) the potential recoverability of our deferred tax assets; (xiv) 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; (xv) the results of litigation or government proceedings and fulfillment of any related obligations; (xvi) the impact of construction defect and home warranty claims; (xvii) the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred; (xiii) the impact of information technology failures, cybersecurity issues or data security breaches; (xix) terrorist acts, natural disasters, acts of war or other factors over which the company has little or no control; or (xx) the impact on homebuilding in key markets of governmental regulations limiting the availability of water. any forward-looking statement, including any statement expressing confidence regarding future outcomes, speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. new factors emerge from time-to-time, and it is not possible to predict all such factors. -tables follow- beazer homes usa, inc. condensed consolidated statements of operations (unaudited) three months ended six months ended march 31, march 31, in thousands (except per share data) 2020 2019 2020 2019 total revenue $ 489,413 $ 421,260 $ 907,217 $ 823,300 home construction and land sales expenses 410,568 356,329 765,235 696,707 inventory impairments and abandonments — 147,611 — 148,618 gross profit (loss) 78,845 (82,680 ) 141,982 (22,025 ) commissions 18,744 15,998 34,809 31,735 general and administrative expenses 40,050 37,372 79,749 76,014 depreciation and amortization 3,627 2,900 7,054 5,670 operating income (loss) 16,424 (138,950 ) 20,370 (135,444 ) equity in income of unconsolidated entities 147 81 134 17 gain on extinguishment of debt — 216 — 216 other expense, net (1,786 ) (337 ) (3,126 ) (379 ) income (loss) from continuing operations before income taxes 14,785 (138,990 ) 17,378 (135,590 ) expense (benefit) from income taxes 4,170 (38,158 ) 3,959 (42,080 ) income (loss) from continuing operations 10,615 (100,832 ) 13,419 (93,510 ) loss from discontinued operations, net of tax (1 ) (30 ) (59 ) (41 ) net income (loss) $ 10,614 $ (100,862 ) $ 13,360 $ (93,551 ) weighted average number of shares: basic 29,868 30,714 29,808 31,263 diluted 29,975 30,714 30,078 31,263 basic income (loss) per share: continuing operations $ 0.36 $ (3.28 ) $ 0.45 $ (2.99 ) discontinued operations — — — — total $ 0.36 $ (3.28 ) $ 0.45 $ (2.99 ) diluted income (loss) per share: continuing operations $ 0.35 $ (3.28 ) $ 0.45 $ (2.99 ) discontinued operations — — — — total $ 0.35 $ (3.28 ) $ 0.45 $ (2.99 ) three months ended six months ended march 31, march 31, capitalized interest in inventory 2020 2019 2020 2019 capitalized interest in inventory, beginning of period $ 137,010 $ 151,886 $ 136,565 $ 144,645 interest incurred 22,271 25,803 43,827 50,724 capitalized interest impaired — (13,792 ) — (13,907 ) interest expense not qualified for capitalization and included as other expense (1,928 ) (597 ) (3,370 ) (839 ) capitalized interest amortized to home construction and land sales expenses (22,660 ) (18,544 ) (42,329 ) (35,867 ) capitalized interest in inventory, end of period $ 134,693 $ 144,756 $ 134,693 $ 144,756 beazer homes usa, inc. condensed consolidated balance sheets (unaudited) in thousands (except share and per share data) march 31, 2020 september 30, 2019 assets cash and cash equivalents $ 294,265 $ 106,741 restricted cash 18,282 16,053 accounts receivable (net of allowance of $309 and $304, respectively) 20,574 26,395 income tax receivable 9,224 4,935 owned inventory 1,595,300 1,504,248 investments in unconsolidated entities 4,040 3,962 deferred tax assets, net 238,766 246,957 property and equipment, net 25,820 27,421 operating lease right-of-use assets 15,109 — goodwill 11,376 11,376 other assets 6,239 9,556 total assets $ 2,238,995 $ 1,957,644 liabilities and stockholders’ equity trade accounts payable $ 137,238 $ 131,152 operating lease liabilities $ 17,147 $ — other liabilities 108,336 109,429 total debt (net of debt issuance costs of $11,867 and $12,470, respectively) 1,428,792 1,178,309 total liabilities 1,691,513 1,418,890 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, 31,020,398 issued and outstanding and 30,933,110 issued and outstanding, respectively) 31 31 paid-in capital 849,643 854,275 accumulated deficit (302,192 ) (315,552 ) total stockholders’ equity 547,482 538,754 total liabilities and stockholders’ equity $ 2,238,995 $ 1,957,644 inventory breakdown homes under construction $ 634,380 $ 507,542 development projects in progress 706,691 738,201 land held for future development 28,531 28,531 land held for sale 10,716 12,662 capitalized interest 134,693 136,565 model homes 80,289 80,747 total owned inventory $ 1,595,300 $ 1,504,248 beazer homes usa, inc. consolidated operating and financial data – continuing operations three months ended march 31, six months ended march 31, selected operating data 2020 2019 2020 2019 closings: west region 735 606 1,429 1,207 east region 235 213 427 401 southeast region 307 315 533 609 total closings 1,277 1,134 2,389 2,217 new orders, net of cancellations: west region 953 806 1,690 1,325 east region 351 334 584 535 southeast region 357 458 638 714 total new orders, net 1,661 1,598 2,912 2,574 as of march 31, backlog units at end of period: 2020 2019 west region 1,243 976 east region 498 415 southeast region 490 598 total backlog units 2,231 1,989 dollar value of backlog at end of period (in millions) $ 895.0 $ 783.3 in thousands three months ended march 31, six months ended march 31, supplemental financial data 2020 2019 2020 2019 homebuilding revenue: west region $ 267,231 $ 210,430 $ 521,629 $ 419,374 east region 110,011 93,751 187,656 181,516 southeast region 110,744 116,764 196,100 221,037 total homebuilding revenue $ 487,986 $ 420,945 $ 905,385 $ 821,927 revenue: homebuilding $ 487,986 $ 420,945 $ 905,385 $ 821,927 land sales and other 1,427 315 1,832 1,373 total revenue $ 489,413 $ 421,260 $ 907,217 $ 823,300 gross profit (loss): homebuilding $ 78,744 $ (44,148 ) $ 141,852 $ 16,471 land sales and other 101 (38,532 ) 130 (38,496 ) total gross profit (loss) $ 78,845 $ (82,680 ) $ 141,982 $ (22,025 ) reconciliation of homebuilding gross profit and the related gross margin before impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit (loss) and gross margin, the most directly comparable gaap measure, is provided for each period discussed below. management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and level of debt. three months ended march 31, six months ended march 31, in thousands 2020 2019 2020 2019 homebuilding gross profit (loss)/margin $ 78,744 16.1 % $ (44,148 ) (10.5 )% $ 141,852 15.7 % $ 16,471 2.0 % inventory impairments and abandonments (i&a) — 109,023 — 110,030 homebuilding gross profit/margin before i&a 78,744 16.1 % 64,875 15.4 % 141,852 15.7 % 126,501 15.4 % interest amortized to cost of sales 22,660 18,544 42,329 35,867 homebuilding gross profit/margin before i&a and interest amortized to cost of sales $ 101,404 20.8 % $ 83,419 19.8 % $ 184,181 20.3 % $ 162,368 19.8 % reconciliation of adjusted ebitda to total company net income (loss), the most directly comparable gaap measure, is provided for each period discussed below. management believes that adjusted ebitda assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, tax position and level of impairments. these ebitda measures should not be considered alternatives to net income (loss) determined in accordance with gaap as an indicator of operating performance. the reconciliation of adjusted ebitda to total company net income (loss) below differs from prior year, as it reclassifies stock-based compensation expense from an adjustment within ebitda to an adjustment within adjusted ebitda in order to accurately present ebitda per its definition. three months ended march 31, six months ended march 31, ltm ended in thousands 2020 2019 2020 2019 2020 2019 net income (loss) $ 10,614 $ (100,862 ) $ 13,360 $ (93,551 ) $ 27,391 $ (19,537 ) expense (benefit) from income taxes 4,170 (38,168 ) 3,942 (42,092 ) 8,789 (56,691 ) interest amortized to home construction and land sales expenses and capitalized interest impaired 22,660 32,336 42,329 49,774 101,496 106,756 interest expense not qualified for capitalization 1,928 597 3,370 839 5,640 1,079 ebit 39,372 (106,097 ) 63,001 (85,030 ) 143,316 31,607 depreciation and amortization 3,627 2,900 7,054 5,670 16,143 13,904 ebitda 42,999 (103,197 ) 70,055 (79,360 ) 159,459 45,511 stock-based compensation expense 899 2,180 3,210 4,294 9,442 9,344 (gain) loss on extinguishment of debt — (216 ) — (216 ) 25,136 1,719 inventory impairments and abandonments (b) — 133,819 — 134,711 — 139,249 joint venture impairment and abandonment charges — — — — — 341 adjusted ebitda $ 43,898 $ 32,586 $ 73,265 $ 59,429 $ 194,037 $ 196,164 (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.”
