Hovnanian Enterprises Reports Fiscal 2024 First Quarter Results
- Total revenues increased by 15.3% to $594.2 million in the first quarter of fiscal 2024.
- Income before income taxes grew by 80.4% to $32.6 million in the first quarter of fiscal 2024.
- The company reported the highest quarterly land and land development spend in 57 quarters at $230 million.
- Consolidated contracts per community increased by 47.7% year-over-year in the first quarter of fiscal 2024.
- The dollar value of contract backlog decreased by 5.6% to $1.11 billion as of January 31, 2024.
- Management emphasized strong demand for new homes driven by factors like low mortgage rates and a tight existing home market.
- Financial guidance for the second quarter of fiscal 2024 projects continued growth in revenues, gross margin, income before taxes, and EBITDA.
- None.
Insights
The report from Hovnanian Enterprises, a prominent national homebuilder, indicates a robust growth trajectory, which is particularly noteworthy given the broader economic context. A 48% year-over-year increase in net contracts per community suggests a strong demand for new homes, which could be attributed to a variety of factors including a recovering economy, low mortgage rates and a tight existing home market. This uptick in demand is a positive signal for the residential construction sector and could potentially lead to increased investor confidence in the industry.
The reported 80% increase in income before income taxes and a 15% growth in total revenues reflect operational efficiency and effective cost management, despite a slight compression in homebuilding gross margin percentage. The substantial investment in land and development, the highest in 57 quarters, signals a strategic expansion move that could position the company for future growth but also represents a significant capital outlay that requires careful monitoring for its impact on the company's cash flow and profitability.
Furthermore, the reduction in the gross contract cancellation rate from 30% to 14% year-over-year is indicative of a healthier market environment and improved consumer confidence. This metric is crucial for understanding the stability of the company's backlog and forecasting future revenue. The company's guidance for the upcoming quarter, with expected growth in revenues and adjusted EBITDA, also provides a positive outlook, although it is based on the assumption of stable market conditions, which could be subject to change.
Analyzing the competitive positioning of Hovnanian Enterprises reveals that the company boasts the highest return on equity (ROE) and the third highest EBIT ROI among its 15 publicly traded peers. This performance metric is a testament to the company's effective capital allocation and profitability in relation to its equity base. The housing market's dynamics, influenced by factors such as mortgage rates and inventory levels, are crucial for understanding the company's potential for sustained growth.
With the company's community count showing a slight decrease year-over-year, the focus seems to be on increasing efficiency and sales within existing communities rather than expanding the number of communities. This strategy could be beneficial in managing risks associated with overexpansion, especially in a market that is sensitive to economic cycles. The increase in internet leads is another positive indicator of consumer interest and could be leveraged for future sales momentum.
It is worth noting the company's emphasis on affordability through mortgage rate buydowns, addressing a key concern in the housing market. This approach may enhance the company's competitive edge by attracting price-sensitive customers, though it may also impact profit margins. The management's commitment to balance sheet health through debt reduction and refinancing is a prudent strategy that could improve financial flexibility and resilience against market volatility.
The data from Hovnanian Enterprises provides a microcosmic view of the broader housing market and economic trends. The company's performance, particularly the robust growth in contracts and revenues, mirrors the resilience of the housing sector amidst ongoing economic challenges such as inflation and potential shifts in mortgage rates. The downward trend in mortgage rates and the favorable employment market mentioned by the company's CEO are key macroeconomic indicators that support the demand for new homes.
The increase in total liquidity above the company's targeted range suggests a strong financial position, which could enable the company to navigate potential economic headwinds and capitalize on strategic opportunities. The management's forward-looking statements regarding the spring selling season and the housing market's direction highlight a cautiously optimistic outlook, assuming stable market conditions.
It is important to consider the potential risks associated with the company's aggressive land acquisition strategy, as shifts in market demand or increases in mortgage rates could impact the ability to realize returns on these investments. Additionally, the company's inability to provide a reconciliation between its non-GAAP projections and the most directly comparable GAAP measures due to uncertain significant items underscores the inherent unpredictability in the housing sector and the need for investors to consider a range of potential outcomes.
Net Contracts per Community Increased
Income Before Income Taxes Increased
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 with18.7% 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 , or14.5% 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 or13.2% of total revenues, in the first quarter of fiscal 2024. Total SG&A, in the first quarter of fiscal 2023 was$73.4 million , or14.2% of total revenues. Excluding$1.4 million of incremental phantom stock expense, total SG&A would have been$72.0 million or14.0% 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 with5.8% 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, increased43.2% 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, increased39.7% 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, decreased4.4% 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 with30% in the fiscal 2023 first quarter. The gross contract cancellation rate for contracts, including domestic unconsolidated joint ventures, was14% for the first quarter of fiscal 2024 compared with29% 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) was32.6% . 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
For the second quarter of fiscal 2024, total revenues are expected to be between
(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
“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.”
WEBCAST INFORMATION:
Hovnanian Enterprises will webcast its fiscal 2024 first quarter financial results conference call at 11:00 a.m. E.T. on Thursday, February 22, 2024. The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Past Events” section of the Investor Relations page on the Hovnanian website at http://www.khov.com. The archive will be available for 12 months.
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.
NON-GAAP FINANCIAL MEASURES:
Consolidated earnings before interest expense and income taxes (“EBIT”) and before depreciation and amortization (“EBITDA”) and before inventory impairments and land option write-offs and gain on extinguishment of debt, net (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (“GAAP”) financial measures. The most directly comparable GAAP financial measure is net income. The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income is presented in a table attached to this earnings release.
Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. The reconciliation for historical periods of homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is presented in a table attached to this earnings release.
Adjusted income before income taxes, which is defined as income before income taxes excluding land-related charges and gain on extinguishment of debt, net is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes. The reconciliation for historical periods of adjusted income before income taxes to income before income taxes is presented in a table attached to this earnings release.
SG&A excluding the impact of incremental phantom stock expense is a non-GAAP financial measure. The
most directly comparable GAAP financial measure is SG&A, to which SG&A excluding the impact of
incremental phantom stock expense is reconciled herein.
Income before income taxes excluding the impact of incremental phantom stock expense is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes, to which income before income taxes excluding the impact of incremental phantom stock expense is reconciled herein.
Total liquidity is comprised of
FORWARD-LOOKING STATEMENTS
All statements in this press release that are not historical facts should be considered as “Forward-Looking Statements” within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to statements related to the Company’s goals and expectations with respect to its financial results for future financial periods and statements regarding demand for homes, mortgage rates, inflation, supply chain issues, customer incentives and underlying factors. Although we believe that our plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (2) shortages in, and price fluctuations of, raw materials and labor, including due to geopolitical events, changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products and related trade disputes with and retaliatory measures taken by other countries; (3) fluctuations in interest rates and the availability of mortgage financing, including as a result of instability in the banking sector; (4) adverse weather and other environmental conditions and natural disasters; (5) the seasonality of the Company’s business; (6) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (7) reliance on, and the performance of, subcontractors; (8) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (9) increases in cancellations of agreements of sale; (10) increases in inflation; (11) changes in tax laws affecting the after-tax costs of owning a home; (12) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (13) levels of competition; (14) utility shortages and outages or rate fluctuations; (15) information technology failures and data security breaches; (16) negative publicity; (17) high leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (18) availability and terms of financing to the Company; (19) the Company’s sources of liquidity; (20) changes in credit ratings; (21) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment; (22) operations through unconsolidated joint ventures with third parties; (23) significant influence of the Company’s controlling stockholders; (24) availability of net operating loss carryforwards; (25) loss of key management personnel or failure to attract qualified personnel; (26) public health issues such as major epidemic or pandemic; and (27) certain risks, uncertainties and other factors described in detail in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2023 and the Company’s Quarterly Reports on Form 10-Q for the quarterly periods during fiscal 2023 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
| Hovnanian Enterprises, Inc. | ||||||||
| January 31, 2024 | ||||||||
| Statements of consolidated operations | ||||||||
| (In thousands, except per share data) | ||||||||
| Three Months Ended | ||||||||
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Total revenues | $ | 594,196 | $ | 515,366 | ||||
| Costs and expenses (1) | 577,956 | 504,479 | ||||||
| Gain on extinguishment of debt, net | 1,371 | - | ||||||
| Income from unconsolidated joint ventures | 14,952 | 7,160 | ||||||
| Income before income taxes | 32,563 | 18,047 | ||||||
| Income tax provision (benefit) | 8,659 | (669 | ) | |||||
| Net income | 23,904 | 18,716 | ||||||
| Less: preferred stock dividends | 2,669 | 2,669 | ||||||
| Net income available to common stockholders | $ | 21,235 | $ | 16,047 | ||||
| Per share data: | ||||||||
| Basic: | ||||||||
| Net income per common share | $ | 3.11 | $ | 2.37 | ||||
| Weighted average number of common shares outstanding | 6,496 | 6,186 | ||||||
| Assuming dilution: | ||||||||
| Net income per common share | $ | 2.91 | $ | 2.26 | ||||
| Weighted average number of common shares outstanding | 6,937 | 6,468 | ||||||
| (1) Includes inventory impairments and land option write-offs. | ||||||||
| Hovnanian Enterprises, Inc. | ||||||||
| January 31, 2024 | ||||||||
| Reconciliation of income before income taxes excluding land-related charges and gain on extinguishment of debt, net to income before income taxes | ||||||||
| (In thousands) | ||||||||
| Three Months Ended | ||||||||
| January 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Income before income taxes | $ | 32,563 | $ | 18,047 | ||||
| Inventory impairments and land option write-offs | 302 | 477 | ||||||
| Gain on extinguishment of debt, net | (1,371 | ) | - | |||||
| Income before income taxes excluding land-related charges and gain on extinguishment of debt, net (1) | $ | 31,494 | $ | 18,524 | ||||
| (1) Income before income taxes excluding land-related charges and gain on extinguishment of debt, net is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes. | ||||||||
| Hovnanian Enterprises, Inc. | |||||||
| January 31, 2024 | |||||||
| Gross margin | |||||||
| (In thousands) | |||||||
| Homebuilding Gross Margin | |||||||
| Three Months Ended | |||||||
| January 31, | |||||||
| 2024 | 2023 | ||||||
| (Unaudited) | |||||||
| Sale of homes | $ | 573,636 | $ | 499,645 | |||
| Cost of sales, excluding interest expense and land charges (1) | 448,448 | 390,963 | |||||
| Homebuilding gross margin, before cost of sales interest expense and land charges (2) | 125,188 | 108,682 | |||||
| Cost of sales interest expense, excluding land sales interest expense | 19,898 | 15,001 | |||||
| Homebuilding gross margin, after cost of sales interest expense, before land charges (2) | 105,290 | 93,681 | |||||
| Land charges | 302 | 477 | |||||
| Homebuilding gross margin | $ | 104,988 | $ | 93,204 | |||
| Homebuilding gross margin percentage | 18.3 | % | 18.7 | % | |||
| Homebuilding gross margin percentage, before cost of sales interest expense and land charges (2) | 21.8 | % | 21.8 | % | |||
| Homebuilding gross margin percentage, after cost of sales interest expense, before land charges (2) | 18.4 | % | 18.8 | % | |||
| Land Sales Gross Margin | |||||||
| Three Months Ended | |||||||
| January 31, | |||||||
| 2024 | 2023 | ||||||
| (Unaudited) | |||||||
| Land and lot sales | $ | 1,340 | $ | 329 | |||
| Cost of sales, excluding interest (1) | 765 | 77 | |||||
| Land and lot sales gross margin, excluding interest and land charges | 575 | 252 | |||||
| Land and lot sales interest expense | - | 21 | |||||
| Land and lot sales gross margin, including interest | $ | 575 | $ | 231 | |||
| (1) Does not include cost associated with walking away from land options or inventory impairment losses which are recorded as Inventory impairment loss and land option write-offs in the Condensed Consolidated Statements of Operations. | |||||||
(2) Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. | |||||||
| Hovnanian Enterprises, Inc. | |||||||
| January 31, 2024 | |||||||
| Reconciliation of adjusted EBITDA to net income | |||||||
| (In thousands) | |||||||
| Three Months Ended | |||||||
| January 31, | |||||||
| 2024 | 2023 | ||||||
| (Unaudited) | |||||||
| Net income | $ | 23,904 | $ | 18,716 | |||
| Income tax provision (benefit) | 8,659 | (669 | ) | ||||
| Interest expense | 30,349 | 30,115 | |||||
| EBIT (1) | 62,912 | 48,162 | |||||
| Depreciation and amortization | 1,598 | 1,410 | |||||
| EBITDA (2) | 64,510 | 49,572 | |||||
| Inventory impairments and land option write-offs | 302 | 477 | |||||
| Gain on extinguishment of debt, net | (1,371 | ) | - | ||||
| Adjusted EBITDA (3) | $ | 63,441 | $ | 50,049 | |||
| Interest incurred | $ | 31,961 | $ | 34,326 | |||
| Adjusted EBITDA to interest incurred | 1.98 | 1.46 | |||||
| (1)EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income. EBIT represents earnings before interest expense and income taxes. | |||||||
| (2)EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. | |||||||
| (3)Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income. Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization and inventory impairments and land option write-offs and gain on extinguishment of debt, net. | |||||||
| Hovnanian Enterprises, Inc. | |||||||
| January 31, 2024 | |||||||
| Interest incurred, expensed and capitalized | |||||||
| (In thousands) | |||||||
| Three Months Ended | |||||||
| January 31, | |||||||
| 2024 | 2023 | ||||||
| (Unaudited) | |||||||
| Interest capitalized at beginning of period | $ | 52,060 | $ | 59,600 | |||
| Plus: interest incurred | 31,961 | 34,326 | |||||
| Less: interest expensed | (30,349 | ) | (30,115 | ) | |||
| Less: interest contributed to unconsolidated joint venture (1) | - | (3,016 | ) | ||||
| Interest capitalized at end of period (2) | $ | 53,672 | $ | 60,795 | |||
| (1) Represents capitalized interest which was included as part of the assets contributed to joint ventures the company entered into during the three months ended January 31, 2023. There was no impact to the Condensed Consolidated Statement of Operations as a result of these transactions. | |||||||
| (2) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest. | |||||||
| Hovnanian Enterprises, Inc. | |||||||||||||||||||
| January 31, 2024 | |||||||||||||||||||
| Calculation of Consolidated Adjusted EBIT ROI | |||||||||||||||||||
| TTM | |||||||||||||||||||
| For the quarter ended | ended | ||||||||||||||||||
| (Dollars in thousands) | 4/30/2023 | 7/31/2023 | 10/31/2023 | 1/31/2024 | 1/31/2024 | ||||||||||||||
| Consolidated EBIT | $ | 82,049 | $ | 103,164 | $ | 157,478 | $ | 62,912 | $ | 405,603 | |||||||||
| Impairments and walk away | $ | 137 | $ | 308 | $ | 614 | $ | 302 | $ | 1,361 | |||||||||
| (Loss) gain on extinguishment of debt | $ | 0 | $ | 4,082 | $ | 21,556 | $ | (1,371 | ) | $ | 24,267 | ||||||||
| Adjusted EBIT | $ | 82,186 | $ | 107,554 | $ | 179,648 | $ | 61,843 | $ | 431,231 | |||||||||
| As of | |||||||||||||||||||
| 1/31/2023 | 4/30/2023 | 7/31/2023 | 10/31/2023 | 1/31/2024 | |||||||||||||||
| Total inventories | $ | 1,507,038 | $ | 1,484,992 | $ | 1,411,260 | $ | 1,349,186 | $ | 1,463,558 | |||||||||
| Less liabilities from inventory not owned, net of debt issuance costs | 209,579 | 200,299 | 145,979 | 124,254 | 114,658 | ||||||||||||||
| Less capitalized interest | 60,795 | 60,274 | 55,274 | 52,060 | 53,672 | ||||||||||||||
| Plus investments in and advances to unconsolidated joint ventures | 101,013 | 85,820 | 85,260 | 97,886 | 110,592 | Five Quarter | |||||||||||||
| Plus goodwill | - | - | - | - | - | Average | |||||||||||||
| Inventories less liabilities from inventory not owned and capitalized interest plus investments in and advances to unconsolidated joint ventures and goodwill | $ | 1,337,677 | $ | 1,310,239 | $ | 1,295,267 | $ | 1,270,758 | $ | 1,405,820 | $ | 1,323,952 | |||||||
| Consolidated Adjusted EBIT ROI | 32.6 | % | |||||||||||||||||
| HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) | |||||||
| January 31, | October 31, | ||||||
| 2024 | 2023 | ||||||
| (Unaudited) | (1) | ||||||
| ASSETS | |||||||
| Homebuilding: | |||||||
| Cash and cash equivalents | $ | 183,118 | $ | 434,119 | |||
| Restricted cash and cash equivalents | 8,369 | 8,431 | |||||
| Inventories: | |||||||
| Sold and unsold homes and lots under development | 1,092,347 | 998,841 | |||||
| Land and land options held for future development or sale | 173,134 | 125,587 | |||||
| Consolidated inventory not owned | 198,077 | 224,758 | |||||
| Total inventories | 1,463,558 | 1,349,186 | |||||
| Investments in and advances to unconsolidated joint ventures | 110,592 | 97,886 | |||||
| Receivables, deposits and notes, net | 24,208 | 27,982 | |||||
| Property and equipment, net | 37,441 | 33,946 | |||||
| Prepaid expenses and other assets | 68,127 | 69,886 | |||||
| Total homebuilding | 1,895,413 | 2,021,436 | |||||
| Financial services | 149,633 | 168,671 | |||||
| Deferred tax assets, net | 295,332 | 302,833 | |||||
| Total assets | $ | 2,340,378 | $ | 2,492,940 | |||
| LIABILITIES AND EQUITY | |||||||
| Homebuilding: | |||||||
| Nonrecourse mortgages secured by inventory, net of debt issuance costs | $ | 99,553 | $ | 91,539 | |||
| Accounts payable and other liabilities | 360,207 | 415,480 | |||||
| Customers’ deposits | 51,798 | 51,419 | |||||
| Liabilities from inventory not owned, net of debt issuance costs | 114,658 | 124,254 | |||||
| Senior notes and credit facilities (net of discounts, premiums and debt issuance costs) | 934,617 | 1,051,491 | |||||
| Accrued interest | 41,472 | 26,926 | |||||
| Total homebuilding | 1,602,305 | 1,761,109 | |||||
| Financial services | 128,402 | 148,181 | |||||
| Income taxes payable | 2,583 | 1,861 | |||||
| Total liabilities | 1,733,290 | 1,911,151 | |||||
| Equity: | |||||||
| Hovnanian Enterprises, Inc. stockholders' equity: | |||||||
| Preferred stock, | 135,299 | 135,299 | |||||
| Common stock, Class A, | 62 | 62 | |||||
| Common stock, Class B, | 8 | 8 | |||||
| Paid in capital - common stock | 740,063 | 735,946 | |||||
| Accumulated deficit | (135,962 | ) | (157,197 | ) | |||
| Treasury stock - at cost – 901,379 shares of Class A common stock at January 31, 2024 and October 31, 2023; 27,669 shares of Class B common stock at January 31, 2024 and October 31, 2023 | (132,382 | ) | (132,382 | ) | |||
| Total Hovnanian Enterprises, Inc. stockholders’ equity | 607,088 | 581,736 | |||||
| Noncontrolling interest in consolidated joint ventures | - | 53 | |||||
| Total equity | 607,088 | 581,789 | |||||
| Total liabilities and equity | $ | 2,340,378 | $ | 2,492,940 | |||
| (1) Derived from the audited balance sheet as of October 31, 2023. | |||||||
| HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) | |||||||
| Three Months Ended January 31, | |||||||
| 2024 | 2023 | ||||||
| Revenues: | |||||||
| Homebuilding: | |||||||
| Sale of homes | $ | 573,636 | $ | 499,645 | |||
| Land sales and other revenues | 5,292 | 3,557 | |||||
| Total homebuilding | 578,928 | 503,202 | |||||
| Financial services | 15,268 | 12,164 | |||||
| Total revenues | 594,196 | 515,366 | |||||
| Expenses: | |||||||
| Homebuilding: | |||||||
| Cost of sales, excluding interest | 449,213 | 391,040 | |||||
| Cost of sales interest | 19,898 | 15,022 | |||||
| Inventory impairments and land option write-offs | 302 | 477 | |||||
| Total cost of sales | 469,413 | 406,539 | |||||
| Selling, general and administrative | 48,937 | 47,918 | |||||
| Total homebuilding expenses | 518,350 | 454,457 | |||||
| Financial services | 11,471 | 9,053 | |||||
| Corporate general and administrative | 37,133 | 25,490 | |||||
| Other interest | 10,451 | 15,093 | |||||
| Other expenses, net | 551 | 386 | |||||
| Total expenses | 577,956 | 504,479 | |||||
| Gain on extinguishment of debt, net | 1,371 | - | |||||
| Income from unconsolidated joint ventures | 14,952 | 7,160 | |||||
| Income before income taxes | 32,563 | 18,047 | |||||
| State and federal income tax provision (benefit): | |||||||
| State | 2,206 | 2,211 | |||||
| Federal | 6,453 | (2,880 | ) | ||||
| Total income taxes | 8,659 | (669 | ) | ||||
| Net income | 23,904 | 18,716 | |||||
| Less: preferred stock dividends | 2,669 | 2,669 | |||||
| Net income available to common stockholders | $ | 21,235 | $ | 16,047 | |||
| Per share data: | |||||||
| Basic: | |||||||
| Net income per common share | $ | 3.11 | $ | 2.37 | |||
| Weighted-average number of common shares outstanding | 6,496 | 6,186 | |||||
| Assuming dilution: | |||||||
| Net income per common share | $ | 2.91 | $ | 2.26 | |||
| Weighted-average number of common shares outstanding | 6,937 | 6,468 | |||||
| HOVNANIAN ENTERPRISES, INC. | ||||||||||||||||
| (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) | ||||||||||||||||
| (SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES) | ||||||||||||||||
| Contracts (1) | Deliveries | Contract | ||||||||||||||
| Three Months Ended | Three Months Ended | Backlog | ||||||||||||||
| January 31, | January 31, | January 31, | ||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | 2024 | 2023 | % Change | ||||||||
| Northeast (2) | ||||||||||||||||
| (DE, MD, NJ, OH, PA, VA, WV) | Home | 383 | 311 | 332 | 371 | (10.5)% | 668 | 782 | (14.6)% | |||||||
| Dollars | $ | 248,753 | $ | 185,850 | $ | 189,989 | $ | 210,874 | (9.9)% | $ | 478,864 | $ | 432,508 | |||
| Avg. Price | $ | 649,486 | $ | 597,588 | $ | 572,256 | $ | 568,394 | $ | 716,862 | $ | 553,079 | ||||
| Southeast | ||||||||||||||||
| (FL, GA, SC) | Home | 110 | 164 | (32.9)% | 195 | 141 | 530 | 525 | ||||||||
| Dollars | $ | 68,671 | $ | 82,191 | (16.4)% | $ | 105,628 | $ | 73,736 | $ | 267,294 | $ | 319,344 | (16.3)% | ||
| Avg. Price | $ | 624,282 | $ | 501,165 | $ | 541,682 | $ | 522,950 | $ | 504,328 | $ | 608,274 | (17.1)% | |||
| West | ||||||||||||||||
| (AZ, CA, TX) | Home | 634 | 313 | 536 | 426 | 690 | 721 | (4.3)% | ||||||||
| Dollars | $ | 306,928 | $ | 147,087 | $ | 278,019 | $ | 215,035 | $ | 365,172 | $ | 425,669 | (14.2)% | |||
| Avg. Price | $ | 484,114 | $ | 469,927 | $ | 518,692 | $ | 504,777 | $ | 529,235 | $ | 590,387 | (10.4)% | |||
| Consolidated Total | ||||||||||||||||
| Home | 1,127 | 788 | 1,063 | 938 | 1,888 | 2,028 | (6.9)% | |||||||||
| Dollars | $ | 624,352 | $ | 415,128 | $ | 573,636 | $ | 499,645 | $ | 1,111,330 | $ | 1,177,521 | (5.6)% | |||
| Avg. Price | $ | 553,995 | $ | 526,812 | $ | 539,639 | $ | 532,671 | $ | 588,628 | $ | 580,632 | ||||
| Unconsolidated Joint Ventures (2) (3) | ||||||||||||||||
| (Excluding KSA JV) | Home | 152 | 105 | 167 | 107 | 357 | 317 | |||||||||
| Dollars | $ | 100,105 | $ | 71,681 | $ | 116,935 | $ | 78,670 | $ | 238,809 | $ | 235,429 | ||||
| Avg. Price | $ | 658,586 | $ | 682,676 | (3.5)% | $ | 700,210 | $ | 735,234 | (4.8)% | $ | 668,933 | $ | 742,677 | (9.9)% | |
| Grand Total | ||||||||||||||||
| Home | 1,279 | 893 | 1,230 | 1,045 | 2,245 | 2,345 | (4.3)% | |||||||||
| Dollars | $ | 724,457 | $ | 486,809 | $ | 690,571 | $ | 578,315 | $ | 1,350,139 | $ | 1,412,950 | (4.4)% | |||
| Avg. Price | $ | 566,425 | $ | 545,139 | $ | 561,440 | $ | 553,411 | $ | 601,398 | $ | 602,537 | (0.2)% | |||
| KSA JV Only | ||||||||||||||||
| Home | 69 | 9 | 39 | 0 | 80 | 2,222 | (96.4)% | |||||||||
| Dollars | $ | 14,108 | $ | 1,398 | $ | 8,274 | $ | 0 | $ | 13,958 | $ | 348,818 | (96.0)% | |||
| Avg. Price | $ | 204,464 | $ | 155,333 | $ | 212,154 | $ | 0 | $ | 174,475 | $ | 156,984 | ||||
| DELIVERIES INCLUDE EXTRAS | ||||||||||||||||
| Notes: | ||||||||||||||||
| (1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. (2) Reflects the reclassification of 8 homes and | ||||||||||||||||
| (3) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income from unconsolidated joint ventures”. | ||||||||||||||||
| HOVNANIAN ENTERPRISES, INC. | ||||||||||||||||
| (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) | ||||||||||||||||
| (SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY) | ||||||||||||||||
| Contracts (1) | Deliveries | Contract | ||||||||||||||
| Three Months Ended | Three Months Ended | Backlog | ||||||||||||||
| January 31, | January 31, | January 31, | ||||||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | 2024 | 2023 | % Change | ||||||||
| Northeast (2) | ||||||||||||||||
| (Unconsolidated Joint Ventures) | Home | 71 | 50 | 91 | 65 | 140 | 165 | (15.2)% | ||||||||
| (Excluding KSA JV) | Dollars | $ | 57,356 | $ | 39,933 | $ | 68,176 | $ | 50,776 | $ | 110,741 | $ | 120,802 | (8.3)% | ||
| (DE, MD, NJ, OH, PA, VA, WV) | Avg. Price | $ | 807,831 | $ | 798,660 | $ | 749,187 | $ | 781,169 | (4.1)% | $ | 791,007 | $ | 732,133 | ||
| Southeast | ||||||||||||||||
| (Unconsolidated Joint Ventures) | Home | 55 | 39 | 50 | 31 | 191 | 137 | |||||||||
| (FL, GA, SC) | Dollars | $ | 31,168 | $ | 22,965 | $ | 35,278 | $ | 22,197 | $ | 115,747 | $ | 106,196 | |||
| Avg. Price | $ | 566,691 | $ | 588,846 | (3.8)% | $ | 705,560 | $ | 716,032 | (1.5)% | $ | 606,005 | $ | 775,153 | (21.8)% | |
| West | ||||||||||||||||
| (Unconsolidated Joint Ventures) | Home | 26 | 16 | 26 | 11 | 26 | 15 | |||||||||
| (AZ, CA, TX) | Dollars | $ | 11,581 | $ | 8,783 | $ | 13,481 | $ | 5,697 | $ | 12,321 | $ | 8,431 | |||
| Avg. Price | $ | 445,423 | $ | 548,938 | (18.9)% | $ | 518,500 | $ | 517,909 | $ | 473,885 | $ | 562,067 | (15.7)% | ||
| Unconsolidated Joint Ventures (2) (3) | ||||||||||||||||
| (Excluding KSA JV) | Home | 152 | 105 | 167 | 107 | 357 | 317 | |||||||||
| Dollars | $ | 100,105 | $ | 71,681 | $ | 116,935 | $ | 78,670 | $ | 238,809 | $ | 235,429 | ||||
| Avg. Price | $ | 658,586 | $ | 682,676 | (3.5)% | $ | 700,210 | $ | 735,234 | (4.8)% | $ | 668,933 | $ | 742,678 | (9.9)% | |
| KSA JV Only | ||||||||||||||||
| Home | 69 | 9 | 39 | 0 | 80 | 2,222 | (96.4)% | |||||||||
| Dollars | $ | 14,108 | $ | 1,398 | $ | 8,274 | $ | 0 | $ | 13,958 | $ | 348,818 | (96.0)% | |||
| Avg. Price | $ | 204,464 | $ | 155,333 | $ | 212,154 | $ | 0 | $ | 174,475 | $ | 156,984 | ||||
| DELIVERIES INCLUDE EXTRAS | ||||||||||||||||
| Notes: | ||||||||||||||||
| (1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. (2) Reflects the reclassification of 8 homes and | ||||||||||||||||
| (3) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income from unconsolidated joint ventures”. | ||||||||||||||||
| Contact: | Brad G. O’Connor | Jeffrey T. O’Keefe |
| Chief Financial Officer & Treasurer | Vice President, Investor Relations | |
| 732-747-7800 | 732-747-7800 | |
FAQ
What was the percentage increase in total revenues for Hovnanian Enterprises in the first quarter of fiscal 2024?
How much was the income before income taxes increase year-over-year for Hovnanian Enterprises in the first quarter of fiscal 2024?
What was the dollar value of contract backlog as of January 31, 2024, for Hovnanian Enterprises?
What factors were highlighted by management as driving strong demand for new homes for Hovnanian Enterprises?
What does the financial guidance for the second quarter of fiscal 2024 project for Hovnanian Enterprises?
