10-Q 1 bzh-20240331.htm 10-Q bzh-20240331
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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 March 31, 2024
or
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.)
2002 Summit Boulevard NE, 15th Floor, Atlanta, Georgia
 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par valueBZHNew 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 filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 April 26, 2024: 31,547,284


BEAZER HOMES USA, INC.
TABLE OF CONTENTS
 
1

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)March 31,
2024
September 30,
2023
ASSETS
Cash and cash equivalents$132,867 $345,590 
Restricted cash32,527 40,699 
Accounts receivable (net of allowance of $284 and $284, respectively)
54,226 45,598 
Income tax receivable246  
Owned inventory2,057,461 1,756,203 
Deferred tax assets, net132,521 133,949 
Property and equipment, net36,839 31,144 
Operating lease right-of-use assets15,867 17,398 
Goodwill11,376 11,376 
Other assets41,480 29,076 
Total assets$2,515,410 $2,411,033 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Trade accounts payable$168,669 $154,256 
Operating lease liabilities17,543 18,969 
Other liabilities144,310 156,961 
Total debt (net of debt issuance costs of $9,314 and $5,759, respectively)
1,023,311 978,028 
Total liabilities1,353,833 1,308,214 
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, 31,547,284 issued and outstanding and 31,351,434 issued and outstanding, respectively)
32 31 
Paid-in capital862,636 864,778 
Retained earnings298,909 238,010 
Total stockholders’ equity1,161,577 1,102,819 
Total liabilities and stockholders’ equity$2,515,410 $2,411,033 
See accompanying notes to condensed consolidated financial statements.
2

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months EndedSix Months Ended
March 31,March 31,
 in thousands (except per share data)2024202320242023
Total revenue$541,540 $543,908 $928,358 $988,836 
Home construction and land sales expenses439,687 440,901 748,775 799,871 
Inventory impairments and abandonments 111  301 
Gross profit101,853 102,896 179,583 188,664 
Commissions18,285 18,305 31,531 32,410 
General and administrative expenses44,004 42,779 85,990 83,427 
Depreciation and amortization3,573 3,020 5,806 5,533 
Operating income35,991 38,792 56,256 67,294 
Loss on extinguishment of debt, net(424) (437)(515)
Other income, net10,343 1,007 13,000 1,583 
Income from continuing operations before income taxes45,910 39,799 68,819 68,362 
Expense from income taxes6,739 5,092 7,920 9,247 
Income from continuing operations39,171 34,707 60,899 59,115 
Loss from discontinued operations, net of tax   (77)
Net income$39,171 $34,707 $60,899 $59,038 
Weighted-average number of shares:
Basic30,769 30,394 30,681 30,464 
Diluted31,133 30,610 31,064 30,702 
Basic income per share:
Continuing operations$1.27 $1.14 $1.98 $1.94 
Discontinued operations    
Total$1.27 $1.14 $1.98 $1.94 
Diluted income per share:
Continuing operations$1.26 $1.13 $1.96 $1.93 
Discontinued operations    
Total$1.26 $1.13 $1.96 $1.93 
See accompanying notes to condensed consolidated financial statements.

3

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended March 31, 2024
Common StockPaid-in CapitalRetained Earnings
in thousandsSharesAmountTotal
Balance as of December 31, 202331,533 $32 $861,241 $259,738 $1,121,011 
Net income and comprehensive income   39,171 39,171 
Stock-based compensation expense  1,389  1,389 
Stock option exercises2  16  16 
Shares issued under employee stock plans, net14     
Forfeiture and other settlements of restricted stock(2)    
Common stock redeemed for tax liability  (10) (10)
Balance as of March 31, 202431,547 $32 $862,636 $298,909 $1,161,577 
Six Months Ended March 31, 2024
Common StockPaid-in CapitalRetained Earnings
in thousandsSharesAmountTotal
Balance as of September 30, 202331,351 $31 $864,778 $238,010 $1,102,819 
Net income and comprehensive income   60,899 60,899 
Stock-based compensation expense  3,062  3,062 
Stock option exercises2  16  16 
Shares issued under employee stock plans, net376 1   1 
Forfeiture and other settlements of restricted stock(10)—    
Common stock redeemed for tax liability(172) (5,220) (5,220)
Balance as of March 31, 202431,547 $32 $862,636 $298,909 $1,161,577 


























4


BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended March 31, 2023
Common StockPaid-in CapitalRetained Earnings
in thousandsSharesAmountTotal
Balance as of December 31, 202231,347 $31 $858,839 $103,730 $962,600 
Net income and comprehensive income— — — 34,707 34,707 
Stock-based compensation expense— — 1,678 — 1,678 
Shares issued under employee stock plans, net3 — — — — 
Forfeiture and other settlements of restricted stock(3)— — — — 
Balance as of March 31, 202331,347 $31 $860,517 $138,437 $998,985 
Six Months Ended March 31, 2023
Common StockPaid-in CapitalRetained Earnings
in thousandsSharesAmountTotal
Balance as of September 30, 202230,880 $31 $859,856 $79,399 $939,286 
Net income and comprehensive income— — — 59,038 59,038 
Stock-based compensation expense— — 3,258 — 3,258 
Shares issued under employee stock plans, net675 — — — — 
Forfeiture and other settlements of restricted stock(3)— — — — 
Common stock redeemed for tax liability(205)— (2,597)— (2,597)
Balance as of March 31, 202331,347 $31 $860,517 $138,437 $998,985 
See accompanying notes to condensed consolidated financial statements.
5

BEAZER HOMES USA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
 March 31,
in thousands20242023
Cash flows from operating activities:
Net income$60,899 $59,038 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization5,806 5,533 
Stock-based compensation expense3,062 3,258 
Inventory impairments and abandonments 301 
Deferred and other income tax expense 7,920 9,225 
(Gain) loss on disposal of fixed assets(194)1,265 
Gain on sale of investment(8,591) 
Loss on extinguishment of debt, net437 515 
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable(8,628)7,429 
(Increase) decrease in income tax receivable(246)9,667 
Increase in inventory(299,116)(2,275)
Decrease (increase) in other assets 4,350 (1,755)
Increase (decrease) in trade accounts payable14,413 (18,401)
Decrease in other liabilities(19,685)(33,532)
Net cash (used in) provided by operating activities(239,573)40,268 
Cash flows from investing activities:
Capital expenditures(11,501)(7,824)
Proceeds from sale of fixed assets194 52 
Purchases of investment securities(7,454) 
Other (2)
Net cash used in investing activities(18,761)(7,774)
Cash flows from financing activities:
Repayment of debt(202,195) 
Proceeds from issuance of debt250,000  
Repayment of borrowings from credit facility(115,000) 
Borrowings from credit facility115,000  
Debt issuance costs(5,162)(2,575)
Tax payments for stock-based compensation awards(5,220)(2,597)
Stock option exercises16  
Net cash provided by (used in) financing activities37,439 (5,172)
Net (decrease) increase in cash, cash equivalents, and restricted cash(220,895)27,322 
Cash, cash equivalents, and restricted cash at beginning of period386,289 251,828 
Cash, cash equivalents, and restricted cash at end of period$165,394 $279,150 
See accompanying notes to condensed consolidated financial statements.
6

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” or the “Company”) is a geographically diversified homebuilder with active operations in 13 states within three 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 extraordinary value at an affordable price, delivered through our three strategic differentiators of Mortgage Choice, Choice Plans®, and Surprising Performance, while seeking to maximize our investment returns over the course of a housing cycle.
For an additional description of our business and strategic differentiators, refer to Item 1 within our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (2023 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 2023 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 six months ended March 31, 2024 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.
Our fiscal year 2024 began on October 1, 2023 and ends on September 30, 2024. Our fiscal year 2023 began on October 1, 2022 and ended on September 30, 2023.
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
In May 2022, the Company's Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $50.0 million of its outstanding common stock. This 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. No share repurchases were made during the three and six months ended March 31, 2024 and 2023. As of March 31, 2024, the remaining availability of the new share repurchase program was $41.8 million. The repurchase program has no expiration date. Previously repurchased shares under the program have been retired.
7

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 process specified in Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers.
The following table presents our total revenue disaggregated by revenue stream for the periods presented:
Three Months EndedSix Months Ended
March 31,March 31,
in thousands2024202320242023
Homebuilding revenue$538,636 $542,007 $919,555 $986,091 
Land sales and other revenue2,904 1,901 8,803 2,745 
Total revenue(a)
$541,540 $543,908 $928,358 $988,836 
(a) Please see Note 14 for total revenue disaggregated by reportable segment.
Homebuilding revenue
Homebuilding revenue is reported net of discounts and is generally recognized when title to and possession of the home 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 $28.7 million and $27.6 million as of March 31, 2024 and September 30, 2023, respectively. Of the customer liabilities outstanding as of September 30, 2023, $10.1 million and $21.9 million was recognized in revenue during the three and six months ended March 31, 2024 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 or 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 when closing services are rendered and title insurance policies are issued, both of which generally occur as each home is closed.
Recent Accounting Pronouncements
Segment Reporting. In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 will be effective for our fiscal year ending September 30, 2025 and for our interim periods starting in our first quarter of fiscal 2026. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. The Company is currently evaluating the impact that the adoption of ASU 2023-07 may have on our consolidated financial statements and disclosures.
Income Taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 will be effective for our fiscal year ending September 30, 2026. Early adoption is permitted and the amendments in this update should be applied on a prospective basis. The Company is currently evaluating the impact that the adoption of ASU 2023-09 may have on our consolidated financial statements and disclosures.
8

(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:
Six Months Ended
 March 31,
in thousands20242023
Supplemental disclosure of non-cash activity:
Increase in operating lease right-of-use assets(a)
$ $7,034 
Increase in operating lease liabilities(a)
$ $7,482 
Supplemental disclosure of cash activity:
Interest payments$34,555 $33,406 
Income tax payments$7,010 $378 
Tax refunds received$ $9,667 
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents$132,867 $240,829 
Restricted cash32,527 38,321 
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$165,394 $279,150 
(a) Represents leases renewed or additional leases commenced during the six months ended March 31, 2024 and 2023.
9

(4) Owned Inventory
The components of our owned inventory are as follows as of March 31, 2024 and September 30, 2023:
in thousandsAs of March 31, 2024As of September 30, 2023
Homes under construction$851,278 $644,363 
Land under development951,221 870,740 
Land held for future development19,879 19,879 
Land held for sale18,264 18,579 
Capitalized interest123,214 112,580 
Model homes93,605 90,062 
Total owned inventory$2,057,461 $1,756,203 
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 March 31, 2024, we had 2,829 homes under construction, including 1,084 spec homes totaling $309.0 million (903 in-process spec homes totaling $234.9 million, and 181 finished spec homes totaling $74.1 million). As of September 30, 2023, we had 2,163 homes under construction, including 779 spec homes totaling $218.0 million (645 in-process spec homes totaling $162.0 million, and 134 finished spec units totaling $56.0 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 or strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2 to the consolidated financial statements within our 2023 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 5 for additional information on capitalized interest).
10

Total owned inventory by reportable segment is presented in the table below as of March 31, 2024 and September 30, 2023:
in thousands
Projects in
Progress(a)
Land Held for Future DevelopmentLand Held for SaleTotal Owned
Inventory
March 31, 2024
West$1,076,824 $3,483 $13,004 $1,093,311 
East392,848 10,888 4,584 408,320 
Southeast349,560 5,508 676 355,744 
Corporate and unallocated(b)
200,086 

  200,086 
Total$2,019,318 $19,879 $18,264 $2,057,461 
September 30, 2023
West$914,908 $3,483 $14,702 $933,093 
East325,395 10,888 3,201 339,484 
Southeast297,142 5,508 676 303,326 
Corporate and unallocated(b)
180,300   180,300 
Total$1,717,745 $19,879 $18,579 $1,756,203 
(a) Projects in progress include homes under construction, land under development, capitalized interest, and model home categories from the preceding table.
(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment.
Inventory Impairments
Inventory assets are assessed for recoverability periodically in accordance with the policies described in Notes 2 and 4 to the consolidated financial statements within our 2023 Annual Report.
The following table presents, by reportable segment, our total impairment and abandonment charges for the periods presented:
 Three Months Ended March 31,Six Months Ended March 31,
in thousands2024202320242023
Abandonments:
West$ $111 $ $147 
East   154 
Total abandonments charges$ $111 $ $301 
Total impairment and abandonment charges$ $111 $ $301 
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 ten 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.
No project in progress impairments were recognized during the three and six months ended March 31, 2024 and 2023.
11

Land Held for Sale 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 six months ended March 31, 2024 and 2023.
Abandonments
From time to time, we may determine to abandon lots or not exercise certain option 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, 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 non-refundable deposit amount and any related capitalized costs in the period such decision is made.
No abandonment charges were recognized during the three and six months ended March 31, 2024. We recognized $0.1 million and $0.3 million of abandonment charges during the three and six months ended March 31, 2023, respectively. As we grow our business in the years ahead, the dollar value of abandonment charges may also grow.
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 issuance of an irrevocable letter of credit or surety bond 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, the cancellation 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 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 March 31, 2024 and September 30, 2023:
As of March 31, 2024As of September 30, 2023
in thousands
Deposits and non-refundable pre-acquisition costs incurred(a)
$174,602 $165,371 
Remaining purchase price if lot option agreements are exercised$989,420 $949,447 
(a) Amount is included as a component of land under development within our owned inventory in the condensed consolidated balance sheets.
12

(5) Interest
Interest capitalized during the three and six months ended March 31, 2024 and 2023 was based upon the balance of inventory eligible for capitalization. The following table presents certain information regarding interest for the periods presented:
Three Months Ended March 31,Six Months Ended March 31,
in thousands2024202320242023
Capitalized interest in inventory, beginning of period$119,596 $113,143 $112,580 $109,088 
Interest incurred19,689 18,034 37,895 35,864 
Capitalized interest amortized to home construction and land sales expenses(a)
(16,071)(17,291)(27,261)(31,066)
Capitalized interest in inventory, end of period$123,214 $113,886 $123,214 $113,886 
(a) Capitalized interest amortized to home construction and land sales expenses varies based on the number of homes closed during the period and land sales, if any, as well as other factors.
(6) Borrowings
The Company's debt, net of unamortized debt issuance costs consisted of the following as of March 31, 2024 and September 30, 2023:
in thousandsMaturity DateMarch 31, 2024September 30, 2023
6.750% Senior Notes (2025 Notes)
March 2025$ $202,195 
5.875% Senior Notes (2027 Notes)
October 2027357,255 357,255 
7.250% Senior Notes (2029 Notes)
October 2029350,000 350,000 
7.500% Senior Notes (2031 Notes)
March 2031250,000  
Unamortized debt issuance costs(9,314)(5,759)
Total Senior Notes, net947,941 903,691 
Junior Subordinated Notes (net of unamortized accretion of $25,403 and $26,436, respectively)
July 203675,370 74,337 
Senior Unsecured Revolving Credit FacilityMarch 2028  
Total debt, net$1,023,311 $978,028 
Senior Unsecured Revolving Credit Facility
The Senior Unsecured Revolving Credit Facility (Unsecured Facility) provides working capital and letter of credit borrowing capacity of $300.0 million. The $300.0 million capacity includes a letter of credit facility of up to $100.0 million. The Company has the right from time to time to request to increase the size of the commitments under the Unsecured Facility by up to $100.0 million for a maximum of $400.0 million. In March 2024, the Company executed an amendment to extend the termination date (Termination Date) from October 13, 2026 to March 15, 2028. The Company may borrow, repay, and reborrow amounts under the Unsecured Facility until the Termination Date.
Substantially all of the Company's significant subsidiaries are full and unconditional guarantors of the Unsecured Facility and are jointly and severally liable for obligations under the Unsecured Facility. For additional discussion of the Unsecured Facility, refer to Note 7 to the consolidated financial statements within our 2023 Annual Report.
As of March 31, 2024, no borrowings and no letters of credit were outstanding under the Unsecured Facility, resulting in a remaining capacity of $300.0 million. The Unsecured Facility requires compliance with certain covenants, including affirmative covenants, negative covenants and financial covenants. As of March 31, 2024, the Company believes it was in compliance with all such covenants.
Letter of Credit Facilities
The Company has entered into stand-alone 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 Unsecured Facility). As of March 31, 2024 and September 30, 2023, the Company had letters of credit outstanding under these additional facilities of $34.8 million and $31.2 million, respectively. The Company may enter into additional arrangements to provide additional letter of credit capacity.
13

Senior Notes
The Company's senior notes (Senior Notes) are unsecured obligations that 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 future secured indebtedness, to the extent of the value of the assets securing such 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. Each guarantor subsidiary is a wholly owned subsidiary of Beazer Homes. The 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.
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 March 31, 2024.
In March 2024, we issued and sold $250.0 million aggregate principal amount of the 2031 Notes at par (before underwriting and other issuance costs) through a private placement to qualified institutional buyers. Interest on the 2031 Notes is payable semiannually, beginning in September 2024. The 2031 Notes will mature in March 2031. The covenants related to the 2031 Notes are substantially consistent with our other Senior Notes.
During the three months ended December 31, 2023, we repurchased $4.3 million of our outstanding 2025 Notes using cash on hand, resulting in a loss on extinguishment of debt of less than $0.1 million. In March 2024, we also redeemed the remaining $197.9 million of our outstanding 2025 Notes using proceeds from the issuance of the 2031 Notes, resulting in a loss on extinguishment of debt of $0.4 million. The Company has terminated, cancelled, and discharged all of its obligations under the 2025 Notes as of March 31, 2024.
14

For additional redemption features, refer to the table below that summarizes the redemption terms of our Senior Notes:
Senior Note DescriptionIssuance DateMaturity DateRedemption Terms
5.875% Senior Notes
October 2017October 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 2019October 2029
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.
7.500% Senior Notes
March 2024March 2031
On or prior to March 15, 2027, we may redeem up to 35% of the aggregate principal amount of the 2031 Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 107.500% 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 2031 Notes originally issued remains outstanding immediately after such redemption.
Callable at any time prior to March 15, 2027, 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, 2027, callable at a redemption price equal to 103.750% of the principal amount; on or after March 15, 2028, callable at a redemption price equal to 101.875% of the principal amount; on or after March 15, 2029, callable at a redemption price equal to 100.000% of the principal amount, plus, in each case, accrued and unpaid interest.
15

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 March 31, 2024. The securities have a floating interest rate as defined in the Junior Subordinated Notes Indentures, which was a weighted-average of 8.03% as of March 31, 2024. 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, we will increase their carrying value until this carrying value equals the face value of the notes. As of March 31, 2024, the unamortized accretion was $25.4 million and will be amortized over the remaining life of the Restructured Notes. The remaining $25.8 million of the Junior Subordinated Notes are subject to the terms of the original agreement, have a floating interest rate equal to a three-month LIBOR (on and prior to June 30, 2023) plus 2.45% per annum, or three-month SOFR (on and after July 1, 2023) plus 2.71% 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 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 increased by 1.785% annually. As of March 31, 2024, the Company believes it was in compliance with all covenants under the Junior Subordinated Notes.
(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 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 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. The following table presents operating lease expense and cash payments on lease liabilities for the periods presented:
Three Months Ended March 31,Six Months Ended March 31,
in thousands2024202320242023
Operating lease expense$1,018 $956 $2,099 $1,957 
Cash payments on lease liabilities$1,021 $1,103 $1,994 $2,244 
At March 31, 2024 and 2023, the weighted-average remaining lease term and discount rate were as follows:
As of March 31,
20242023
Weighted-average remaining lease term6.8 years7.3 years
Weighted-average discount rate6.07%5.79%
16

The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating lease liabilities as of March 31, 2024:
Fiscal Years Ending September 30,
in thousands
2024(a)
$2,131 
20254,004 
20263,393 
20272,467 
20282,212 
Thereafter7,967 
    Total lease payments(b)
22,174 
    Less: imputed interest4,631 
    Total operating lease liabilities$17,543 
(a) Remaining lease payments are for the period beginning April 1, 2024 through September 30, 2024.
(b) Lease payments exclude $3.5 million of legally binding minimum lease payments for office 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 March 31, 2024.
(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 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, which 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. 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 selling 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.
17

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 EndedSix Months Ended
 March 31,March 31,
in thousands2024202320242023
Balance at beginning of period$12,348 $13,159 $13,046 $13,926 
Warranty provision2,208 2,335 4,112 3,938 
Warranty expenditures(2,427)(2,421)(5,029)(4,791)
Balance at end of period$12,129 $13,073 $12,129 $13,073 
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 operations as a reduction of home construction expenses, if applicable. 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, if applicable.
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 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 $8.8 million and $9.4 million in other liabilities on our condensed consolidated balance sheets related to litigation matters as of March 31, 2024 and September 30, 2023, respectively.
Surety Bonds and Letters of Credit
We had outstanding letters of credit and surety bonds of $34.8 million and $255.4 million, respectively, as of March 31, 2024, related principally to our obligations to local governments to construct roads and other improvements in various developments.
(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;
Level 2 – Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly through corroboration with market data; and
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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 recoverable. We review our long-lived assets, including inventory, for recoverability when factors indicate an impairment may exist, but no less than quarterly. The fair value of assets deemed to be impaired is determined based upon the type of asset being evaluated. The fair value of our owned inventory assets, when required to be calculated, is further discussed within Note 4. Due to the substantial use of unobservable inputs in valuing the assets on a non-recurring basis, they are classified within Level 3.
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 for each hierarchy level:
in thousandsLevel 1Level 2Level 3Total
As of March 31, 2024
Deferred compensation plan assets(a)
$7,500 $ $ $7,500 
As of September 30, 2023
Deferred compensation plan assets(a)
$6,495 $ $ $6,495 
(a) Amount is measured at fair value on a recurring basis and included in other assets within the 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 assets and liabilities as of March 31, 2024 and September 30, 2023:
As of March 31, 2024As of September 30, 2023
in thousandsCarrying
Amount
Fair ValueCarrying
Amount
Fair Value
Financial assets
Certificates of deposit(a)
$9,279 $9,579 $1,951 $1,986 
Total financial assets$9,279 $9,579 $1,951 $1,986 
Financial liabilities(b)
Senior Notes(c)
$947,941 $958,980 $903,691 $858,528 
Junior Subordinated Notes(d)
75,370 75,370 74,337 74,337 
Total financial liabilities$1,023,311 $1,034,350 $978,028 $932,865 
(a) Certificates of deposit held for investment with an original maturity greater than three months are carried at original cost plus accrued interest and reported as other assets on the condensed consolidated balance sheets. The type of certificates of deposit that the Company invests in are not considered debt securities under ASC Topic 320, Investments - Debt Securities. The estimated fair value of our certificates of deposit has been determined using quoted market rates (Level 2).
(b) Carrying amounts for financial liabilities are net of unamortized debt issuance costs or accretion.
(c) The estimated fair value of our publicly-held Senior Notes has been determined using quoted market rates (Level 2).
(d) 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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(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. We recognized income tax expense from continuing operations of $6.7 million and $7.9 million for the three and six months ended March 31, 2024, compared to $5.1 million and $9.2 million for the three and six months ended March 31, 2023. Income tax expense for the six months ended March 31, 2024 was primarily driven by income tax expense on earnings from continuing operations and permanent differences, partially offset by both energy efficiency tax credits generated from expected closings during the current year and the discrete tax benefits related to the generation of additional energy efficiency tax credits from homes closed in prior periods, as well as stock-based compensation activity in the period. Income tax expense for the six months ended March 31, 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 discrete tax benefits related to the generation of additional energy efficiency tax credits for homes closed in prior periods and interest received with the refund of our alternative minimum tax credit.
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 March 31, 2024, management concluded that it is more likely than not that 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, 2023, and such conclusions are based on similar company specific and industry factors to those discussed in Note 12 to the consolidated financial statements within our 2023 Annual Report.
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(11) Stock-based Compensation
Stock-based compensation expense is included in general and administrative expenses in our condensed consolidated statements of operations. The following table presents a summary of stock-based compensation expense related to stock options and restricted stock awards for the periods presented:
Three Months EndedSix Months Ended
March 31,March 31,
in thousands2024202320242023
Stock-based compensation expense$1,389 $1,678 $3,062 $3,258 
Stock Options
Following is a summary of stock option activity for the six months ended March 31, 2024:
Six Months Ended
 March 31, 2024
 SharesWeighted Average
Exercise Price
Outstanding at beginning of period13,575 $9.61 
Exercised(2,110)7.56 
Outstanding at end of period11,465 9.99 
Exercisable at end of period11,365 $9.83 
As of March 31, 2024 and September 30, 2023, there was less than $0.1 million of total unrecognized compensation costs related to unvested stock options, respectively.
Restricted Stock Awards
During the six months ended March 31, 2024, 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 six months ended March 31, 2024:
Six Months Ended March 31, 2024
 Performance-Based Restricted SharesTime-Based Restricted SharesTotal Restricted Shares
Beginning of period348,223 593,834 942,057 
Granted (a)
180,144 194,498 374,642 
Vested (210,176)(319,828)(530,004)
Forfeited(791)(9,106)(9,897)
End of period317,400 459,398 776,798 
(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 2023, we issued 108,108 shares earned above target level based on the performance level achieved under the fiscal 2021 performance-based award plan.
As of March 31, 2024 and September 30, 2023, total unrecognized compensation costs related to unvested restricted stock awards were $10.5 million and $6.9 million, respectively. The costs remaining as of March 31, 2024 are expected to be recognized over a weighted average period of 1.95 years.
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(12) Earnings Per Share
Basic income per share is calculated by dividing net income by the weighted-average number of shares outstanding during the period. Diluted income per share adjusts the basic income 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 March 31,Six Months Ended March 31,
in thousands (except per share data)2024202320242023
Numerator:
Income from continuing operations$39,171 $34,707 $60,899 $59,115 
Loss from discontinued operations, net of tax   (77)
Net income$39,171 $34,707 $60,899 $59,038 
Denominator:
Basic weighted-average shares30,769 30,394 30,681 30,464 
Dilutive effect of restricted stock awards357 211 375 234 
Dilutive effect of stock options7 5 8 4 
Diluted weighted-average shares(a)
31,133 30,610 31,064 30,702 
Basic income per share:
Continuing operations$1.27 $1.14 $1.98 $1.94 
Discontinued operations    
Total$1.27 $1.14 $1.98 $1.94 
Diluted income per share:
Continuing operations$1.26 $1.13 $1.96 $1.93 
Discontinued operations    
Total$1.26 $1.13 $1.96 $1.93 
(a) The following potentially dilutive shares were excluded from the calculation of diluted income per share as a result of their anti-dilutive effect.
Three Months Ended March 31,Six Months Ended March 31,
in thousands2024202320242023
Stock options 12  12 
Time-based restricted stock1 119 2 134 
(13) Other Liabilities
Other liabilities include the following as of March 31, 2024 and September 30, 2023:
in thousandsAs of March 31, 2024As of September 30, 2023
Accrued compensations and benefits32,335 $50,242 
Customer deposits28,716 27,577 
Accrued interest 24,328 23,132 
Warranty reserves12,129 13,046 
Litigation accruals8,775 9,404 
Income tax liabilities 272 
Other38,027 33,288 
Total $144,310 $156,961 
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(14) Segment Information
We currently operate in 13 states that are grouped into three homebuilding segments based on geography. Revenues from our homebuilding segments are derived from the sale of homes that we construct, land and lot sales, and our title operations. Land sales revenue relates to land that does not fit within our homebuilding programs or strategic plans. We also provide title examinations for our homebuyers in certain markets. 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 three reportable segments as follows:
West: Arizona, California, Nevada, and Texas
East: Delaware, Indiana, Maryland, New Jersey(a), Tennessee, and Virginia
Southeast: Florida, Georgia, North Carolina, and South Carolina
(a) 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, land sales expense, title operations 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 2023 Annual Report.
The following tables contain our revenue, operating income, and depreciation and amortization by segment for the periods presented:
Three Months EndedSix Months Ended
 March 31,March 31,
in thousands2024202320242023
Revenue
West$347,338 $330,413 $584,431 $605,228 
East111,844 120,071 186,621 206,261 
Southeast82,358 93,424 157,306 177,347 
Total revenue$541,540 $543,908 $928,358 $988,836 
Three Months EndedSix Months Ended
March 31,March 31,
in thousands2024202320242023
Operating income
West$46,030 $45,513 $74,369 $82,870 
East12,282 16,244 18,638 25,506 
Southeast10,953 11,517 20,093 22,196 
Segment total69,265 73,274 113,100 130,572 
Corporate and unallocated(a)
(33,274)(34,482)(56,844)(63,278)
Total operating income$35,991 $38,792 $56,256 $67,294 
(a) Includes amortization of capitalized interest, capitalization and amortization of indirect costs, impairment of capitalized interest and capitalized indirect costs, when applicable, 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 certain other amounts that are not allocated to our operating segments.
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Below operating income, we recognized a gain on sale of investment of $8.6 million during the three and six months ended March 31, 2024 within other income, net. We previously held a minority interest in a technology company specializing in digital marketing for new home communities, which was sold during the quarter ended March 31, 2024. In exchange for the previously held investment, we received cash in escrow along with a minority partnership interest in the acquiring company, which was recorded within other assets in our condensed consolidated balance sheets.
Three Months EndedSix Months Ended
 March 31,March 31,
in thousands2024202320242023
Depreciation and amortization
West$2,452 $1,939 $3,763 $3,544 
East406 388 615 661 
Southeast268 398 588 728 
Segment total3,126 2,725 4,966 4,933 
Corporate and unallocated(a)
447 295 840 600 
Total depreciation and amortization $3,573 $3,020 $5,806 $5,533 
(a) 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:
Six Months Ended
 March 31,
in thousands20242023
Capital expenditures
West$6,873 $3,086 
East865 1,239 
Southeast462 925 
Corporate and unallocated3,301 2,574 
Total capital expenditures$11,501 $7,824 
The following table presents assets by segment as of March 31, 2024 and September 30, 2023:
in thousandsAs of March 31, 2024As of September 30, 2023
Assets
West$1,157,508 $994,597 
East432,585 356,020 
Southeast372,324 320,430 
Corporate and unallocated(a)
552,993 739,986 
Total assets$2,515,410 $2,411,033 
(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.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview and Outlook
Market Conditions
During the second quarter of fiscal 2024, we observed healthy demand for our homes as mortgage rates continue to modestly adjust, ultimately rising about 20 basis points. We generated a solid sales pace and achieved double-digit growth in our net new orders compared to the quarter ended March 31, 2023. We believe these results reflect the underlying demand for homeownership and a favorable economic backdrop characterized by low unemployment rates, fairly strong consumer confidence, and sustained low levels of resale inventory.
Despite the overall strength in demand bolstered by favorable economic conditions, the housing industry remains sensitive to fluctuations in mortgage rates, and home affordability remains a challenge. One way we address affordability concerns is through our Mortgage Choice platform, which identifies qualified lenders and encourages competition among them to offer our customers the most competitive interest rates, fees, and service levels. Additionally, we continue to refine our product offerings in certain markets by adjusting home sizes and specification levels to address pricing and affordability concerns.
Although we expect uncertainty around mortgage interest rates in near-term market conditions to persist, we remain confident in the long-term outlook for the housing market, supported by favorable demographic trends and a multimillion unit housing deficit that has accumulated over the past decade. Our long-term strategic business objectives encompass expanding our active communities to over 200 by the end of fiscal 2026, reducing our net debt to net capitalization ratio below 30% by the end of fiscal 2026, and reaching our target of 100% of home starts as Zero Energy Ready by the end of the calendar year 2025.
Looking ahead to the remainder of fiscal 2024, our strategic focus remains on positioning our business for durable long-term growth. In March 2024, we successfully refinanced our remaining outstanding 2025 Notes of $197.9 million through the issuance of $250.0 million of Senior Notes due 2031 and extended the maturity of our Unsecured Facility. With an improved balance sheet and ample liquidity, we believe we are well-equipped to navigate the evolving market dynamics as we continue to make strides in achieving our long-term strategic objectives.
Overview of Results for Our Fiscal Second Quarter
The following is a summary of our performance against certain key operating and financial metrics during the quarter ended March 31, 2024 and a comparison to the quarter ended March 31, 2023:
During the quarter ended March 31, 2024, our average active community count of 140 was up 13.8% from 123 in the prior year quarter. We ended the quarter with 145 active communities, up 19.8% from 121 a year ago. This marks the eighth consecutive quarter of year-over-year growth in community count as we work towards our goal of reaching more than 200 active communities by the end of fiscal 2026. We invested $197.8 million in land acquisition and land development during the quarter ended March 31, 2024, representing an increase of 75.0% compared to $113.0 million in land spend during the quarter ended March 31, 2023.
During the quarter ended March 31, 2024, sales per community per month was 3.1 compared to 3.2 in the prior year quarter, and our net new orders were 1,299, up 10.0% from 1,181 in the prior year quarter. The expanded average active community count allowed us to deliver higher net new orders year-over-year despite a slight decline in sales pace to 3.1 orders per community per month during the fiscal second quarter compared to the prior year quarter.
As of March 31, 2024, our land position included 26,887 controlled lots, up 12.9% from 23,820 as of March 31, 2023. Excluding land held for future development and land held for sale lots, we controlled 26,218 active lots, up 13.5% from a year ago. As of March 31, 2024, we had 13,527 lots, or 51.6% of our total active lots, under option agreements as compared to 12,460 lots, or 54.0% of our total active lots, under option agreements as of March 31, 2023.
Our Average Selling Price (ASP) for homes closed during the quarter ended March 31, 2024 was $515.9 thousand, up 1.2% from $509.9 thousand in the prior year quarter. Our backlog ASP of $525.5 thousand as of March 31, 2024 was down slightly from $531.3 thousand as of March 31, 2023. We are addressing new home affordability challenges by altering our product strategy in certain markets through reduction of homes sizes and/or features included in our base price.
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Homebuilding gross margin for the quarter ended March 31, 2024 remained consistent at 18.7% compared to the prior year quarter. Homebuilding gross margin, excluding impairments, abandonments, and interest for the quarter ended March 31, 2024, was 21.7%, down from 22.0% in the prior year quarter. The decrease in homebuilding gross margin compared to the prior year quarter was primarily due to changes in product and community mix and an increase in closing cost incentives, partially offset by a decrease in build costs. If market conditions deteriorate due to unfavorable mortgage rate movements, gross margin may be compressed in the future.
SG&A for the quarter ended March 31, 2024 was 11.5% of total revenue, up from 11.2% in the prior year quarter. The increase in SG&A as a percentage of total revenue compared to the prior year quarter was primarily due to higher sales and marketing costs as we prepare for new community activations and future growth, as well as a slight decrease in homebuilding revenues. We remain focused on prudently managing overhead costs.
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 by a variety of factors, including periods of market volatility and changes in mortgage interest rates, which may result in increased or decreased new orders and/or revenues and closings that are outside of the normal ranges typically realized on account of seasonality. Accordingly, our financial results for the three and six months ended March 31, 2024 may not be indicative of our full year results.
26

RESULTS OF CONTINUING OPERATIONS:
The following table summarizes certain key income statement metrics for the periods presented:
Three Months EndedSix Months Ended
 March 31,March 31,
$ in thousands2024202320242023
Revenue: