Beazer homes reports first quarter fiscal 2020 results
Atlanta--(business wire)--beazer homes usa, inc. (nyse: bzh) (www.beazer.com) today announced its financial results for the three months ended december 31, 2019. “we were very pleased with our first quarter results,” said allan p. merrill, chairman and ceo of beazer homes. “increases in both home sales and gross margins reflected improved consumer demand for new homes and our efforts to drive increases in profitability and returns. these results have enhanced our visibility and confidence in reaching our fiscal 2020 goals of generating a return on assets above 10% and a double-digit growth rate in adjusted ebitda. “longer term, our focus on delivering ‘extraordinary value at an affordable price’, principally to first time and downsizing buyers, is ideally aligned with demographics and responsive to the challenge of providing affordable new homes. we remain confident in our ability to improve profitability and returns while reducing debt below $1 billion in the years ahead.” beazer homes fiscal first quarter 2020 highlights and comparison to fiscal first quarter 2019 net income from continuing operations of $2.8 million, compared to net income from continuing operations of $7.3 million in fiscal first quarter 2019 adjusted ebitda of $29.4 million, up 9.4% homebuilding revenue of $417.4 million, up 4.1% on a 2.7% increase in home closings to 1,112 and a 1.4% increase in average selling price to $375.4 thousand homebuilding gross margin was 15.1%, flat year-over-year. excluding impairments, abandonments and amortized interest, homebuilding gross margin was 19.8%, up 10 basis points sg&a as a percentage of total revenue was 13.3%, down 20 basis points year-over-year unit orders of 1,251, up 28.2% on an increase in sales/community/month to 2.5 and an increase in average community count to 168 dollar value of backlog of $732.1 million, up 23.4% unrestricted cash at quarter end was $41.3 million; total liquidity was $261.3 million the following provides additional details on the company's performance during the fiscal first quarter 2020: profitability. first quarter adjusted ebitda of $29.4 million was up $2.5 million year-over-year. net income from continuing operations was $2.8 million, generating diluted earnings per share of $0.09. net income was down $4.5 million year-over-year with less income tax credits and incremental interest expense more than offsetting higher ebitda . orders. net new orders for the first quarter increased 28.2% year-over-year, to 1,251. the increase in net new orders was primarily driven by a 21.8% increase in sales/community/month to 2.5. the cancellation rate for the quarter was 14.9%, down 490 basis points year-over-year. homebuilding revenue. first quarter closings rose 2.7% to 1,112 homes. combined with a 1.4% increase in the average selling price to $375.4 thousand, homebuilding revenue was $417.4 million, up 4.1% year-over-year. backlog. the dollar value of homes in backlog as of december 31, 2019 increased 23.4% to $732.1 million, or 1,847 homes, compared to $593.1 million, or 1,525 homes, at the same time last year. the average selling price of homes in backlog was $396.4 thousand, up 1.9% year-over-year. homebuilding gross margin. homebuilding gross margin (excluding impairments, abandonments and amortized interest) was 19.8% for the first quarter, up 10 basis points year-over-year. sg&a expenses. selling, general and administrative expenses, as a percentage of total revenue, were 13.3% for the quarter, down 20 basis points year-over-year. liquidity. at the close of the first quarter, the company had approximately $261.3 million of available liquidity, including $41.3 million of unrestricted cash and $220.0 million available on its secured revolving credit facility after accounting for borrowings. gatherings the first quarter of fiscal 2020 represented another step forward for our gatherings business. fiscal year-over-year, gatherings experienced an increase in sales in both actively selling communities located in dallas and orlando. we anticipate selling efforts to begin in two new communities in dallas and nashville during early calendar 2020, adding to our selling opportunities. new communities are under various stages of entitlement and development in atlanta, charleston, dallas, houston, maryland, and orlando, positioning gatherings for continued growth in fiscal 2020. summary results for the three months ended december 31, 2019 are as follows: three months ended december 31, 2019 2018 change* new home orders, net of cancellations 1,251 976 28.2 % orders per community per month 2.5 2.0 21.8 % average active community count 168 160 5.2 % actual community count at quarter-end 166 162 2.5 % cancellation rates 14.9 % 19.8 % -490 bps total home closings 1,112 1,083 2.7 % average selling price (asp) from closings (in thousands) $ 375.4 $ 370.3 1.4 % homebuilding revenue (in millions) $ 417.4 $ 401.0 4.1 % homebuilding gross margin 15.1 % 15.1 % 0 bps homebuilding gross margin, excluding impairments and abandonments (i&a) 15.1 % 15.4 % -30 bps homebuilding gross margin, excluding i&a and interest amortized to cost of sales 19.8 % 19.7 % 10 bps income from continuing operations before income taxes (in millions) $ 2.6 $ 3.4 $ (0.8 ) benefit from income taxes (in millions) $ (0.2 ) $ (3.9 ) $ 3.7 income from continuing operations (in millions) $ 2.8 $ 7.3 $ (4.5 ) basic income per share from continuing operations $ 0.09 $ 0.23 $ (0.14 ) diluted income per share from continuing operations $ 0.09 $ 0.23 $ (0.14 ) income from continuing operations before income taxes (in millions) $ 2.6 $ 3.4 $ (0.8 ) inventory impairments and abandonments (in millions) $ — $ 1.0 $ (1.0 ) income from continuing operations excluding inventory impairments and abandonments before income taxes (in millions) $ 2.6 $ 4.4 $ (1.8 ) income from continuing operations excluding inventory impairments and abandonments after income taxes (in millions)+ $ 2.8 $ 8.1 $ (5.3 ) net income $ 2.7 $ 7.3 $ (4.6 ) land and land development spending (in millions) $ 146.0 $ 121.0 $ 25.0 adjusted ebitda (in millions) $ 29.4 $ 26.8 $ 2.5 ltm adjusted ebitda (in millions) $ 182.7 $ 203.1 $ (20.4 ) * change and totals are calculated using unrounded numbers. + there was no inventory impairments and abandonments for the three months ended december 31, 2019. for the three months ended december 31, 2018, inventory impairments and abandonments were tax-effected at the effective tax rate of 24.9%. “ltm” indicates amounts for the trailing 12 months. as of december 31, 2019 2018 change backlog units 1,847 1,525 21.1 % dollar value of backlog (in millions) $ 732.1 $ 593.1 23.4 % asp in backlog (in thousands) $ 396.4 $ 388.9 1.9 % land and lots controlled 19,742 23,149 (14.7 )% conference call the company will hold a conference call on january 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 10:00 pm et on february 6, 2020 at 800-324-4696 (for international callers, dial 402-220-3856) 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. 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.com 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) 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; (iii) 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; (iv) 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; (v) 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; (vi) 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; (vii) 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; (viii) our allocation of capital and the cost of and ability to access capital, due to factors such as limitations in the capital markets or adverse credit market conditions, and ability to otherwise meet our ongoing liquidity needs, including the impact of any downgrades of our credit ratings or reduction in our liquidity levels; (ix) our ability to reduce our outstanding indebtedness and to comply with covenants in our debt agreements or satisfy such obligations through repayment or refinancing; (x) our ability to continue to execute and complete our capital allocation plans, including our share and debt repurchase programs; (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; (xviii) 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 december 31, in thousands (except per share data) 2019 2018 total revenue $ 417,804 $ 402,040 home construction and land sales expenses 354,667 340,378 inventory impairments and abandonments — 1,007 gross profit 63,137 60,655 commissions 16,065 15,737 general and administrative expenses 39,699 38,642 depreciation and amortization 3,427 2,770 operating income 3,946 3,506 equity in loss of unconsolidated entities (13 ) (64 ) other expense, net (1,340 ) (42 ) income from continuing operations before income taxes 2,593 3,400 benefit from income taxes (211 ) (3,922 ) income from continuing operations 2,804 7,322 loss from discontinued operations, net of tax (58 ) (11 ) net income $ 2,746 $ 7,311 weighted average number of shares: basic 29,746 31,801 diluted 30,138 32,055 basic income per share: continuing operations $ 0.09 $ 0.23 discontinued operations — — total $ 0.09 $ 0.23 diluted income per share: continuing operations $ 0.09 $ 0.23 discontinued operations — — total $ 0.09 $ 0.23 three months ended december 31, capitalized interest in inventory 2019 2018 capitalized interest in inventory, beginning of period $ 136,565 $ 144,645 interest incurred 21,556 24,921 capitalized interest impaired — (115 ) interest expense not qualified for capitalization and included as other expense (1,442 ) (242 ) capitalized interest amortized to home construction and land sales expenses (19,669 ) (17,323 ) capitalized interest in inventory, end of period $ 137,010 $ 151,886 beazer homes usa, inc. condensed consolidated balance sheets (unaudited) in thousands (except share and per share data) december 31, 2019 september 30, 2019 assets cash and cash equivalents $ 41,277 $ 106,741 restricted cash 18,759 16,053 accounts receivable (net of allowance of $313 and $304, respectively) 19,439 26,395 income tax receivable 4,612 4,935 owned inventory 1,574,280 1,504,248 investments in unconsolidated entities 3,930 3,962 deferred tax assets, net 247,382 246,957 property and equipment, net 26,623 27,421 operating lease right-of-use assets 12,975 — goodwill 11,376 11,376 other assets 7,451 9,556 total assets $ 1,968,104 $ 1,957,644 liabilities and stockholders’ equity trade accounts payable $ 110,153 $ 131,152 operating lease liabilities $ 15,158 $ — other liabilities 95,451 109,429 total debt (net of debt issuance costs of $12,080 and $12,470, respectively) 1,208,062 1,178,309 total liabilities 1,428,824 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, 31,383,068 issued and outstanding and 30,933,110 issued and outstanding, respectively) 31 31 paid-in capital 852,055 854,275 accumulated deficit (312,806 ) (315,552 ) total stockholders’ equity 539,280 538,754 total liabilities and stockholders’ equity $ 1,968,104 $ 1,957,644 inventory breakdown homes under construction $ 580,580 $ 507,542 development projects in progress 732,380 738,201 land held for future development 28,531 28,531 land held for sale 11,443 12,662 capitalized interest 137,010 136,565 model homes 84,336 80,747 total owned inventory $ 1,574,280 $ 1,504,248 beazer homes usa, inc. consolidated operating and financial data – continuing operations three months ended december 31, selected operating data 2019 2018 closings: west region 694 601 east region 192 188 southeast region 226 294 total closings 1,112 1,083 new orders, net of cancellations: west region 737 519 east region 233 201 southeast region 281 256 total new orders, net 1,251 976 as of december 31, backlog units at end of period: 2019 2018 west region 1,025 776 east region 382 294 southeast region 440 455 total backlog units 1,847 1,525 dollar value of backlog at end of period (in millions) $ 732.1 $ 593.1 in thousands three months ended december 31, supplemental financial data 2019 2018 homebuilding revenue: west region $ 254,398 $ 208,944 east region 77,645 87,765 southeast region 85,356 104,273 total homebuilding revenue $ 417,399 $ 400,982 revenue: homebuilding $ 417,399 $ 400,982 land sales and other 405 1,058 total revenue $ 417,804 $ 402,040 gross profit: homebuilding $ 63,108 $ 60,619 land sales and other 29 36 total gross profit $ 63,137 $ 60,655 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 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 december 31, in thousands 2019 2018 homebuilding gross profit/margin $ 63,108 15.1 % $ 60,619 15.1 % inventory impairments and abandonments (i&a) — 1,007 homebuilding gross profit/margin before i&a 63,108 15.1 % 61,626 15.4 % interest amortized to cost of sales 19,669 17,323 homebuilding gross profit/margin before i&a and interest amortized to cost of sales $ 82,777 19.8 % $ 78,949 19.7 % 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. three months ended december 31, ltm ended december 31,(a) in thousands 2019 2018 2019 2018 net income (loss) $ 2,746 $ 7,311 $ (84,085 ) $ 92,883 benefit from income taxes (228 ) (3,924 ) (33,549 ) (17,530 ) interest amortized to home construction and land sales expenses and capitalized interest impaired 19,669 17,438 111,172 94,075 interest expense not qualified for capitalization 1,442 242 4,309 2,132 ebit 23,629 21,067 (2,153 ) 171,560 depreciation and amortization and stock-based compensation amortization 5,738 4,884 26,139 23,832 ebitda 29,367 25,951 23,986 195,392 loss on extinguishment of debt — — 24,920 1,935 inventory impairments and abandonments (b) — 892 133,819 5,430 joint venture impairment and abandonment charges — — — 341 adjusted ebitda $ 29,367 $ 26,843 $ 182,725 $ 203,098 (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.”
