UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________________________________________________________

FORM 10-Q

_____________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-12822

_____________________________________________________________

BEAZER HOMES USA, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________________________


Delaware						58-2086934
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


~~1000 Abernathy Road, Suite 260,~~2002 Summit Boulevard NE, 15th Floor, Atlanta, Georgia						~~30328~~30319
(Address of principal executive offices)						(Zip Code)

(770) 829-3700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	BZH	New York Stock Exchange

_____________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding as of July ~~25, 2022~~24, 2023: ~~31,275,185~~31,339,214

Table of Contents

BEAZER HOMES USA, INC.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements			2
Condensed Consolidated Balance Sheets as of J un e 3 0 ~~, 2022~~June 30, 2023 and September 30, ~~2021~~2022 (Unaudited)			2
Condensed Consolidated Statements of Operations for the three and ni ne nine months ended June 3 0 ~~, 2022~~ 30, 2023 and ~~2021~~2022 (Unaudited)			3
Condensed Consolidated Statements of Stockholders' Equity for the three and ni ne nine months ended June 3 0 ~~, 2022~~ 30, 2023 and ~~2021~~2022 (Unaudited)			4
Condensed Consolidated Statements of Cash Flows for the n ~~ine~~nine months ended June 3 0 , 30, 2023 and 2022 ~~and 2021~~ (Unaudited)			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2723
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4340
Item 4. Controls and Procedures			4340
Item 5. Other Information			4441

PART II. OTHER INFORMATION			4441
Item 1. Legal Proceedings			4441
Item 1A. Risk Factors			4441
~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~			44
Item 6. Exhibits			4441

SIGNATURES			4542

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


in thousands (except share and per share data)	in thousands (except share and per share data)	June 30, 2022		September 30, 2021		in thousands (except share and per share data)	June 30, 2023		September 30, 2022
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	42,039	$	246,715	Cash and cash equivalents	$	276,125	$	214,594
Restricted cash	Restricted cash	39,762		27,428		Restricted cash	39,540		37,234
Accounts receivable (net of allowance of $284 and $290, respectively)		25,137		25,685
Accounts receivable (net of allowance of $284 and $284, respectively)						Accounts receivable (net of allowance of $284 and $284, respectively)	33,195		35,890
Income tax receivable	Income tax receivable	9,929		9,929		Income tax receivable	—		9,606

Owned inventory	Owned inventory	1,858,851		1,501,602		Owned inventory	1,741,651		1,737,865

Investments in unconsolidated entities		897		4,464

Deferred tax assets, net	Deferred tax assets, net	179,038		204,766		Deferred tax assets, net	141,761		156,358
Property and equipment, net	Property and equipment, net	24,971		22,885		Property and equipment, net	28,927		24,566
Operating lease right-of-use assets	Operating lease right-of-use assets	10,641		12,344		Operating lease right-of-use assets	16,156		9,795
Goodwill	Goodwill	11,376		11,376		Goodwill	11,376		11,376
Other assets	Other assets	15,759		11,616		Other assets	29,867		14,679
Total assets	Total assets	$	2,218,400	$	2,078,810	Total assets	$	2,318,598	$	2,251,963
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable	Trade accounts payable	$	145,864	$	133,391	Trade accounts payable	$	136,813	$	143,641
Operating lease liabilities	Operating lease liabilities	12,155		14,154		Operating lease liabilities	17,665		11,208
Other liabilities	Other liabilities	155,176		152,351		Other liabilities	138,207		174,388

Total debt (net of debt issuance costs of $7,752 and $8,983, respectively)		1,049,078		1,054,030
Total debt (net of debt issuance costs of $6,142 and $7,280, respectively)						Total debt (net of debt issuance costs of $6,142 and $7,280, respectively)	981,128		983,440
Total liabilities	Total liabilities	1,362,273		1,353,926		Total liabilities	1,273,813		1,312,677
Stockholders’ equity:	Stockholders’ equity:					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, 31,275,185 issued and outstanding and 31,294,198 issued and outstanding, respectively)		31		31
Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, no shares issued)						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, 31,339,214 issued and outstanding and 30,880,138 issued and outstanding, respectively)						Common stock (par value $0.001 per share, 63,000,000 shares authorized, 31,339,214 issued and outstanding and 30,880,138 issued and outstanding, respectively)	31		31
Paid-in capital	Paid-in capital	863,520		866,158		Paid-in capital	862,500		859,856
Accumulated deficit		(7,424)		(141,305)
Retained earnings						Retained earnings	182,254		79,399

Total stockholders’ equity	Total stockholders’ equity	856,127		724,884		Total stockholders’ equity	1,044,785		939,286
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,218,400	$	2,078,810	Total liabilities and stockholders’ equity	$	2,318,598	$	2,251,963

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					June 30,				June 30,
in thousands (except per share data)	in thousands (except per share data)	2022		2021		2022		2021		in thousands (except per share data)	2023		2022		2023		2022
Total revenue	Total revenue	$	526,666	$	570,932	$	1,489,321	$	1,549,360	Total revenue	$	572,544	$	526,666	$	1,561,380	$	1,489,321
Home construction and land sales expenses	Home construction and land sales expenses	394,201		455,178		1,138,771		1,259,922		Home construction and land sales expenses	455,485		394,201		1,255,356		1,138,771
Inventory impairments and abandonments	Inventory impairments and abandonments	—		231		935		696		Inventory impairments and abandonments	315		—		616		935
Gross profit	Gross profit	132,465		115,523		349,615		288,742		Gross profit	116,744		132,465		305,408		349,615
Commissions	Commissions	16,277		20,955		48,668		58,346		Commissions	19,473		16,277		51,883		48,668
General and administrative expenses	General and administrative expenses	45,760		42,186		129,057		119,903		General and administrative expenses	46,464		45,760		129,891		129,057
Depreciation and amortization	Depreciation and amortization	3,189		3,689		9,101		10,494		Depreciation and amortization	2,907		3,189		8,440		9,101

Operating income	Operating income	67,239		48,693		162,789		99,999		Operating income	47,900		67,239		115,194		162,789
Equity in income of unconsolidated entities		3		313		454		424
Gain (loss) on extinguishment of debt, net		86		(1,050)		(78)		(1,613)
Other income (expense), net		134		(10)		405		(2,356)

(Loss) gain on extinguishment of debt, net										(Loss) gain on extinguishment of debt, net	(18)		86		(533)		(78)
Other income, net										Other income, net	2,176		137		3,759		859
Income from continuing operations before income taxes	Income from continuing operations before income taxes	67,462		47,946		163,570		96,454		Income from continuing operations before income taxes	50,058		67,462		118,420		163,570
Expense from income taxes	Expense from income taxes	13,150		10,804		29,685		22,633		Expense from income taxes	6,241		13,150		15,488		29,685
Income from continuing operations	Income from continuing operations	54,312		37,142		133,885		73,821		Income from continuing operations	43,817		54,312		102,932		133,885
Income (loss) from discontinued operations, net of tax		12		(7)		(4)		(161)
Gain (loss) from discontinued operations, net of tax										Gain (loss) from discontinued operations, net of tax	—		12		(77)		(4)
Net income	Net income	$	54,324	$	37,135	$	133,881	$	73,660	Net income	$	43,817	$	54,324	$	102,855	$	133,881
Weighted-average number of shares:	Weighted-average number of shares:									Weighted-average number of shares:
Basic	Basic	30,512		30,022		30,480		29,915		Basic	30,395		30,512		30,335		30,480
Diluted	Diluted	30,872		30,562		30,806		30,292		Diluted	30,860		30,872		30,649		30,806

Basic income (loss) per share:
Basic income per share:										Basic income per share:
Continuing operations	Continuing operations	$	1.78	$	1.24	$	4.39	$	2.47	Continuing operations	$	1.44	$	1.78	$	3.39	$	4.39
Discontinued operations	Discontinued operations	—		—		—		(0.01)		Discontinued operations	—		—		—		—
Total	Total	$	1.78	$	1.24	$	4.39	$	2.46	Total	$	1.44	$	1.78	$	3.39	$	4.39
Diluted income (loss) per share:
Diluted income per share:										Diluted income per share:
Continuing operations	Continuing operations	$	1.76	$	1.22	$	4.35	$	2.44	Continuing operations	$	1.42	$	1.76	$	3.36	$	4.35
Discontinued operations	Discontinued operations	—		—		—		(0.01)		Discontinued operations	—		—		—		—
Total	Total	$	1.76	$	1.22	$	4.35	$	2.43	Total	$	1.42	$	1.76	$	3.36	$	4.35

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



	Three Months Ended June 30, 2023
	Common Stock			Paid-in Capital		Retained Earnings
in thousands	Shares	Amount						Total
Balance as of March 31,2023	31,347	$	31	$	860,517	$	138,437	$	998,985
Net income and comprehensive income	—	—		—		43,817		43,817
Stock-based compensation expense	—	—		1,989		—		1,989
Stock option exercises	2	—		12		—		12

Forfeiture and other settlements of restricted stock	(9)	—		—		—		—
Common stock redeemed for tax liability	(1)	—		(18)		—		(18)


Balance as of June 30, 2023	31,339	$	31	$	862,500	$	182,254	$	1,044,785


	Nine Months Ended June 30, 2023
	Common Stock			Paid-in Capital		Retained Earnings
in thousands	Shares	Amount						Total
Balance as of September 30, 2022	30,880	$	31	$	859,856	$	79,399	$	939,286
Net income and comprehensive income	—	—		—		102,855		102,855
Stock-based compensation expense	—	—		5,247		—		5,247
Stock option exercises	2	—		12		—		12
Shares issued under employee stock plans, net	675	—		—		—		—
Forfeiture and other settlements of restricted stock	(12)	—		—		—		—
Common stock redeemed for tax liability	(206)	—		(2,615)		—		(2,615)


Balance as of June 30, 2023	31,339	31		862,500		182,254		1,044,785

Three Months Ended June 30, 2022
Common Stock Paid-in Capital Accumulated Deficit
in thousands Shares Amount Total
Balance as of March 31, 2022 31,458 $ 31 $ 864,074 $ (61,748) $ 802,357
Net income and comprehensive income — — — 54,324 54,324
Stock-based compensation expense — — 1,983 — 1,983
Stock option exercises — — 1 — 1
Shares issued under employee stock plans, net 1 — — — —
Forfeiture and other settlements of restricted stock (8) — — — —
Common stock redeemed for tax liability (1) — (11) — (11)
Share repurchases (175) — (2,527) — (2,527)
Balance as of June 30, 2022 31,275 $ 31 $ 863,520 $ (7,424) $ 856,127

Nine Months Ended June 30, 2022
Common Stock Paid-in Capital Accumulated Deficit
in thousands Shares Amount Total
Balance as of September 30, 2021 31,294 $ 31 $ 866,158 $ (141,305) $ 724,884
Net income and comprehensive income — — — 133,881 133,881
Stock-based compensation expense — — 6,515 — 6,515
Stock option exercises 1 — 5 — 5
Shares issued under employee stock plans, net 518 — — — —
Forfeiture and other settlements of restricted stock (55) — — — —
Common stock redeemed for tax liability (308) — (6,631) — (6,631)
Share repurchases (175) — (2,527) — (2,527)
Balance as of June 30, 2022 31,275 $ 31 $ 863,520 $ (7,424) $ 856,127

Table of Contents

BEAZER ~~HOMES~~HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


		Three Months Ended June 30, 2021																Three Months Ended June 30, 2022
		Common Stock			Paid-in Capital				Accumulated Deficit									Common Stock				Paid-in Capital				Accumulated Deficit
in thousands	in thousands	Shares	Amount								Total		in thousands		Shares				Amount					Total
Balance as of March 31, 2021		31,289	$	31			$	860,537			$	(226,801)				$	633,767
Balance as of March 31, 2022																Balance as of March 31, 2022		31,458		$	31			$	864,074			$	(61,748)			$	802,357
Net income and comprehensive income	Net income and comprehensive income	—	—		—				37,135				37,135			Net income and comprehensive income		—		—		—				54,324				54,324
Stock-based compensation expense	Stock-based compensation expense	—	—		3,194				—				3,194			Stock-based compensation expense		—		—		1,983				—				1,983
Stock option exercises	Stock option exercises	30	—		(67)				—				(67)			Stock option exercises		—		—		1				—				1
Shares issued under employee stock plans, net	Shares issued under employee stock plans, net	6	—		—				—				—			Shares issued under employee stock plans, net		1		—		—				—				—
Forfeiture and other settlements of restricted stock	Forfeiture and other settlements of restricted stock	(13)	—		—				—				—			Forfeiture and other settlements of restricted stock		(8)		—		—				—				—
Common stock redeemed for tax liability	Common stock redeemed for tax liability	(18)	—		(424)				—				(424)			Common stock redeemed for tax liability		(1)		—		(11)				—				(11)

Balance as of June 30, 2021		31,294	$	31	$	863,240			$	(189,666)			$	673,605
Share repurchases																Share repurchases		(175)		—		(2,527)				—				(2,527)
Balance as of June 30, 2022																Balance as of June 30, 2022		31,275		$	31	$	863,520			$	(7,424)			$	856,127


		Nine Months Ended June 30, 2021																Nine Months Ended June 30, 2022
		Common Stock			Paid-in Capital				Accumulated Deficit									Common Stock				Paid-in Capital				Accumulated Deficit
in thousands	in thousands	Shares	Amount								Total		in thousands		Shares				Amount					Total
Balance as of September 30, 2020		31,012	$	31			$	856,466			$	(263,326)				$	593,171
Balance as of September 30, 2021																Balance as of September 30, 2021		31,294		$	31			$	866,158			$	(141,305)			$	724,884
Net income and comprehensive income	Net income and comprehensive income	—	—		—				73,660				73,660			Net income and comprehensive income		—		—		—				133,881				133,881
Stock-based compensation expense	Stock-based compensation expense	—	—		9,254				—				9,254			Stock-based compensation expense		—		—		6,515				—				6,515
Stock option exercises	Stock option exercises	198	—		564				—				564			Stock option exercises		1		—		5				—				5
Shares issued under employee stock plans, net	Shares issued under employee stock plans, net	417	—		—				—				—			Shares issued under employee stock plans, net		518		—		—				—				—
Forfeiture and other settlements of restricted stock	Forfeiture and other settlements of restricted stock	(29)	—		—				—				—			Forfeiture and other settlements of restricted stock		(55)		—		—				—				—
Common stock redeemed for tax liability	Common stock redeemed for tax liability	(304)	—		(3,044)				—				(3,044)			Common stock redeemed for tax liability		(308)		—		(6,631)				—				(6,631)
Share repurchases																Share repurchases		(175)		—		(2,527)				—				(2,527)

Balance as of June 30, 2021		31,294	$	31	$	863,240			$	(189,666)			$	673,605
Balance as of June 30, 2022																Balance as of June 30, 2022		31,275		$	31	$	863,520			$	(7,424)			$	856,127

See accompanying notes to condensed consolidated financial statements.

Table of Contents

BEAZER HOMES USA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended					Nine Months Ended
		June 30,					June 30,
in thousands	in thousands	2022		2021		in thousands	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	133,881	$	73,660	Net income	$	102,855	$	133,881
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:						Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	9,101		10,494		Depreciation and amortization	8,440		9,101
Stock-based compensation expense	Stock-based compensation expense	6,515		9,254		Stock-based compensation expense	5,247		6,515
Inventory impairments and abandonments	Inventory impairments and abandonments	935		696		Inventory impairments and abandonments	616		935

Deferred and other income tax expense	Deferred and other income tax expense	29,683		22,587		Deferred and other income tax expense	15,466		29,683

Gain on sale of fixed assets		(252)		(258)
Loss (gain) on disposal of fixed assets						Loss (gain) on disposal of fixed assets	1,178		(252)
Change in allowance for doubtful accounts	Change in allowance for doubtful accounts	(6)		(66)		Change in allowance for doubtful accounts	—		(6)

Equity in income of unconsolidated entities		(454)		(424)
Cash distributions of income from unconsolidated entities		380		66

Loss on extinguishment of debt, net	Loss on extinguishment of debt, net	78		1,613		Loss on extinguishment of debt, net	533		78
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		554		(3,145)
Decrease in accounts receivable						Decrease in accounts receivable	2,695		554
Decrease in income tax receivable	Decrease in income tax receivable	—		49		Decrease in income tax receivable	9,987		—
Increase in inventory	Increase in inventory	(351,424)		(54,867)		Increase in inventory	(1,228)		(351,424)
Increase in other assets	Increase in other assets	(4,540)		(4,195)		Increase in other assets	(5,346)		(4,614)
Increase in trade accounts payable		12,473		22,892
(Decrease) increase in other liabilities		(1,428)		186
(Decrease) increase in trade accounts payable						(Decrease) increase in trade accounts payable	(6,828)		12,473
Decrease in other liabilities						Decrease in other liabilities	(37,783)		(1,428)

Net cash (used in) provided by operating activities		(164,504)		78,542
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	95,832		(164,504)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(11,192)		(10,319)		Capital expenditures	(14,122)		(11,192)
Proceeds from sale of fixed assets	Proceeds from sale of fixed assets	257		308		Proceeds from sale of fixed assets	143		257
Purchases of investment securities						Purchases of investment securities	(7,838)		—

Other						Other	(2)		—

Net cash used in investing activities	Net cash used in investing activities	(10,935)		(10,011)		Net cash used in investing activities	(21,819)		(10,935)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repayment of debt	Repayment of debt	(7,750)		(25,128)		Repayment of debt	(4,998)		(7,750)

Repayment of borrowings from credit facility	Repayment of borrowings from credit facility	(80,000)		—		Repayment of borrowings from credit facility	—		(80,000)
Borrowings from credit facility	Borrowings from credit facility	80,000		—		Borrowings from credit facility	—		80,000

Debt issuance costs	Debt issuance costs	—		(427)		Debt issuance costs	(2,575)		—

Repurchase of common stock	Repurchase of common stock	(2,527)		—		Repurchase of common stock	—		(2,527)

Tax payments for stock-based compensation awards	Tax payments for stock-based compensation awards	(6,631)		(3,044)		Tax payments for stock-based compensation awards	(2,615)		(6,631)
Stock option exercises	Stock option exercises	5		564		Stock option exercises	12		5

Net cash used in financing activities	Net cash used in financing activities	(16,903)		(28,035)		Net cash used in financing activities	(10,176)		(16,903)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(192,342)		40,496
Net increase (decrease) in cash, cash equivalents, and restricted cash						Net increase (decrease) in cash, cash equivalents, and restricted cash	63,837		(192,342)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	274,143		342,528		Cash, cash equivalents, and restricted cash at beginning of period	251,828		274,143
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	81,801	$	383,024	Cash, cash equivalents, and restricted cash at end of period	$	315,665	$	81,801

See accompanying notes to condensed consolidated financial statements.

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BEAZER HOMES USA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Description of Business

Beazer Homes USA, Inc. (“we,” “us,” “our,” “Beazer,” “Beazer Homes” and the “Company”) is a geographically diversified homebuilder with active operations in 13 states within 3three geographic regions in the United States: the West, East, and Southeast.

Our homes are designed to appeal to homeowners at different price points across various demographic segments and are generally offered for sale in advance of their construction. Our objective is to provide our customers with homes that incorporate ~~exceptional~~extraordinary value at an affordable price, delivered through our three strategic pillars of Mortgage Choice, Choice Plans®, and ~~quality,~~ Surprising Performance,while seeking to maximize ~~our return on invested capital~~investment returns over the course of a housing cycle.

For an additional description of our business and strategic pillars, refer to Item 1 within our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021 (2021~~2022 (2022 Annual Report).

(2) Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. The unaudited condensed consolidated financial statements do not include all of the information and disclosures required by GAAP for complete financial statements. As such, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's ~~2021~~2022 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The results of the Company's consolidated operations presented herein for the three and nine months ended June 30, ~~2022~~2023 are not necessarily indicative of the results to be expected for the full fiscal year due to seasonal variations in our operations and other factors.

Basis of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Beazer Homes USA, Inc. and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Our net income is equivalent to our comprehensive income, so we have not presented a separate statement of comprehensive income.

In the past, we have discontinued homebuilding operations in various markets. Results from certain of these exited markets are reported as discontinued operations in the accompanying unaudited condensed consolidated statements of operations for all periods ~~presented (see Note 16 for a further discussion of our discontinued operations).~~presented.

Our fiscal year 2023 began on October 1, 2022 and ends on September 30, 2023. Our fiscal year 2022 began on October 1, 2021 and ~~ends~~ended on September 30, 2022. ~~Our fiscal year 2021 began on October 1, 2020 and ended on September 30, 2021.~~

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make informed estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Accordingly, actual results could differ from these estimates.

Share Repurchase Program

~~The aggregate reduction to stockholders’ equity related to share repurchases duri~~three and nineng ~~the nine~~ months ended June 30, ~~2022 was $2.5 million.~~2023. As of June 30, ~~2022,~~2023, the remaining availability of the new share repurchase program was ~~$47.5~~$41.8 million. The repurchase program has no expiration date. Previously repurchased shares under the program have been retired.

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Revenue Recognition

We recognize revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the ~~following five-step~~ process specified in ASC Topic 606, Revenue from Contracts with Customers.

•~~Identify the contract(s) with a customer~~

•~~Identify the performance obligations~~

•~~Determine the transaction price~~

•~~Allocate the transaction price~~

•~~Recognize revenue when the performance obligations are met~~

The following table presents our total revenue disaggregated by revenue stream:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					June 30,				June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Homebuilding revenue	Homebuilding revenue	$	523,229	$	566,930	$	1,477,166	$	1,538,576	Homebuilding revenue	$	570,535	$	523,229	$	1,556,626	$	1,477,166
Land sales and other revenue	Land sales and other revenue	3,437		4,002		12,155		10,784		Land sales and other revenue	2,009		3,437		4,754		12,155
Total revenue (a)	Total revenue (a)	$	526,666	$	570,932	$	1,489,321	$	1,549,360	Total revenue(a)	$	572,544	$	526,666	$	1,561,380	$	1,489,321

(a) Please see Note 1514 for total revenue disaggregated by reportable segment.

Homebuilding revenue

Homebuilding revenue is reported net of ~~any~~ discounts ~~and incentives~~ and is generally recognized when title to and possession of the home ~~are~~is transferred to the buyer at the closing date. The performance obligation to deliver the home is generally satisfied in less than one year from the original contract date. Home sale contract assets consist of cash from home closings held by title companies in escrow for our benefit, typically for less than five days, and are considered accounts receivable. Contract liabilities include customer deposits related to sold but undelivered homes and totaled ~~$44.1~~$32.9 million and ~~$28.5~~$34.3 million as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively. Of the customer liabilities outstanding as of September 30, ~~2021, $5.4~~2022, $6.2 million and ~~$23.1~~$28.4 million was recognized in revenue during the three and nine months ended June 30, ~~2022~~2023 upon closing of the related homes.

Land sales and other revenue

Land sales revenue relates to land that does not fit within our homebuilding programs and strategic plans. Land sales typically require cash consideration on the closing date, which is generally when performance obligations are satisfied. We also provide title examinations for our homebuyers in certain markets. Revenues associated with our title operations are recognized aswhen closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed.

Recent Accounting Pronouncements

Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04). ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective beginning on March 12, 2020, and all entities may elect to apply the amendments prospectively through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848, to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024. The Company is currently evaluating the ~~effect~~impact of ~~adopting~~these accounting standards updates but does not expect that the ~~new guidance~~adoption of ASU 2020-04 and ASU 2022-06 will have a material impact on ~~its~~our consolidated financial statements and related disclosures.

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(3) Supplemental Cash Flow Information

The following table presents supplemental disclosure of non-cash and cash activity as well as a reconciliation of total cash balances between the condensed consolidated balance sheets and condensed consolidated statements of cash flows for the periods presented:


		Nine Months Ended					Nine Months Ended
		June 30,					June 30,
in thousands	in thousands	2022		2021		in thousands	2023		2022
Supplemental disclosure of non-cash activity:	Supplemental disclosure of non-cash activity:					Supplemental disclosure of non-cash activity:

Increase in operating lease right-of-use assets (a)	Increase in operating lease right-of-use assets (a)	$	811	$	2,649	Increase in operating lease right-of-use assets(a)	$	8,814	$	811
Increase in operating lease liabilities (a)	Increase in operating lease liabilities (a)	$	811	$	2,649	Increase in operating lease liabilities(a)	9,262		811
Derecognition of investment in unconsolidated entities (b)	Derecognition of investment in unconsolidated entities (b)	$	3,641	$	—	Derecognition of investment in unconsolidated entities (b)	$	—	$	3,641
Supplemental disclosure of cash activity:	Supplemental disclosure of cash activity:					Supplemental disclosure of cash activity:
Interest payments	Interest payments	$	60,052	$	63,878	Interest payments	$	58,405	$	60,052
Income tax payments	Income tax payments	$	3,783	$	2,297	Income tax payments	1,450		3,783
Tax refunds received	Tax refunds received	$	—	$	49	Tax refunds received	9,987		—
Reconciliation of cash, cash equivalents, and restricted cash:	Reconciliation of cash, cash equivalents, and restricted cash:					Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	42,039	$	358,334	Cash and cash equivalents	$	276,125	$	42,039
Restricted cash	Restricted cash	39,762		24,690		Restricted cash	39,540		39,762
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	81,801	$	383,024	Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	315,665	$	81,801

(a) Represents leases renewed or additional leases commenced during the nine months ended June 30, ~~2022~~2023 and ~~June 30, 2021.~~2022.

(b) Represents the derecognition of investment in unconsolidated entities associated with the carrying value of previously held interest in Imagine Homes upon the acquisition of substantially all of the assets of Imagine Homes during the quarter ended June 30, 2022. ~~Refer to Note 4 for further discussion.~~

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(4) ~~Investments in Unconsolidated Entities~~

~~Unconsolidated Entities~~

As of June 30, 2022, the Company participated in certain joint ventures and had investments in unconsolidated entities in which it had less than a controlling interest. The following table presents the Company's investment in these unconsolidated entities as well as the total equity and outstanding borrowings of these unconsolidated entities as of June 30, 2022 and September 30, 2021:

in thousands June 30, 2022 September 30, 2021
Investment in unconsolidated entities $ 897 $ 4,464
Total equity of unconsolidated entities $ 1,032 $ 7,316
Total outstanding borrowings of unconsolidated entities $ — $ 12,708

On May 20, 2022, the Company acquired substantially all of the assets of Imagine Homes, a private San Antonio-based homebuilder. For the past 16 years, Beazer has held a one-third ownership stake in Imagine Homes, recorded as an investment in unconsolidated entities on the condensed consolidated balance sheet. The transaction was deemed an asset acquisition under the guidance of ASC Topic 805-50, ~~Business Combinations - Related Issues.~~ ~~The Company accounted for the asset acquisition following the cost accumulation model, whereby the sum of the~~ ~~carrying value of the previously held interest, additional consideration paid and transaction costs was allocated to the acquired assets on a relative fair value basis. The~~ ~~reduction in balances of the Company's investment in unconsolidated entities, total equity and outstanding borrowings of unconsolidated entities during the quarter ended~~ ~~June 30, 2022~~ ~~reflects the Imagine Homes transaction.~~

~~Equity in income from unconsolidated entity activities included in income from continuing operations is as follows for the periods presented:~~

Three Months Ended Nine Months Ended
June 30, June 30,
in thousands 2022 2021 2022 2021
Equity in income of unconsolidated entities $ 3 $ 313 $ 454 $ 424

~~For the nine months ended June 30, 2022 and 2021, there were no~~ ~~impairments related to investments in unconsolidated entities.~~

~~Guarantees~~

Historically, the Company's joint ventures typically obtained secured acquisition, development, and construction financing. In addition, the Company and its joint venture partners provided varying levels of guarantees of debt and other debt-related obligations for these unconsolidated entities. However, as of June 30, 2022 and September 30, 2021, the Company had no outstanding guarantees or other debt-related obligations related to our investments in unconsolidated entities.

The Company and its joint venture partners generally provide unsecured environmental indemnities to land development joint venture project lenders. These indemnities obligate the Company to reimburse the project lenders for claims related to environmental matters for which they are held responsible. During the three and nine months ended June 30, 2022 and 2021, the Company was not required to make any payments related to environmental indemnities.

In assessing the need to record a liability for these guarantees, the Company considers its historical experience in being required to perform under the guarantees, the fair value of the collateral underlying these guarantees, and the financial condition of the applicable unconsolidated entities. In addition, the fair value of the collateral of unconsolidated entities is monitored to ensure that the related borrowings do not exceed the specified percentage of the value of the property securing the borrowings. As of June 30, 2022, no liability was recorded for the contingent aspects of any guarantees that were determined to be reasonably possible but not probable.

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~~(5)~~ Owned Inventory

The components of our owned inventory are as follows as of June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:


in thousands	in thousands	June 30, 2022		September 30, 2021		in thousands	June 30, 2023		September 30, 2022
Homes under construction	Homes under construction	$	976,590	$	648,283	Homes under construction	$	719,231	$	785,742
Land under development	Land under development	659,057		648,404		Land under development	785,752		731,190
Land held for future development	Land held for future development	19,879		19,879		Land held for future development	19,879		19,879
Land held for sale	Land held for sale	13,598		9,179		Land held for sale	16,764		15,674
Capitalized interest	Capitalized interest	115,735		106,985		Capitalized interest	114,409		109,088
Model homes	Model homes	73,992		68,872		Model homes	85,616		76,292
Total owned inventory	Total owned inventory	$	1,858,851	$	1,501,602	Total owned inventory	$	1,741,651	$	1,737,865

Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including costs of the underlying lot, direct construction costs and capitalized indirect costs. As of June 30, ~~2022,~~2023, we had ~~3,656~~2,340 homes under construction, including ~~936~~720 spec homes totaling ~~$212.8~~$212.7 million ~~(881~~(592 in-process spec homes totaling ~~$191.0~~$159.7 million, and 55128 finished spec homes totaling ~~$21.8~~$53.0 million). As of September 30, ~~2021,~~2022, we had ~~2,912~~2,688 homes under construction, including ~~576~~887 spec homes totaling ~~$116.4~~$246.5 million ~~(542~~(793 in-process spec units totaling ~~$105.2~~$208.7 million, and 3494 finished spec units totaling ~~$11.2~~$37.8 million).

Land under development consists principally of land acquisition, land development and other common costs. These land related costs are allocated to individual lots on a pro-rata basis, and the lot costs are transferred to homes under construction when home construction begins for the respective lots. Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract.

Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable carrying costs, such as interest and real estate taxes, are expensed as incurred.

Land held for sale includes land and lots that do not fit within our homebuilding programs and strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2 to the audited consolidated financial statements within our ~~2021~~2022 Annual Report). These assets are recorded at the lower of the carrying value or fair value less costs to sell (net realizable value).

The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and land under development but excludes land held for future development and land held for sale (see Note 65 for additional information on capitalized interest).

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Total owned inventory by reportable segment is presented in the table below as of June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:


in thousands	Projects in Progress(a)		Land Held for Future Development		Land Held for Sale		Total Owned Inventory
June 30, 2023
West	$	889,585	$	3,483	$	16,088	$	909,156
East	339,573		10,888		—		350,461
Southeast	293,706		5,508		676		299,890
Corporate and unallocated(b)	182,144		—		—		182,144
Total	$	1,705,008	$	19,879	$	16,764	$	1,741,651
September 30, 2022
West	$	934,309	$	3,483	$	14,998	$	952,790
East	313,613		10,888		—		324,501
Southeast	284,424		5,508		676		290,608
Corporate and unallocated(b)	169,966		—		—		169,966
Total	$	1,702,312	$	19,879	$	15,674	$	1,737,865

in thousands
Projects in
Progress (a)
Land Held for Future Development Land Held for Sale Total Owned
Inventory
June 30, 2022
West $ 977,567 $ 3,483 $ 12,922 $ 993,972
East 340,673 10,888 — 351,561
Southeast 327,156 5,508 676 333,340
Corporate and unallocated (b)
179,978

— — 179,978
Total $ 1,825,374 $ 19,879 $ 13,598 $ 1,858,851
September 30, 2021
West $ 781,036 $ 3,483 $ 4,478 $ 788,997
East 264,991 10,888 584 276,463
Southeast 269,738 5,508 4,117 279,363
Corporate and unallocated (b)
156,779 — — 156,779
Total $ 1,472,544 $ 19,879 $ 9,179 $ 1,501,602

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(a) Projects in progress include homes under construction, land under development, capitalized interest, and model home categories from the preceding table.

(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment.

Inventory Impairments

Inventory assets are assessed for recoverability periodically in accordance with the policies described in Notes 2 and 5 to the audited consolidated financial statements within our ~~2021~~2022 Annual Report.

The following table presents, by reportable segment, our total impairment and abandonment charges for the periods presented:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022

Land Held for Sale:	Land Held for Sale:									Land Held for Sale:
West	West	$	—	$	—	$	440	$	—	West	$	—	$	—	$	—	$	440

Total impairment charges on land held for sale	Total impairment charges on land held for sale	$	—	$	—	$	440	$	—	Total impairment charges on land held for sale	$	—	$	—	$	—	$	440
Abandonments:	Abandonments:									Abandonments:
West	West	$	—	$	—	$	12	$	—	West	$	315	$	—	$	462	$	12
East	East	—		0		—		465		East	—		—		154		—
Southeast	Southeast	—		231		483		231		Southeast	—		—		—		483

Total abandonments charges	Total abandonments charges	$	—	$	231	$	495	$	696	Total abandonments charges	$	315	$	—	$	616	$	495

Total impairment and abandonment charges		$	—	$	231	$	935	$	696
Total impairments and abandonment charges										Total impairments and abandonment charges	$	315	$	—	$	616	$	935

Projects in Progress Impairments

Projects in progress inventory includes homes under construction and land under development grouped together as communities. Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable.

We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis. If indicators of impairment are present for a community with more than 10ten homes remaining to close, we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value. If the aggregate undiscounted cash flows are in excess of the carrying value, the asset is considered to be recoverable and is not impaired. If the carrying value exceeds the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.

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No project in progress impairments were recognized during the three and nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Land Held for Sale ~~Impairments`~~Impairments

We evaluate the net realizable value (fair value less cost to sell) of a land held for sale asset when indicators of impairment are present. Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts, letters of intent, current market conditions, and recent comparable land sale transactions, as applicable. Absent an executed sales contract, our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions, and our estimates of sale prices could differ significantly from actual results.

No land held for sale impairments were recognized during the three and nine months ended June 30, ~~2022.~~ ~~We recognized $0.4 million land held for sale impairments during~~ ~~the~~ ~~nine~~ ~~months ended June 30, 2022 related to one held for sale community in the West segment.~~2023. No land held for sale impairments were recognized during the three months ended June 30, 2022. We recognized $0.4 million land held for sale impairments during the nine months ended June 30, 2022. The fair value of land held for sale inventory is measured on a non-recurring basis and has been determined using unobservable inputs (Level 3). The impairment-date fair value of land held for sale assets that were impaired during the nine months ended June 30, ~~2021.~~2022 was $0.3 million. Refer to Note 9 for further discussion on fair value measurements and fair value hierarchy.

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Abandonments

From time-to-time, we may determine to abandon lots or not exercise certain option ~~contracts~~agreements that are not projected to produce adequate results or no longer fit with our long-term strategic plan. Additionally, in certain limited instances, we are forced to abandon lots due to seller non-performance, or permitting or other regulatory issues that do not allow us to build on those lots. If we intend to abandon or walk away from a property, we record an abandonment charge to earnings for the deposit amount and any related capitalized costs in the period such decision is made.

We recognized $0.3 million and $0.6 million abandonment charges during the three and nine months ended June 30, 2023, respectively. No abandonment charges were recognized during the three months ended June 30, ~~2022.~~2022. We recognized $0.5 million abandonment charges during the ~~nine months ended June 30, 2022 related to one under contract deal in the West segment and one under contract deal in the Southeast segment that we decided to terminate. During the three and~~ nine months ended June 30, ~~2021,~~2022 ~~we recognized $0.2 million and~~ ~~$0.7 million~~ ~~abandonment charges, respectively, related to under contract deals that we decided to terminate in the East and Southeast segments.~~.

Lot Option Agreements

In addition to purchasing land directly, we utilize lot option agreements that enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our lot option. The majority of our lot option agreements require a non-refundable cash deposit or irrevocable letter of credit based on a percentage of the purchase price of the land for the right to acquire lots during a specified period at a specified price. Purchase of the properties under these agreements is contingent upon satisfaction of certain requirements by us and the sellers. Under lot option agreements, our liability is generally limited to forfeiture of the non-refundable deposits, letters of credit or surety bonds, and other non-refundable amounts incurred. If the Company cancels a lot option agreement, it would result in a write-off of the related deposits and pre-acquisition costs, but would not expose the Company to the overall risks or losses of the applicable entity we are purchasing from. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our remaining option ~~contracts.~~agreements. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all.

The following table provides a summary of our interests in lot option agreements as of June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:

in thousands
Deposits &
Non-refundable
Pre-acquisition
Costs Incurred (a)
Remaining
Obligation, Net of Deposits
As of June 30, 2022
Unconsolidated lot option agreements $ 137,357 $ 819,072
As of September 30, 2021
Unconsolidated lot option agreements $ 114,688 $ 676,149


	June 30, 2023		September 30, 2022
in thousands


Deposits and non-refundable pre-acquisition costs incurred(a)	$	144,746	$	142,433

Remaining purchase price if lot option agreements are exercised	$	747,900	$	827,600

(a) Amount is included as a component of land under development within our owned inventory in the condensed consolidated balance ~~sheet.~~sheets.

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~~(6)~~(5) Interest

Interest capitalized during the three and nine months ended June 30, 2023 and 2022 ~~and 2021~~ was ~~limited by~~based upon the balance of inventory eligible for capitalization. The following table presents certain information regarding interest for the periods presented:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Capitalized interest in inventory, beginning of period	Capitalized interest in inventory, beginning of period	$	112,686	$	113,414	$	106,985	$	119,659	Capitalized interest in inventory, beginning of period	$	113,886	$	112,686	$	109,088	$	106,985
Interest incurred	Interest incurred	18,728		19,270		55,292		58,517		Interest incurred	18,027		18,728		53,891		55,292

Interest expense not qualified for capitalization and included as other expense (a)		—		(212)		—		(2,781)

Capitalized interest amortized to home construction and land sales expenses ~~(b)~~(a)	Capitalized interest amortized to home construction and land sales expenses ~~(b)~~(a)	(15,679)		(22,529)		(46,542)		(65,452)		Capitalized interest amortized to home construction and land sales expenses ~~(b)~~(a)	(17,504)		(15,679)		(48,570)		(46,542)
Capitalized interest in inventory, end of period	Capitalized interest in inventory, end of period	$	115,735	$	109,943	$	115,735	$	109,943	Capitalized interest in inventory, end of period	$	114,409	$	115,735	$	114,409	$	115,735

(a)The amount of interest capitalized depends on the qualified inventory balance, which considers the status of the Company's inventory holdings. Qualified inventory balance includes the majority of homes under construction and land under development but excludes land held for future development and land held for sale.

~~(b)~~ Capitalized interest amortized to home construction and land sales expenses varies based on the number of homes closed during the period and land sales, if any, as well as other factors.

~~(7)~~

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(6) Borrowings

The Company's debt, net of unamortized debt issuance costs consisted of the following as of June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:


in thousands	in thousands	Maturity Date	June 30, 2022		September 30, 2021		in thousands	Maturity Date	June 30, 2023		September 30, 2022
Senior Unsecured Term Loan		September 2022	$	50,000	$	50,000

6.750% Senior Notes (2025 Notes)	6.750% Senior Notes (2025 Notes)	March 2025	227,822		229,555		6.750% Senior Notes (2025 Notes)	March 2025	$	206,195	$	211,195
5.875% Senior Notes (2027 Notes)	5.875% Senior Notes (2027 Notes)	October 2027	357,255		363,255		5.875% Senior Notes (2027 Notes)	October 2027	357,255		357,255
7.250% Senior Notes (2029 Notes)	7.250% Senior Notes (2029 Notes)	October 2029	350,000		350,000		7.250% Senior Notes (2029 Notes)	October 2029	350,000		350,000

Unamortized debt issuance costs	Unamortized debt issuance costs		(7,752)		(8,983)		Unamortized debt issuance costs		(6,142)		(7,280)
Total Senior Notes, net	Total Senior Notes, net		977,325		983,827		Total Senior Notes, net		907,308		911,170
Junior Subordinated Notes (net of unamortized accretion of $29,020 and $30,570, respectively)		July 2036	71,753		70,203
Junior Subordinated Notes (net of unamortized accretion of $26,953 and $28,503, respectively)							Junior Subordinated Notes (net of unamortized accretion of $26,953 and $28,503, respectively)	July 2036	73,820		72,270

Revolving Credit Facility		February 2024	—		—

Secured Revolving Credit Facility							Secured Revolving Credit Facility	February 2024(a)	N/A(c)		—
Senior Unsecured Revolving Credit Facility							Senior Unsecured Revolving Credit Facility	October 2026(b)	—		N/A(c)
Total debt, net	Total debt, net		$	1,049,078	$	1,054,030	Total debt, net		$	981,128	$	983,440

~~Secured Revolving Credit Facility~~

(a) The Secured Revolving Credit Facility ~~(the~~(Secured Facility) provided working capital and letter of credit capacity of $250.0 million and was scheduled to mature in February 2024; however, the Secured Facility was terminated early in October 2022 in conjunction with the Company entering into the Senior Unsecured Revolving Credit Facility. We recorded a loss on extinguishment of debt of $0.5 million during the nine months ended June 30, 2023 due to write-off of debt issuance costs related to the early termination of the Secured Facility.As of September 30, 2022, no borrowings were outstanding and $5.5 million letters of credit were outstanding under the Secured Facility, resulting in a remaining capacity of $244.5 million.

(b) The Senior Unsecured Revolving Credit Facility was entered into on October 13, 2022. Refer to below for further discussion.

Senior Unsecured Revolving Credit Facility

On October 13, 2022, the Company entered into a Senior Unsecured Revolving Credit Facility (Unsecured Facility), which replaced the Secured Facility. The Unsecured Facility provides working capital and letter of credit capacity of $~~250.0~~265.0 million. The Company also will have the right from time to time to request to increase the size of the commitments under the Unsecured Facility ~~is currently with~~ by up to $135.0 million for a maximum of $400.0 million. The Unsecured Facility terminates on October 13, 2026 (Termination Date), and the Company may borrow, repay, and reborrow amounts under the Unsecured Facility until the Termination Date.4 ~~lenders.~~

Obligations of the Company under the Unsecured Facility are jointly and severally guaranteed by certain of the Company’s existing and future direct and indirect subsidiaries, excluding, among others, certain specified unrestricted subsidiaries. For additional discussion of the Unsecured Facility, refer to Note 8 to the audited consolidated financial statements within our ~~2021~~2022 Annual Report.

As of June 30, ~~2022~~2023, no borrowings and ~~September 30, 2021,~~ no ~~borrowings~~letters of credit were outstanding under the ~~Facility. As of June 30, 2022, we had letters of credit outstanding of~~ ~~$1.8 million~~ ~~under the~~Unsecured Facility, resulting in a remaining capacity of $265.0 million.~~$248.2 million. We had no letters of credit outstanding under the Facility as of September 30, 2021.~~ The Unsecured Facility requires compliance with certain covenants, including affirmative covenants, negative covenants and financial covenants. As of June 30, ~~2022,~~2023, the Company believes it was in compliance with all such covenants.

~~Senior Unsecured Term Loan~~

~~On September 9, 2019, the Company entered into a term loan agreement, which provides for a Senior Unsecured Term Loan (the Term Loan). The principal balance as of~~ ~~June 30, 2022~~ ~~was $50.0 million~~. The Term Loan (1) will mature in September 2022, with the remaining $50.0 million annual repayment installment due in September 2022; (2) bears interest at a fixed rate of 4.875%; and (3) includes an option to prepay, subject to certain conditions and the payment of certain premiums. The Term Loan contains covenants generally consistent with the covenants contained in the Facility. As of June 30, 2022, the Company believes it was in compliance with all such covenants.

~~Table of Contents~~

Letter of Credit Facilities

The Company has entered into stand-alone ~~cash-secured~~ letter of credit agreements with banks, secured with cash or certificates of deposit, to maintain pre-existing letters of credit and to provide for the issuance of new letters of credit (in addition to the letters of credit issued under the Secured Facility and the Unsecured Facility). As of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, the Company had letters of credit outstanding under these additional facilities of ~~$28.8~~$32.1 million and ~~$21.8~~$29.7 million, respectively ~~all of which were secured by cash collateral in restricted accounts totaling~~ ~~$31.5 million~~ ~~and $22.3 million, respectively.~~. The Company may enter into additional arrangements to provide additional letter of credit capacity.

Senior Notes

The Company's ~~Senior Notes~~senior notes (Senior Notes) are unsecured obligations ranking pari passu with all other existing and future senior indebtedness. Substantially all of the Company's significant subsidiaries are full and unconditional guarantors of the Senior Notes and are jointly and severally liable for obligations under the Senior Notes and the Unsecured Facility. Each guarantor subsidiary is a ~~100%~~wholly owned subsidiary of Beazer Homes.

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All unsecured Senior Notes rank equally in right of payment with all existing and future senior unsecured obligations, senior to all of the Company's existing and future subordinated indebtedness and effectively subordinated to the Company's existing and future secured indebtedness, ~~including indebtedness under the Facility, if outstanding,~~ to the extent of the value of the assets securing such indebtedness. The unsecured Senior Notes and related guarantees are structurally subordinated to all indebtedness and other liabilities of all of the Company's subsidiaries that do not guarantee these notes but are fully and unconditionally guaranteed jointly and severally on a senior basis by the Company's wholly-owned subsidiaries party to each applicable indenture.

The Company's Senior Notes are issued under indentures that contain certain restrictive covenants which, among other things, restrict our ability to pay dividends, repurchase our common stock, incur certain types of additional indebtedness, and make certain investments. Compliance with the Senior Note covenants does not significantly impact the Company's operations. The Company believes it was in compliance with the covenants contained in the indentures of all of its Senior Notes as of June 30, ~~2022.~~2023.

During the three and nine months ended June 30, 2023, we repurchased $5.0 million of our outstanding 2025 Notes Senior Notes using cash on hand, resulting in a loss on extinguishment of debt of less than $0.1 million.

During the three months ended June 30, 2022, we repurchased $1.7 million of our outstanding 2025 Notes using cash on hand, resulting in a gain on extinguishment of debt of $0.1 million.

During the nine months ended June 30, 2022, we repurchased $6.0 million of our outstanding 2027 Notes and $1.7 million of

our outstanding 2025 Notes using cash on hand, resulting in a net loss on extinguishment of debt of $0.1 million.

~~Table of Contents~~

For additional redemption features, refer to the table below that summarizes the redemption terms of our Senior Notes:

Senior Note Description

Issuance Date

Maturity Date

Redemption Terms

6.750% Senior Notes

March 2017

March 2025

Callable at any time prior to March 15, 2020, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after March 15, 2020, callable at a redemption price equal to 105.063% of the principal amount; on or after March 15, 2021, callable at a redemption price equal to 103.375% of the principal amount; on or after March 15, 2022, callable at a redemption price equal to 101.688% of the principal amount; on or after March 15, 2023, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.

5.875% Senior Notes

October 2017

October 2027

Callable at any time prior to October 15, 2022, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2022, callable at a redemption price equal to 102.938% of the principal amount; on or after October 15, 2023, callable at a redemption price equal to 101.958% of the principal amount; on or after October 15, 2024, callable at a redemption price equal to 100.979% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.

7.250% Senior Notes

September 2019

October 2029

On or prior to October 15, 2022, we may redeem up to 35% of the aggregate principal amount of the 2029 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 107.250% of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, provided at least 65% of the aggregate principal amount of the 2029 Notes originally issued remains outstanding immediately after such redemption.

Callable at any time prior to October 15, 2024, in whole or in part, at a redemption price equal to 100.000% of the principal amount, plus a customary make-whole premium; on or after October 15, 2024, callable at a redemption price equal to 103.625% of the principal amount; on or after October 15, 2025, callable at a redemption price equal to 102.417% of the principal amount; on or after October 15, 2026, callable at a redemption price equal to 101.208% of the principal amount; on or after October 15, 2027, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.

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Junior Subordinated Notes

The Company's unsecured junior subordinated notes (Junior Subordinated Notes) mature on July 30, 2036 and have an aggregate principal balance of $100.8 million as of June 30, ~~2022.~~2023. The securities have a floating interest rate as defined in the Junior Subordinated Notes Indentures, which was a weighted-average of ~~4.12%~~7.75% as of June 30, ~~2022.~~2023. The obligations relating to these notes are subordinated to the Unsecured Facility and the Senior Notes. In January 2010, the Company restructured $75.0 million of these notes (Restructured Notes) and recorded them at their then estimated fair value. Over the remaining life of the ~~restructured notes,~~Restructured Notes, we will increase their carrying value until this carrying value equals the face value of the notes. As of June 30, ~~2022,~~2023, the unamortized accretion was ~~$29.0~~$27.0 million and will be amortized over the remaining life of the ~~restructured notes.~~Restructured Notes. The remaining $25.8 million of ~~these notes~~the Junior Subordinated Notes are subject to the terms of the original agreement, have a floating interest rate equal to three-month LIBOR plus 2.45% per annum, resetting quarterly, and are redeemable in whole or in part at par value. The material terms of the $75.0 million ~~restructured notes~~Restructured Notes are identical to the terms of the original agreement except that the floating interest rate is subject to a floor of 4.25% and a cap of 9.25%. In addition, beginning on June 1, 2012, the Company has the option to redeem the $75.0 million principal balance in whole or in part at 75% of par value; beginning on June 1, 2022, the redemption price ~~will increase~~increased by 1.785% annually. As of June 30, ~~2022,~~2023, the Company believes it was in compliance with all covenants under the Junior Subordinated Notes.

~~(8)~~(7) Operating Leases

The Company leases certain office space and equipment under operating leases for use in our operations. We recognize operating lease expense on a straight-line basis over the lease term. Certain of our lease agreements include one or more options to renew. The exercise of lease renewal options is generally at our discretion. Variable lease expense primarily relates to maintenance and other monthly ~~expense~~expenses that do not depend on an index or rate.

We determine if an arrangement is a lease at contract inception. Lease and non-lease components are accounted for as a single component for all leases. Operating lease ~~ROU~~right to use (ROU) assets and liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term, which includes optional renewal periods if we determine it is reasonably certain that the option will be exercised. As our leases do not provide an implicit rate, the discount rate used in the present value calculation represents our incremental borrowing rate determined using information available at the commencement date.

Operating lease expense is included as a component of general and administrative expenses in our condensed consolidated statements of operations. Sublease income and variable lease expenses are de minimis. For the three and nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, operating lease expense and cash payments on lease liabilities were as follows:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Operating lease expense	Operating lease expense	$	986	$	1,075	$	2,964	$	3,248	Operating lease expense	$	963	$	986	$	2,920	$	2,964
Cash payments on lease liabilities	Cash payments on lease liabilities	$	1,083	$	1,161	$	3,259	$	3,679	Cash payments on lease liabilities	$	1,027	$	1,083	$	3,271	$	3,259

At June 30, ~~2022~~2023 and ~~2021,~~2022, the weighted-average remaining lease term and discount rate were as follows:


		As of June 30,			As of June 30,
		2022	2021		2023	2022
Weighted-average remaining lease term	Weighted-average remaining lease term	4.4 years	4.9 years	Weighted-average remaining lease term	7.2 years	4.4 years
Weighted-average discount rate	Weighted-average discount rate	4.45%	4.62%	Weighted-average discount rate	5.95%	4.45%

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The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of June 30, ~~2022:~~2023:

Fiscal Years Ending September 30,
in thousands
2022 (a)
$ 1,103
2023 3,799
2024 2,680
2025 2,277
2026 1,643
Thereafter 1,928
    Total lease payments (b)
13,430
    Less: Imputed interest 1,275
    Total operating lease liabilities $ 12,155
`


Fiscal Years Ending September 30,
in thousands
2023(a)	$	977
2024	3,836
2025	3,550
2026	2,924
2027	2,016
Thereafter	9,360
Total lease payments(b)	22,663
Less: imputed interest	4,998
Total operating lease liabilities	$	17,665

(a) Remaining lease payments are for the period beginning July 1, ~~2022~~2023 through September 30, ~~2022.~~2023.

(b) Lease payments excludes ~~$10.3~~$3.3 million of legally binding minimum lease payments for an office ~~lease~~leases signed but not yet commenced. The related ROU asset and operating lease liability are not reflected on the Company's condensed consolidated balance sheet as of June 30, ~~2022.~~2023.

~~(9)~~(8) Contingencies

Beazer Homes and certain of its subsidiaries have been and continue to be named as defendants in various construction defect claims, complaints, and other legal actions. The Company is subject to the possibility of loss contingencies related to these defects as well as others arising from its business. In determining loss contingencies, we consider the likelihood of loss and our ability to reasonably estimate the amount of such loss. An estimated loss is recorded when it is considered probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Warranty Reserves

We currently provide a limited warranty ranging from one to two years covering workmanship and materials per our defined quality standards. In addition, we provide a limited warranty for up to ten years covering only certain defined structural element failures.

Our homebuilding work is performed by subcontractors who typically must agree to indemnify us with regard to their work and provide certificates of insurance demonstrating that they have met our insurance requirements and have named us as an additional insured under their policies. Therefore, many claims relating to workmanship and materials that result in warranty spending are the primary responsibility of these subcontractors.

Warranty reserves are included in other liabilities within the condensed consolidated balance sheets, and the provision for warranty accruals is included in home construction expenses in the condensed consolidated statements of operations. Reserves covering anticipated warranty expenses are recorded for each home closed. Management assesses the adequacy of warranty reserves each reporting period based on historical experience and the expected costs to remediate potential claims. Our review includes a quarterly analysis of the historical data and trends in warranty expense by division. An analysis by division allows us to consider market-specific factors such as warranty experience, the number of home closings, the prices of homes, product mix, and other data in estimating warranty reserves. In addition, the analysis also contemplates the existence of any non-recurring or community-specific warranty-related matters that might not be included in historical data and trends that may need to be separately estimated based on management's judgment of the ultimate cost of repair for that specific issue. While estimated warranty liabilities are adjusted each reporting period based on the results of our quarterly analyses, we may not accurately predict actual warranty costs, which could lead to significant changes in the reserve.

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In addition, we maintain third-party insurance, subject to applicable self-insured retentions, for most construction defects that we encounter in the normal course of business. We believe that our warranty and litigation accruals and third-party insurance are adequate to cover the ultimate resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation. However, there can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers; that we will be able to renew our insurance coverage or renew it at reasonable rates; that we will not be liable for damages, the cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence, or building related claims; or that claims will not arise out of events or circumstances not covered by insurance and/or not subject to effective indemnification agreements with our subcontractors.

Changes in warranty reserves are as follows for the periods presented:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					June 30,				June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period	$	12,681	$	12,421	$	12,931	$	13,052	Balance at beginning of period	$	13,073	$	12,681	$	13,926	$	12,931
Accruals for warranties issued (a)	Accruals for warranties issued (a)	2,842		2,921		8,025		7,958		Accruals for warranties issued(a)	3,298		2,842		8,783		8,025
Net changes in liability related to warranties existing in prior periods		536		(294)		558		26
Changes in liability related to warranties existing in prior periods										Changes in liability related to warranties existing in prior periods	(134)		536		(1,681)		558
Payments made	Payments made	(3,039)		(2,702)		(8,494)		(8,690)		Payments made	(2,971)		(3,039)		(7,762)		(8,494)
Balance at end of period	Balance at end of period	$	13,020	$	12,346	$	13,020	$	12,346	Balance at end of period	$	13,266	$	13,020	$	13,266	$	13,020

(a)Accruals for warranties issued are a function of the number of home closings in the period, the selling prices of the homes closed, and the rates of accrual per home estimated as a percentage of the selling price of the home.

Insurance Recoveries

The Company has insurance policies that provide for the reimbursement of certain warranty costs incurred above specified thresholds for each period covered. Amounts recorded for anticipated insurance recoveries are reflected within the condensed consolidated statements of ~~income~~operations as a reduction of home construction expenses. Amounts not yet received from our insurer are recorded on a gross basis, without any reduction for the associated warranty expense, within accounts receivable on our condensed consolidated balance sheets.

Litigation

In the normal course of business, we and certain of our subsidiaries are subject to various lawsuits and have been named as defendants in various claims, complaints, and other legal actions, most relating to construction defects, moisture intrusion, and product liability. Certain of the liabilities resulting from these actions are covered in whole or in part by insurance.

We cannot predict or determine the timing or final outcome of these lawsuits or the effect that any adverse findings or determinations in pending lawsuits may have on us. In addition, an estimate of possible loss or range of loss, if any, cannot presently be made with respect to certain of these pending matters. An unfavorable determination in any of the pending lawsuits could result in the payment by us of substantial monetary damages that may not be fully covered by insurance. Further, the legal costs associated with the lawsuits and the amount of time required to be spent by management and our Board of Directors on these matters, even if we are ultimately successful, could have a material adverse effect on our financial condition, results of operations, or cash flows.

We have an accrual of $~~8.7~~8.2 million and ~~$8.3~~$9.8 million in other liabilities on our condensed consolidated balance sheets related to litigation matters as of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, respectively.

Surety Bonds and Letters of Credit

We had outstanding letters of credit and surety bonds of ~~$30.6~~$32.1 million and $~~272.5~~283.6 million, respectively, as of June 30, ~~2022,~~2023, related principally to our obligations to local governments to construct roads and other improvements in various developments.

~~(10)~~(9) Fair Value Measurements

As of the dates presented, we had assets on our condensed consolidated balance sheets that were required to be measured at fair value on a recurring or non-recurring basis. We use a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value as follows:

•Level 1 – Quoted prices in active markets for identical assets or liabilities;

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•Level 2 – Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly through corroboration with market data; and

•Level 3 – Unobservable inputs that reflect our own estimates about the assumptions market participants would use in pricing the asset or liability.

Certain of our assets are required to be recorded at fair value on a non-recurring basis when events and circumstances indicate that the carrying value of these assets may not be ~~recovered.~~recoverable. We review our long-lived assets, including inventory, for recoverability when factors indicate an impairment may exist, but no less than quarterly. Fair value on assets deemed to be impaired is determined based upon the type of asset being evaluated. Fair value of our owned inventory assets, when required to be calculated, is further discussed within Note 5.4. Due to the substantial use of unobservable inputs in valuing the assets on a non-recurring basis, they are classified within Level 3.

No impairments on projects in progress or land held for sale were recognized during the three months ended June 30, 2022. During the nine months ended June 30, 2022, we recognized $0.4 million impairments on land held for sale. No impairments on projects in progress or land held for sale were recognized during the three and nine months ended June 30, 2021.

Determining within which hierarchical level an asset or liability falls requires significant judgment. We evaluate our hierarchy disclosures each quarter. The following table presents the period-end balances of assets measured at fair value ~~on a recurring basis and the impairment-date fair value of certain assets measured at fair value on a non-recurring basis~~ for each hierarchy ~~level. These balances represent only those assets whose carrying values were adjusted to fair value during the periods presented:~~level:

in thousands Level 1 Level 2 Level 3 Total
As of June 30, 2022
Deferred compensation plan assets (a)
$ — $ 3,083 $ — $ 3,083
Land held for sale (b)
$ — $ — $ 250 (c) $ 250
As of September 30, 2021
Deferred compensation plan assets (a)
$ — $ 2,730 $ — $ 2,730



in thousands	Level 1		Level 2		Level 3		Total
As of June 30, 2023

Deferred compensation plan assets(a)	$	6,641	$	—	$	—	$	6,641


As of September 30, 2022
Deferred compensation plan assets(a)	$	—	$	3,179	$	—	$	3,179

(a) ~~Measured~~Amount is measured at fair value on a recurring basis ~~using market-corroborated inputs.~~

~~(b)~~ ~~Measured at fair value on a non-recurring basis, refer to Note 5 for further discussion.~~

~~(c)~~ ~~Amount represents~~and included in other assets within the ~~impairment-date fair value of the land held for sale assets that were impaired during the period indicated.~~condensed consolidated balance sheets.

The fair value of cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, other liabilities, and amounts due under the Unsecured Facility (if outstanding) approximate their carrying amounts due to the short maturity of these assets and liabilities. When outstanding, obligations related to land not owned under option agreements approximate fair value.

The following table presents the carrying value and estimated fair value of certain other financial liabilities as of June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:


		As of June 30, 2022				As of September 30, 2021					June 30, 2023				September 30, 2022
in thousands	in thousands	Carrying Amount (a)		Fair Value		Carrying Amount (a)		Fair Value		in thousands	Carrying Amount(a)		Fair Value		Carrying Amount(a)		Fair Value
Senior Notes and Term Loan (b)		$	977,325	$	819,471	$	983,827	$	1,046,965
Senior Notes(b)										Senior Notes(b)	$	907,308	$	887,167	$	911,170	$	753,338
Junior Subordinated Notes (c)	Junior Subordinated Notes (c)	71,753		71,753		70,203		70,203		Junior Subordinated Notes(c)	73,820		73,820		72,270		72,270
Total	Total	$	1,049,078	$	891,224	$	1,054,030	$	1,117,168	Total	$	981,128	$	960,987	$	983,440	$	825,608

(a) Carrying amounts are net of unamortized debt issuance costs or accretion.

(b) The estimated fair value for our publicly-held Senior Notes ~~and the Term Loan~~ have been determined using quoted market rates (Level 2).

(c) Since there is no trading market for our Junior Subordinated Notes, the fair value of these notes is estimated by discounting scheduled cash flows through maturity (Level 3). The discount rate is estimated using market rates currently being offered on loans with similar terms and credit quality. Judgment is required in interpreting market data to develop these estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange.

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~~(11)~~(10) Income Taxes

Income Tax Provision

The Company's income tax provision for quarterly interim periods is based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent, or unusual items. ~~Income~~We recognized income tax expense from continuing operations ~~was~~of $6.2 million and $15.5 million for the three and nine months ended June 30, 2023, compared to $13.2 million and $29.7 million for the three and nine months ended June 30, ~~2022, compared to $10.8 million and $22.6 million~~2022. Income tax expense for the ~~three and~~ nine months ended June 30, ~~2021.~~2023 was primarily driven by income tax expense on earnings from continuing operations, permanent differences and the discrete tax expense related to stock-based compensation activity in the period, partially offset by the generation of additional federal tax credits and interest received with the refund of our alternative minimum tax credit. Income tax expense for the nine months ended June 30, 2022 was ~~substantially~~primarily driven by ~~(1)~~ income tax expense on earnings from continuing operations and permanent differences, partially offset by ~~(2)~~ the ~~completion~~generation of ~~work necessary to claim an~~ additional ~~$8.9 million in energy efficiency~~federal tax credits ~~related to homes closed in prior fiscal years,~~ and ~~(3)~~ the discrete ~~impact~~tax benefit related to stock-based compensation ~~expense as a result of current period activity. Income tax expense for~~activity in the ~~nine months ended June 30, 2021 was substantially driven by (1) income from continuing operations, partially offset by (2)~~ ~~the discrete impact related to the closing of a state tax audit, and (3) the discrete impact related to stock-based compensation expense as a result of current period activity.~~period.

Deferred Tax Assets and Liabilities

The Company continues to evaluate its deferred tax assets each period to determine if a valuation allowance is required based on whether it is more likely than not that some portion of these deferred tax assets will not be realized. As of June 30, ~~2022,~~2023, management concluded that it is more likely than not that ~~a substantial portion~~all of our federal and certain state deferred tax assets will be realized. As part of our analysis, we considered both positive and negative factors that impact profitability and whether those factors would lead to a change in the estimate of our deferred tax assets that may be realized in the future. At this time, our conclusions on the valuation allowance and Internal Revenue Code Section 382 limitations related to our deferred tax assets remain consistent with the determinations we made during the period ended September 30, ~~2021,~~2022, and such conclusions are based on similar company specific and industry factors to those discussed in Note 13 to the audited consolidated financial statements within our ~~2021~~2022 Annual Report.

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~~(12)~~(11) Stock-based Compensation

Stock-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations. Following is a summary of stock-based compensation expense related to stock options and restricted stock awards for the three and nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					June 30,				June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Stock-based compensation expense	Stock-based compensation expense	$	1,983	$	3,194	$	6,515	$	9,254	Stock-based compensation expense	$	1,989	$	1,983	$	5,247	$	6,515

Stock Options

Following is a summary of stock option activity for the nine months ended June 30, ~~2022:~~2023:


		Nine Months Ended
		June 30, 2022				Nine Months Ended June 30, 2023
		Shares	Weighted Average Exercise Price			Shares	Weighted Average Exercise Price
Outstanding at beginning of period	Outstanding at beginning of period	114,259	$	17.89	Outstanding at beginning of period	27,507	$	14.31
Granted		236	16.58

Exercised	Exercised	(988)	11.32		Exercised	(1,576)	7.66
Expired		(86,000)	19.11

Forfeited					Forfeited	(236)	16.58
Outstanding at end of period	Outstanding at end of period	27,507	14.31		Outstanding at end of period	25,695	$	14.70
Exercisable at end of period	Exercisable at end of period	27,271	$	14.29	Exercisable at end of period	25,695	$	14.70

As of ~~both~~ June 30, ~~2022 and September 30, 2021,~~2023, there was ~~less than $0.1 million of total~~no remaining unrecognized compensation costs related to unvested stock options. ~~The costs remaining as of June 30, 2022 are expected to be recognized over a weighted-average period of 1.69 years~~.

Restricted Stock Awards

During the nine months ended June 30, ~~2022,~~2023, the Company issued time-based and performance-based restricted stock awards. The time-based restricted shares granted to our non-employee directors vest on the first anniversary of the grant, while the time-based restricted shares granted to our executive officers and other employees generally vest ratably over two to three years from the date of grant. Performance-based restricted share awards vest subject to the achievement of performance and market conditions over a three-year performance period.

Following is a summary of restricted stock activity for the nine months ended June 30, ~~2022:~~2023:


		Nine Months Ended June 30, 2022				Nine Months Ended June 30, 2023
		Performance-Based Restricted Shares	Time-Based Restricted Shares	Total Restricted Shares		Performance-Based Restricted Shares	Time-Based Restricted Shares	Total Restricted Shares
Beginning of period	Beginning of period	738,155	486,574	1,224,729	Beginning of period	436,146	412,042	848,188
Granted (a)	Granted (a)	269,617	246,844	516,461	Granted (a)	249,534	425,398	674,932
Vested	Vested	(552,417)	(283,854)	(836,271)	Vested	(334,736)	(234,218)	(568,954)
Forfeited	Forfeited	(19,209)	(35,007)	(54,216)	Forfeited	(2,721)	(9,388)	(12,109)
End of period	End of period	436,146	414,557	850,703	End of period	348,223	593,834	942,057

(a) Each of our performance shares represent a contingent right to receive one share of the Company's common stock if vesting is satisfied at the end of the three-year performance period. Our performance stock award plans provide that any performance shares earned in excess of the target number of performance shares issued may be settled in cash or additional shares at the discretion of the Compensation Committee. In November ~~2021,~~2022, we issued ~~177,759~~92,104 shares earned above target level based on the performance level achieved under the fiscal ~~2019~~2020 performance-based award plan.

As of June 30, ~~2022~~2023 and September 30, ~~2021,~~2022, total unrecognized compensation costs related to unvested restricted stock awards was $~~8.6~~8.4 million and ~~$7.2~~$7.3 million, respectively. The costs remaining as of June 30, ~~2022~~2023 are expected to be recognized over a weighted average period of ~~1.74~~1.79 years.

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~~(13)~~(12) Earnings Per Share

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted income (loss) per share adjusts the basic income (loss) per share for the effects of any potentially dilutive securities in periods in which the Company has net income and such effects are dilutive under the treasury stock method.

Following is a summary of the components of basic and diluted income per share for the periods presented:


		Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
in thousands (except per share data)	in thousands (except per share data)	2022		2021		2022		2021		in thousands (except per share data)	2023		2022		2023		2022
Numerator:	Numerator:									Numerator:
Income from continuing operations	Income from continuing operations	$	54,312	$	37,142	$	133,885	$	73,821	Income from continuing operations	$	43,817	$	54,312	$	102,932	$	133,885
Income (loss) from discontinued operations, net of tax		12		(7)		(4)		(161)
Gain (loss) from discontinued operations, net of tax										Gain (loss) from discontinued operations, net of tax	—		12		(77)		(4)
Net income	Net income	$	54,324	$	37,135	$	133,881	$	73,660	Net income	$	43,817	$	54,324	$	102,855	$	133,881

Denominator:	Denominator:									Denominator:
Basic weighted-average shares	Basic weighted-average shares	30,512		30,022		30,480		29,915		Basic weighted-average shares	30,395		30,512		30,335		30,480
Dilutive effect of restricted stock awards	Dilutive effect of restricted stock awards	354		517		319		352		Dilutive effect of restricted stock awards	458		354		309		319
Dilutive effect of stock options	Dilutive effect of stock options	6		23		7		25		Dilutive effect of stock options	7		6		5		7
Diluted weighted-average shares (a)	Diluted weighted-average shares (a)	30,872		30,562		30,806		30,292		Diluted weighted-average shares(a)	30,860		30,872		30,649		30,806

Basic income (loss) per share:
Basic income per share:										Basic income per share:
Continuing operations	Continuing operations	$	1.78	$	1.24	$	4.39	$	2.47	Continuing operations	$	1.44	$	1.78	$	3.39	$	4.39
Discontinued operations	Discontinued operations	—		—		—		(0.01)		Discontinued operations	—		—		—		—
Total	Total	$	1.78	$	1.24	$	4.39	$	2.46	Total	$	1.44	$	1.78	$	3.39	$	4.39

Diluted income (loss) per share:
Diluted income per share:										Diluted income per share:
Continuing operations	Continuing operations	$	1.76	$	1.22	$	4.35	$	2.44	Continuing operations	$	1.42	$	1.76	$	3.36	$	4.35
Discontinued operations	Discontinued operations	—		—		—		(0.01)		Discontinued operations	—		—		—		—
Total	Total	$	1.76	$	1.22	$	4.35	$	2.43	Total	$	1.42	$	1.76	$	3.36	$	4.35

(a) The following potentially dilutive shares were excluded from the calculation of diluted income ~~(loss)~~ per share as a result of their anti-dilutive effect.


		Three Months Ended June 30,		Nine Months Ended June 30,			Three Months Ended June 30,		Nine Months Ended June 30,
in thousands	in thousands	2022	2021	2022	2021	in thousands	2023	2022	2023	2022
Stock options	Stock options	13	12	25	227	Stock options	13	13	14	25
Time-based restricted stock	Time-based restricted stock	187	—	—	1	Time-based restricted stock	—	187	128	—

~~(14)~~(13) Other Liabilities

Other liabilities include the following as of June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:


in thousands	in thousands	June 30, 2022		September 30, 2021		in thousands	June 30, 2023		September 30, 2022
Accrued compensations and benefits						Accrued compensations and benefits	36,897		$	57,781
Customer deposits	Customer deposits	$	44,055	$	28,526	Customer deposits	32,852		34,270
Accrued compensations and benefits		41,222		54,606
Accrued interest	Accrued interest	14,972		22,835		Accrued interest	15,020		22,723
Warranty reserve	Warranty reserve	13,020		12,931		Warranty reserve	13,266		13,926

Litigation accruals	Litigation accruals	8,704		8,325		Litigation accruals	8,231		9,832
Income tax liabilities	Income tax liabilities	174		—		Income tax liabilities	120		320
Other	Other	33,029		25,128		Other	31,821		35,536
Total	Total	$	155,176	$	152,351	Total	$	138,207	$	174,388

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~~(15)~~(14) Segment Information

We currently operate in 13 states that are grouped into 3three homebuilding segments based on geography. Revenues from our homebuilding segments are derived from the sale of homes that we construct and from land and lot sales. Our reportable segments have been determined on a basis that is used internally by management for evaluating segment performance and resource allocations. We have considered the applicable aggregation criteria and have combined our homebuilding operations into 3three reportable segments as follows:

West: Arizona, California, Nevada, and Texas(a)

East: Delaware, Indiana, Maryland, New Jersey(b), Tennessee, and Virginia

Southeast: Florida, Georgia, North Carolina, and South Carolina

(a) On May 20, 2022, we acquired substantially all of the assets of Imagine Homes, a private San Antonio-based ~~homebuilder.~~homebuilder in which the Company held a one-third ownership stake for the previous 16 years. The results of our San Antonio operations are reported herein within our West reportable segment.

(b) During our fiscal 2015, we made the decision that we would not continue to reinvest in new homebuilding assets in our New Jersey division; therefore, it is no longer considered an active operation. However, it is included in this listing because the segment information below continues to include New Jersey.

Management’s evaluation of segment performance is based on segment operating income. Operating income for our homebuilding segments is defined as homebuilding and land sales and other revenue less home construction, land development, and land sales expense, commission expense, depreciation and amortization, and certain G&A expenses that are incurred by or allocated to our homebuilding segments. The accounting policies of our segments are those described in Note 2 to the consolidated financial statements within our ~~2021~~2022 Annual Report.

The following tables contain our revenue, operating income, and depreciation and amortization by segment for the periods presented:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					June 30,				June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Revenue	Revenue									Revenue
West	West	$	324,679	$	297,073	$	885,837	$	812,673	West	$	328,347	$	324,679	$	933,575	$	885,837
East	East	112,519		162,156		359,623		413,691		East	133,096		112,519		339,357		359,623
Southeast	Southeast	89,468		111,703		243,861		322,996		Southeast	111,101		89,468		288,448		243,861
Total revenue	Total revenue	$	526,666	$	570,932	$	1,489,321	$	1,549,360	Total revenue	$	572,544	$	526,666	$	1,561,380	$	1,489,321


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					June 30,				June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Operating income	Operating income									Operating income
West	West	$	65,106	$	52,295	$	165,933	$	128,086	West	$	55,629	$	65,106	$	138,499	$	165,933
East	East	20,935		27,437		64,866		61,254		East	16,415		20,935		41,921		64,866
Southeast	Southeast	14,476		14,981		32,683		40,363		Southeast	16,930		14,476		39,126		32,683

Segment total	Segment total	100,517		94,713		263,482		229,703		Segment total	88,974		100,517		219,546		263,482
Corporate and unallocated (a)	Corporate and unallocated (a)	(33,278)		(46,020)		(100,693)		(129,704)		Corporate and unallocated(a)	(41,074)		(33,278)		(104,352)		(100,693)
Total operating income	Total operating income	$	67,239	$	48,693	$	162,789	$	99,999	Total operating income	$	47,900	$	67,239	$	115,194	$	162,789

(a) ~~Corporate and unallocated operating loss includes~~Includes amortization of capitalized interest, movement in capitalized indirect costs, expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments reported above, including information technology, treasury, corporate finance, legal, branding and national marketing, and other amounts that are not allocated to our operating segments.

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		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		June 30,				June 30,					June 30,				June 30,
in thousands	in thousands	2022		2021		2022		2021		in thousands	2023		2022		2023		2022
Depreciation and amortization	Depreciation and amortization									Depreciation and amortization
West	West	$	2,067	$	1,924	$	5,476	$	5,397	West	$	1,750	$	2,067	$	5,294	$	5,476
East	East	311		602		1,113		1,648		East	402		311		1,063		1,113
Southeast	Southeast	371		628		1,144		1,899		Southeast	421		371		1,149		1,144

Segment total	Segment total	2,749		3,154		7,733		8,944		Segment total	2,573		2,749		7,506		7,733
Corporate and unallocated (a)	Corporate and unallocated (a)	440		535		1,368		1,550		Corporate and unallocated(a)	334		440		934		1,368
Total depreciation and amortization	Total depreciation and amortization	$	3,189	$	3,689	$	9,101	$	10,494	Total depreciation and amortization	$	2,907	$	3,189	$	8,440	$	9,101

(a) ~~Corporate and unallocated depreciation and amortization represents~~Represents depreciation and amortization related to assets held by our corporate functions that benefit all segments.

The following table presents capital expenditures by segment for the periods presented:


		Nine Months Ended					Nine Months Ended
		June 30,					June 30,
in thousands	in thousands	2022		2021		in thousands	2023		2022
Capital expenditures	Capital expenditures					Capital expenditures
West	West	$	6,353	$	4,359	West	$	6,840	$	6,353
East	East	723		1,334		East	1,975		723
Southeast	Southeast	843		987		Southeast	1,273		843

Corporate and unallocated	Corporate and unallocated	3,273		3,639		Corporate and unallocated	4,034		3,273
Total capital expenditures	Total capital expenditures	$	11,192	$	10,319	Total capital expenditures	$	14,122	$	11,192

The following table presents assets by segment as of June 30, ~~2022~~2023 and September 30, ~~2021:~~2022:


in thousands	in thousands	June 30, 2022		September 30, 2021		in thousands	June 30, 2023		September 30, 2022
Assets	Assets					Assets
West	West	$	1,026,635	$	819,317	West	$	961,637	$	995,339
East	East	361,148		286,133		East	364,157		334,323
Southeast	Southeast	347,640		296,581		Southeast	315,993		305,443
Corporate and unallocated (a)	Corporate and unallocated (a)	482,977		676,779		Corporate and unallocated(a)	676,811		616,858
Total assets	Total assets	$	2,218,400	$	2,078,810	Total assets	$	2,318,598	$	2,251,963

(a) Primarily consists of cash and cash equivalents, restricted cash, deferred taxes, capitalized interest and indirect costs, and other items that are not allocated to the segments.

~~(16) Discontinued Operations~~

We continually review each of our markets in order to refine our overall investment strategy and to optimize capital and resource allocations in an effort to enhance our financial position and to increase stockholder value. This review entails an evaluation of both external market factors and our position in each market and over time has resulted in the decision to discontinue certain of our homebuilding operations.

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We have classified the results of operations of our discontinued operations separately in the accompanying condensed consolidated statements of operations for all periods presented. There were no material assets or liabilities related to our discontinued operations as of June 30, 2022 or September 30, 2021. Discontinued operations were not segregated in the condensed consolidated statements of cash flows. Therefore, amounts for certain captions in the condensed consolidated statements of cash flows will not agree with the respective data in the condensed consolidated statements of operations. The results of our discontinued operations in the condensed consolidated statements of operations for the periods presented were as follows:

Three Months Ended Nine Months Ended
June 30, June 30,
in thousands 2022 2021 2022 2021
Home construction and land sales expenses $ — $ — $ (5) $ 119
Gross profit (loss) — — 5 (119)
General and administrative expenses (14) 10 11 88
Income (loss) from discontinued operations before income taxes 14 (10) (6) (207)
Expense (benefit) from income taxes 2 (3) (2) (46)
Income (loss) from discontinued operations, net of tax $ 12 $ (7) $ (4) $ (161)

~~Table of Contents~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview and Outlook

Market Conditions

During ~~the first half of fiscal 2022, housing market conditions remained robust and demand remained strong despite the geopolitical environment and increasing affordability concerns. However, in~~ the third quarter of fiscal ~~2022, demand started to moderate due to a sharp increase~~2023, we delivered strong sales results as conditions in mortgage rates, the substantial increase in home prices experienced over the past 18 months, significant inflation in the broader economy, stock market volatility, and other macro-economic conditions, which have negatively impacted buyer sentiment and behavior. While these factors may continue to impact demand for our homes in the future, over the long-term, we believe that the housing market ~~will~~continued to stabilize relative to the prior fiscal quarter. We remain ~~healthy driven~~focused on adjusting prices, features, and incentives to align with the current market. While affordability constraints persist, limited inventories in the existing home market allowed us to reduce closing cost incentives and maintain or raise selling prices in many of our communities during the fiscal quarter. Further, as supply chain conditions normalized in recent quarters, the benefit materialized into a sequential decrease in our construction cycle times and improved backlog conversion rate. We continue to strive to reduce build costs through re-negotiation and re-bidding of construction jobs, reduce cycle times, and prudently manage our overhead costs.

While we expect uncertainty in market conditions to persist for some time, we believe the long-term housing market outlook remains positive, supported by a demographic shift towards homeownership ~~amplified by the COVID-19 pandemic~~ and a multimillion unit housing deficit that has accumulated over the past decade.

~~Given~~For the ~~current environment,~~remainder of fiscal 2023, we remain focused on executing our consumer positioning strategy of delivering extraordinary value at an affordable price. Our strategy to deliver value is embedded in our three pillars, all of which are centered around affordability: (1) our Mortgage Choice platform which eliminates the typical mortgage subsidiary middleman and allows us to partner with our customers to help them get the most competitive interest rates, fees, and service levels available; (2) our Choice PlansTM which allow customers to select from a list of structural options at no additional cost; and (3) the Surprising Performance our homes are designed to deliver as they are all built to meet or exceed the latest ENERGY STAR® ~~standards and reduce home energy costs.~~

~~We are focused on making the necessary adjustments~~plan to continue ~~adapting~~ to ~~the changing environment. For instance,~~invest in land strategically, increase our ~~sales process involves almost constant analysis of competitive market data, including pricing, features~~active communities, and incentives, which enables us to refine our offerings on a timely basis in response to market shifts and to best position each of our communities. In relation to land acquisition, we are seeking price discounts or other improvements in deal terms on many of our pending land transactions. In addition, we are incorporating higher than current mortgage rates, lower sales pace and higher sales incentive in our underwriting assumptions in anticipation of a more challenging sales environment.

~~Like many other homebuilders, we~~ continue to experience production challenges due to supply chain disruptions and tightness in labor markets. These disruptions have resulted in elongated construction cycle times and decreased backlog conversion. We have been proactively working with our trade partners to address these delays.

~~Balanced Growth Strategy~~

~~We continue to execute against our balanced growth strategy, which we define as the expansion of earnings at a faster rate than our revenue growth, supported by a less-leveraged capital structure.~~us ~~This strategy provides us with flexibility to reduce leverage, increase investment in land and other operating assets, or repurchase shares in response to changing market conditions.~~ ~~Our priorities for fiscal 2022 continue to include growing our~~e lot ~~position by increasing our use of land~~ option agreements ~~improve profitability~~to position our business for longer-term growth, while ~~reducing our total debt below $1.0 billion, deliver an extraordinary customer experience, encourage employee well-being,~~focusing on the appropriate balance between pursuing growth opportunities, controlling risk, and ~~execute on our Environmental, Social, and Governance (ESG) initiatives~~maintaining a strong liquidity position.

Overview of Results for Our Fiscal Third Quarter

The following is a summary of our performance against certain key operating and financial metrics during the quarter ended June 30, 2023 and a comparison to the quarter ended June 30, 2022:

•During the quarter ended June 30, ~~2022,~~2023, sales per community per month was ~~2.5~~3.2 compared to ~~3.2~~2.5 in the prior year quarter, and our net new orders were ~~925, down 22.9%~~1,200, up 29.7% from ~~1,199~~925 in the prior year ~~quarter.~~ quarter~~Sales per community per month~~. With mortgage interest rates stabilizing and homebuyers adapting to the market, sales pace has improved in the last two quarters compared to the depressed sales pace in the prior year. Fiscal third quarter sales pace of 3.2 was ~~3.1~~strong by historical standards and reflected both typical seasonality and an improving sales environment as the market stabilized.

•~~d 4.0~~Cancellation rate for the ~~trailing 12 months~~quarter ended June 30, ~~2022 and 2021, respectively. The decrease~~2023 was 16.1%, down from 17.0% in ~~sales pace is a reflection of the previously discussed unfavorable macro-economic factors impacting homebuyers. As we navigate the changing environment, our focus will be balancing sales pace, incentives and price adjustments to maximize return on capital over time.~~

•~~As of June 30, 2022, our land position includes~~ ~~24,899~~ ~~controlled lots, up 26.0% from 19,761 as of June 30, 2021.~~ ~~Excluding land held for future development and land held for sale lots, we controlled 24,132 active lots, up 25.2% from~~ the prior year ~~quarter. A~~s of June 30, 2022, we had 12,571 lots, or 52.1% of our total active lots, under option contracts as compared to 9,263 lots, or 48.1% of our total active lots, under option contracts as of June 30, 2021.

~~Table of Contents~~

•~~Aggregated dollar value of homes~~quarter and down sequentially from 18.6% in ~~backlog as of June 30, 2022 was $1,588.0 million, up 17.2% compared to~~ the prior ~~year~~fiscal quarter. ~~We ended~~Following a period of elevated cancellation rates in the fourth quarter ~~with 3,003 homes in backlog, down 3.9% compared~~of fiscal 2022 and first quarter of fiscal 2023, cancellation rates decreased and returned to ~~the prior year quarter. Benefiting from pricing power in most markets, the average selling price (ASP) in~~ ~~backlog~~a level within our normal historical range as ~~of June 30, 2022 rose to $528.8 thousand, up 22.0% versus the prior year quarter.~~buyer sentiment improved.

•Our ~~ASP~~Average Selling Price (ASP) for homes closed during the quarter ended June 30, ~~2022~~2023 was ~~$501.7~~$510.8 thousand, up ~~21.9%~~1.8% from ~~$411.4~~$501.7 thousand in the prior year quarter.~~The~~ While up year-over-year, ~~increase in~~ our closing ASP ~~on closings~~ was ~~impacted primarily by price appreciation due to strong demand and limited supply~~flat sequentially, reflecting the stabilizing sales environment. Additionally, our backlog ASP of ho~~mes. On average, we anticipate that our ASP will continue to increase in the near-term as indicated by the ASP for homes in backlog~~$520.3 thousand as of June 30, ~~2022. However, higher mortgage interest rates~~2023was down from $528.8 thousand year-over-year and ~~softening demand may temper ASP growth~~down sequentially from $531.3 thousand in the ~~future.~~prior fiscal quarter.

•Homebuilding gross margin for the quarter ended June 30, ~~2022~~2023 was ~~25.1%~~20.2%, updown from ~~20.2%~~25.1% in the prior year quarter. Homebuilding gross margin, excluding impairments, abandonments, and interest for the quarter ended June 30, ~~2022~~2023, was ~~28.1%~~23.4%, updown from ~~24.2%~~ 28.1% in the prior year quarter. ~~Our~~Although down year-over-year, homebuilding gross margin ~~has been driven~~remained strong by ~~a favorable pricing environment, although moderated demand may temper gross margin~~historical standards and increased sequentially from the prior fiscal quarter, primarily attributed to decreased lumber costs and our success in ~~the future.~~lowering closing cost incentives.

•~~Cancellation rate~~ ~~for~~During the quarter ended June 30, ~~2022~~2023, our average active community count of 124 was ~~17.0%~~, up 1.1% from ~~10.9%~~123 in the prior year quarter. ~~Although cancellation rates increased during~~We ended the ~~current~~quarter with an active community count of 125, compared to 124 at the prior year quarter ~~due~~end. We have been working to ~~the previously discussed unfavorable macro-economic factors,~~ ~~our cancellation rates remained well within our historical normal range and only represented approximately 6.0% of the fiscal 2022 third quarter beginning backlog.~~grow community counts by increasing investments in new communities strategically.

•SGSG&A for the quarter ended June 30, ~~2022~~2023 was ~~11.8%~~11.5% of total revenue, updown from ~~11.1% a~~11.8% in the prior year ~~earlier.~~quarter. The ~~increase~~improvement in SG&A as a percentage of total revenue was primarily due to ~~decreased closings and revenue as a result of construction cycle time extension. The dollar amount of SG&A decreased by~~ ~~$1.1 million~~higher revenues, ~~or 1.7%,~~partially offset by higher commissions and sales and marketing costs for the quarter ended June 30, 2023 compared to the prior year ~~quarter primarily due to decreased commissions expense. W~~equarter. We remain focused on ~~improving~~prudently managing overhead ~~cost management in relation to our revenue gr~~costs.

Table of Contents~~owth.~~

Seasonal and Quarterly Variability

Our homebuilding operating cycle historically has reflected escalating new order activity in the second and third fiscal quarters and increased closings in the third and fourth fiscal quarters. However, these seasonal patterns may be impacted or reduced ~~due to~~by a variety of ~~factors.~~factors, including periods of market volatility, which may result in increased or decreased revenues and closings that are outside of our typical seasonality. Accordingly, our financial results for the three and nine months ended June 30, ~~2022~~2023 may not be indicative of our full year results.

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RESULTS OF CONTINUING OPERATIONS:

The following table summarizes certain key income statement metrics for the periods presented:


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		June 30,						June 30,							June 30,						June 30,
$ in thousands	$ in thousands	2022			2021			2022			2021			$ in thousands	2023			2022			2023			2022
Revenue:	Revenue:													Revenue:
Homebuilding	Homebuilding	$	523,229		$	566,930		$	1,477,166		$	1,538,576		Homebuilding	$	570,535		$	523,229		$	1,556,626		$	1,477,166
Land sales and other	Land sales and other	3,437			4,002			12,155			10,784			Land sales and other	2,009			3,437			4,754			12,155
Total	Total	$	526,666		$	570,932		$	1,489,321		$	1,549,360		Total	$	572,544		$	526,666		$	1,561,380		$	1,489,321
Gross profit:	Gross profit:													Gross profit:
Homebuilding	Homebuilding	$	131,549		$	114,710		$	344,255		$	287,003		Homebuilding	$	115,493		$	131,549		$	302,195		$	344,255
Land sales and other	Land sales and other	916			813			5,360			1,739			Land sales and other	1,251			916			3,213			5,360
Total	Total	$	132,465		$	115,523		$	349,615		$	288,742		Total	$	116,744		$	132,465		$	305,408		$	349,615
Gross margin:	Gross margin:													Gross margin:
Homebuilding (a)	Homebuilding (a)	25.1		%	20.2		%	23.3		%	18.7		%	Homebuilding(a)	20.2		%	25.1		%	19.4		%	23.3		%
Land sales and other		26.7		%	20.3		%	44.1		%	16.1		%
Land sales and other(b)														Land sales and other(b)	62.3		%	26.7		%	67.6		%	44.1		%
Total	Total	25.2		%	20.2		%	23.5		%	18.6		%	Total	20.4		%	25.2		%	19.6		%	23.5		%
Commissions	Commissions	$	16,277		$	20,955		$	48,668		$	58,346		Commissions	$	19,473		$	16,277		$	51,883		$	48,668
General and administrative expenses (G&A)	General and administrative expenses (G&A)	$	45,760		$	42,186		$	129,057		$	119,903		General and administrative expenses (G&A)	$	46,464		$	45,760		$	129,891		$	129,057
SG&A (commissions plus G&A) as a percentage of total revenue	SG&A (commissions plus G&A) as a percentage of total revenue	11.8		%	11.1		%	11.9		%	11.5		%	SG&A (commissions plus G&A) as a percentage of total revenue	11.5		%	11.8		%	11.6		%	11.9		%
G&A as a percentage of total revenue	G&A as a percentage of total revenue	8.7		%	7.4		%	8.7		%	7.7		%	G&A as a percentage of total revenue	8.1		%	8.7		%	8.3		%	8.7		%
Depreciation and amortization	Depreciation and amortization	$	3,189		$	3,689		$	9,101		$	10,494		Depreciation and amortization	$	2,907		$	3,189		$	8,440		$	9,101
Operating income	Operating income	$	67,239		$	48,693		$	162,789		$	99,999		Operating income	$	47,900		$	67,239		$	115,194		$	162,789
Operating income as a percentage of total revenue	Operating income as a percentage of total revenue	12.8		%	8.5		%	10.9		%	6.5		%	Operating income as a percentage of total revenue	8.4		%	12.8		%	7.4		%	10.9		%
Effective tax rate ~~(b)~~(c)	Effective tax rate ~~(b)~~(c)	19.5		%	22.5		%	18.1		%	23.5		%	Effective tax rate ~~(b)~~(c)	12.5		%	19.5		%	13.1		%	18.1		%
Inventory impairments and abandonments	Inventory impairments and abandonments	$	—		$	231		$	935		$	696		Inventory impairments and abandonments	$	315		$	—		$	616		$	935

Gain (loss) on extinguishment of debt, net		$	86		$	(1,050)		$	(78)		$	(1,613)
(Loss) gain on extinguishment of debt, net														(Loss) gain on extinguishment of debt, net	$	(18)		$	86		$	(533)		$	(78)

(a) Excluding impairments, abandonments, and interest amortized to cost of sales, homebuilding gross margin was ~~28.1%~~23.4% and ~~24.2%~~28.1% for the three months ended June 30, ~~2022~~2023 and ~~2021~~2022, respectively, and ~~26.5%~~22.6% and ~~22.9%~~26.5% for the nine months ended June 30, ~~2022~~2023 and ~~2021, respectively.~~2022, respectively. Please see "Homebuilding Gross Profit and Gross Margin" section below for a reconciliation of homebuilding gross profit and the related gross margin excluding impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure.

(b) Calculated as land sales and other gross profit divided by land sales and other revenue.

(c) Calculated as tax expense for the period divided by income from c~~ontinuing~~continuing operations. ~~Due to a variety of factors, including the impact of discrete tax items on our effective tax rate, our~~Our income tax ~~expense is~~expenses are not always directly correlated to the amount of pre-tax income for the associated ~~periods.~~period due to a variety of factors, including, but not limited to, the impact of tax credits and permanent differences. For the three and nine months ended June 30, ~~2022,~~2023, our effective tax rate was impacted by, among other factors, ~~$2.7~~$5.7 million and ~~$8.9~~$14.3 million of energy efficiency tax credits claimed, respectively, compared to ~~less than $0.1~~$2.7 million and $8.9 million of such credits claimed during the three and nine months ended June 30, ~~2021.~~2022, respectively.

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EBITDA: Reconciliation of Net Income to Adjusted EBITDA

Reconciliation of Adjusted EBITDA to total company net income, 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 determined in accordance with GAAP as an indicator of operating performance.

The following table reconciles our net income to Adjusted EBITDA for the periods presented:


		Three Months Ended June 30,						Nine Months Ended June 30,						LTM Ended June 30, (a)							Three Months Ended June 30,						Nine Months Ended June 30,						LTM Ended June 30,(a)
in thousands	in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		2022		2021		22 vs 21		in thousands	2023		2022		23 vs 22		2023		2022		23 vs 22		2023		2022		23 vs 22
Net income	Net income	$	54,324	$	37,135	$	17,189	$	133,881	$	73,660	$	60,221	$	182,242	$	97,338	$	84,904	Net income	$	43,817	$	54,324	$	(10,507)	$	102,855	$	133,881	$	(31,026)	$	189,678	$	182,242	$	7,436
Expense from income taxes	Expense from income taxes	13,152		10,801		2,351		29,683		22,587		7,096		28,597		31,351		(2,754)		Expense from income taxes	6,241		13,152		(6,911)		15,466		29,683		(14,217)		39,050		28,597		10,453
Interest amortized to home construction and land sales expenses and capitalized interest impaired	Interest amortized to home construction and land sales expenses and capitalized interest impaired	15,679		22,529		(6,850)		46,542		65,452		(18,910)		68,380		96,179		(27,799)		Interest amortized to home construction and land sales expenses and capitalized interest impaired	17,504		15,679		1,825		48,570		46,542		2,028		74,086		68,380		5,706
Interest expense not qualified for capitalization		—		212		(212)		—		2,781		(2,781)		—		4,876		(4,876)

EBIT	EBIT	83,155		70,677		12,478		210,106		164,480		45,626		279,219		229,744		49,475		EBIT	67,562		83,155		(15,593)		166,891		210,106		(43,215)		302,814		279,219		23,595
Depreciation and amortization	Depreciation and amortization	3,189		3,689		(500)		9,101		10,494		(1,393)		12,583		15,300		(2,717)		Depreciation and amortization	2,907		3,189		(282)		8,440		9,101		(661)		12,699		12,583		116
EBITDA	EBITDA	86,344		74,366		11,978		219,207		174,974		44,233		291,802		245,044		46,758		EBITDA	70,469		86,344		(15,875)		175,331		219,207		(43,876)		315,513		291,802		23,711
Stock-based compensation expense	Stock-based compensation expense	1,983		3,194		(1,211)		6,515		9,254		(2,739)		9,428		14,421		(4,993)		Stock-based compensation expense	1,989		1,983		6		5,247		6,515		(1,268)		7,210		9,428		(2,218)
(Gain) loss on extinguishment of debt		(86)		1,050		(1,136)		78		1,613		(1,535)		490		1,613		(1,123)
Loss (gain) on extinguishment of debt																				Loss (gain) on extinguishment of debt	18		(86)		104		533		78		455		146		490		(344)
Inventory impairments and abandonments (b)	Inventory impairments and abandonments (b)	—		231		(231)		935		696		239		1,092		1,333		(241)		Inventory impairments and abandonments(b)	315		—		315		616		935		(319)		2,205		1,092		1,113

Restructuring and severance expenses		—		—		—		—		(10)		10		—		(54)		54
Severance expenses																				Severance expenses	—		—		—		335		—		335		335		—		335

Litigation settlement in discontinued operations		—		—		—		—		120		(120)		—		1,380		(1,380)

Adjusted EBITDA	Adjusted EBITDA	$	88,241	$	78,841	$	9,400	$	226,735	$	186,647	$	40,088	$	302,812	$	263,737	$	39,075	Adjusted EBITDA	$	72,791	$	88,241	$	(15,450)	$	182,062	$	226,735	$	(44,673)	$	325,409	$	302,812	$	22,597

(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."

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Homebuilding Operations Data

The following table summarizes new orders and cancellation rates by reportable segment for the periods presented:


		Three Months Ended June 30,									Three Months Ended June 30,
		New Orders, net				Cancellation Rates					New Orders, net				Cancellation Rates
		2022	2021	22 vs 21		2022		2021			2023	2022	23 vs 22		2023		2022
West	West	576	715	(19.4)	%	16.8	%	11.4	%	West	705	576	22.4	%	17.8	%	16.8	%
East	East	192	263	(27.0)	%	17.6	%	11.1	%	East	251	192	30.7	%	17.4	%	17.6	%
Southeast	Southeast	157	221	(29.0)	%	17.4	%	8.7	%	Southeast	244	157	55.4	%	9.3	%	17.4	%
Total	Total	925	1,199	(22.9)	%	17.0	%	10.9	%	Total	1,200	925	29.7	%	16.1	%	17.0	%

		Nine Months Ended June 30,									Nine Months Ended June 30,
		New Orders, net				Cancellation Rates					New Orders, net				Cancellation Rates
		2022	2021	22 vs 21		2022		2021			2023	2022	23 vs 22		2023		2022
West	West	2,063	2,613	(21.0)	%	13.7	%	11.6	%	West	1,584	2,063	(23.2)	%	24.2	%	13.7	%
East	East	712	940	(24.3)	%	13.4	%	10.7	%	East	667	712	(6.3)	%	19.1	%	13.4	%
Southeast	Southeast	582	942	(38.2)	%	12.9	%	9.6	%	Southeast	612	582	5.2	%	16.7	%	12.9	%
Total	Total	3,357	4,495	(25.3)	%	13.5	%	11.0	%	Total	2,863	3,357	(14.7)	%	21.5	%	13.5	%

Net new orders for the quarter ended June 30, ~~2022 decreased~~2023 increased to ~~925, down 22.9%~~1,200, up 29.7% from the quarter ended June 30, ~~2021. Net new orders for the~~ ~~nine~~ ~~months ended June 30, 2022 decreased to 3,357, down 25.3% from the~~ ~~nine~~ ~~months ended June 30, 2021. For the quarter ended June 30, 2022, the decrease~~2022. The increase in net new orders compared to the prior year quarter was driven by a ~~22.9% decrease~~28.3% increase in sales pace from ~~3.2~~2.5 sales per community per month in the prior year quarter to ~~2.5, while~~3.2, and a 1.1% increase in average active community count ~~remained flat year-over-year.~~ from 123 in the prior year quarter to 124. With mortgage interest rates stabilizing and homebuyers adapting to the market, sales pace improved in the last two quarters compared to the depressed sales pace in the prior year. Current~~The decreases~~ quarter sales pace of 3.2 is strong by historical standards and reflects both typical seasonality and an improving sales environment as the market stabilized.

Net new orders for the nine months ended June 30, 2023 decreased to 2,863, down 14.7% from the nine months ended June 30, 2022. This was primarily attributed to low sale pace and historically high cancellation rates we experienced during our fiscal first quarter as a result of a significant decline in the housing market conditions at the time. As discussed above, we have seen improvements during the last two fiscal quarters with sales pace and ~~increases in~~ cancellation rates ~~across reportable segments were primarily driven by the sharp increase in mortgage rates as well as the other unfavorable macro-economic factors previously discussed.~~ ~~Although cancellation rates were up, our cancellation rates remained within our~~returning to historical normal ~~range and only represents approximately 6.0% of our fiscal 2022 third quarter beginning backlog.~~ranges.

The table below summarizes backlog units by reportable segment as well as the aggregate dollar value and ASP of homes in backlog as of June 30, ~~2022~~2023 and ~~2021:~~2022:


		As of June 30,							As of June 30,
		2022		2021		22 vs 21			2023		2022		23 vs 22
Backlog Units:	Backlog Units:							Backlog Units:
West	West	1,782		1,814		(1.8)	%	West	1,066		1,782		(40.2)	%
East	East	614		690		(11.0)	%	East	433		614		(29.5)	%
Southeast	Southeast	607		620		(2.1)	%	Southeast	442		607		(27.2)	%
Total	Total	3,003		3,124		(3.9)	%	Total	1,941		3,003		(35.4)	%
Aggregate dollar value of homes in backlog (in millions)	Aggregate dollar value of homes in backlog (in millions)	$	1,588.0	$	1,354.6	17.2	%	Aggregate dollar value of homes in backlog (in millions)	$	1,009.8	$	1,588.0	(36.4)	%
ASP in backlog (in thousands)	ASP in backlog (in thousands)	$	528.8	$	433.6	22.0	%	ASP in backlog (in thousands)	$	520.3	$	528.8	(1.6)	%

Backlog reflects the number of homes for which the Company has entered into a sales contract with a customer but has not yet delivered the home. Homes in backlog have historically been delivered within three to six months following commencement of construction. Ongoing supply chain disruptions, including the availability of certain materials and construction labor, has led to extended construction cycle times. As a result, we are experiencing increased construction cycle times by an average of two to three months across our markets compared to the prior year quarter. The aggregate dollar value of homes in backlog as of June 30, ~~2022 increased 17.2%~~2023 decreased 36.4% compared to June 30, ~~2021~~2022 due to a ~~22.0% increase~~35.4% decrease in backlog units and a 1.6% decrease in the ASP of homes in ~~backlog, partially offset by a 3.9%~~backlog. The decrease in backlog ~~units.~~units reflected the combined effects of lower sales during the latter half of fiscal 2022 through first quarter of fiscal 2023 as mortgage interest rates rose sharply, as well as improved backlog conversion rate year-over-year as we reduced construction cycle times. Backlog units, although down year-over-year, have been growing for two consecutive quarters driven by strong sales.

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Table of Contents

Homebuilding Revenue, Average Selling Price, and Closings

The table below summarizes homebuilding revenue, ASP of our homes closed, and closings by reportable segment for the periods presented:


		Three Months Ended June 30,																	Three Months Ended June 30,
		Homebuilding Revenue						Average Selling Price						Closings					Homebuilding Revenue						Average Selling Price						Closings
$ in thousands	$ in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		2022	2021	22 vs 21		$ in thousands	2023		2022		23 vs 22		2023		2022		23 vs 22		2023	2022	23 vs 22
West	West	$	324,074	$	294,834	9.9	%	$	486.6	$	385.4	26.3	%	666	765	(12.9)	%	West	$	326,883	$	324,074	0.9	%	$	515.6	$	486.6	6.0	%	634	666	(4.8)	%
East	East	112,237		160,393		(30.0)	%	529.4		486.0		8.9	%	212	330	(35.8)	%	East	132,863		112,237		18.4	%	525.2		529.4		(0.8)	%	253	212	19.3	%
Southeast	Southeast	86,918		111,703		(22.2)	%	526.8		394.7		33.5	%	165	283	(41.7)	%	Southeast	110,789		86,918		27.5	%	481.7		526.8		(8.6)	%	230	165	39.4	%
Total	Total	$	523,229	$	566,930	(7.7)	%	$	501.7	$	411.4	21.9	%	1,043	1,378	(24.3)	%	Total	$	570,535	$	523,229	9.0	%	$	510.8	$	501.7	1.8	%	1,117	1,043	7.1	%

		Nine Months Ended June 30,																	Nine Months Ended June 30,
		Homebuilding Revenue						Average Selling Price						Closings					Homebuilding Revenue						Average Selling Price						Closings
$ in thousands	$ in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		2022	2021	22 vs 21		$ in thousands	2023		2022		23 vs 22		2023		2022		23 vs 22		2023	2022	23 vs 22
West	West	$	883,453	$	805,617	9.7	%	$	456.8	$	372.3	22.7	%	1,934	2,164	(10.6)	%	West	$	930,166	$	883,453	5.3	%	$	524.0	$	456.8	14.7	%	1,775	1,934	(8.2)	%
East	East	354,948		410,350		(13.5)	%	500.6		469.5		6.6	%	709	874	(18.9)	%	East	338,763		354,948		(4.6)	%	526.0		500.6		5.1	%	644	709	(9.2)	%
Southeast	Southeast	238,765		322,609		(26.0)	%	480.4		383.1		25.4	%	497	842	(41.0)	%	Southeast	287,697		238,765		20.5	%	484.3		480.4		0.8	%	594	497	19.5	%
Total	Total	$	1,477,166	$	1,538,576	(4.0)	%	$	470.4	$	396.5	18.6	%	3,140	3,880	(19.1)	%	Total	$	1,556,626	$	1,477,166	5.4	%	$	516.6	$	470.4	9.8	%	3,013	3,140	(4.0)	%

~~For~~Three Months Ended June 30, 2023 as compared to 2022

West Segment: Homebuilding revenue increased slightly by 0.9% for the three ~~and nine~~ months ended June 30, ~~2022, homebuilding revenue decreased primarily as a result of a decrease in closings, partially offset by an increase in ASP.~~

~~The increase in~~ ASP across all segments was primarily attributed to price appreciation due to strong demand, short supply of homes, and inflation. In the East segment, ASP changes were also impacted by a change in mix of closings between products and among communities within the markets as2023 compared to the prior year ~~period. On average, we anticipate that our ASP will continue~~quarter due to a 6.0% increase in ~~the near-term as indicated~~ASP, partially offset by ~~the ASP for homes~~a 4.8% decrease in ~~backlog as of June 30, 2022, although~~ ~~higher mortgage interest rates and softening demand may temper ASP growth in the future.~~

closings. The decrease in closings was primarily due to lower beginning backlog, partially offset by a ~~decrease in~~higher backlog conversion ~~rates as a result of longer construction cycle times~~rate compared to the prior year quarter. ~~Among~~

East Segment: Homebuilding revenue increased by 18.4% for the three ~~reportable segments, our Southeast segment has experienced~~months ended June 30, 2023 compared to the ~~highest~~prior year quarter due to a 19.3% increase in ~~construction cycle times~~closings, partially offset by ~~an average of~~ ~~3.3 months,~~ ~~resulting in~~ a ~~significant~~0.8% decrease in ASP. The increase in closings was primarily due to a higher backlog conversion ~~rates~~rate, partially offset by lower beginning backlog compared to the prior year quarter.

Southeast Segment: Homebuilding revenue increased by 27.5% for the three months ended June 30, 2023 compared to the prior year quarter due to a 39.4% increase in closings, partially offset by a 8.6% decrease in ASP in part due to changes in product and community mix. The increase in closings was primarily due to a higher backlog conversion rate, partially offset by lower beginning backlog compared to the prior year quarter.

Nine Months Ended June 30, 2023 as compared to 2022

West Segment:. Homebuilding revenue increased by 5.3% for the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022 due to an increase in ASP of 14.7%, partially offset by a 8.2% decrease in closings. The decrease in closings was primarily due to lower beginning backlog, partially offset by a higher backlog conversion rate compared to the prior year period.

East Segment: Homebuilding revenue decreased by 4.6% for the nine months ended June 30, 2023 compared to the nine months ended June 30, 2022 due to a 9.2% decrease in closings, partially offset by a 5.1% increase in ASP. The decrease in closings was primarily due to lower beginning backlog, partially offset by a higher backlog conversion rate compared to the prior year period.

Southeast Segment: Homebuilding revenue increased by 20.5% compared to the nine months ended June 30, 2022 due to a 19.5% increase in closings as well as a 0.8% increase in ASP. The increase in closings was primarily due to a higher backlog conversion rate, partially offset by lower beginning backlog compared to the prior year period.

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Homebuilding Gross Profit and Gross Margin

The following tables present our homebuilding (HB) gross profit and gross margin by reportable segment and in total. In addition, such amounts are presented excluding inventory impairments and abandonments and interest amortized to cost of sales (COS). Homebuilding gross profit is defined as homebuilding revenue less home cost of sales (which includes land and land development costs, home construction costs, capitalized interest, indirect costs of construction, estimated warranty costs, closing costs, and inventory ~~impairment~~impairments and abandonment charges).

Reconciliation of homebuilding gross profit and the related gross margin excluding 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. These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance.


		Three Months Ended June 30, 2022																	Three Months Ended June 30, 2023
$ in thousands	$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest		$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	West	$	89,705	27.7	%	$	—	$	89,705	27.7	%	$	—	$	89,705	27.7	%	West	$	81,051	24.8	%	$	315	$	81,366	24.9	%	$	—	$	81,366	24.9	%
East	East	29,669		26.4	%	—		29,669		26.4	%	—		29,669		26.4	%	East	26,053		19.6	%	—		26,053		19.6	%	—		26,053		19.6	%
Southeast	Southeast	22,401		25.8	%	—		22,401		25.8	%	—		22,401		25.8	%	Southeast	26,039		23.5	%	—		26,039		23.5	%	—		26,039		23.5	%
Corporate & unallocated (a)	Corporate & unallocated (a)	(10,226)				—		(10,226)				15,679		5,453				Corporate & unallocated(a)	(17,650)				—		(17,650)				17,504		(146)
Total homebuilding	Total homebuilding	$	131,549	25.1	%	$	—	$	131,549	25.1	%	$	15,679	$	147,228	28.1	%	Total homebuilding	$	115,493	20.2	%	$	315	$	115,808	20.3	%	$	17,504	$	133,312	23.4	%

		Three Months Ended June 30, 2021																	Three Months Ended June 30, 2022
$ in thousands	$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest		$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	West	$	75,233	25.5	%	$	—	$	75,233	25.5	%	$	—	$	75,233	25.5	%	West	$	89,705	27.7	%	$	—	$	89,705	27.7	%	$	—	$	89,705	27.7	%
East	East	38,296		23.9	%	—		38,296		23.9	%	—		38,296		23.9	%	East	29,669		26.4	%	—		29,669		26.4	%	—		29,669		26.4	%
Southeast	Southeast	25,352		22.7	%	231		25,583		22.9	%	—		25,583		22.9	%	Southeast	22,401		25.8	%	—		22,401		25.8	%	—		22,401		25.8	%
Corporate & unallocated (a)	Corporate & unallocated (a)	(24,171)				—		(24,171)				22,529		(1,642)				Corporate & unallocated(a)	(10,226)				—		(10,226)				15,679		5,453
Total homebuilding	Total homebuilding	$	114,710	20.2	%	$	231	$	114,941	20.3	%	$	22,529	$	137,470	24.2	%	Total homebuilding	$	131,549	25.1	%	$	—	$	131,549	25.1	%	$	15,679	$	147,228	28.1	%

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		Nine Months Ended June 30, 2022																	Nine Months Ended June 30, 2023
$ in thousands	$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest		$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	West	$	234,481	26.5	%	$	12	$	234,493	26.5	%	$	—	$	234,493	26.5	%	West	$	211,803	22.8	%	$	462	$	212,265	22.8	%	$	—	$	212,265	22.8	%
East	East	88,876		25.0	%	—		88,876		25.0	%	—		88,876		25.0	%	East	68,636		20.3	%	154		68,790		20.3	%	—		68,790		20.3	%
Southeast	Southeast	55,946		23.4	%	483		56,429		23.6	%	—		56,429		23.6	%	Southeast	64,525		22.4	%	—		64,525		22.4	%	—		64,525		22.4	%
Corporate & unallocated (a)	Corporate & unallocated (a)	(35,048)				—		(35,048)				46,542		11,494				Corporate & unallocated (a)	(42,769)				—		(42,769)				48,570		5,801
Total homebuilding	Total homebuilding	$	344,255	23.3	%	$	495	$	344,750	23.3	%	$	46,542	$	391,292	26.5	%	Total homebuilding	$	302,195	19.4	%	$	616	$	302,811	19.5	%	$	48,570	$	351,381	22.6	%

		Nine Months Ended June 30, 2021																	Nine Months Ended June 30, 2022
$ in thousands	$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest		$ in thousands	HB Gross Profit		HB Gross Margin		Impairments & Abandonments (I&A)		HB Gross Profit excluding I&A		HB Gross Margin excluding I&A		Interest Amortized to COS (Interest)		HB Gross Profit excluding I&A and Interest		HB Gross Margin excluding I&A and Interest
West	West	$	193,702	24.0	%	$	—	$	193,702	24.0	%	$	—	$	193,702	24.0	%	West	$	234,481	26.5	%	$	12	$	234,493	26.5	%	$	—	$	234,493	26.5	%
East	East	91,730		22.4	%	465		92,195		22.5	%	—		92,195		22.5	%	East	88,876		25.0	%	—		88,876		25.0	%	—		88,876		25.0	%
Southeast	Southeast	70,461		21.8	%	231		70,692		21.9	%	—		70,692		21.9	%	Southeast	55,946		23.4	%	483		56,429		23.6	%	—		56,429		23.6	%
Corporate & unallocated (a)	Corporate & unallocated (a)	(68,890)		—		—		(68,890)				65,199		(3,691)				Corporate & unallocated (a)	(35,048)				—		(35,048)				46,542		11,494
Total homebuilding	Total homebuilding	$	287,003	18.7	%	$	696	$	287,699	18.7	%	$	65,199	$	352,898	22.9	%	Total homebuilding	$	344,255	23.3	%	$	495	$	344,750	23.3	%	$	46,542	$	391,292	26.5	%

(a) Corporate and unallocated includes capitalized interest and capitalized indirect costs expensed to homebuilding cost of sale related to homes closed, as well as capitalized interest and capitalized indirect costs impaired in order to reflect projects in progress assets at fair value.

Three Months Ended June 30, ~~2022~~2023 as compared to ~~2021~~2022

Our homebuilding gross profit ~~increased~~decreased by ~~$16.8~~$16.1 million to ~~$131.5~~$115.5 million for the three months ended June 30, ~~2022,~~2023, compared to ~~$114.7~~$131.5 million in the prior year quarter. The ~~increase~~decrease in homebuilding gross profit was primarily ~~driven by an increase~~due to a decrease in gross margin of 490 basis points to ~~25.1%~~20.2%, partially offset by ~~a decrease~~an increase in homebuilding revenue of ~~$43.7~~$47.3 million. ~~However, as~~As shown in the tables above, the comparability of our gross profit and gross margin was slightly impacted by impairment and abandonment charges, which ~~decreased~~increased by ~~$0.2~~$0.3 million, and interest amortized to homebuilding cost of sales, which ~~decreased~~increased by ~~$6.9~~$1.8 million period-over-period (refer to Note 54 and Note 65 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit ~~increased~~decreased by ~~$9.8~~$13.9 million compared to the prior year quarter, while homebuilding gross margin ~~increased~~decreased by ~~390~~470 basis points to ~~28.1%~~23.4%. The year-over-year ~~improvement~~decrease in gross margin for the three months ended June 30, ~~2022~~2023 was primarily ~~driven by lower sales~~due to an increase in price concessions and closing cost incentives ~~and pricing increases, although moderated demand may temper~~as the housing market weakened during the second half of fiscal 2022 through the first quarter of fiscal 2023. Although down year-over-year, homebuilding gross margin ~~expansion~~remained strong by historical standards and increased sequentially from the prior fiscal quarter, primarily attributed to decreased lumber costs and our success in ~~the future.~~lowering closing cost incentives.

West ~~Segment~~:Segment: Compared to the prior year quarter, homebuilding gross profit ~~increased~~decreased by ~~$14.5~~$8.7 million due to ~~the~~lower gross margin, partially offset by an increase in homebuilding ~~revenue and higher gross margin.~~revenue. Homebuilding gross margin, excluding impairments and abandonments, ~~increased~~decreased to ~~27.7%~~24.9%, updown from ~~25.5%~~27.7% in the prior year ~~quarter. The~~quarter, primarily driven by an increase in ~~gross margin was driven primarily by lower sales incentives~~price concessions and ~~pricing increases.~~closing cost incentives.

East Segment: Compared to the prior year quarter, homebuilding gross profit decreased by ~~$8.6~~$3.6 million due ~~a decrease in homebuilding revenue,~~to lower gross margin, partially offset by ~~higher gross margin.~~an increase in homebuilding revenue. Homebuilding gross margin, excluding impairments and abandonments, ~~increased~~decreased to ~~26.4%~~19.6%, updown from ~~23.9%~~26.4% in the prior year ~~quarter. The~~quarter, primarily driven by an increase in ~~gross margin was driven primarily by lower sales~~price concessions and closing cost incentives, as well as changes in product and ~~pricing increases.~~community mix.

Southeast Segment: Compared to the prior year quarter, homebuilding gross profit ~~decreased~~increased by ~~$3.0~~$3.6 million due to ~~a decrease~~an increase in homebuilding revenue primarily driven by a 39.4% increase in closings, partially offset by ~~higher~~lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, ~~increased~~decreased to ~~25.8%~~23.5%, updown from ~~22.9%~~25.8% in the prior year ~~quarter. The~~quarter, primarily driven by an increase in ~~gross margin was driven primarily by lower sales incentives~~price concessions and ~~pricing increases.~~closing cost incentives.

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Nine Months Ended June 30, ~~2022~~ 2023as compared to ~~2021~~2022

Our homebuilding gross profit ~~increased~~decreased by ~~$57.3~~$42.1 million to ~~$344.3~~$302.2 million for the nine months ended June 30, ~~2022,~~2023, from ~~$287.0~~$344.3 million in the prior year period. ~~The increase~~Gross profit decreased due to a decrease in gross ~~profit was primarily driven~~margin of 390 basis points to 19.4%, partially offset by an increase in ~~gross margin of 460 basis points to 23.3%, partially offset by a decrease in~~ homebuilding revenue of ~~$61.4~~$79.5 million. ~~However, similar~~Similar to the ~~three-month~~three-month period discussed above, the comparability of our gross profit and gross margin for the nine-month period was slightly impacted by impairment and abandonment charges, which ~~decreased~~increased by ~~$0.2~~$0.1 million, and interest amortized to homebuilding cost of sales, which ~~decreased~~increased by ~~$18.7~~$2.0 million period-over-period (refer to Note 54 and Note 65 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details). When excluding the impact of impairment and abandonment charges and interest amortized to homebuilding cost of sales, homebuilding gross profit ~~increased~~decreased by ~~$38.4~~$39.9 million compared to the prior year period, while homebuilding gross margin ~~increased~~decreased by ~~360~~390 basis points to ~~26.5%~~22.6%. The year-over-year ~~improvement~~decrease in gross margin for the nine months ended June 30, ~~2022~~2023 was primarily driven by ~~lower sales incentives~~an increase in price concessions and ~~pricing increases, although moderated demand due to higher mortgage interest rates and the previously discussed unfavorable macro-economic factors may temper gross margin expansion in the future.~~closing cost incentives.

West Segment: Compared to the prior year period, homebuilding gross profit ~~increased~~decreased by ~~$40.8~~$22.7 million due to ~~the~~lower gross margin, partially offset by an increase in homebuilding ~~revenue and higher gross margin.~~revenue. Homebuilding gross margin, excluding impairments and abandonments, ~~increased~~decreased to ~~26.5%~~22.8%, updown from ~~24.0%~~26.5% in the prior year ~~period. The~~period, primarily driven by an increase in ~~gross margin was driven primarily by lower sales incentives~~price concessions and ~~pricing increases.~~closing cost incentives.

East Segment: Compared to the prior year period, homebuilding gross profit decreased by ~~$2.9~~$20.2 million due to a decrease in homebuilding revenue ~~partially offset by higher~~as well as lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, ~~increased~~decreased to ~~25.0%~~20.3%, updown from ~~22.5%~~25.0% in the prior year ~~period. The~~period, primarily driven by an increase in ~~gross margin was driven primarily by lower sales~~price concessions and closing cost incentives, as well as changes in product and ~~pricing increases.~~community mix.

Southeast Segment: Compared to the prior year period, homebuilding gross profit ~~decreased~~increased by ~~$14.5~~$8.6 million due to ~~a decrease~~an increase in homebuilding revenue primarily driven by a 19.5% increase in closings, partially offset by ~~higher~~lower gross margin. Homebuilding gross margin, excluding impairments and abandonments, ~~increased~~decreased to ~~23.6%~~22.4%, updown from ~~21.9%~~23.6% in the prior year ~~period. The~~period, primarily driven by an increase in ~~gross margin was driven primarily~~price concessions and closing cost incentives, partially offset by ~~lower sales incentives~~changes in product and ~~pricing increases.~~community mix.

Measures of homebuilding gross profit and gross margin after excluding inventory impairments and abandonments, interest amortized to cost of sales, and other non-recurring items are not GAAP financial measures. These measures should not be considered alternatives to homebuilding gross profit and gross margin determined in accordance with GAAP as an indicator of operating performance.

In particular, the magnitude and volatility of non-cash inventory ~~impairment~~impairments and abandonment charges for the Company and other homebuilders have been significant historically and, as such, have made financial analysis of our industry more difficult. Homebuilding metrics excluding these charges, as well as interest amortized to cost of sales and other similar presentations by analysts and other companies, are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective level of impairments and levels of debt. Management believes these non-GAAP measures enable holders of our securities to better understand the cash implications of our operating performance and our ability to service our debt obligations as they currently exist and as additional indebtedness is incurred in the future. These measures are also useful internally, helping management to compare operating results and to measure cash available for discretionary spending.

In a given period, our reported gross profit is generated from both communities previously impaired and communities not previously impaired. In addition, as indicated above, certain gross profit amounts arise from recoveries of prior period costs, including warranty items that are not directly tied to communities generating revenue in the period. Home closings from communities previously impaired would, in most instances, generate very low or negative gross margins prior to the impact of the previously recognized impairment. Gross margin for each home closing is higher for a particular community after an impairment because the carrying value of the underlying land was previously reduced to the present value of future cash flows as a result of the impairment, leading to lower cost of sales at the home closing. This improvement in gross margin resulting from one or more prior impairments is frequently referred to in the aggregate as the “impairment turn” or “flow-back” of impairments within the reporting period. The amount of this impairment turn may exceed the gross margin for an individual impaired asset if the gross margin for that asset prior to the impairment would have been negative. The extent to which this impairment turn is greater than the reported gross margin for the individual asset is related to the specific historical cost basis of that individual asset.

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The asset valuations that result from our impairment calculations are based on discounted cash flow analyses and are not derived by simply applying prospective gross margins to individual communities. As such, impaired communities may have gross margins that are somewhat higher or lower than the gross margins for unimpaired communities. The mix of home closings in any particular quarter varies to such an extent that comparisons between previously impaired and never impaired communities would not be a reliable way to ascertain profitability trends or to assess the accuracy of previous valuation estimates. In addition, since any amount of impairment turn is tied to individual lots in specific communities, it will vary considerably from period to period. As a result of these factors, we review the impairment turn impact on gross margin on a trailing 12-month basis rather than a quarterly basis as a way of considering whether our impairment calculations are resulting in gross margins for impaired communities that are comparable to our unimpaired communities. For the trailing 12-month period ended June 30, ~~2022~~,2023, our homebuilding gross margin w~~as 22.2%~~was 20.6%. Excluding interest amortized to cost of sales and inventory impairments and abandonments, our homebuilding gross margin for the trailing 12-month period ended June 30, ~~2022~~2023 was ~~25.6%~~23.7%. For the same trailing 12-month period, ho~~mebuilding~~homebuilding gross margin was as follows in those communities that have previously been impaired, which ~~represented 4.8%~~represented 81 homes and 1.7% of to~~tal~~total closings ~~durin~~gduring this period:


Homebuilding Gross Margin from previously impaired communities:
Pre-impairment turn gross margin	~~11.7~~ (2.1)	%
Impact of interest amortized to COS related to these communities	~~2.8~~2.5	%
Pre-impairment turn gross margin, excluding interest amortization	~~14.5~~0.4	%
Impact of impairment turns	~~17.3~~24.7	%
Gross margin (post impairment turns), excluding interest amortization	~~31.8~~25.1	%

For a further discussion of our impairment policies, refer to Note 54 of the notes to the condensed consolidated financial statements in this Form 10-Q.

Land Sales and Other Revenue and Gross Profit

Land sales relate to land and lots sold that do not fit within our homebuilding programs and strategic plans. We also have other revenue related to title examinations provided for our homebuyers in certain markets. The following tables summarize our land sales and other revenue and related gross profit by reportable segment for the periods presented:


		Land Sales and Other Revenue						Land Sales and Other Gross Profit							Land Sales and Other Revenue						Land Sales and Other Gross Profit
		Three Months Ended June 30,						Three Months Ended June 30,							Three Months Ended June 30,						Three Months Ended June 30,
in thousands	in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		in thousands	2023		2022		23 vs 22		2023		2022		23 vs 22
West	West	$	605	$	2,239	$	(1,634)	$	439	$	606	$	(167)	West	$	1,464	$	605	$	859	$	810	$	439	$	371
East	East	282		1,763		(1,481)		205		207		(2)		East	233		282		(49)		189		205		(16)
Southeast	Southeast	2,550		—		2,550		272		—		272		Southeast	312		2,550		(2,238)		252		272		(20)

Total	Total	$	3,437	$	4,002	$	(565)	$	916	$	813	$	103	Total	$	2,009	$	3,437	$	(1,428)	$	1,251	$	916	$	335


		Land Sales and Other Revenue						Land Sales and Other Gross Profit (Loss)							Land Sales and Other Revenue						Land Sales and Other Gross Profit
		Nine Months Ended June 30,						Nine Months Ended June 30,							Nine Months Ended June 30,						Nine Months Ended June 30,
in thousands	in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		in thousands	2023		2022		23 vs 22		2023		2022		23 vs 22
West	West	$	2,384	$	7,056	$	(4,672)	$	932	$	1,625	$	(693)	West	$	3,409	$	2,384	$	1,025	$	2,164	$	932	$	1,232
East	East	4,675		3,341		1,334		3,811		349		3,462		East	594		4,675		(4,081)		463		3,811		(3,348)
Southeast	Southeast	5,096		387		4,709		617		73		544		Southeast	751		5,096		(4,345)		586		617		(31)
Corporate and unallocated (a)		—		—		—		—		(308)		308

Total	Total	$	12,155	$	10,784	$	1,371	$	5,360	$	1,739	$	3,621	Total	$	4,754	$	12,155	$	(7,401)	$	3,213	$	5,360	$	(2,147)

~~(a)~~For the Corporate and unallocated includes capitalized interest and capitalized indirect costs expensed to land cost of sale related to land sold, as well as capitalized interest and capitalized indirect costs impaired in order to reflect land held for sale assets at net realizable value.

~~To further support our efforts to improve capital efficiency, we continued to focus on closing a number of land sales in the~~ three ~~and nine~~ months ended June 30, ~~2022 for~~2023, land sales and other revenue decreased by $1.4 million to $2.0 million, and land ~~positions that did not fit within our strategic plans.~~sales and other gross profit increased by $0.3 million to $1.3 million compared to the prior year quarters. For thenine months ended June 30, 2023, land sales and other revenue decreased by $7.4 million to $4.8 million, and land sales and other gross profit decreased by $2.1 million to $3.2 million compared to the prior year period. Year-over-year fluctuations on land sales and other revenue are primarily driven by the timing and volume of land and lot sales closings. Land sales and other gross profit is primarily impacted by the profitability of individual land and lot sale transactions. Future land and lot sales will depend on a variety of factors, including local market conditions, individual community performance, and changing strategic plans.

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Operating Income

The table below summarizes operating income by reportable segment for the periods presented:


		Three Months Ended June 30,						Nine Months Ended June 30,							Three Months Ended June 30,						Nine Months Ended June 30,
in thousands	in thousands	2022		2021		22 vs 21		2022		2021		22 vs 21		in thousands	2023		2022		23 vs 22		2023		2022		23 vs 22
West	West	$	65,106	$	52,295	$	12,811	$	165,933	$	128,086	$	37,847	West	$	55,629	$	65,106	$	(9,477)	$	138,499	$	165,933	$	(27,434)
East	East	20,935		27,437		(6,502)		64,866		61,254		3,612		East	16,415		20,935		(4,520)		41,921		64,866		(22,945)
Southeast	Southeast	14,476		14,981		(505)		32,683		40,363		(7,680)		Southeast	16,930		14,476		2,454		39,126		32,683		6,443

Corporate and unallocated (a)	Corporate and unallocated (a)	(33,278)		(46,020)		12,742		(100,693)		(129,704)		29,011		Corporate and unallocated(a)	(41,074)		(33,278)		(7,796)		(104,352)		(100,693)		(3,659)
Operating income	Operating income	$	67,239	$	48,693	$	18,546	$	162,789	$	99,999	$	62,790	Operating income	$	47,900	$	67,239	$	(19,339)	$	115,194	$	162,789	$	(47,595)

(a) ~~Corporate and unallocated includes~~Includes amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses related to numerous shared services functions that benefit all segments but are not allocated to the operating segments, and certain other amounts that are not allocated to our operating segments.

Our operating income ~~increased~~decreased by ~~$18.5~~$19.3 million to $47.9 million for the three months ended June 30, 2023, compared to operating income of $67.2 million for the three months ended June 30, ~~2022, compared~~2022. This decrease was primarily due to ~~operating income~~the previously discussed decrease in gross profit, and higher commissions, sales and marketing costs during the period. SG&A as a percentage of ~~$48.7 million~~total revenue decreased by 30 basis points quarter-over-quarter, from 11.8% to 11.5%, as a result of higher revenue for the three months ended June 30, ~~2021, driven primarily by~~2023, compared to the previously discussed increase in gross profit as well as a decrease of $1.1 million, or 1.7%, in SG&A expense due to decreased commissions expense. SG&A as a percentage of total revenue increased by 70 basis points quarter-over-quarter from ~~11.1%~~ to ~~11.8% primarily due to decreases in closings and revenue as a result of construction cycle time extension.~~prior year quarter.

Our operating income ~~increased~~decreased by ~~$62.8~~$47.6 million to $115.2 million for the nine months ended June 30, 2023, compared to operating income of $162.8 million for the nine months ended June 30, ~~2022, compared~~2022. This decrease was primarily due to ~~operating income of $100.0 million for the~~ ~~nine~~ ~~months ended June 30, 2021, driven primarily by~~ the previously discussed ~~increase~~decrease in gross ~~profit as well as a decrease~~profit. The dollar value of ~~$0.5 million, or 0.3% in~~ SG&A ~~expense~~increased during the period due to ~~decreased~~higher commissions, ~~expense.~~sales and marketing costs, partially offset by lower incentive compensation year-over-year. SG&A as a percentage of total revenue ~~increased~~decreased by 4030 basis points year-over-year, from ~~11.5%~~11.9% to ~~11.9%~~ 11.6%, primarily due to ~~decreases in closings and~~higher revenue ~~as a result of construction cycle time extension.~~for the nine months ended June 30, 2023, compared to the prior year period.

Three Months Ended June 30, ~~2022~~2023 as compared to ~~2021~~2022

West Segment: The $12.8 million increase in operating income compared to the prior year quarter was primarily due to the increase in gross profit previously discussed and lower commissions expense despite higher homebuilding revenue as we reduce our reliance on external agents given the favorable sales environment. This increase to operating income was partially offset by higher G&A expenses and higher sales and marketing expenses in the segment.

~~East Segment:~~ ~~The $6.5~~$9.5 million decrease in operating income compared to the prior year quarter was primarily due to the ~~decrease in~~lower gross profit previously discussed, as well as higher commissions, sales and marketing costs, partially offset by lower other G&A expenses, and lower incentive compensation expense.

East Segment: The $4.5 million decrease in operating income compared to the prior year quarter was primarily due to the lower gross profit previously discussed, as well as higher commissions, sales and marketing ~~expenses. This decrease to operating income was~~costs, partially offset by lower ~~commissions expense on~~other G&A expenses, and lower ~~homebuilding revenue in the segment.~~incentive compensation expense.

Southeast Segment: The ~~$0.5~~$2.5 million ~~decrease~~increase in operating income compared to the prior year quarter was primarily due to the ~~decrease~~ inhigher gross profit previously ~~discussed. This~~ ~~decrease~~ ~~to operating income was~~discussed, partially offset by ~~lower~~higher commissions expense on ~~lower~~higher homebuilding ~~revenue, lower G&A expenses, and~~ ~~lower sales and marketing expenses~~ ~~in the segment.~~revenue.

Corporate and Unallocated: Our ~~Corporate~~corporate and unallocated results include amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, expenses for various shared services functions that benefit all segments but are not allocated, including information technology, treasury, corporate finance, legal, branding and national marketing, and certain other amounts that are not allocated to our operating segments. For the three months ended June 30, ~~2022,~~2023, corporate and unallocated net expenses ~~decreased~~increased by ~~$12.7~~$7.8 million from the prior year quarter primarily due to ~~lower~~higher amortization of capitalized interest and capitalized indirect costs to cost of sales ~~partially offset by~~on higher ~~G&A costs.~~homebuilding revenue.

Nine Months Ended June 30, ~~2022~~ 2023as compared to ~~2021~~2022

West Segment: The ~~$37.8~~$27.4 million ~~increase~~decrease in operating income compared to the prior year period was primarily due to the ~~increase~~decrease in gross profit previously discussed, ~~and lower~~as well as higher commissions expense ~~despite~~on higher homebuilding revenue, ~~as we reduced our reliance on external agents given the favorable sales environment. This increase to operating income was partially offset by higher G&A expenses and~~ higher sales and marketing expenses, ~~in the segment.~~

~~Table of Contents~~and higher other G&A expenses.

East Segment: The ~~$3.6~~$22.9 million ~~increase~~decrease in operating income compared to the prior year period was primarily due to ~~lower commissions expense on lower homebuilding revenue. This increase to operating income was partially offset by~~ the decrease in gross profit previously discussed, ~~higher G&A expenses, and~~as well as higher sales and marketing expenses, ~~in the segment.~~partially offset by lower commission expenses on lower homebuilding revenue and lower incentive compensation.

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Southeast Segment: The ~~$7.7~~$6.4 million ~~decrease~~increase in operating income compared to the prior year period was primarily due to the ~~decrease~~increase in gross profit previously ~~discussed. This~~ ~~decrease~~ ~~to operating income was~~discussed, partially offset by ~~lower~~higher commissions expense on ~~lower~~higher homebuilding ~~revenue, lower G&A expenses, and~~ ~~lower sales and marketing expenses~~ ~~in the segment.~~revenue.

Corporate and Unallocated: For the nine months ended June 30, ~~2022,~~2023, corporate and unallocated net ~~costs decreased~~expenses increased by $~~29.0~~3.7 million over the prior year period. ~~The decrease~~This increase was primarily due to ~~lower~~higher amortization of capitalized interest and capitalized indirect costs to cost of sales on higher homebuilding revenue, partially offset by ~~higher~~lower G&A ~~costs.~~costs and lower incentive compensation.

Below operating income, we had one noteworthy year-over-year ~~fluctuations~~fluctuation for the three and nine months ~~months~~ ended June 30, ~~2022~~2023 compared to the prior ~~period as follows: (1)~~period. Specifically, we experienced ~~a decline~~an increase in other ~~expense,~~income, net, primarily attributable to a year-over-year ~~decrease~~increase in external interest ~~expense not qualified for capitalization, and (2) we recorded a loss~~received due to higher interest rates on extinguishment of debt of $0.1 million during the current period compared to a loss of $1.6 million in the prior year. See Note 6 and 7 of the notes to our condensed consolidated financial statements in this Form 10-Q for a further discussion of these items.operating cash bank accounts.

Income Taxes

Our income tax assets and liabilities and related effective tax rate are affected by various factors, the most significant of which is the valuation allowance recorded against a portion of our deferred tax assets. Due to the effect of our valuation allowance adjustments beginning in fiscal 2008, a comparison of our annual effective tax rates must consider the changes in our valuation allowance. In addition, our effective tax rate is also impacted by a variety of factors, including, but not limited to, tax credits, permanent differences and ~~permanent differences.~~other discrete items. A comparison of our effective tax rates should also consider the changes in valuation allowance in periods when a change occurs. As such, our income tax expense/benefit is notnot always directly correlated to the amount of pre-tax income or loss for the associated periods.

We recognized income tax expense from continuing operations of $6.2 million and $15.5 million for the three and nine months ended June 30, 2023, compared to $13.2 million and $29.7 million for the three and nine months ended June 30, ~~2022, respectively, compared to $10.8 million and $22.6 million~~2022. Income tax expense for the ~~three and~~ nine months ended June 30, ~~2021, respectively.~~2023 was primarily driven by income tax expense on earnings from continuing operations, permanent differences and the discrete tax expense related to stock-based compensation activity in the period, partially offset by the generation of additional federal tax credits and interest received with the refund of our alternative minimum tax credit. Income tax expense for the nine months ended June 30, 2022 was primarily driven by income tax expense on earnings from continuing operations and permanent differences, partially offset by the generation of additional federal tax credits and the discrete tax ~~benefits~~benefit related to stock-based compensation activity in the quarter. Income tax expense for the nine months ended June 30, 2021 was primarily driven by income tax expense on earnings from continuing operations, partially offset by the discrete tax benefits related to stock-based compensation activity in the quarter and the resolution of a state tax audit.period. Refer to Note 1110 of the notes to the condensed consolidated financial statements included in this Form 10-Q for further discussion of our income taxes.

Liquidity and Capital Resources

Our sources of liquidity include, but are not limited to, cash from operations, proceeds from Senior Notes, the Unsecured Facility and other bank borrowings, the issuance of equity and equity-linked securities, and other external sources of funds. Our short-term and long-term liquidity depends primarily upon our level of net income, working capital management (cash, accounts receivable, accounts payable and other liabilities), and available credit facilities.

Net changes in cash, cash equivalents, and restricted cash are as follows for the periods presented:

Nine Months Ended June 30,
in thousands 2022 2021
Cash (used in) provided by operating activities $ (164,504) $ 78,542
Cash used in investing activities (10,935) (10,011)
Cash used in financing activities (16,903) (28,035)
Net (decrease) increase in cash, cash equivalents, and restricted cash $ (192,342) $ 40,496

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	Nine Months Ended June 30,
in thousands	2023		2022
Net cash provided by (used in) operating activities	$	95,832	$	(164,504)
Net cash used in investing activities	(21,819)		(10,935)
Net cash used in financing activities	(10,176)		(16,903)
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	63,837	$	(192,342)

Operating Activities

Net cash ~~used in~~provided by operating activities was ~~$164.5~~$95.8 million for the nine months ended June 30, ~~2022.~~2023. The primary drivers of operating cash flows are typically cash earnings and changes in inventory levels, including land acquisition and development spending. Net cash ~~used in~~provided by operating activities during the period was primarily driven by cash inflows from income before income taxes of $118.3 million, which included $16.0 million of non-cash charges. This was partially offset by a net increase in non-inventory working capital balances of $37.3 million and an increase in inventory of $1.2 million resulting from land acquisition, land development and house construction spending.

Net cash used in operating activities was $164.5 million for the nine months ended June 30, 2022, primarily driven by an increase in inventory of $351.4 million resulting from land acquisition, land development and house construction spending to support continued growth. This was partially offset by cash inflows from income before income taxes of $163.6 million, which included $16.3 million of non-cash charges and ~~and~~ a net decrease in non-inventory working capital balances of $7.0 million.

~~Net cash provided by operating activities was $78.5 million for the nine months ended June 30, 2021, primarily driven by income before income taxes~~

Table of $96.2 million, which included $21.4 million of non-cash charges, and a net decrease in non-inventory working capital balances of $15.8 million, partially offset by an increase in inventory of $54.9 million resulting from land acquisition, land development, and house construction spending to support continued growth.Contents

Investing Activities

Net cash used in investing activities was $21.8 millionfor the nine months ended June 30, 2023, primarily driven by capital expenditures for model homes and information systems infrastructure, and investments in securities.

Net cash used in investing activities was $10.9 million, for the nine months ended June 30, 2022, ~~and~~ ~~June 30, 2021~~ ~~was $10.9 million and~~ ~~$10.0 million, respectively,~~ primarily driven ~~in both periods~~ by capital expenditures for model homes and information systems infrastructure.

Financing Activities

Net cash used in financing activities was $10.2 million for the nine months ended June 30, ~~2022 was $16.9 million~~2023, primarily driven by the repurchase of a portion of our 2025 ~~and 2027~~ Senior Notes, ~~common stock repurchases under our share repurchase program,~~debt issuance costs for the Unsecured Facility (see Note 6), and tax payments for stock-based compensation awards vesting.

Net cash used in financing activities was $16.9 million for the nine months ended June 30, ~~2021 was $28.0 million~~2022, primarily driven by the repurchase of a portion of our 2027 Senior Notes, and tax payments for stock-based compensation awards vesting.

Financial Position

As of June 30, ~~2022,~~2023, our liquidity position consisted of $276.1 million in cash and cash equivalents and $265.0 million of remaining capacity under the Unsecured Facility, compared to $42.0 million in cash and cash equivalents ~~respectively,~~ and $248.2 million of remaining capacity under the ~~Facility.~~Secured Facility as of June 30, 2022. Meanwhile, we invested $131.6 million and $159.5 million in land acquisition and land development during quarters ended June 30, 2023 and June 30, 2022, respectively.

While we believe we possess sufficient liquidity, we are mindful of potential short-term or seasonal requirements for enhanced liquidity that may arise to operate and grow our business. As of the date of this report, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.

~~During this time,~~At times, we may also engage in capital markets, bank loan, project debt or other financial transactions, including the repurchase of debt or potential new issuances of debt or equity securities to support our business needs. The amounts involved in these transactions, if any, may be material. In addition, as necessary or desirable, we may adjust or amend the terms of and/or expand the capacity of the Facility, or enter into additional letter of credit facilities, or other similar facility arrangements, in each case with the same or other financial institutions, or allow any such facilities to mature or expire.

Debt

We generally fulfill our short-term cash requirements with cash generated from our operations and available borrowings. Additionally, our ~~Secured Revolving Credit~~Unsecured Facility provides working capital and letter of credit capacity of ~~$250.0~~$265.0 million. As of June 30, ~~2022~~2023, no borrowings and ~~September 30, 2021,~~ no ~~borrowings~~letters of credit were outstanding under the ~~Facility. As of June 30, 2022, we had letters of credit outstanding of~~ ~~$1.8 million~~ ~~under the~~Unsecured Facility, resulting in a remaining capacity of ~~$248.2 million~~.$265.0 million.

We have also entered into a number of stand-alone ~~cash secured~~ letter of credit agreements with ~~banks.~~banks, secured with cash or certificates of deposit. These combined facilities provide for letter of credit needs collateralized by either cash or assets of the Company. We currently have ~~$28.8~~$32.1 million of outstanding letters of credit under these ~~facilities, which are secured by cash collateral that is maintained in restricted~~ facilities.~~accounts totaling $31.5 million.~~

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In the future, we may from time to time seek to continue to retire or purchase our outstanding debt through cash repurchases or in exchange for other debt securities, in open market purchases, privately-negotiated transactions, or otherwise. In addition, any material variance from our projected operating results could require us to obtain additional equity or debt financing. There can be no assurance that we will be able to complete any of these transactions in the future on favorable terms or at all. See Note 76 of the notes to the condensed consolidated financial statements in this Form 10-Q for additional details related to our borrowings.

Supplemental Guarantor Information

As discussed in Note 76 of the notes to the condensed consolidated financial statements in this Form 10-Q, the Company's obligations to pay principal and interest under certain debt agreements are guaranteed on a joint and several basis by substantially all of the Company's subsidiaries. Some of the immaterial subsidiaries do not guarantee the Senior Notes. The guarantees are full and unconditional.

~~The following summarized~~ Summarized financial information is not presented for Beazer Homes USA, Inc. and the guarantor subsidiaries on a combined basis ~~after elimination~~as the assets, liabilities and results of ~~intercompany transactions between entities~~operations of the combined issuer and guarantors of the guaranteed security are not materially different than corresponding amounts presented in the ~~combined group and amounts related to investments in any subsidiary that is a non-guarantor.~~condensed consolidated financial statements of the parent company.

As of
in thousands June 30, 2022 September 30, 2021
Due from non-guarantor subsidiary $ 2,494 $ 1,532
Total assets $ 3,705,679 $ 2,075,518
Total liabilities $ 1,361,813 $ 1,353,734

Nine Months Ended June 30,
in thousands 2022 2021
Total revenues $ 1,486,473 $ 1,547,975
Gross profit $ 347,555 $ 287,794
Income from continuing operations $ 133,341 $ 73,253
Net income $ 133,337 $ 73,094

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Credit Ratings

Our credit ratings are periodically reviewed by rating agencies. In July 2022, S&P reaffirmed the Company’s corporate credit rating of B and the Company's positive outlook. In ~~August 2021,~~October 2022, Moody's upgraded the ratings for our senior unsecured notes from B3 to B2, reaffirmed the Company's issuer corporate family rating ~~from B3 to~~of B2 and ~~revised~~returned the Company's outlook from ~~positive~~stable to ~~stable.~~positive. These ratings and our current credit condition affect, among other things, our ability to access new capital. Negative changes to these ratings ~~may~~may result in more stringent covenants and higher interest rates under the terms of any new debt. Our credit ratings could be lowered, or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our business, financial condition, results of operations, and liquidity. In particular, a weakening of our financial condition, including any further increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, could result in a credit rating downgrade or change in outlook, or could otherwise increase our cost of borrowing.

Stock Repurchases and Dividends Paid

In May 2022, the Company's Board of Directors approved a ~~new~~ share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. This ~~newly authorized~~share repurchase program replaced the prior share repurchase program, authorized in the first quarter of fiscal 2019 of up to $50.0 million of common stock repurchases, pursuant to which $12.0 million of the capacity remained prior to the replacement of the program. ~~As part of this new program, the Company repurchased 175 thousand shares of its common stock for $2.5 million at an average price per share of $14.47 during the~~ ~~three~~ ~~months ended June 30, 2022 through open market transactions.~~ No share repurchases were made during ~~fiscal year 2021.~~the ~~All shares have been retired upon repurchase. The aggregate reduction to stockholders’ equity related to share repurchases duri~~threeng and ~~the~~ nine months ended June 30, ~~2022 was $2.5 million.~~2023. As of June 30, ~~2022,~~2023, the remaining availability of the new share repurchase program was ~~$47.5~~$41.8 million. The repurchase program has no expiration date. Previously repurchased shares under the program have been retired.

The indentures under which our Senior Notes were issued contain certain restrictive covenants, including limitations on the payment of dividends. There were no dividends paid during the three and nine months ended June 30, ~~2022~~2023 or ~~2021.~~

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Off-Balance Sheet Arrangements and Aggregate Contractual Commitments

Lot Option Agreements

In addition to purchasing land directly, we control a portion of our land supply through lot option ~~agreements.~~agreements with land developers and land bankers, which generally require the payment of cash or the posting of a letter of credit or surety bond for the right to acquire lots during a specified period of time at a certain price. In recent years, we have focused on increasing our lot option agreement usage to minimize risk as we grow our land position. As of June 30, ~~2022,~~2023, we controlled ~~24,899~~22,719 lots, which includes 272 lots of land held for future development and ~~495~~386 lots of land held for sale. Of the ~~total active 24,132~~22,061 active lots, we ~~owned 47.9%, or 11,561 of these lots, and the remaining 12,571~~controlled 11,510 of these lots, or ~~52.1%~~52.2%, ~~were under option contracts, primarily~~ through ~~lot~~ option agreements, ~~with land developers and land bankers, which generally require the payment of cash~~as compared to 12,571 active lots controlled, or ~~the posting of a letter of credit for the right to acquire lots during a specified period of time at a certain price. In comparison, we controlled 9,263 lots, or 48.1%~~52.1% of our total active ~~lot position,~~lots, through option ~~contracts~~agreements as of June 30, ~~2021. As a result of~~2022. Lot option agreements allow us to position for future growth while providing us with the flexibility ~~that these options provide us, upon a change~~to respond to changes in market conditions ~~we may renegotiate~~by renegotiating the terms of the options prior to exercise or ~~terminate~~terminating the agreement.

Under option ~~contracts,~~agreements, purchase of the properties is contingent upon satisfaction of certain requirements by us and the sellers, and our liability is generally limited to forfeiture of the non-refundable deposits, letters of credit or surety bonds, and other non-refundable amounts incurred, which totaled approximately ~~$137.4~~$144.7 million as of June 30, ~~2022.~~2023. The total remaining purchase price, net of cash deposits, committed under all options was ~~$819.1~~$747.9 million as of June 30, ~~2022. Based on~~2023. Subject to market conditions and our liquidity, we ~~may~~plan to further expand our use of option agreements to supplement our owned inventory supply.

We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our option ~~contracts.~~agreements. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all.

We have historically funded the exercise of lot options with operating cash flows. We expect these sources to continue to be adequate to fund anticipated future option exercises. Therefore, we do not anticipate that the exercise of our lot options will have a material adverse effect on our liquidity.

~~Investments in Unconsolidated Entities~~

~~Occasionally, we use legal entities in which we have less than a controlling interest. We enter into the majority~~Table of these arrangements with land developers, other homebuilders, and financial partners to acquire attractive land positions, to manage our risk profile, and to leverage our capital base. The underlying land positions are developed into finished lots for sale to the unconsoContents~~lidated entity’s members or other third parties. We account for our interest in unconsolidated entities under the equity method.~~

Historically, we and our partners have provided varying levels of guarantees of debt or other obligations of our unconsolidated entities. As of June 30, 2022, we had no repayment guarantees outstanding related to the debt of our unconsolidated entities. See Note 4 of the notes to the condensed consol~~idated financial statements in this Form 10-Q for more information.~~

Letters of Credit and Surety Bonds

In connection with the development of our communities, we are frequently required to provide performance, maintenance, and other bonds and letters of credit in support of our related obligations with respect to such developments. The amount of such obligations outstanding at any time varies in accordance with our pending development activities. In the event any such bonds or letters of credit are drawn upon, we would be obligated to reimburse the issuer of such bonds or letters of credit. We had outstanding letters of credit and surety bonds of $~~30.6~~32.1 million and $~~272.5~~283.6 million, respectively, as of June 30, ~~2022,~~2023, primarily related to our obligations to local governments to construct roads and other improvements in various developments.

Critical Accounting ~~Policies and~~ Estimates

Our critical accounting policies require the use of judgment in their application and in certain cases require estimates of inherently uncertain matters. Although our accounting policies are in compliance with accounting principles generally accepted in the United States of America (GAAP), a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. It is also possible that other professionals applying reasonable judgment to the same set of facts and circumstances could reach a different conclusion. As disclosed in our ~~2021~~2022 Annual Report, our most critical accounting policies relate to inventory valuation of projects in progress, warranty reserves, and income tax valuation allowances. There have been no significant changes to our critical accounting policies and estimates during the nine months ended June 30, ~~2022~~2023 as compared to those described in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2021~~2022 Annual Report on Form 10-K.

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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 events or results, and it is possible that such events or results described in this Form 10-Q will not occur or be achieved. These forward-looking statements can generally be identified by the use of statements that include words such as "outlook," "may," "will," "strategy," "believe," "expect," "anticipate," "intend," "plan," "foresee," "likely," "goal," "target," "estimate," "project," "initial" or other similar words or phrases.

These forward-looking statements involve 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, 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 is contained in Part I, Item 1A— Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021.~~2022. 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:

•the cyclical nature of the homebuilding industry and ~~further~~ deterioration in homebuilding industry conditions;

•continued increases in mortgage interest rates and reduced availability of mortgage financing due to, among other factors, ~~recent and likely continued~~additional actions by the Federal Reserve to address sharp increases in inflation;

•other economic changes nationally and in local markets, including changes in consumer confidence, wage levels, declines in employment levels, and an increase in the number of foreclosures, each of which is outside our control and affects the affordability of, and demand for, the homes we sell;

•continued supply chain challenges negatively impacting our homebuilding production, including shortages of raw materials and other critical components such as windows, doors, and appliances;

•continued shortages of or increased costs for labor used in housing production, and the level of quality and craftsmanship provided by such labor;

•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;

•financial institution disruptions, such as recent bank failures;

•potential negative impacts of public health emergencies such as the COVID-19 pandemic, which, in addition to exacerbating each of the risks listed above and 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, including lumber, 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~~agreement abandonments;

•factors affecting margins, such as adjustments to home pricing, increased sales incentives and mortgage rate buy down ~~programs;~~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 ~~structure;~~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, such as asset impairment charges we took on select California assets during the second quarter of fiscal 2019;

•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 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);

•~~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;~~

•changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes;

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•increased competition or delays in reacting to changing consumer preferences in home design;

•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;

•the potential recoverability of our deferred tax assets;

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•increases in corporate tax rates;

•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;

•the impact of governmental regulations on homebuilding in key markets, such as regulations limiting the availability of ~~water;~~water and electricity (including availability of electrical equipment such as transformers and meters);

•the success of our ESG initiatives, including our ability to meet our goal that by 2025 every home we build will be Net Zero Energy Ready, ~~by 2025~~ 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 and prepare for a Net Zero future; and

•terrorist acts, protests and civil unrest, political uncertainty, acts of war or other factors over which the Company has no control.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a number of market risks in the ordinary course of business. Our primary market risk exposure relates to fluctuations in interest rates. We do not believe that our exposure in this area is material to our cash flows or results of operations. As of June 30, ~~2022,~~2023, we had variable rate debt outstanding totaling approximately ~~$71.8~~$73.8 million. A one percent increase in the interest rate for these notes would result in an increase of our interest expense by approximately $1.0 million over the next twelve-month period. The estimated fair value of our fixed-rate debt as of June 30, ~~2022~~2023 was ~~$819.5~~$887.2 million, compared to a carrying amount of ~~$977.3~~$907.3 million. The effect of a hypothetical one-percentage point decrease in our estimated discount rates would increase the estimated fair value of the fixed rate debt instruments from $~~819.5~~887.2 million to ~~$852.1~~$920.9 million as of June 30, ~~2022.~~2023.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed based on criteria established in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Act). Based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, ~~2022~~2023 at a reasonable assurance level.

Attached as exhibits to this ~~Quarterly Report on~~ Form 10-Q are certifications of our CEO and CFO, which are required by Rule 13a-14 of the Act. This Disclosure Controls and Procedures section includes information concerning management’s evaluation of disclosure controls and procedures referred to in those certifications and should be read in conjunction with the certifications of the CEO and CFO.

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Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 5. Other Information

~~None.~~Rule 10b5-1 Trading Plans

During the fiscal quarter ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of our legal proceedings, see Note 98 of the notes to our condensed consolidated financial statements in this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended September 30, ~~2021.~~2022.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~

~~The following table summarizes the Company's common stock repurchases during the~~ ~~third~~ ~~fiscal quarter of~~ ~~2022~~:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1 - April 30, 2022 — $ — — $ 50,000,000
May 1 - May 31, 2022 166,915 $ 14.51 166,915 $ 47,574,512
June 1 - June 30, 2022 7,785 $ 13.67 7,785 $ 47,467,968

Item 6. Exhibits








22			List of Guarantor Subsidiaries (incorporated herein by reference to Exhibit 22 of the Company's Form 10-K filed on November 10, ~~202~~1 )2021)

31.1			Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14 promulgated under Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

4441

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:

July ~~28, 2022~~27, 2023

Beazer Homes USA, Inc.

By:

/s/ David I. Goldberg

Name:

David I. Goldberg

Senior Vice President and
Chief Financial Officer

4542


in thousands	Projects in Progress (a)		Land Held for Future Development		Land Held for Sale		Total Owned Inventory
June 30, 2022
West	$	977,567	$	3,483	$	12,922	$	993,972
East	340,673		10,888		—		351,561
Southeast	327,156		5,508		676		333,340
Corporate and unallocated (b)	179,978		—		—		179,978
Total	$	1,825,374	$	19,879	$	13,598	$	1,858,851
September 30, 2021
West	$	781,036	$	3,483	$	4,478	$	788,997
East	264,991		10,888		584		276,463
Southeast	269,738		5,508		4,117		279,363
Corporate and unallocated (b)	156,779		—		—		156,779
Total	$	1,472,544	$	19,879	$	9,179	$	1,501,602


in thousands	Deposits & Non-refundable Pre-acquisition Costs Incurred (a)		Remaining Obligation, Net of Deposits
As of June 30, 2022


Unconsolidated lot option agreements	$	137,357	$	819,072

As of September 30, 2021


Unconsolidated lot option agreements	$	114,688	$	676,149


Fiscal Years Ending September 30,
in thousands
2022 (a)	$	1,103
2023	3,799
2024	2,680
2025	2,277
2026	1,643
Thereafter	1,928
Total lease payments (b)	13,430
Less: Imputed interest	1,275
Total operating lease liabilities	$	12,155


	As of
in thousands	June 30, 2022		September 30, 2021
Due from non-guarantor subsidiary	$	2,494	$	1,532
Total assets	$	3,705,679	$	2,075,518
Total liabilities	$	1,361,813	$	1,353,734


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
April 1 - April 30, 2022	—	$	—	—	$	50,000,000
May 1 - May 31, 2022	166,915	$	14.51	166,915	$	47,574,512
June 1 - June 30, 2022	7,785	$	13.67	7,785	$	47,467,968