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Hovnanian Enterprises Reports Fiscal 2024 Fourth Quarter and Full Year Results

December 5, 2024

MATAWAN, N.J., Dec. 05, 2024 (GLOBE NEWSWIRE) — Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal fourth quarter and year ended October 31, 2024.

RESULTS FOR THE THREE-MONTHS AND FULL YEAR ENDED OCTOBER 31, 2024:

  • Total revenues, adjusted homebuilding gross margin and total SG&A as a percentage of total revenues for the full year ended October 31, 2024, were within our guidance range. Adjusted EBITDA, adjusted income before income taxes and diluted earnings per share for the full year ended October 31, 2024, exceeded the high end of our guidance, despite income from unconsolidated joint ventures being slightly below the low end of our guidance.
  • Total revenues increased 10.4% to $979.6 million in the fourth quarter of fiscal 2024, compared with $887.0 million in the same quarter of the prior year. For the year ended October 31, 2024, total revenues increased 9.0% to $3.00 billion compared with $2.76 billion in fiscal 2023.
  • Sale of homes revenues increased 11.8% to $927.5 million (1,747 homes) in the fiscal 2024 fourth quarter compared with $829.7 million (1,517 homes) in the previous year’s fourth quarter. During the year ended October 31, 2024, sale of homes revenues increased 9.3% to $2.88 billion (5,348 homes) compared with $2.63 billion (4,878 homes) in the previous fiscal year.
  • Domestic unconsolidated joint ventures(1) sale of homes revenues for the fourth quarter of fiscal 2024 was $141.7 million (235 homes) compared with $144.0 million (196 homes) for the three months ended October 31, 2023. For fiscal 2024, domestic unconsolidated joint ventures sale of homes revenues increased 24.6% to $528.6 million (803 homes) compared with $424.3 million (595 homes) in the year ended October 31, 2023.
  • Sale of homes revenues, including domestic unconsolidated joint ventures, increased 9.8% to $1.07 billion (1,982 homes) in the fourth quarter of fiscal 2024 compared with $973.7 million (1,713 homes) during the fourth quarter of fiscal 2023. During the year ended October 31, 2024, sale of homes revenues, including domestic unconsolidated joint ventures, increased 11.4% to $3.40 billion (6,151 homes) compared with $3.05 billion (5,473 homes) during fiscal 2023.
  • Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 18.0% for the three months ended October 31, 2024, compared with 21.4% during the fourth quarter a year ago. In fiscal 2024, homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 18.7% compared with 19.6% in the prior fiscal year.
  • Homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 21.7% during the fiscal 2024 fourth quarter compared with 24.5% in last year’s fourth quarter. For the year ended October 31, 2024, homebuilding gross margin percentage, before cost of sales interest expense and land charges, was at the midpoint of the guidance range provided at 22.0% compared with 22.7% in the previous fiscal year.
  • Total SG&A was $87.7 million, or 9.0% of total revenues, in the fourth quarter of fiscal 2024 compared with $80.8 million, or 9.1% of total revenues, in the fourth quarter of fiscal 2023. Total SG&A was $342.2 million, or 11.4% of total revenues, in fiscal 2024 compared with $304.8 million, or 11.1% of total revenues, in the previous fiscal year.
  • Total interest expense as a percent of total revenues was 3.2% for the fourth quarter of fiscal 2024 compared with 4.1% for the fourth quarter of fiscal 2023. For the year ended October 31, 2024, total interest expense as a percent of total revenues was 4.0% compared with 4.9% in the previous fiscal year.
  • Income before income taxes for the fourth quarter of fiscal 2024 was $117.9 million compared with $121.4 million in the fourth quarter of the prior fiscal year. For fiscal 2024, income before income taxes increased 23.9% to $317.1 million compared with $256.0 million during the prior fiscal year.
  • Income before income taxes excluding land-related charges and loss (gain) on extinguishment of debt, net was $125.8 million in the fourth quarter of fiscal 2024 compared with income before these items of $143.6 million in the fourth quarter of fiscal 2023. For fiscal 2024, income before income taxes excluding land-related charges and loss (gain) on extinguishment of debt, net increased 15.6% to $327.3 million compared with income before these items of $283.1 million in fiscal 2023.
  • Net income was $94.3 million, or $12.79 per diluted common share, for the three months ended October 31, 2024, compared with net income of $97.3 million, or $13.05 per diluted common share, in the same period of the previous fiscal year. For fiscal 2024, net income was $242.0 million, or $31.79 per diluted common share, compared with net income of $205.9 million, or $26.88 per diluted common share, during fiscal 2023.
  • EBITDA was $151.0 million for the fourth quarter of fiscal 2024 compared with $159.1 million for the fourth quarter of the prior year. For fiscal 2024, EBITDA increased 11.4% to $445.4 million compared with $399.7 million in the prior year.
  • Consolidated contracts in the fourth quarter of fiscal 2024 increased 44.5% to 1,355 homes ($705.6 million) compared with 938 homes ($564.1 million) in the same quarter last year. Contracts, including domestic unconsolidated joint ventures, for the three months ended October 31, 2024, increased 47.5% to 1,571 homes ($845.7 million) compared with 1,065 homes ($648.4 million) in the fourth quarter of fiscal 2023.
  • As of October 31, 2024, consolidated community count increased 15.0% to 130 communities, compared with 113 communities as of October 31, 2023. Community count, including domestic unconsolidated joint ventures, increased 14.0% to 147 as of October 31, 2024, compared with 129 communities at October 31, 2023.
  • Consolidated contracts per community increased 25.3% year over year to 10.4 in the fourth quarter of fiscal 2024, compared with 8.3 contracts per community for the fourth quarter of fiscal 2023. This is significantly higher than our quarterly average since 1997 of 8.8 contracts per community. Contracts per community, including domestic unconsolidated joint ventures, increased 28.9% to 10.7 in the three months ended October 31, 2024, compared with 8.3 contracts per community in the same quarter one year ago.
  • The dollar value of consolidated contract backlog, as of October 31, 2024, decreased 11.7% to $936.8 million compared with $1.06 billion as of October 31, 2023. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of October 31, 2024, decreased 6.2% to $1.23 billion compared with $1.32 billion as of October 31, 2023.
  • The gross contract cancellation rate for consolidated contracts was 18% for the fourth quarter ended October 31, 2024 compared with 25% in the fiscal 2023 fourth quarter. The gross contract cancellation rate for contracts, including domestic unconsolidated joint ventures, was 18% for the fourth quarter of fiscal 2024 compared with 24% in the fourth quarter of the prior year.
  • For the trailing twelve-month period our return on equity (ROE) was 34.6% and adjusted earnings before interest and income taxes return on investment (Adjusted EBIT ROI) was 30.7%. We believe that for the most recently reported trailing twelve-month periods, we had the second highest ROE and the third highest EBIT ROI compared to 14 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 OCTOBER 31, 2024:

  • During the fourth quarter of fiscal 2024, land and land development spending increased 45.0% to $318.4 million compared with $219.6 million in the same quarter one year ago. For fiscal 2024, land and land development spending increased 46.5% to $995.4 million compared with $679.3 million one year ago. This is the highest amount of quarterly and annual land and land development spend since we started reporting it in fiscal 2010.
  • Total liquidity as of October 31, 2024, was $338.2 million, well above our targeted liquidity range of $170 million to $245 million.
  • In the fourth quarter of fiscal 2024, approximately 5,500 lots were put under option or acquired in 56 consolidated communities.
  • As of October 31, 2024, our total controlled consolidated lots were 41,891, an increase of 32.0% compared with 31,726 lots at the end of the previous year. The total controlled consolidated lots also increased sequentially from 39,516 lots as of July 31, 2024. Based on trailing twelve-month deliveries, the current position equaled a 7.8 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 first quarter of fiscal 2025. Financial guidance below assumes no adverse changes in current market conditions, including 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 $176.04 on October 31, 2024.

For the first quarter of fiscal 2025, total revenues are expected to be between $650 million and $750 million, adjusted homebuilding gross margin is expected to be between 17.5% and 18.5%, adjusted income before income taxes is expected to be between $25 million and $35 million and adjusted EBITDA is expected to be between $55 million and $65 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 pleased that our total full year contracts of 6,007 homes and deliveries of 6,151 homes increased by 16% and 12% respectively year over year, which resulted in better-than-expected adjusted income before income taxes and adjusted EBITDA,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “The 48% increase in total fourth quarter contracts followed by the 55% increase in November demonstrates that consumer demand remains strong despite high mortgage rates and geopolitical and economic uncertainty, which persisted throughout this period. We adjusted our balance of pace versus price during the quarter. To spur consumers to action and to help them qualify for mortgages, we offered additional incentives, particularly in the West. Although these contracts are at lower margins, this is a conscious effort and we are very pleased with the tradeoff of pace for margin given our focus on inventory turns, EBIT ROI and quick move in homes.”

“After several years of focusing on debt reduction, we shifted our focus in fiscal 2024 to a strategy with growth as the focal point. As evidence of our commitment to growth, during fiscal 2024, our land and land development spend increased 47% year over year, lot count grew 32% year over year and community count increased 14% year over year. The housing market continues to be driven by positive fundamentals. Given the growth in our lot count, community count and land and land development spend, we think we are well positioned to drive delivery growth in excess of 10% on an annual basis over the next few years and to continue to deliver top-tier industry returns to our shareholders,” concluded Mr. Hovnanian.

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.