US Market News
3月前
Beazer Homes Announces Expansion of Revolving Credit Facility to $525 millionMarch 17, 2026 4:30 PM
Business Wire
Beazer Homes USA, Inc. (the “Company”) (NYSE: BZH) announced that it has entered into a third amendment to its existing senior unsecured revolving credit facility (“Credit Facility”) that increased the available aggregate commitment amount by $160 million to $525 million. The amendment also extends the maturity date of the Credit Facility from March 15, 2028 to March 13, 2030.
The amendment to the Credit Facility was arranged by JP Morgan Chase Bank, N.A., Royal Bank of Canada, Truist Securities, Inc. and Regions Capital Markets, a division of Regions Bank. Royal Bank of Canada, Truist Bank and Regions Bank served as Syndication Agents, and JP Morgan Chase Bank, N.A., as Administrative Agent.
“We continue to execute our differentiated product strategy and progress toward achieving our Multi-Year Goals for growing community count, de-leveraging, and increasing book value per share,” said David Goldberg, Senior Vice President and Chief Financial Officer. “The expanded revolver provides increased liquidity and financial flexibility as we pursue these goals and reflects the broad support from our valued banking partners.”
About Beazer Homes
Beazer Homes (NYSE: BZH), headquartered in Atlanta, Georgia, is a leading national homebuilder in energy-efficient construction. Building on a legacy spanning nine generations, Beazer crafts homes that deliver savings and lasting value. Our trusted team of experts guide homebuyers through the building and purchasing process to deliver an industry-leading customer experience. With curated design options, buyers can personalize their homes with confidence. Beazer's exclusive Mortgage Choice program provides access to competitive loan offers from multiple lenders, helping homebuyers choose the best financing for their individual needs. Beazer builds in 13 states nationwide. Learn more at beazer.com or follow us @BeazerHomes.
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:
macroeconomic uncertainty, including high levels of inflation, elevated interest rates and insurance costs, stock market volatility, enhanced and/or altered government regulation resulting from legislation and/or executive orders, and historic changes in U.S. trade policy, negatively impacting consumer sentiment and softening demand for the homes we sell;
elevated mortgage interest rates for prolonged periods, as well as further increases to, and reduced availability of, mortgage financing;
supply chain challenges (including as a result of U.S. trade policies and retaliatory responses from other countries) negatively impacting our homebuilding production, including shortages of raw materials and other critical components such as windows, doors, and appliances;
our ability to meet or achieve our sustainability related goals, aspirations, initiatives, and our public statements and disclosures regarding them;
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;
factors affecting margins, such as adjustments to home pricing, increased sales incentives and mortgage rate buy down programs in order to remain competitive;
decreased revenues;
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 cycle times and production and overhead cost structures;
not being able to pass on cost increases (including cost increases due to increasing the energy efficiency of our homes) through pricing increases;
the availability and cost of land and the risks associated with the future value of our inventory, including impairments and abandonment charges;
our ability to raise debt and/or equity capital, due to factors such as limitations in the capital markets (including market volatility), adverse credit market conditions and financial institution disruptions, 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;
market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital);
inefficient or ineffective allocation of capital, including with respect to planned share repurchases;
market conditions and other factors outside our control that adversely impact our ability to execute on our planned share repurchases;
changes in tax laws, such as the One Big Beautiful Bill Act (OBBBA), or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as the IRS's guidance regarding heightened qualification requirements for federal credits for building energy-efficient homes;
increased competition or delays in reacting to changing consumer preferences in home design;
natural disasters, severe weather, 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;
shortages of or increased costs for labor used in housing production, including as a result of federal or state legislation, and/or enforcement, and the level of quality and craftsmanship provided by such labor;
terrorist acts, protests and civil unrest, political uncertainty, acts of war or other factors over which the Company has no control, such as the conflict between Russia and Ukraine, the instability and tension in Gaza, and other instabilities and tensions in the Middle East;
the potential recoverability of our deferred tax assets;
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;
the results of litigation or government proceedings and fulfillment of any related obligations;
the impact of construction defect and home warranty claims;
the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred;
the impact of information technology failures, cybersecurity issues or data security breaches, including cybersecurity incidents deploying evolving artificial intelligence tools and incidents impacting third-party service providers that we depend on to conduct our business;
the impact of governmental regulations on homebuilding in key markets, such as regulations limiting the availability of water and electricity (including availability of electrical equipment such as transformers and meters); and
the success of our sustainability initiatives, 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.
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20260317258912/en/
Beazer Homes USA, Inc.
Mark Chekanow, CFA
Vice President, Investor Relations
917.365.0085
investor.relations@beazer.com
Original: Beazer Homes Announces Expansion of Revolving Credit Facility to $525 million
US Market News
4月前
Beazer Homes Reports First Quarter Fiscal 2026 ResultsJanuary 29, 2026 4:15 PM
Business Wire
Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the three months ended December 31, 2025.
"Results for our first fiscal quarter of 2026 reflected persistent demand challenges and elevated incentives in the market," said Allan P. Merrill, the Company’s Chairman and Chief Executive Officer. "However, with national builders slowing starts last year and lower mortgage rates, we are cautiously optimistic for the spring selling season."
"As we navigate an uncertain environment, we remain focused on driving sequential margin improvements through the remainder of fiscal 2026 through construction cost reductions, favorable mix impacts, and strong performance from our newest communities. We will also realign our land portfolio through selective asset sales and use a portion of the proceeds to accelerate highly accretive share repurchases."
Speaking to Beazer’s Multi-Year Goals, Mr. Merrill said, "During the year we expect to make further progress toward our 2027 goals for community count, deleveraging, and book value per share growth. We are confident in our differentiated product strategy, the value of our assets, and our ability to generate improving returns over time, which positions the Company well to create long-term shareholder value.”
Beazer Homes Fiscal First Quarter 2026 Highlights and Comparison to Fiscal First Quarter 2025
Net loss was $32.6 million, or net loss of $1.13 per diluted share. This included a litigation-related charge recognized during the first fiscal quarter which reduced diluted earnings per share by $0.23. During the fiscal first quarter 2025, net income was $3.1 million, or $0.10 per diluted share
Adjusted EBITDA was a loss of $11.2 million, compared to Adjusted EBITDA of $23.0 million a year ago
Homebuilding revenue was $359.7 million, down 21.9% on a 22.8% decrease in home closings to 700, partially offset by a 1.2% increase in average selling price (ASP) to $513.9 thousand
Homebuilding gross margin was 10.4%, down 480 basis points compared to a year ago. Excluding impairments, abandonments and amortized interest, homebuilding gross margin was 14.0%, down 420 basis points
SG&A as a percentage of total revenue was 17.9%, up 390 basis points
Net new orders were 763, down 18.1% on a 21.1% decrease in orders per community per month to 1.5, partially offset by a 3.7% increase in average active community count to 167
Active community count at period-end of 168, up 3.1%
Backlog dollar value was $573.3 million, down 29.7% on a 33.1% decrease in backlog units to 1,008, partially offset by a 5.0% increase in ASP of homes in backlog to $568.7 thousand
Land acquisition and land development spending was $180.7 million, down 14.5% from $211.3 million
Repurchased $15.1 million of the Company's outstanding common stock through open market transactions
Controlled lots of 24,832, down 14.0% from 28,874
Unrestricted cash at quarter end was $120.8 million; total liquidity was $342.7 million
Total debt to total capitalization ratio of 48.4% at quarter end compared to 46.5% a year ago. Net debt to net capitalization ratio was 45.6% at quarter end compared to 44.5% a year ago
The following provides additional details on the Company's performance during the fiscal first quarter 2026:
Profitability. Net loss was $32.6 million, generating diluted loss per share of $1.13. This included a litigation-related charge recognized during the first fiscal quarter which reduced diluted earnings per share by $0.23. First quarter Adjusted EBITDA was a loss of $11.2 million compared to Adjusted EBITDA of $23.0 million a year ago. The decrease in Adjusted EBITDA was primarily due to lower closings and lower gross margin as well as the impact of the litigation-related charge.
Orders. Net new orders for the first quarter decreased to 763, down 18.1% from 932 in the prior year quarter, driven by a 21.1% decrease in sales pace to 1.5 orders per community per month from 1.9 in the prior year quarter, partially offset by a 3.7% increase in average community count to 167 from 161 a year ago. The cancellation rate for the quarter was 18.3%, up from 16.5% in the prior year quarter.
Backlog. The dollar value of homes in backlog as of December 31, 2025 was $573.3 million, representing 1,008 homes, compared to $816.0 million, representing 1,507 homes, at the same time last year. The ASP of homes in backlog was $568.7 thousand, up 5.0% versus the prior year quarter. The increase in backlog ASP was primarily due to changes in product and community mix.
Homebuilding Revenue. First quarter homebuilding revenue was $359.7 million, down 21.9% year-over-year. The decrease in homebuilding revenue was driven by a 22.8% decrease in home closings to 700 homes, partially offset by a 1.2% increase in ASP to $513.9 thousand. The decrease in closings was primarily due to the lower beginning backlog.
Homebuilding Gross Margin. Homebuilding gross margin was 10.4%, down 480 basis points compared to a year ago. Excluding impairments, abandonments and amortized interest, homebuilding gross margin was 14.0% for the first quarter, down from 18.2% in the prior year quarter primarily due to an increase in price concessions and closing cost incentives, changes in product and community mix, and a litigation-related charge recognized during the quarter ended December 31, 2025. The litigation-related charge reduced homebuilding gross margin by 1.8%.
SG&A Expenses. Selling, general and administrative expenses as a percentage of total revenue was 17.9% for the quarter, up 390 basis points year-over-year primarily due to lower homebuilding revenue.
Land Position. For the current fiscal quarter, land acquisition and land development spending was $180.7 million, down 14.5% year-over-year. Controlled lots decreased 14.0% to 24,832, compared to 28,874 from the prior year quarter. Excluding land held for future development and land held for sale lots, active lots controlled were 23,498, down 16.6% year-over-year. As of December 31, 2025, the Company controlled 61.0% of its total active lots through option agreements compared to 58.9% as of December 31, 2024.
Liquidity. At the close of the first quarter, the Company had $342.7 million of available liquidity, including $120.8 million of unrestricted cash and $221.9 million of remaining capacity under the unsecured revolving credit facility, compared to total available liquidity of $335.4 million a year ago.
Share Repurchases. During the quarter, the Company repurchased $15.1 million of its outstanding common stock through open market transactions at an average price per share of $21.72.
Conference Call
The Company will hold a conference call on January 29, 2026 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 630-395-0227). To be admitted to the call, enter the pass code "8571348." A replay of the conference call will be available, until 11:59 PM ET on February 12, 2026 at 800-391-9853 (for international callers, dial 203-369-3269) with pass code "3740."
Summary results for the three months ended December 31, 2025 and 2024 are as follows:
Three Months Ended December 31,
2025
2024
Change*
New home orders, net of cancellations
763
932
(18.1
)%
Cancellation rates
18.3
%
16.5
%
180 bps
Orders per community per month
1.5
1.9
(21.1
)%
Average active community count
167
161
3.7
%
Active community count at quarter-end
168
163
3.1
%
Land acquisition and land development spending (in millions)
$
180.7
$
211.3
(14.5
)%
Total home closings
700
907
(22.8
)%
ASP from closings (in thousands)
$
513.9
$
507.6
1.2
%
Homebuilding revenue (in millions)
$
359.7
$
460.4
(21.9
)%
Homebuilding gross margin
10.4
%
15.2
%
(480) bps
Homebuilding gross margin, excluding impairments and abandonments (I&A) (Non-GAAP)
10.8
%
15.2
%
(440) bps
Homebuilding gross margin, excluding I&A and interest amortized to cost of sales (Non-GAAP)
14.0
%
18.2
%
(420) bps
SG&A expenses as a percentage of total revenue
17.9
%
14.0
%
390 bps
(Loss) income before income taxes (in millions)
$
(31.1
)
$
3.2
n/m(a)
Expense from income taxes (in millions)
$
1.5
$
—
n/m(a)
Net (loss) income (in millions)
$
(32.6
)
$
3.1
n/m(a)
Basic (loss) income per share
$
(1.13
)
$
0.10
n/m(a)
Diluted (loss) income per share
$
(1.13
)
$
0.10
n/m(a)
Adjusted EBITDA (in millions) (Non-GAAP)
$
(11.2
)
$
23.0
n/m(a)
LTM(b) Adjusted EBITDA (in millions) (Non-GAAP)
$
123.4
$
228.4
(46.0
)%
Total debt to total capitalization ratio
48.4
%
46.5
%
190 bps
Net debt to net capitalization ratio (Non-GAAP)
45.6
%
44.5
%
110 bps
* Change and totals are calculated using unrounded numbers.
(a) n/m - indicates the percentage is "not meaningful."
(b)LTM indicates amounts for the trailing 12 months.
As of December 31,
2025
2024
Change
Backlog units
1,008
1,507
(33.1
)%
Dollar value of backlog (in millions)
$
573.3
$
816.0
(29.7
)%
ASP in backlog (in thousands)
$
568.7
$
541.5
5.0
%
Land and lots controlled
24,832
28,874
(14.0
)%
About Beazer Homes
Beazer Homes (NYSE: BZH), headquartered in Atlanta, Georgia, is a leading national homebuilder in energy-efficient construction. Building on a legacy spanning nine generations, Beazer crafts homes that deliver savings and lasting value. Our trusted team of experts guide homebuyers through the building and purchasing process to deliver an industry-leading customer experience. With curated design options, buyers can personalize their homes with confidence. Beazer's exclusive Mortgage Choice program provides access to competitive loan offers from multiple lenders, helping homebuyers choose the best financing for their individual needs. Beazer builds in 13 states nationwide. Learn more at beazer.com or follow us @BeazerHomes.
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:
macroeconomic uncertainty, including high levels of inflation, elevated interest rates and insurance costs, stock market volatility, enhanced and/or altered government regulation resulting from legislation and/or executive orders, and historic changes in U.S. trade policy, negatively impacting consumer sentiment and softening demand for the homes we sell;
elevated mortgage interest rates for prolonged periods, as well as further increases to, and reduced availability of, mortgage financing;
supply chain challenges (including as a result of U.S. trade policies and retaliatory responses from other countries) negatively impacting our homebuilding production, including shortages of raw materials and other critical components such as windows, doors, and appliances;
our ability to meet or achieve our sustainability related goals, aspirations, initiatives, and our public statements and disclosures regarding them;
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;
factors affecting margins, such as adjustments to home pricing, increased sales incentives and mortgage rate buy down programs in order to remain competitive;
decreased revenues;
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 cycle times and production and overhead cost structures;
not being able to pass on cost increases (including cost increases due to increasing the energy efficiency of our homes) through pricing increases;
the availability and cost of land and the risks associated with the future value of our inventory, including impairments and abandonment charges;
our ability to raise debt and/or equity capital, due to factors such as limitations in the capital markets (including market volatility), adverse credit market conditions and financial institution disruptions, 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;
market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital);
inefficient or ineffective allocation of capital, including with respect to planned share repurchases;
market conditions and other factors outside our control that adversely impact our ability to execute on our planned share repurchases;
changes in tax laws, such as the One Big Beautiful Bill Act (OBBBA), or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as the IRS's guidance regarding heightened qualification requirements for federal credits for building energy-efficient homes;
increased competition or delays in reacting to changing consumer preferences in home design;
natural disasters, severe weather, 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;
shortages of or increased costs for labor used in housing production, including as a result of federal or state legislation, and/or enforcement, and the level of quality and craftsmanship provided by such labor;
terrorist acts, protests and civil unrest, political uncertainty, acts of war or other factors over which the Company has no control, such as the conflict between Russia and Ukraine, the instability and tension in Gaza, and other instabilities and tensions in the Middle East;
the potential recoverability of our deferred tax assets;
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;
the results of litigation or government proceedings and fulfillment of any related obligations;
the impact of construction defect and home warranty claims;
the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred;
the impact of information technology failures, cybersecurity issues or data security breaches, including cybersecurity incidents deploying evolving artificial intelligence tools and incidents impacting third-party service providers that we depend on to conduct our business;
the impact of governmental regulations on homebuilding in key markets, such as regulations limiting the availability of water and electricity (including availability of electrical equipment such as transformers and meters); and
the success of our sustainability initiatives, 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.
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)
2025
2024
Total revenue
$
363,491
$
468,953
Home construction and land sales expenses
323,917
396,875
Inventory impairments and abandonments
2,370
—
Gross profit
37,204
72,078
Commissions
12,016
16,113
General and administrative expenses
52,989
49,772
Depreciation and amortization
4,042
4,055
Operating (loss) income
(31,843
)
2,138
Other income, net
778
1,028
(Loss) income before income taxes
(31,065
)
3,166
Expense from income taxes
1,532
36
Net (loss) income
$
(32,597
)
$
3,130
Weighted-average number of shares:
Basic
28,928
30,426
Diluted
28,928
30,800
(Loss) income per share:
Basic
$
(1.13
)
$
0.10
Diluted
(1.13
)
0.10
Three Months Ended
December 31,
Capitalized Interest in Inventory
2025
2024
Capitalized interest in inventory, beginning of period
$
131,845
$
124,182
Interest incurred
19,756
20,161
Capitalized interest impaired
(66
)
—
Capitalized interest amortized to home construction and land sales expenses
(11,857
)
(13,910
)
Capitalized interest in inventory, end of period
$
139,678
$
130,433
BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
in thousands (except share and per share data)
December 31, 2025
September 30, 2025
ASSETS
Cash and cash equivalents
$
120,757
$
214,705
Restricted cash
3,592
3,866
Accounts receivable (net of allowance of $266 and $266, respectively)
92,759
78,145
Inventory
2,140,766
2,029,433
Deferred tax assets, net
141,953
142,647
Property and equipment, net
49,461
47,945
Operating lease right-of-use assets
33,100
34,987
Goodwill
11,376
11,376
Other assets
45,949
46,604
Total assets
$
2,639,713
$
2,609,708
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable
$
120,149
$
143,481
Operating lease liabilities
27,093
27,762
Other liabilities
167,168
160,445
Total debt (net of debt issuance costs of $6,187 and $6,611, respectively)
1,125,055
1,029,114
Total liabilities
1,439,465
1,360,802
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, 29,507,049 issued and outstanding and 29,762,293 issued and outstanding, respectively)
30
30
Paid-in capital
809,042
825,103
Retained earnings
391,176
423,773
Total stockholders’ equity
1,200,248
1,248,906
Total liabilities and stockholders’ equity
$
2,639,713
$
2,609,708
Inventory Breakdown
Homes under construction
$
701,010
$
692,327
Land under development
1,090,862
1,065,702
Land held for future development
19,489
19,489
Land held for sale
73,218
47,368
Capitalized interest
139,678
131,845
Model homes
82,467
72,702
Land not owned under option agreements
34,042
—
Total inventory
$
2,140,766
$
2,029,433
BEAZER HOMES USA, INC.
SUPPLEMENTAL OPERATING AND FINANCIAL DATA
Three Months Ended December 31,
SELECTED OPERATING DATA
2025
2024
Closings:
West region
436
581
East region
177
201
Southeast region
87
125
Total closings
700
907
New orders, net of cancellations:
West region
458
589
East region
176
227
Southeast region
129
116
Total new orders, net
763
932
As of December 31,
Backlog units:
2025
2024
West region
547
973
East region
227
341
Southeast region
234
193
Total backlog units
1,008
1,507
Aggregate dollar value of homes in backlog (in millions)
$
573.3
$
816.0
ASP in backlog (in thousands)
$
568.7
$
541.5
in thousands
Three Months Ended December 31,
SUPPLEMENTAL FINANCIAL DATA
2025
2024
Homebuilding revenue:
West region
$
220,209
$
291,863
East region
93,126
108,564
Southeast region
46,407
59,995
Total homebuilding revenue
$
359,742
$
460,422
Revenue:
Homebuilding
$
359,742
$
460,422
Land sales and other
3,749
8,531
Total revenue
$
363,491
$
468,953
Gross profit:
Homebuilding
$
37,416
$
69,975
Land sales and other
(212
)
2,103
Total gross profit
$
37,204
$
72,078
Reconciliation of homebuilding gross profit and homebuilding gross margin (GAAP measures) to homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales (non-GAAP measures) 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 non-GAAP financial measures may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
Three Months Ended December 31,
in thousands
2025
2024
Homebuilding gross profit/margin (GAAP)
$
37,416
10.4
%
$
69,975
15.2
%
Inventory impairments and abandonments (I&A)
1,325
—
Homebuilding gross profit/margin excluding I&A (Non-GAAP)
38,741
10.8
%
69,975
15.2
%
Interest amortized to cost of sales
11,754
13,910
Homebuilding gross profit/margin excluding I&A and interest amortized to cost of sales (Non-GAAP)
$
50,495
14.0
%
$
83,885
18.2
%
Reconciliation of Net (Loss) Income (GAAP measure) to Adjusted EBITDA (Non-GAAP measure) is provided for each period discussed below. Management believes that Adjusted EBITDA assists investors in understanding and comparing core operating results and underlying business trends by eliminating many of the differences in companies' respective capitalization, tax position, level of impairments, and other non-recurring items. This non-GAAP financial measure may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
Three Months Ended December 31,
LTM Ended December 31,(a)
in thousands
2025
2024
2025
2024
Net (loss) income (GAAP)
$
(32,597
)
$
3,130
$
9,861
$
121,577
Expense from income taxes
1,532
36
(3,242
)
17,765
Interest amortized to home construction and land sales expenses and capitalized interest impaired
11,923
13,910
76,879
70,953
EBIT (Non-GAAP)
(19,142
)
17,076
83,498
210,295
Depreciation and amortization
4,042
4,055
19,155
16,689
EBITDA (Non-GAAP)
(15,100
)
21,131
102,653
226,984
Stock-based compensation expense
1,554
1,913
6,979
7,631
Loss on extinguishment of debt
—
—
—
424
Inventory impairments and abandonments(b)
2,304
—
13,801
1,996
Gain on sale of investment(c)
—
—
—
(8,591
)
Adjusted EBITDA (Non-GAAP)
$
(11,242
)
$
23,044
$
123,433
$
228,444
(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."
(c)
We previously held a minority interest in a technology company specializing in digital marketing for new home communities, which was sold during the quarter ended March 31, 2024. In exchange for the previously held investment, we received cash in escrow along with a minority partnership interest in the acquiring company, which was recorded within other assets in our condensed consolidated balance sheets. The resulting gain of $8.6 million from this transaction was recognized in other income, net on our condensed consolidated statement of operations. The Company believes excluding this one-time gain from Adjusted EBITDA provides a better reflection of the Company's performance as this item is not representative of our core operations.
Reconciliation of total debt to total capitalization ratio (GAAP measure) to net debt to net capitalization ratio (non-GAAP measure) is provided for each period below. Management believes that net debt to net capitalization ratio is useful in understanding the leverage employed in our operations and as an indicator of our ability to obtain financing. This non-GAAP financial measure may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
in thousands
As of December 31,
2025
As of December 31,
2024
Total debt (GAAP)
$
1,125,055
$
1,071,290
Stockholders' equity (GAAP)
1,200,248
1,234,048
Total capitalization (GAAP)
$
2,325,303
$
2,305,338
Total debt to total capitalization ratio (GAAP)
48.4
%
46.5
%
Total debt (GAAP)
$
1,125,055
$
1,071,290
Less: cash and cash equivalents (GAAP)
120,757
80,379
Net debt (Non-GAAP)
1,004,298
990,911
Stockholders' equity (GAAP)
1,200,248
1,234,048
Net capitalization (Non-GAAP)
$
2,204,546
$
2,224,959
Net debt to net capitalization ratio (Non-GAAP)
45.6
%
44.5
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20260129820038/en/
Beazer Homes USA, Inc.
David I. Goldberg
Sr. Vice President & Chief Financial Officer
770-829-3700
Mark Chekanow, CFA
Vice President, Investor Relations
917-365-0085
investor.relations@beazer.com
Original: Beazer Homes Reports First Quarter Fiscal 2026 Results
Wildbilly
13年前
Beazer Homes Is All In
http://seekingalpha.com/article/1622742-beazer-homes-is-all-in?source=email_rt_article_readmore
about: BZH (Beazer Homes USA, Inc.)
Editor's notes: Strong growth potential at BZH should lead to multiple expansion and improving earnings. With the help of deferred tax assets, shares could see 90% upside by the end of FY14.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Beazer Homes USA (BZH), the once $3.5 billion market cap homebuilder, is not afraid to show its hand. While the memory of overbuilding real estate remains etched in the minds of many CEOs, the significantly smaller Beazer Homes (current market cap now just over $400 million) has decided to go all in. With the housing recovery in this country still estimated to be in the early innings, the move appears well timed and could provide significant upside potential for equity holders. Beazer CEO Allan Merrill is enthusiastic about the company poised to report full-year profitability for the first time in nearly a decade during FY14.
The stock price has significantly lagged the rest of the industry over the past decade (see chart below) and many analysts and Wall Street research firms have discontinued coverage due to the asset class change from small-cap to micro-cap. But like any poker player will tell you, the longer you keep playing the game, the greater your odds of winning become. Beazer has made it through the roughest housing downturn in the company's history and been severely beaten down, but not knocked out. The housing game is still being played and with a growing backlog, massive inventory purchase program and significant deferred tax asset, Beazer Homes is extremely well positioned to impress shareholders over the next few years.
BZH data by YCharts
Brief Overview
Atlanta, Georgia based Beazer Homes has been building homes across the United States for over 35 years. Operating in 16 states across three geographic regions, the company caters towards entry level, move-up (both first and second time), and retirement oriented consumers. With a marketing pitch towards energy efficient homes, the company differentiates itself from many competitors.
Unlike many publicly traded homebuilders, Beazer does not have a captive mortgage agency. The company works with a small number of preferred lenders to offer multiple competitive rates to would be home buyers. This process actually causes the lenders to compete against one another for the business, ultimately benefiting the borrower.
Similar to many builders in the industry, Beazer overbuilt during the housing boom and has taken significant inventory writedowns in the past few years. The company has since re-emerged and is much more financially sound. Investors looking at the company today have upside potential via the rising tide of a housing market coupled with significant net operating losses from prior years to offset most taxable income moving forward. Beazer Homes is positioning itself to take advantage of this housing recovery and making bold moves to accomplish this.
Leverage
With almost every publicly traded homebuilder borrowing in this extremely low interest rate environment, leverage in this industry is a common practice. While the offering size and type of debt vary by the issuing company's credit quality, we rarely see debt-to-capital (debt-to-total assets) cross above 50%. Beazer Homes is clearly a believer in this housing market and currently pushing the limits at 77%. However, in spite of tipping the liability side of the balance sheet, in January 2013, Moody's increased the company's long-term debt rating to Caa1, S&P reaffirmed B- in December 2012, and Fitch upgraded the debt one notch to B- in September 2012. The strengthening housing market is giving Beazer some help, exactly what you are looking for when taking on such high levels of debt. Given the following statement from Beazer Homes' recent 10-Q filing, the company is truly all in, "As of June 30, 2013, we were not able to incur additional indebtedness, except refinancing and non-recourse indebtedness."
BZH Debt to Total Assets data by YCharts
Keep in mind that Beazer still has access to $150 million of additional borrowings under a secured revolving credit facility if necessary. Additionally, with just under $300 million in cash on the balance sheet as of 6/30/13, they have ample liquidity if unexpected expenditures were to arise. Regardless of the high debt, cash flow problems do not appear evident for the company.
Below is a snapshot of the current debt profile. While the next maturity date is not for another three years, the June 2016 bonds are callable beginning next year and refinancing may be in line. While management has not given any explicit comments towards calling the bonds, lengthening the maturity and lowering the interest payments would be very beneficial for equity holders. Note: the TEU (tangible equity units) Senior Amortizing Notes, maturing in August '13 and '15 will be settled in stock, not cash.
(click to enlarge)
Source: Beazer Homes SEC Filings
Before you immediately pass on Beazer Homes given their substantial leverage, consider the environment they are operating in. With new home sales roughly half of pre-crisis levels, demand for new homes far outpacing supply, home prices growing at double digit rates year-over-year, and home price affordability at record levels (even with higher interest rates), the homebuilding space offers substantial growth potential. If Beazer is correct in leveraging up during this growth phase, the long-term results could be significant.
New Orders and Backlog
If you were to evaluate Beazer based upon new orders alone, the recent quarterly and full-year results would be disappointing. New homes ordered fell to 1,381 from 1,555 in the same quarter a year prior and are expected to show no gain for the full year. At first glance, this would appear to be negative, but impressively, the company was able to increase revenue and profit margins substantially as a result of selling higher priced homes from a smaller base of communities. As you can see in the table below, the community count has dropped significantly over the past five quarters. This was expected and clearly communicated by management a few quarters earlier; 2013 was anticipated to be a year of strengthening the income statement and controlling costs before bringing the number of communities back up to 170 by FY14 end.
(click to enlarge)
Source: Beazer Homes Investor Presentations
Even though the community count is dropping, the backlog value continues to grow at very impressive rates. Homebuilding is seasonal in nature with the fall and winter (Beazer FQ1 and FQ4) quarters exhibiting much less order flow. When you smooth out the backlog (below) you can see a clear upward trend in the backlog order value. As of the recent quarter end, the backlog has increased to $646 million. Keep in mind that we have seen this rise come in the presence of a lower community count.
(click to enlarge)
Source: Beazer Homes SEC Filings
During the recent quarterly earnings call, CFO Robert Saloman provided guidance as to what the community count will look like moving forward, "In addition to the 144 active communities at June 30, we had 50 communities in various stages of development that were not yet opened and 21 communities that have been approved, but whose transactions had not yet closed. During July, we approved another 11 communities for acquisition, several of which should contribute their first sales in fiscal 2014." When Beazer begins opening more communities over the next few quarters we are likely to see the backlog exhibit substantial growth rates. Couple this with an increase in the average selling price (see chart below), and profitability for Beazer Homes is not far off.
(click to enlarge)
Source: Beazer Homes SEC Filings
Inventory
Beazer Homes is not just hording cash, they are actively putting their borrowings to work. Over the recent quarter, the company spent $162 million on land and land development, bringing the year-to-date total to $314 million (compared to $141 million over the first three quarters of last year). Expectations for the final quarter of FY13 are $170-$190 million, bringing the full year total to roughly $500 million. This money is not being spent in speculative markets, however, the lion's share of this investment is being spent in some of the hottest growing markets in the country; California, Florida, Texas, and the Mid-Atlantic.
The company is also looking to build more condominium and multi-family properties rather than free standing single family homes. This shift to what the market is currently demanding shows a management team which is capable of adjusting to consumer preferences and not getting stuck in their old ways. Below is a table showing the breakdown of Beazer Homes' current inventory. Note that the company (like all others in the industry) capitalizes interest costs, I have subtracted this from total inventory on the balance sheet to provide an adjusted inventory level to measure tangible assets.
(click to enlarge)
Source: Beazer Homes SEC Filings
West: Arizona, California, Nevada, Texas
East: Indiana, Maryland, Delaware, New Jersey, Pennsylvania, New York, Tennessee, Virginia
Southeast: Florida, Georgia, North Carolina, South Carolina
Valuation
If Beazer Homes is correct in their robust land purchases funded with borrowed dollars, the company is poised to deliver substantial profits in the years to come. Additionally, if the best case scenario plays out, shares offer some of the most attractive valuations in the industry. Since we cannot evaluate earnings quite yet (Beazer still has negative earnings), and use of the deferred tax asset (to be described later) will significantly alter earnings per share among competitors, I prefer to evaluate this industry utilizing a price-to-sales and price-to-book value ratio. As you can see in the first chart below, shares of Beazer Homes trade significantly below the industry utilizing a P/S ratio. I believe this stock is mis-priced given the limited coverage amongst analysts and a very small market cap.
BZH Price / Sales Ratio TTM data by YCharts
When looking at a price-to-book value ratio, it appears Beazer Homes is fairly priced within the industry. This is somewhat misleading; however, Beazer homes has been recording declining shareholders equity for the past few quarters while their share price has been range bound with an average of roughly $16. Given that many competitors have much less debt and have been utilizing their deferred tax assets to increase profitability (i.e. growing shareholder equity), if Beazer were to run similar financial statements as the rest of the industry, one could argue they should have a significantly higher P/BV multiple. Given that they trade in line with the industry today and have the potential to outperform the industry on both equity growth and share price appreciation over the next twelve months, we are likely to see the market award shares of BZH with a higher multiple moving forward.
BZH Price / Book Value data by YCharts
Given the combination of a depressed share price compared to the industry, significantly lower P/S ratio and artificially low P/BV ratio, shares of BZH are extremely undervalued. If the company is successful in implementing its growth strategies moving forward, shares could see the $30 range before FY14 comes to an end.
Concluding Remarks
While we are likely to see continued volatility in the homebuilding space due to interest rate fears and differing results in the multitude of housing reports released each month, the overall trend of housing continues to remains strong. If you remove the "noise" which the media bombards us with, you see an industry that currently has the ability to increase home prices without affecting demand. In fact, demand has actually proven stronger when average selling prices are raised (over the past few years). I also recommend investors keep a close eye on the monthly employment data released from the Bureau of Labor Statistics to see how construction hiring is trending. Below is a chart of residential building jobs created each month since January 2011, when the housing market unofficially bottomed and began recovering.
Source: Bureau of Labor Statistics
Investors looking to acquire homebuilders in today's market have another valuable incentive, deferred tax assets. The massive inventory impairments over the past few years have turned into substantial net operating losses which can be used to offset most taxable gains moving forward. Beazer Homes has a current valuation allowance of $505 million which if converted into a deferred tax asset is estimated to be worth $454 million, roughly $13 a share. Without getting into the intricate details of what a deferred tax asset and valuation allowance are, to simplify my point, profitability from Beazer in the future is highly unlikely to have taxable consequences at the corporate level.
Consider your investment goals and objectives before initiating a position in Beazer Homes and remember that the value of investments in equity securities, like BZH, will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy. Given what appears to be a sustainable recovery in housing and a company levering up to take advantage of this, if management is correct in their bets, the share price has significant upside potential.
Note: All data reported and graphed is pulled directly from Beazer Homes SEC Filings, Press Releases, and Investor Presentations.
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Wildbilly
13年前
Mea Culpa: BZH May Be Best Speculative Play In Homebuilding
http://seekingalpha.com/article/1622752-mea-culpa-beazer-homes-may-be-best-speculative-play-in-homebuilding?source=email_rt_article_readmore
about: BZH (Beazer Homes USA, Inc.)
Editor's notes: BZH's strong performance, despite a declining community count, and a deferred tax asset that will help with looming profitability make it a high-return way to play housing.
Alpha-Rich ideas are our best money-making long and short investment ideas.
They are released exclusively to Seeking Alpha Pro users 24 hours before publication.
Learn more about Seeking Alpha Pro.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
I previously highlighted Beazer Homes (BZH) as one of the riskier names in the homebuilder group for a number of reasons that can be found in the aforementioned article. I have completely changed my opinion that Beazer should be avoided. It is my belief that Beazer is still a speculative play compared to the other homebuilders but that it now potentially offers the most upside of the legacy homebuilders that survived the housing downturn. Where the story now begins to get interesting for Beazer are the options the company has to potentially de-lever its balance sheet as a standalone company. With a tax asset the company continues to gain more belief in its ability to monetize, Beazer will at some point in time after returning to profitability, trade at a discount to its book value that dwarfs the price to book ratio of any other publicly traded homebuilder. The significant operational improvement seen in the last quarter is almost startling. The land holdings that Beazer has amassed are starting to bear fruit. The company is poised to significantly grow its community count and in turn significantly expand its top line growth and return to profitability. There are still opportunities in the sector that offer a higher margin of error should the housing rally start to fade. However, should the housing market just stay at its current level seen in the recovery, Beazer is probably the one legacy homebuilder that has the potential to see its share price double over the next one to two years based on the brightening outlook for its business.
Why The Thesis Change?
The operational improvement on both a YoY basis and a QoQ basis shown in the Q3 2013 results from Beazer is remarkable. The table below highlights the key operating results figures pertinent to investors from the results of this past quarter:
(click to enlarge)
The bullet points below highlight why the results are so impressive:
The top line growth is notable but should be expected in an improving housing market. What makes this growth impressive for Beazer is that the company accomplished this growth with a material decrease in its community count on both a YoY and QoQ basis.
The single most impressive line item is the expansion in gross margin. On a YoY basis, gross margin % expanded by 890bps to 17.2%. When compared to just the prior quarter, gross margin % expanded by 200bps. This is remarkable and is the best improvement seen in the entire homebuilding sector.
The company has also significantly increased its average sales price "ASP", from $227K one year ago to $254K in Q3 2013. The ASP for homes that have been sold, but not yet closed, was reported at $274K. This is again critical as ever incremental increase in ASP adds additional gross margin $s and operating income for the company.
The item that is not on its face a bullish data point, is the decrease in new home orders. The bearish camp will harp on the fact that Beazer sold fewer homes in Q3 2013 than the company did a year ago, despite a vastly improved housing market. The reason for this is simple and lies in the 20% decrease in active communities on a YoY basis. The company actually sold 1.4 additional homes per active community in Q3 2013 compared to a year ago. The drop in sales per community from Q2 2013 was extremely marginal. This is also a critical factor as the jump in mortgage rates would have fully impacted Q3 2013, and the lack of a significant degradation in sales per community should refute the loudest bearish argument about home sales in general.
What Will Drive Share Price Upside?
Beazer made a strategic decision on how it would approach the housing recovery. Given a heavily indebted balance sheet, combined with cash available for investment below that of some of its larger peers, the company is operating in 2013 on a two pronged approach. First, the company has chosen to forgo volume in order to maximize the profitability on its legacy land assets. Beazer CEO Alan Merrill confirmed this strategy on the Q3 2013 earnings call:
Third, consistent with our decision more than a year ago to forfeit order growth in fiscal 2013 to focus on improving our margins and growing community count in fiscal '14 and beyond, full year fiscal 2013 orders are expected to be essentially flat with last year despite a much lower community count.
This is further evidenced by the guidance provided by the company as to its projected growth in community count over the coming year. Mr. Merrill had the following comments on the latest earnings call about how quickly the company expects to grow its community count:
Moving now to the fourth strategy in our path to profitability plan. With slightly more closeouts than expected, we ended June with 144 active communities. During the quarter, we closed out of 21 communities, but we also successfully opened 17. Our average active community count for the third quarter was also 144, below our longer term target range of 190 to 210.
As I discussed on our last call, we expect to return to profitability well before reaching the low end of our target. And in fact, expect to be profitable for our fiscal fourth quarter with roughly the same number of active communities as we have today. By the end of fiscal 2014, we expect to grow our active community count to approximately 170, give or take a few, as it is difficult to predict the timing of all community openings and closeouts.
Recall that Beazer averaged only 144 communities during the most recent quarter, selling close to 10 homes per community. The company is projecting that it will add ~25 additional communities over the next 5 quarters (by the end of FY 2014). Assuming the company continues to sell ~10 homes per quarter in each community, this will equate to ~1,000 more homes sold on an annual basis (4 quarters x 10 homes per quarter x 25 additional communities). The importance of this growth cannot be understated. These additional homes could add $250M per year in annual revenue, with very minimal additional fixed costs needed to generate this revenue. For perspective, through 9 months in FY 2013, Beazer has generated ~$900M in revenue. Assuming the company generates roughly $1.2B in revenue for the entirety of FY 2013, after a full year of growing its community count in FY 2014, the company should see FY 2015 revenue $250M higher than the level seen in FY 2013 just from growing its community count and without any additional home price gains.
Without the ample cash balance seen by many of its peers, Beazer had to choose whether it would attempt to reduce its punitively high interest rate outstanding debt or aggressively invest its precious capital/cash in opportunistic land deals. The company has chosen to invest in land, and I believe this decision was the right move. The obvious reason is the pending growth in community count that the company will soon see. The less obvious reason is that the company now controls enough land and lots to fund its business for anywhere from 4 to 5 years. Said another way, the company can continue to opportunistically invest in additional land deals in the near term, but it should also begin to generate significant cash flow that can be used to reduce its outstanding borrowings.
The table below from the Q3 2013 10-Q shows the long-term debt position for Beazer:
(click to enlarge)
The company has about $1.5B of outstanding debt, compared to an unrestricted cash balance of ~$300M. About ~$200M of the outstanding debt is entirely offset by restricted cash the company holds on its balance sheet.
Beazer has been creative in its ability to tap the equity markets to raise additional capital as well as having entered into a land banking agreement with a Blackstone affiliated entity that will provide the company with up to $150M in additional firepower to acquire land going forward. The company also has an undrawn $150M line of credit which could also be put to use as needed.
I would expect to see the company get more aggressive now that it has a fully loaded pipeline of land and future communities, in terms of paying down its high interest rate borrowings. In the most recent quarter, Beazer paid ~$29M in interest on its borrowings, of which ~$14M was directly expensed to the income statement. Even with such a significant amount of interest flowing through the income statement, the company was bordering on being profitable from a net income standpoint for Q3 2013. Mr. Merrill provided a projection on the Q3 earnings call that Beazer would be profitable from a net income standpoint during Q4 2013, and on a full year basis in FY 2014. This is where the potential earnings power of the company should begin to be evident. Beazer currently has ~25M shares outstanding which will expand to ~34M most likely during 2014 as convertible equity not currently eligible for conversion is accounted for and increases the total shares outstanding. While dilution is never a positive, in this case, the dilution is being highlighted to show just how immaterial it is in terms of the total earnings power for Beazer. Consider that the company is currently incurring an annual expense run rate of almost $60M from interest expense. This is close to the equivalent of $2 per share. The stock trades at just over $15 per share currently. As Beazer generates cash from its significant land position, and reduces its outstanding borrowings, the company will materially improve its earnings outlook going forward.
Valuation / Earnings Outlook
Beazer currently trades for just under $16 per share. The 52 week trading range is from slightly below $13 to just over $23 per share. The company currently sports a market capitalization of just under $400M. With a book value of ~$230M, Beazer is currently trading at roughly 1.7x book value, which is a favorable valuation compared to most of its homebuilding peers.
Where the price to book valuation goes from appealing to utterly cheap, is when you factor in the deferred tax asset that the company has generated through losses incurred during the housing downturn:
(click to enlarge)
The above slide is from the presentation that accompanied the Q3 2013 earnings report. There are questions as to the overall amount of the deferred tax asset that Beazer will be able to monetize without regard to certain statutory limitations. Even then, if you take the figure shown above of ~$363M that the company shows as the minimum amount of its tax asset not subject to any type of limitation, you begin to see how cheap from a price to book value Beazer will trade in the near future. As the company returns to profitability, it will return this tax asset to the balance sheet which will have the effect of increasing the book value of the company by a corresponding amount. Said another way, the ~$230M reported book value will increase by ~$363M at a minimum when the tax asset is reversed. At that point in time, with a reported book value of ~$593M and a market cap of ~$400M, Beazer would be trading for less than .7x its book value.
Full disclosure, it will take the company years to fully capture the entire value of its tax asset through future profits. At the same time, as the company returns to profitability, it will as well be organically increasing its book value through the earnings it generates. Beazer will at some point in the near future be by far the cheapest homebuilder from a price to book value standpoint.
On the earnings front, the story is just as bright. The company is set to materially grow its community count heading into fiscal year 2014 which will in turn materially drive revenue higher and the first full year of profitability in almost a decade. I noted earlier that I expect Beazer to report over $1.2B in total revenue for FY 2013 and for that to grow materially to over $1.4B in FY 2014. The table below shows the 3 and 9 month results through Q3 2013:
(click to enlarge)
Note the following points:
Gross margin was 17.2% for Q3 2013 which was an expansion of 200bps from the prior quarter. With the higher prices noted previously from homes sold but not yet closed, I predict FY 2014 gross margin will climb to 19% or higher
Commission expenses will directly correlate to revenue and in Q3 2013 were ~4.2% of total revenue.
G&A expense will not correlate with revenue which is a positive. The company will be able to leverage its existing infrastructure to grow its community count with minimal additional G&A expenses. As an example, Q3 2013 revenue was ~25% higher than Q3 2012, however, G&A expenses were only about 7% higher. The company will materially expand its revenue base in FY 2014 without a corresponding significant increase in G&A costs.
The company will incur less in interest expense in FY 2014 as it continues to acquire more land which will allow for more interest to be capitalized into land inventory versus being expensed as incurred. This will materially lower the hit to the income statement from interest expense.
Considering the above factors, my projection for FY 2014 revenue and earnings is shown below:
For what it's worth, the average analyst estimate for FY 2014 is for $1.48B in revenue and EPS of $.40. I think the consensus EPS estimate will be blown out of the water, and if I prove to be conservative with my revenue estimate shown above, all incremental revenue will be complete upside to my projected EPS figures.
I am assuming gross margin continues to expand to 19% in 2014 from the 17.2% level seen in Q3 2013. Commission expense is only marginally more favorable as a % of revenue as the company will be able to offer fewer incentives to sell homes. G&A expense expands to a quarterly run rate of over $32M in 2014 from the $29M seen in Q3 2013. Depreciation expense increased slightly. The item that I do not believe Wall Street appreciates, but will drive significant operating improvement in 2014, is a significantly lower interest expense. Again, as the company increases its eligible asset base for capitalizing interest, more interest will be capitalized to inventory leaving less interest to flow through the income statement. The company has guided for over $170M in additional land investment in just Q4 2013. I have a high degree of confidence that the interest expense number will fall sharply in 2014.
Investment Opportunity
Beazer provides a different opportunity than other homebuilders I have previously profiled that are focused mainly on a specific geographic area such as California. Beazer is one of the largest national builders, with operations in close to 20 states:
The company still struggles with legacy issues, such as its debt burden, more so than other homebuilders. As the image above shows, it is also making marked improvements operationally in a short period of time.
I believe Beazer could earn close to $1 per share in its next fiscal year as shown in the projection previously provided, which would far surpass analyst expectations. That would leave the company trading at just 16x its forward earnings estimate today. Going a step further, by continuing to grow its asset base and retiring debt, Beazer could generate an additional $1 per share in earnings in FY 2015 just by reducing the amount of interest expense flowing through the income statement. In this case, Beazer has the potential to earn ~$2 per share by FY 2015 without even accounting for any additional top line growth or margin expansion.
What are the downside risks? The downside would be that Beazer is more exposed than other builders if the housing recovery were to collapse. Notice that I said collapse, because if the housing recovery were to stall at the current level seen today, I believe Beazer is set up to achieve the projections laid out above without any additional macro gains in the housing market. In a housing market correction or collapse, Beazer would struggle under the weight of its heavy debt burden. The company has no significant debt maturities until 2016 and between the cash on hand and its significant land assets it will monetize, it is highly unlikely that even looking out 36 months in a housing market correction that Beazer would face any type of liquidity crunch. It is important nonetheless to note that the company has less flexibility than some of its peers.
However, at the end of the day, if you are investing in homebuilders, you are investing in a high beta group of stocks regardless of which company you choose to invest in. MDC Holdings (MDC) has a pristine balance sheet and is destroying analyst expectations with each earnings report. Yet the misguided fear of rising interest rates has left this company trading at a dirt cheap price to book value of 1.25x after the stock has sold off almost 25% since mortgage rates began their rise. I say misguided fear, because a recent Fannie Mae study shows that even as the % of home buyers who expect interest rates to rise increases, so too do the % of home buyers who still believe it is a great time to buy a house.
In summary, the market has proven that no homebuilder will be spared if macro news causes the entire sector to no longer be the flavor of the month for the market. With this in mind, if you want exposure to this sector, you will not find a top 10 publicly traded homebuilder that could realistically double outside of Beazer Homes. For that reason, the risk reward is screaming for this company right now and I highly believe the potential reward outweighs the risk.
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