Beazer Homes Reports Strong Third Quarter Fiscal 2020 Results; Announces Succession Plan for Chief Financial Officer

Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the three and nine months ended June 30, 2020.

"We generated very strong results in the third quarter, as improvements in home closings and margins allowed us to substantially improve profitability," said Allan P. Merrill, Chairman and Chief Executive Officer of Beazer Homes. "After weathering difficult sales conditions in April, we experienced much stronger demand in the second half of the quarter, culminating in our best June sales month in more than ten years. We also took steps to adjust to the new operating environment by enhancing our liquidity, re-underwriting proposed land acquisition transactions and improving our cost structure. Looking forward, we're optimistic about the prospects for new home demand as well as our ability to execute on our Balanced Growth strategy."

Beazer Homes Fiscal Third Quarter 2020 Highlights and Comparison to Fiscal Third Quarter 2019

• Net income from continuing operations of $15.3 million, compared to net income from continuing operations of $11.6 million in fiscal third quarter 2019
• Adjusted EBITDA of $54.0 million, up 39.6%
• Homebuilding revenue of $532.5 million, up 10.4% on a 7.6% increase in home closings to 1,366 and a 2.6% increase in average selling price to $389.8 thousand
• Homebuilding gross margin was 17.0%, up 210 basis points. Excluding impairments, abandonments and amortized interest, homebuilding gross margin was 21.2%, up 180 basis points
• SG&A as a percentage of total revenue was 11.7%, down 50 basis points year-over-year
• Unit orders of 1,372, down 11.1% on a decrease in orders/community/month to 2.7 and a decrease in average community count to 167
• Dollar value of backlog of $884.9 million, which was essentially flat
• Unrestricted cash at quarter end was $152.3 million; total liquidity was $402.3 million

The following provides additional details on the Company's performance during the fiscal third quarter 2020:

Profitability. Third quarter net income from continuing operations was $15.3 million, generating diluted earnings per share of $0.51. This included impairment charges of $2.3 million and restructuring and severance charges of $1.4 million. Adjusted EBITDA of $54.0 million was up $15.3 million year-over-year.

Orders. Net new orders for the third quarter decreased 11.1% year-over-year, to 1,372. The decrease in net new orders was driven by a decrease in the absorption rate to 2.7 sales per community per month, down from 3.0 in the previous year, and a decrease in average community count to 167, down from 174 in the previous year. Net orders improved sequentially each month with April orders down, May orders essentially flat, and June orders up more than 40% year-over-year. The cancellation rate for the quarter was 21.1%, up 590 basis points year-over-year. Early in the quarter, the cancellation rate spiked from a combination of declining orders and increasing cancellations. As conditions improved, the cancellation rate normalized, ending with a June cancellation rate of 13.9%.

Homebuilding Revenue. Third quarter closings rose 7.6% to 1,366 homes. Combined with a 2.6% increase in the average selling price to $389.8 thousand, homebuilding revenue was $532.5 million, up 10.4% year-over-year.

Backlog. The dollar value of homes in backlog as of June 30, 2020 was $884.9 million, or 2,237 homes, essentially flat compared to $881.6 million, or 2,264 homes, at the same time last year. The average selling price of homes in backlog was $395.6 thousand, up 1.6% year-over-year.

Homebuilding Gross Margin. Homebuilding gross margin (excluding impairments, abandonments and amortized interest) was 21.2% for the third quarter, up 180 basis points year-over-year. The increase in homebuilding gross margin was primarily driven by margin improvement on spec homes and reduced incentives.

SG&A Expenses. Selling, general and administrative expenses as a percentage of total revenue was 11.7% for the quarter, down 50 basis points year-over-year.

Liquidity. At the close of the third quarter, the Company had approximately $402.3 million of available liquidity, including $152.3 million of unrestricted cash and $250.0 million available on its secured revolving credit facility.

Succession Plan for Chief Financial Officer

The Company also announced the retirement and succession plans for Robert L. Salomon, Executive Vice President and Chief Financial Officer. Mr. Salomon has decided to retire after a 28-year career in homebuilding following the filing of the Company's 10-K for the fiscal year ending September 30, 2020 in November. Mr. Salomon joined the Company as Chief Accounting Officer in February 2008 and was promoted to Executive Vice President and Chief Financial Officer in June 2011. Upon Mr. Salomon's retirement, the Company will be appointing David I. Goldberg to serve as Senior Vice President and Chief Financial Officer. Mr. Goldberg currently serves as the Company's Vice President and Treasurer, positions he has held since joining the Company in March 2015.

"Bob has been an indispensable part of our management team from the day he joined the Company," said Mr. Merrill. "He's been my valued business partner as well as a mentor to operational and corporate leaders across the Company. Since joining us, he has successfully led or managed our financial reporting, internal audit, business planning, capital markets and treasury activities, and in recent years he has overseen crucial corporate functions including land acquisition and information technology. While we will miss his contributions after the end of our fiscal year, he has established a deep and talented finance team, led by David Goldberg. I am very confident that David, working closely with our experienced Senior Leadership Team, will allow us to complete a smooth and successful leadership transition in fiscal 2021."

Summary results for the three and nine months ended June 30, 2020 are as follows:

Conference Call

The Company will hold a conference call on July 30, 2020 at 5:00 p.m. ET to discuss these results. Interested parties may listen to the conference call and view the Company's slide presentation on the "Investor Relations" page of the Company's website, www.beazer.com. In addition, the conference call will be available by telephone at 800-475-0542 (for international callers, dial 517-308-9429). To be admitted to the call, enter the pass code "8571348". A replay of the conference call will be available, until 10:00 PM ET on August 7, 2020 at 886-463-2180 (for international callers, dial 203-369-1377) with pass code "3740".

About Beazer Homes

Headquartered in Atlanta, Beazer Homes (NYSE: BZH) is one of the country's largest homebuilders. Every Beazer home is designed and built to provide Surprising Performance, giving you more quality and more comfort from the moment you move in ? saving you money every month. With Beazer's Choice Planstm, you can personalize your primary living areas ? giving you a choice of how you want to live in the home, at no additional cost. And unlike most national homebuilders, we empower our customers to shop and compare loan options. Our Mortgage Choice program gives you the resources to easily compare multiple loan offers and choose the best lender and loan offer for you, which will save you thousands over the life of your loan.

We build our homes in Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas, and Virginia. For more information, visit beazer.com, or check out Beazer on Facebook, Instagram and Twitter.

This press release contains forward-looking statements. These forward-looking statements represent our expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things: (i) the potential negative impact of the ongoing COVID-19 pandemic, which, in addition to exacerbating each of the risks listed below, may include a significant decrease in demand for our homes or consumer confidence generally with respect to purchasing a home, an inability to sell and build homes in a typical manner or at all, increased costs or decreased supply of building materials or the availability of subcontractors, housing inspectors, and other third-parties we rely on to support our operations, and recognizing charges in future periods, which may be material, for goodwill impairments, inventory impairments and/or land option contract abandonments; (ii) our ability to raise debt and/or equity capital, due to factors such as limitations in the capital markets (including market volatility) or adverse credit market conditions, which have worsened and may continue to worsen as a result of the COVID-19 pandemic, 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; (iii) market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital); (iv) the cyclical nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions; (v) economic changes nationally or in local markets, changes in consumer confidence, wage levels, declines in employment levels, inflation or increases in the quantity and decreases in the price of new homes and resale homes on the market; (vi) 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; (vii) the availability and cost of land and the risks associated with the future value of our inventory, such as asset impairment charges we took on select California assets during the second quarter of fiscal 2019; (viii) factors affecting margins, such as decreased land values underlying land option agreements, increased land development costs in communities under development or delays or difficulties in implementing initiatives to reduce our production and overhead cost structure; (ix) 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; (x) increases in mortgage interest rates, increased disruption in the availability of mortgage financing, changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes or an increased number of foreclosures; (xi) increased competition or delays in reacting to changing consumer preferences in home design; (xii) natural disasters or other related events that could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas; (xiii) the potential recoverability of our deferred tax assets; (xiv) potential delays or increased costs in obtaining necessary permits as a result of changes to, or complying with, laws, regulations or governmental policies, and possible penalties for failure to comply with such laws, regulations or governmental policies, including those related to the environment; (xv) the results of litigation or government proceedings and fulfillment of any related obligations; (xvi) the impact of construction defect and home warranty claims; (xvii) the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred; (xviii) the impact of information technology failures, cybersecurity issues or data security breaches; (xix) terrorist acts, natural disasters, acts of war or other factors over which the Company has little or no control; or (xx) the impact on homebuilding in key markets of governmental regulations limiting the availability of water.

Any forward-looking statement, including any statement expressing confidence regarding future outcomes, speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time-to-time, and it is not possible to predict all such factors.

-Tables Follow-

Reconciliation of homebuilding gross profit and the related gross margin before impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and level of debt.

Reconciliation of Adjusted EBITDA to total company net income (loss), the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, tax position and level of impairments. These EBITDA measures should not be considered alternatives to net income (loss) determined in accordance with GAAP as an indicator of operating performance.

The reconciliation of Adjusted EBITDA to total company net income (loss) below differs from prior year, as it reclassifies stock-based compensation expense from an adjustment within EBITDA to an adjustment within Adjusted EBITDA in order to accurately present EBITDA per its definition.