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BEAZER HOMES USA INC (BZH)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered weaker top-line and earnings: total revenue $545.4M and diluted EPS from continuing operations of -$0.01, reflecting $10.3M inventory impairments (~$0.27/share); homebuilding gross margin compressed to 13.5% (18.4% ex I&A and interest) .
  • Versus S&P Global consensus for Q3, revenue missed ($545.4M actual vs $554.35M estimate) and EPS missed (Primary EPS $0.303 actual vs $0.42 estimate; note company-reported diluted EPS was -$0.01, impacted by impairments)*.
  • Management guided Q4 to 1,200–1,300 closings, ASP ~ $535K, adjusted gross margin ~18%, SG&A ~11.5%, adjusted EBITDA ~ $50M, diluted EPS just above $0.80; land sale revenue expected to be above prior periods .
  • Strategic posture: double-digit growth in active communities (167 at Q3, +14.4% YoY), moderation of land spend, and opportunistic buybacks ($12.5M in Q3; $100M authorization), aiming for net debt to net capitalization in the low 30% range and double-digit book value per share growth by FY2027 .
  • Liquidity remains solid: $292.3M available ($82.9M cash, $209.4M revolver capacity); leverage at quarter-end: debt/cap 48.4%, net debt/net cap 46.6% .

What Went Well and What Went Wrong

What Went Well

  • Resilient adjusted margins despite spec-heavy mix: non-GAAP homebuilding gross margin 18.4% (ex I&A and interest). “We were really happy with the resilience of our gross margin” in newer communities and Zero Energy Ready homes .
  • Sustained footprint expansion: active community count 167 (+14.4% YoY); controlled lots 27,794; accelerating option-lot share to 60.1% of active lots .
  • Capital returns: repurchased $12.5M in Q3, increasing book value per share to >$41; $100M buyback authorization in place .
    “Overall, we remain highly confident in our differentiated market position… As America's #1 Energy-Efficient Homebuilder, we remain optimistic about the growth opportunities ahead” .

What Went Wrong

  • Demand pressure: net new orders fell 19.5% YoY to 861; orders per community per month dropped to 1.7. Texas pace fell to 1.3 per community per month, well below recent history .
  • Margin and cost pressure: GAAP homebuilding gross margin declined 380 bps YoY to 13.5%, SG&A rose to 13.2% of revenue (+130 bps YoY) as revenue fell .
  • Backlog contracted: dollar backlog $742.5M (-29% YoY), units 1,352 (-30.6% YoY); cancellation rate rose to 19.8% .

Financial Results

Core Financials by Quarter

MetricQ1 2025Q2 2025Q3 2025
Total revenue ($USD Millions)$468.953 $565.339 $545.367
Homebuilding revenue ($USD Millions)$460.422 $556.032 $535.390
Diluted EPS - Continuing Ops ($)$0.10 $0.42 -$0.01
Adjusted EBITDA ($USD Millions, Non-GAAP)$23.0 $38.8 $32.1
SG&A as % of total revenue14.0% 12.0% 13.2%
Homebuilding gross margin (GAAP)15.2% 15.1% 13.5%
Adj. HB gross margin ex I&A & interest (Non-GAAP)18.2% 18.3% 18.4%

Actual vs S&P Global Consensus (Q3 2025)

MetricConsensusActual
Revenue ($USD Millions)554.35545.367
Primary EPS ($)0.420.303
Notes: Values retrieved from S&P Global.* Company-reported diluted EPS was -$0.01 due to $10.3M impairments (~$0.27/share) .

Regional Homebuilding Revenue ($USD Millions)

RegionQ1 2025Q2 2025Q3 2025
West$291.863 $365.141 $322.935
East$108.564 $120.420 $145.587
Southeast$59.995 $70.471 $66.868
Total$460.422 $556.032 $535.390

KPIs and Operating Metrics

KPIQ1 2025Q2 2025Q3 2025
Net new orders (units)932 1,098 861
Orders per community per month1.9 2.3 1.7
Cancellation rate16.5% 16.9% 19.8%
Avg. active community count161 163 167
Active community count (end of period)163 162 167
Backlog units1,507 1,526 1,352
Backlog ASP ($USD thousands)$541.5 $544.9 $549.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Closings (units)Q4 2025N/A1,200–1,300 New
ASP ($USD)Q4 2025N/A~$535K New
Adjusted homebuilding gross margin (Non-GAAP)Q4 2025N/A~18% New
SG&A as % of revenueQ4 2025N/A~11.5% New
Adjusted EBITDA ($USD Millions)Q4 2025N/A~ $50M New
Interest amortized (% of HB revenue)Q4 2025N/AJust over 3% New
Tax impactQ4 2025N/ANet tax benefit of several $M New
Diluted EPSQ4 2025N/AJust above $0.80 New
Land spendFY2025$850M (Q1 outlook) $700–$750M (Q3 call) Lowered
Community count targetMulti-year>200 by FY2026 >200 by FY2027 Deferred 1 year
Leverage target (net debt/net cap)Multi-year<30% by FY2026 Low 30% by FY2027 Deferred 1 year
Book value per share CAGRFY2024–FY2027N/ADouble-digit CAGR added New

Earnings Call Themes & Trends

TopicQ1 2025 (Prior)Q2 2025 (Prior)Q3 2025 (Current)Trend
Sales pace & affordabilityUneven demand; incentive pressure; financing innovation for to‑be‑built Pace down; spec mix ~70%; margin resilience via newer specs Texas drag; orders/pace down; aiming to improve with product/incentive changes Deteriorated then stabilizing efforts
Spec vs to‑be‑built mixSpecs ~70% of closings; goal to narrow margin gap Spec preference persists; backlog conversion rising Spec share “high 60s” expected to remain elevated; margins resilient in the “18s” Elevated spec mix persists
Zero Energy Ready strategy98% of starts ZER; cost reductions underway ZER nearly fully adopted; marketing differentiation (VISION House) Reinforced differentiation; tactile sales tools; cost premium ~$8,500/home Strengthening positioning
Cost structure & cycle times~$3K build-cost reductions; cycle times improving Standardization; labor availability improving; more option lots Further cost reduction; 2026 cycle-time gains expected Gradual improvement
Regional dynamicsTexas/Florida challenging; West/Mid-Atlantic steadier West strong; community activation cadence discussed Texas weak (1.3 pace); strength in Virginia, Myrtle Beach, SoCal Mixed by market
Tariffs/lumber & input costsLimited impact seen near-term Watching tariffs; minimal impact expected in FY2025 Lumber duties uncertain; suppliers focused on holding price Monitoring risk, no major hit yet
Portfolio actionsPlan to activate >60 communities; renegotiate contracts Buyback authorization; shift capital allocation Impairments: Phoenix (Maricopa) & Orlando condo; sell non-core land Active portfolio management

Management Commentary

  • “Despite a particularly challenging sales environment in the third quarter, we were pleased with our progress toward our multi-year goals and the resilience of our gross margin” .
  • “We now expect to direct more of our discretionary capital toward meeting our two other fiscal 2027 objectives… attaining a net debt to net capitalization ratio in the low 30% range and generating double-digit growth in book value per share” .
  • “We remain highly confident in our differentiated market position… As America’s #1 Energy‑Efficient Homebuilder” .
  • On Texas: “Our pace was disappointing at 1.3 sales per community per month… we will [compete] harder” .
  • On impairments: “Two such cases arose during the third quarter… Maricopa (Phoenix) and a condo community in Orlando” .

Q&A Highlights

  • Pace vs price elasticity: demand appears inelastic; management won’t chase volume with dramatic price cuts; targeted incentives/product tweaks in Texas .
  • Spec mix and margins: spec closings in “high 60%” range expected to persist near-term; adjusted gross margins guided ~18% despite elevated closing costs .
  • Guidance clarity: Q4 orders expected relatively flat YoY with an ~8% community count increase; sequential improvement expected in Texas; ASP mix shift supports ~$535K .
  • Cost actions: renegotiating land/trade/materials; Zero Energy Ready cost reductions and cycle time improvements underpin FY2026 profitability .
  • Tariffs/lumber: minimal impact so far; lumber suppliers focused on holding price amid lower starts .
  • Cancellations: running 15–20% of gross sales, elevated but “normal” given consumer confidence dynamics .

Estimates Context

  • Q3 FY2025: Revenue missed S&P Global consensus ($545.4M actual vs $554.35M estimate); Primary EPS missed ($0.303 actual vs $0.42 estimate). Company diluted EPS was -$0.01 due to $10.3M impairments (~$0.27/share)* .
  • Q4 FY2025 (forward look at time of call): S&P Global consensus EPS ~ $0.80 and revenue ~$674.8M; management guided diluted EPS slightly above $0.80 and outlined volume/margin/SG&A drivers aligned with that outlook .
    Notes: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term headwinds (orders, margins, Texas absorption) should persist into Q4, but guidance implies stabilization and modest sequential improvement driven by community growth, product mix and cost actions .
  • Elevated spec mix remains a drag on GAAP gross margin; non-GAAP adjusted margins (~18%) are resilient, supported by Zero Energy Ready product and ongoing cost reductions .
  • Capital allocation pivot (lower land spend, higher buybacks) and extended multi-year goals (to FY2027) prioritize book value per share compounding and deleveraging at a measured pace .
  • Backlog and sales pace softness increase execution risk; watch Texas-specific initiatives and Q4 order trajectory as the key swing factor .
  • Liquidity and revolver capacity remain ample with no maturities until Oct 2027, providing flexibility to fund growth and repurchases through the cycle .
  • Monitor policy/tariff and input-cost developments (lumber, insurance) and spec-to-be‑built mix normalization for FY2026 margin lift .

Footnotes:

  • All estimate figures shown are Values retrieved from S&P Global.

Sources: Q3 FY2025 8‑K and press release ; Q3 FY2025 earnings call transcript ; Q2 FY2025 8‑K and press release ; Q1 FY2025 press release .