Beazer Homes USA, Inc.

Transcription

1 Beazer Homes USA, Inc. Q Earnings Presentation Trammel Ridge Atlanta, GA Johns Creek, GA Cameron Parc Community

2 Forward Looking Statements This Quarterly Report on Form 10-Q (Form 10-Q) contains forward-looking statements. These forward-looking statements represent our expectations or beliefs concerning future results, and it is possible that the results described in this Form 10-Q will not be achieved. All forward-looking statements are based upon information available to us on the date of this Form 10-Q. 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 forwardlooking statements, including, among other things, the matters discussed in this Form 10-Q in the section captioned Management s Discussion and Analysis of Financial Condition and Results of Operations. Additional information about factors that could lead to material changes in performance is contained in Part I, Item 1A Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, These factors are not intended to be an all inclusive list of risks and uncertainties that may affect the operations, performance, development and results of our business, but instead are the risks that we currently perceive as potentially being material. Such factors may include: (i) economic changes nationally or in local markets, including changes in consumer confidence, declines in employment levels, inflation and increases in the quantity and decreases in the price of new homes and resale homes on the market; (ii) the cyclical nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions; (iii) continuing severe weather conditions or other related events could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas; (iv) our cost of and ability to access capital, due to factors such as limitations in the capital markets or adverse credit market conditions, and otherwise meet our ongoing liquidity needs, including the impact of any downgrades of our credit ratings or reductions in our tangible net worth or liquidity levels; (v) our ability to reduce our outstanding indebtedness and to comply with covenants in our debt agreements or satisfy such obligations through repayment or refinancing; (vi) the availability and cost of land and the risks associated with the future value of our inventory, such as additional asset impairment charges or writedowns; (vii) 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; (viii) 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; (ix) a substantial increase in mortgage interest rates, increased disruption in the availability of mortgage financing, a change in tax laws regarding the deductibility of mortgage interest for tax purposes or an increased number of foreclosures; (x) increased competition or delays in reacting to changing consumer preferences in home design; (xi) factors affecting margins, such as decreased land values underlying land option agreements, increased land development costs on communities under development or delays or difficulties in implementing initiatives to reduce our production and overhead cost structure; (xii) estimates related to the potential recoverability of our deferred tax assets; (xiii) 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 and governmental policies, including those related to the environment; (xiv) the results of litigation or government proceedings and fulfillment of the obligations in the consent orders with governmental authorities and other settlement agreements; (xv) the impact of construction defect and home warranty claims, including water intrusion issues in Florida and New Jersey; (xvi) the cost and availability of insurance and surety bonds; (xvii) the performance of our unconsolidated entities and our unconsolidated entity partners; (xviii) the impact of information technology failures 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. 2

3 Introduction Allan Merrill - President & Chief Executive Officer Bob Salomon - EVP & Chief Financial Officer David Goldberg - Vice President, Treasurer 3

4 1 st Quarter Highlights Net Income $1.2 million of Net Income from Continuing Operations Adjusted EBITDA* $25.9 million of Adjusted EBITDA*, up 59.0% 7.5% Adjusted EBITDA* Margin of Total Revenue, up 140 bps SG&A 13.2% of Total Revenue, down 270 bps Closings 1,049 Closings, up 18.5% Backlog Conversion rate of 51.5%, ahead of Q1 guidance 1,912 homes, up 8.0% in units; $634.6 million, up 13.2% in dollars Debt Repurchase $23 million Senior Notes repurchased (additional $5 million repurchased subsequent to quarter end) *Details are included on the Adjusted EBITDA Reconciliation slide in the appendix 4

5 West Segment Q1 Commentary Dallas Improving backlog management by intentionally slowing sales pace in certain locations; market demand remains robust Houston Although a slowdown is apparent, sales pace remains healthy; further market risk ahead in many sub-markets, but we are well-positioned in lot sizes, locations and management Southern California Newer and better-located communities didn t match sales pace with last year s close-outs Sacramento Our Natomas communities are just coming online; poised to become cash generator as we monetize previously stranded assets Phoenix Our performance in-line with expectations; market showing signs of strength as demand catches up to community count growth Las Vegas Weak opening of our two new Inspirada communities led to intra-quarter 4-P changes; market remains fragile 5

6 2B-10 Plan Ranges "2B-10" Plan Ranges Revenue Sales / Community / Month Average Sales Price ("ASP") $330K - $340K Average Community Count $2 Billion Revenue Margins HB Gross Margin* % 21% - 22% SG&A (% of Revenue) 11% - 12% 10% EBITDA Margin 2B-10 is a multi-year plan to reach $2 billion in Revenue and 10% EBITDA Margins * Excludes impairments, abandonments and interest included in cost of sales 6

7 Increases in LTM Revenue and EBITDA $ in millions $1,750 $1,700 $1,650 $1,600 $1,550 $1,500 $1,450 $1,400 $1,350 $1,300 Total Revenue LTM $1,706 $1,627 $1,540 $1,466 $1,436 Q1 Q2 Q3 Q4 Q1 FY15 FY16 Adjusted EBITDA LTM* $ in millions $180 $170 $153.7 $160 $144.1 $150 $134.4 $127.9 $129.1 $140 $130 $120 $110 $100 $90 $80 Q1 Q2 Q3 Q4 Q1 FY15 FY16 *Adjusted EBITDA excludes the impact of certain warranty items (net of expected insurance recoveries) and a litigation settlement recorded in discontinued operations; details are included on the Adjusted EBITDA Reconciliation slide in the appendix 7

8 Sales Pace Remains Near 2B-10 Goals Sales per Active Community per Month B-10 Range, LTM Q1 Q2 Q3 Q4 Q1 FY15 FY16 Sales per Active Community per Month, LTM Sales per Active Community per Month, Quarterly Note: An active community has achieved at least 2 initial sales and has at least 2 unsold units remaining 8

9 Backlog ASP Suggests Further Growth $ in thousands $350 $340 $340 "2B-10" Range, LTM Basis $330 $330 $320 $318 $323 $321 $310 $306 $300 $290 $296 $317 $321 $325 $328 $314 $318 $332 $280 $270 $288 $295 $304 $260 Q1 Q2 Q3 Q4 Q1 FY15 FY16 Average Sales Price, LTM Backlog ASP at Quarter End Average Sales Price, Quarterly 9

10 Growing Backlog; Ending Value Up 13% Q1 FY15 Q1 FY16 Quarter Ending Backlog (uni ts) 1,771 1,912 Quarter Ending Backlog ($ in millions) $ $ ASP in Backlog ($ in thousands) $ $ Q1 FY15 Q1 FY16 Quarter Beginning Backlog 1,690 2,038 Scheduled to Close in Future Quarters (844) (1,070) Backlog Scheduled to Close in the Quarter Backlog Activity: Cancellations (94) (91) Pushed to Future Quarters (107) (84) Close Date Brought Forward Sold & Closed During the Quarter Units up 8% Value up 13% ASP up 5% Total Closings in the Quarter 885 1,049 Backlog Conversion Rate 52.4% 51.5% 10

11 Community Count Stabilizing Active Communities "2B-10" Range Active Community Count Q1 Q2 Q3 Q4 Q1 FY15 Active Community Count, LTM Active Community Count, Quarterly FY16 Community Count Activity Active Communities 169 Communities Under Development 40 Communities Approved But Not Yet Closed 42 Near-Term Closeouts (next 6 months) 37 The information above is as of 12/31/15 Note: An active community has achieved at least 2 initial sales and has at least 2 unsold units remaining 11

12 Gross Margin Homebuilding Gross Margin* Homebuilding Gross Profit Dollars Per Closing* 23% 22% 21% 20% 19% 18% 21.8% 22.3% "2B-10" Range, LTM Basis 21.7% 21.3% 21.3% 22.2% 21.8% 21.5% 22% 21% 20.4% 21.2% $ in thousands $68 $67 $66 $ $64 $ % $62 16% $61 15% Q1 Q2 Q3 Q4 Q1 $60 Q1 Q2 Q3 Q4 Q1 FY15 HB Gross Margins, LTM HB Gross Margins, Quarterly FY16 FY15 FY16 HB Gross Profit, LTM *Excludes impairments, abandonments and interest included in cost of sales as well as certain warranty items; details are included on the Adjusted EBITDA Reconciliation slide in the appendix; Homebuilding Gross Profit Dollars Per Closing is based on quarterly data, not LTM 12

13 G&A Leverage as Revenue Grows 16% 14% 12% 10% 15.9% 14.9% SG&A Leverage (% of Total Revenue) 12.8% "2B-10" Range, LTM Basis 12% 10.4% 11% 13.2% $ in thousands $70 $65 $60 $57 $55 $50 $45 LTM Homebuilding Gross Profit vs. SG&A per Closing $63 $64 $60 $65 $66 $67 $67 8% 6% 13.7% 13.5% 13.1% 12.8% 12.3% Q1 Q2 Q3 Q4 Q1 $40 $35 $30 $41 $42 $42 $41 $41 $38 $39 $37 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY15 SG&A % of Total Revenue, LTM FY16 SG&A % of Total Revenue, Quarterly FY14 FY15 FY16 HB Gross Profit per Closing SG&A per Closing *Excludes impairments, abandonments and interest included in cost of sales as well as certain warranty items; details are included on the Adjusted EBITDA Reconciliation slide in the appendix 13

14 Managing Land Spend $ in millions $200 $180 $160 $140 $145.4 $120 $100 $57.7 $102.1 $105.9 $99.8 $111.7 $80 $56.7 $60.2 $54.9 $45.0 $60 $40 $87.7 $66.7 $20 $45.4 $45.7 $44.9 $0 Q1 Q2 Q3 Q4 Q1 FY15 FY16 Land Land Development 14

15 Inventory Growth Slowing Total Inventory Lot Position at December 31, ,295 $ in millions 1,800 1,700 $1,679 $1,730 4,513 4,663 1,600 1,500 1,400 $1,383 1,300 1,200 1,100 $1,151 5,688 7,277 1,000 Q1 Q1 Q1 Q1 FY13 FY14 FY15 FY16 At December 31, 2015: 25,326 total controlled lots 19,923 active lots Immediate Availability Near-Term Availability Homes Under Construction Owned Land Under Development Finished Lots Lots Under Option Long-Term and Non-Strategic Assets Land Held for Future Development Property Held for Sale 15

16 Maturity Schedule as of 12/31/2015 $ in millions $600 Repurchased $5 million subsequent to 12/31/2015 Approximately $260 million of Liquidity $400 $235.0 $200 $116.4 $22.4 $17.0 $300.0 $325.0 $- $200.0 $200.0 $144.9 $148.0 $ /31/ $58.3 Undrawn Unrestricted Revolver Cash Cash Restricted Secured Cash Term - LC/Escrow Loan Restricted Junior Debt Cash - Net - LC/Escrow of Accretion Undrawn Revolver Unrestricted Cash Senior Senior Unsecured Unsecured Debt Debt Senior Junior Secured Debt Debt - Net of Accretion Cash Senior Secured Secured Term Debt Loan Revolving Credit Facility Note: Based on calendar years 16

17 FY16 Goals & Q1 Achievements Generate Significant EBITDA Growth in FY16 Year over year EBITDA growth of nearly 60% Drive Greater Capital Efficiency Grew EBITDA at dramatically faster pace than Inventory Reduce Leverage & Lower Interest Expense Retired $23 million of 2016 Notes Implemented plan to fully pay-off 2016 Notes 17

18 Appendices 18

19 Q1 Results: Revenue & EBITDA Growth $ in millions, except ASP Profitability Q1 FY16 Q1 FY15 Total Revenue $ $ % Adjusted EBITDA* $ 25.9 $ 16.3 $ 9.6 Net Income/Loss $ 1.0 $ (22.3) $ 23.3 Unit Activity Orders (4.5)% Closings 1, % Average Sales Price ($000's) $ $ % Cancellation Rate 25.8% 21.4% 440 bps Active Community Count, Avg** % Sales/Community/Month Margins HB Gross Margin*** 20.4% 21.8% (140 bps) SG&A (% of total revenue) 13.2% 15.9% (270 bps) Balance Sheet Unrestricted Cash $ $ $ 6.2 Land & Development Spending $ $ $ (33.8) Note: Variances are calculated using un-rounded numbers *Adjusted EBITDA excludes the impact of certain warranty items and litigation settlement recorded in discontinued operations **Active Community Count was 156 at 12/31/2014 and 169 at 12/31/2015 ***HB Gross Margin excludes impairments, abandonments, interest included in cost of sales and certain warranty items 19

20 Capital Efficiency Strategies: Impact on Margins Capital Strategy Former LHFFD Assets Rationale Cash generation Margin Impact FY15 % of Revenue Total Impact Margin Impact FY16 % of Revenue Total Impact Incremental EBITDA ~ 700 bps 4% ~ 30 bps ~ 1000 bps 6% ~ 60 bps Land Banking Transactions Incremental EBITDA Higher IRR on investments ~ 400 bps 5% ~ 20 bps ~ 400 bps 10% ~ 40 bps ~ 50 bps ~ 100 bps 50 bps of additional impact in Fiscal Year

21 Geographic Mix Impacts Year-Over-Year Q1 ASP Q1 FY15 ASP Q1 FY15 Closings Q1 FY16 ASP Q1 FY16 Closings Change in ASP ($) Change in ASP (%) Change in Mix West $273K 35.7% $320K 46.9% +$47K 16.9% bps East $334K 34.5% $367K 24.5% +$33K 9.9% bps SE $278K 29.8% $284K 28.6% +$6K 1.9% -120 bps Houston, Houston, Houston, Houston, Houston, Houston, TX TX TX TX TX TX Note: Variances are calculated using un-rounded numbers 21

22 Geographic Mix Impacts Year-Over-Year Q1 Margin Q1 FY15 GM% Q1 FY15 Closings Q1 FY16 GM% Q1 FY16 Closings Change in GM% Change in Mix West 20.3% 35.7% 20.5% 46.9% +20 bps bps East 18.2% 34.5% 15.5% 24.5% -270 bps bps SE* 21.3% 29.8% 19.8% 28.6% -150 bps -120 bps Houston, Houston, Houston, Houston, Houston, Houston, TX TX TX TX TX TX Note: Segment gross margins exclude required capitalization of indirects *Southeast excludes certain unusual warranty charges and recoveries 22

23 Emphasizing Spec Sales in 1H FY16 Number of Spec Homes Q1 Q2 Q3 Q4 Q1 FY15 Finished Homes Under Construction FY16 Note: Spec count as of each quarter-end 23

24 Debt Structure (In thousands) Maturity Date Call Date Call Price December 31, 2015 September 30, /8% Senior Notes June 2016 MW $ 148,004 $ 170, /8% Senior Secured Notes April /15/ , , /8% Senior Notes May /15/ , , /4% Senior Notes June , , /2% Senior Notes September /15/ , , /4% Senior Notes February /01/ , ,000 Unamortized debt discounts (3,449) (3,639) Total Senior Notes, net 1,404,555 1,427,240 Junior Subordinated Notes July ,320 57,803 Cash Secured Loans November ,368 22,368 Other Secured Notes Payable Various Dates 16,813 20,864 Total debt, net $ 1,502,056 $ 1,528,275 Note: Additional $5 million of 2016 Senior Notes repurchased subsequent to December 31,

25 Adjusted EBITDA Reconciliation Three Months Ended December 31 LTM Ended December v v 14 Net income (loss) 999 (22,340) 23, ,433 17, ,252 Provision (benefit) from income taxes 506 (697) 1,203 (324,724) (42,551) (282,173) Interest amortized to home construction and land sales expenses, capitalized interest impaired and interest expense not qualified for capitalization 21,083 18,034 3,049 89,035 86,716 2,319 Depreciation and amortization and stock compensation amortization 4,747 3,715 1,032 20,505 16,065 4,440 Inventory impairments and abandonments 1,356 1,356 4,465 8,031 (3,566) Loss on debt extinguishment ,917 (19,009) Adjusted EBITDA $ 29,519 $ (1,288) $ 30,807 $ 157,622 $ 105,359 $ 52,263 Unexpected warranty costs related to Florida stucco issues (net of expected insurance recoveries) (3,612) 13,582 (17,194) (3,612) 17,872 (21,484) Unexpected warranty costs related to water intrusion issue in New Jersey 648 (648) Litigation settlement in discontinued operations 4,000 (4,000) (340) 4,000 (4,340) Adjusted EBITDA excluding unexpected warranty costs and a litigation settlement in discontinued operations $ 25,907 $ 16,294 $ 9,613 $ 153,670 $ 127,879 $ 25,791 25

26 Shares Outstanding Shares Outstanding at period end Future conversion of stock options & restricted stock Total Future shares outstanding upon conversions Q1 FY million 0.7 million 33.8 million Q1 FY16 Basic weighted average shares Diluted weighted average shares 31.8 million 31.8 million 26

27 Deferred Tax Asset ($ in millions) December 31, 2015 Deferred Tax Assets $ Valuation Allowance (57.7) Net Deferred Tax Assets $ As of December 31, 2015, our valuation allowance of $57.7 million related to our deferred tax assets remains consistent with the determinations we made during the period ended September 30,