Senior Vice President, Chief Financial Officer & Treasurer, BEAZER HOMES USA INC
David Goldberg, Chief Financial Officer at Beazer Homes joins NYSE TV Live
About David Goldberg
David Goldberg, Senior Vice President, Chief Financial Officer and Treasurer at Beazer Homes USA, appeared on NYSE TV Live on December 17, 2024, to discuss the company's fourth-quarter results and outlook. He noted that October sales grew over 30% year-over-year, attributing the increase to buyers returning to the market despite high mortgage rates. Goldberg stated that he expects mortgage rates to remain "higher for longer" in the seven percent range, adding that the company had previously anticipated a decline in rates. He said Beazer is watching the job market and wages closely, but described it as "still early to tell" what impact potential policy changes from the incoming Trump administration, such as tariffs and mass deportations, could have on the business. Goldberg highlighted Beazer's commitment to building "Zero Energy ready" homes, stating the company plans for 100% of its homes to meet that standard by the end of calendar year 2025, a goal he said no other public builder has made. He also discussed the company's "mortgage Choice" program, which allows lenders to compete for buyers at the community level, and said Beazer is focused on growing its community count and driving double-digit returns on capital employed.
Transcript (24 segments)
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Christian Scher0:00
Welcome back to NYC TV Live, everyone. I'm Christian Scher here in studio. As usual, it has been a very busy earnings season as publicly traded companies are navigating the ever-changing market conditions. Homebuilder and NYSE-listed firm Beazer Homes reported its fourth quarter results last week, and the company had plenty to say about the current state of mortgage rates. In a statement, the CEO Alan Merl pointed out that despite higher rates, October sales grew by over 30% year-over-year. He also said this on the company's call: 'At a macro level, we do not expect significant reductions in mortgage rates over the balance of the fiscal year. It's less optimistic than our views several months ago, but we're taking the movement in the bond market since September as a sign that mortgage rates may remain elevated.' Joining me now is the Chief Financial Officer of Beazer Homes, David Goldberg. David, it's great to have you on the show today. Positive results, Wall Street responded accordingly after a better-than-expected top and bottom line beat. What was working for you in this latest quarter?
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David Goldberg1:09
Well, I think people were excited about a couple things. First, really good results in September and October from a sales perspective. You talked about it in your opening comments: October sales were up more than 30% year-over-year. So we're seeing buyers come back into the market, traffic's really good despite high rates. Affordability remains an issue. The second thing is we were able to post really good community count. We've been talking about having double-digit community count on a path to get to 200 communities by the time we get to 2026, and we gave great visibility onto that this quarter. And then the last thing I would tell you is Beazer has a differentiated product. We sell Zero Energy Ready homes, and we've made a commitment that 100% of our homes are going to be Zero Energy Ready by the end of calendar year 2025. We're the only public builder to make that commitment. So between a differentiated product, a growing community count, and the better orders we're seeing, investors got pretty excited.
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Christian Scher2:04
What does that commitment mean for home buyers? What exactly do they get out of that?
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David Goldberg2:09
We've done a lot of disclosure, and I would urge investors to go look at the slides we put out in our earnings presentation and our ESG report we put out every two years or so that really gets into Zero Energy Ready. But what it really means in the end is a healthier home, a cleaner home, a more energy-efficient home that's much more comfortable and much more durable for our buyers.
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Christian Scher2:31
I want to talk about expectations for 2025. Of course, the market got certainty and clarity from the presidential election just about two weeks ago. How does that impact your business?
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David Goldberg2:43
We talked about two things, and you mentioned in the opening remarks. First, I think rates are going to be higher. A quarter ago, we really thought maybe we'd see some decline in rates, and we saw some of it in September. Rates went down into the sixes and the low sixes before moving back up in October. I think you're going to see rates continue to be higher for longer, in the sevens, kind of where we are now. I think that's very much expected. But on the positive side, which we talked about, jobs and wage growth. I think people are optimistic that we'll have some improvement in demand because we'll get some good job numbers and some good wage growth as we move through the year.
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Christian Scher3:18
Interesting. So in terms of what we've heard from the Trump administration on the campaign trail, two of his campaign promises were huge tariffs and mass deportations. Do those particular promises impact your business?
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David Goldberg3:33
I think it's probably too early to see what kind of impact that could have. Certainly, we're watching the job market pretty carefully, we're watching wages especially for our employees and for our vendors and folks that we hire out into our business. So I think it's still early to tell, but we're watching it very closely.
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Christian Scher3:51
I want to know in terms of what our viewers can expect, investors can expect here in the next quarter, David. What would you tell them?
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David Goldberg3:57
I would tell them it's more of the same. We're going to see some improvement in our sales pace, and we gave guidance for higher sales pace year-over-year. We achieved in October improved sales pace. You're going to see community count, and you're going to see us continue to move towards our multi-year goals, including our Zero Energy Ready goals.
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Christian Scher4:15
Are there certain areas of the market geographically that are outperforming?
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David Goldberg4:20
That's always a tough question because you have to consider where you're positioned in a market, how you're positioned, your team, you have better locations, your location maybe not as good. In general, I would tell you the market's performing pretty similarly across the country. Last quarter, we called out a couple price-sensitive markets that we operate in; conditions seem to have improved there, and we've also kind of taken our pricing to find the market. So I would say generally the market's performing pretty consistently.
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Christian Scher4:47
It sounds like inflation is not a concern for you. Of course, it could mean higher rates for longer, but in terms of jobs and wage growth, that seems to be a positive in your thesis in terms of expecting growth ahead. Is that right?
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David Goldberg4:58
Certainly helps buyers, and it helps on the affordability issue, which is really the central issue to housing right now.
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Christian Scher5:05
What are the steps to get to these Zero Energy Ready homes that are happening behind the scenes?
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David Goldberg5:12
It's a complicated question because it's a process that we've been going through for many years. Going from being an Energy Star compliant builder with all of our homes to Zero Energy Ready has been a multiphase process: changing the design, changing the way we build the homes, materials we include. It's been a multi-year process to get into.
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Christian Scher5:31
What was the decision by Beazer to move into this initiative?
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David Goldberg5:36
We talked about before what the benefits to the buyer are. We think it's the right way to build a home, we think it's the right experience to drive for our buyers. We talk about it internally as building the house of the future today, and that's absolutely the case. We want to be an innovator and we want to deliver great homes and great experiences to our buyers.
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Christian Scher5:53
How closely do you watch the mortgage rates as it impacts your business?
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David Goldberg5:58
We watch them every single day. We have a very differentiated program at Beazer called Mortgage Choice. Most builders, most public builders have captive mortgage subsidiaries; we don't. We let lenders compete for our buyer business at the community level. So we're constantly watching what lenders are doing, how our preferred lenders are performing, making sure that we're driving the right level of competition for our buyers.
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Christian Scher6:27
Quickly, David, we have just a few seconds left. Homebuilder confidence coming out at 10:00 a.m. What's your expectation?
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David Goldberg6:33
It's really hard to put a number on HMI or what's going to happen with the confidence number. What I would tell you at Beazer is we have a differentiated product, we have a strong balance sheet, we're growing the business and growing our community count, and really focused on driving double-digit returns on capital employed. We're really excited about that for investors.
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Christian Scher6:51
All right, David Goldberg, Chief Financial Officer of Beazer Homes. David, thank you.
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David Goldberg6:55
Thank you.