Beazer Homes USA (NYSE:BZH) after market close Thursday reported net income from continuing operations of $2.8 million, or $0.09 per share, for its fiscal first quarter ended Dec. 31, compared to net income from continuing operations of $7.3 million, or $0.23 per share in fiscal first quarter 2019. Wall Street was expecting a gain of $0.08 per share.
Among the results:
- Adjusted EBITDA of $29.4 million, up 9.4%
- Home building 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
- Home building gross margin was 15.1%, flat year-over-year. Excluding impairments, abandonments and amortized interest, home building 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.
Home building 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, home building 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 the company’s Gatherings business. Fiscal year-over-year, Gatherings experienced an increase in sales in both actively selling communities located in Dallas and Orlando. Beazer said it anticipates selling efforts to begin in two new communities in Dallas and Nashville during early calendar 2020. 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.
“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.”
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 | )% | ||||
