MATAWAN, N.J., Feb. 22, 2024 (GLOBE NEWSWIRE) — Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal first quarter ended January 31, 2024.
RESULTS FOR THE THREE-MONTHS ENDED JANUARY 31, 2024:
- Total revenues increased 15.3% to $594.2 million (including 1,063 deliveries) in the first quarter of fiscal 2024, compared with $515.4 million (including 938 deliveries) in the same quarter of the prior year.
- Domestic unconsolidated joint venture deliveries for the first quarter of 2024 increased 56.1% to 167 homes compared with 107 homes for the three months ended January 31, 2023.
- Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 18.3% for the three months ended January 31, 2024, compared with 18.7% during the first quarter a year ago.
- Homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 21.8% in both the fiscal 2024 and fiscal 2023 first quarters.
- Total SG&A was $86.1 million, or 14.5% of total revenues, in the first quarter of fiscal 2024. Excluding $7.5 million of incremental phantom stock expense, total SG&A would have been $78.6 million or 13.2% of total revenues, in the first quarter of fiscal 2024. Total SG&A, in the first quarter of fiscal 2023 was $73.4 million, or 14.2% of total revenues. Excluding $1.4 million of incremental phantom stock expense, total SG&A would have been $72.0 million or 14.0% of total revenues, in the previous year’s first quarter.
- Total interest expense as a percent of total revenues was 5.1% for the first quarter of fiscal 2024 compared with 5.8% for the first quarter of fiscal 2023.
- Income before income taxes for the first quarter of fiscal 2024 increased 80.4% to $32.6 million compared with $18.0 million in the first quarter of the prior fiscal year.
- For the first quarter of fiscal 2024, income before income taxes excluding $7.5 million of incremental phantom stock expense would have been $40.1 million. Income before income taxes excluding $1.4 million of incremental phantom stock expense, would have been $19.4 million in the first quarter of fiscal 2023.
- Net income was $23.9 million, or $2.91 per diluted common share, for the three months ended January 31, 2024, compared with net income of $18.7 million, or $2.26 per diluted common share, in the same period of the previous fiscal year.
- EBITDA increased 30.1% to $64.5 million for the first quarter of fiscal 2024 compared with $49.6 million for the first quarter of the prior year.
- Consolidated contracts in the first quarter of fiscal 2024 increased 43.0% to 1,127 homes ($624.4 million) compared with 788 homes ($415.1 million) in the same quarter last year. Contracts, including domestic unconsolidated joint ventures1, for the three months ended January 31, 2024, increased 43.2% to 1,279 homes ($724.5 million) compared with 893 homes ($486.8 million) in the first quarter of fiscal 2023.
- As of January 31, 2024, consolidated community count was 118 communities, compared with 113 communities at October 31, 2023 and 121 communities on January 31, 2023. Community count, including domestic unconsolidated joint ventures, was 135 as of January 31, 2024, compared with 129 communities at October 31, 2023 and 132 communities at the end of the first quarter of the prior fiscal year.
- Consolidated contracts per community increased 47.7% year-over-year to 9.6 in the first quarter of fiscal 2024 compared with 6.5 contracts per community for the first quarter of fiscal 2023. Contracts per community, including domestic unconsolidated joint ventures, increased 39.7% to 9.5 in the three months ended January 31, 2024, compared with 6.8 contracts per community in the same quarter one year ago.
- The dollar value of consolidated contract backlog, as of January 31, 2024, decreased 5.6% to $1.11 billion compared with $1.18 billion as of January 31, 2023. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of January 31, 2024, decreased 4.4% to $1.35 billion compared with $1.41 billion as of January 31, 2023.
- The gross contract cancellation rate for consolidated contracts was 14% for the first quarter ended January 31, 2024 compared with 30% in the fiscal 2023 first quarter. The gross contract cancellation rate for contracts, including domestic unconsolidated joint ventures, was 14% for the first quarter of fiscal 2024 compared with 29% in the first quarter of the prior year.
- For the trailing twelve-month period our return on equity (ROE) was 40.1% and earnings before interest and income taxes return on investment (EBIT ROI) was 32.6%. We believe for the most recently reported trailing twelve-month periods, we had the highest ROE and the third highest EBIT ROI compared to 15 of our publicly traded peers.
(1)When we refer to “Domestic Unconsolidated Joint Ventures”, we are excluding results from our multi-community unconsolidated joint venture in the Kingdom of Saudi Arabia (KSA).
LIQUIDITY AND INVENTORY AS OF JANUARY 31, 2024:
- During the first quarter of fiscal 2024, land and land development spending was $230.4 million compared with $134.4 million in the same quarter one year ago. This is the highest amount of quarterly land and land development spend since we started reporting it in fiscal 2010.
- Total liquidity as of January 31, 2024 was $313.1 million, above our targeted liquidity range of $170 million to $245 million.
- In the first quarter of fiscal 2024, approximately 3,800 lots were put under option or acquired in 43 consolidated communities.
- As of January 31, 2024, our total controlled consolidated lots were 33,576, an increase compared with both 29,123 lots at the end of the first quarter of the previous year and 31,726 lots at October 31, 2023. Based on trailing twelve-month deliveries, the current position equaled a 6.7 years’ supply.
FINANCIAL GUIDANCE(2):
The Company is providing guidance for total revenues, adjusted homebuilding gross margin, adjusted income before income taxes and adjusted EBITDA for the second quarter of fiscal 2024. Financial guidance below assumes no adverse changes in current market conditions, including further deterioration in our supply chain or material increases in mortgage rates, inflation or cancellation rates, and excludes further impact to SG&A expenses from phantom stock expense related solely to stock price movements from the closing price of $168.97 on January 31, 2024.
For the second quarter of fiscal 2024, total revenues are expected to be between $675 million and $775 million, adjusted homebuilding gross margin is expected to be between 21.5% and 23.0%, adjusted income before income taxes is expected to be between $45 million and $55 million and adjusted EBITDA is expected to be between $80 million and $90 million.
(2)The Company cannot provide a reconciliation between its non-GAAP projections and the most directly comparable GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. These items include, but are not limited to, land-related charges, inventory impairments and land option write-offs and loss (gain) on extinguishment of debt, net. These items are uncertain, depend on various factors and could have a material impact on GAAP reported results.
COMMENTS FROM MANAGEMENT:
“We are off to a solid start to fiscal 2024, with 80% year over year growth in our income before income taxes for the first quarter. Excluding incremental phantom stock expense, we were at or above the high end of the guidance range for our first quarter total revenues, adjusted income before income taxes and adjusted EBITDA,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “Along with the growth in profitability, the past few months have drawn attention to the relative strength of demand for new homes, which can best be exemplified by our 48% growth in consolidated contracts per community during the first quarter of fiscal 2024. Total internet leads in January 2024 increased 16% year over year and 43% from December 2023, giving us confidence that demand remains strong. There are many factors that underpin the current levels of demand, including the downward trend in mortgage rates, the tightness of existing homes for sale, favorable signs from the employment market and overall growth in the broader economy.”
“Despite those encouraging developments, affordability remains challenging, and we continue to offer mortgage rate buydowns in order to make our homes more affordable to homebuyers,” said Mr. Hovnanian. “As demonstrated by reducing debt for several years and refinancing much of our remaining debt last fall, we remain committed to repairing our balance sheet. However, we are now in a position where we can also focus on growing our revenues and achieving higher levels of profitability. All these positive trends impacting our company and our industry leave us optimistic of the trajectory of the 2024 spring selling season over the short term and the general direction of the housing market over the longer term.”
ABOUT HOVNANIAN ENTERPRISES, INC.:
Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Matawan, New Jersey and, through its subsidiaries, is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. The Company’s homes are marketed and sold under the trade name K. Hovnanian Homes. Additionally, the Company’s subsidiaries, as developers of K. Hovnanian’s Four Seasons communities, make the Company one of the nation’s largest builders of active lifestyle communities.
Additional information on Hovnanian Enterprises, Inc. can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian’s investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.
