In This Article:
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Revenue: $674 million, a 13% increase year-over-year.
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Adjusted Gross Margin: 18.3%, near the high end of guidance.
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SG&A Ratio: 12.9%, improved by 160 basis points year-over-year.
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Income from Unconsolidated Joint Ventures: $9 million, below guidance.
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Adjusted EBITDA: $72 million, above the high end of guidance.
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Adjusted Pre-Tax Income: $41 million, above the high end of guidance.
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Contracts Growth: 9% increase year-over-year, including joint ventures.
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Incentives: 9.7% of average sales price, up 160 basis points year-over-year.
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Quick Move-In Homes (QMI) Sales: 69% of total sales.
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Backlog Conversion Ratio: 76%, highest in 27 years for the first quarter.
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Open-for-Sale Communities: 148, a 10% increase year-over-year.
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Controlled Lots: 43,254, a 29% increase year-over-year.
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Liquidity: $222 million at the end of the first quarter.
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Net Debt to Net Cap: 52.2%, improved from 146.2% in fiscal '20.
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Return on Equity (ROE): 33%, second highest among peers.
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Adjusted EBIT Return on Investment: 29.8%, highest among mid-sized peers.
Release Date: February 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Hovnanian Enterprises Inc (NASDAQ:HOVNP.PFD) reported a 13% increase in total revenues to $674 million compared to last year's first quarter.
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The company's adjusted EBITDA was $72 million, exceeding the high end of their guidance range.
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Contracts for the first quarter, including unconsolidated joint ventures, increased 9% year over year.
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The company ended the quarter with a 10% increase in open-for-sale communities, totaling 148.
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Hovnanian Enterprises Inc (NASDAQ:HOVNP.PFD) has a high percentage of land controlled via options at 84%, the highest in its history, which supports their strategic focus on land-light operations.
Negative Points
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Revenues were near the low end of guidance due to 50 fewer wholly owned deliveries than expected, partly because of delays in utility hookups.
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Gross margin decreased year-over-year due to increased use of incentives, including mortgage rate buy-downs.
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Income from unconsolidated joint ventures was below guidance due to delays in highly profitable deliveries.
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The company experienced significant monthly volatility in contracts, with a 10% year-over-year decline in January.
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Finished Quick Move-In Homes (QMIs) per community increased to 2.6, higher than desired, indicating slower than expected sales pace.
Q & A Highlights
Q: What do you attribute the recent softness in demand to, given that interest rates have slightly decreased? A: Ara Hovnanian, CEO, explained that the demand fluctuations are due to various concerns that change monthly, such as tariffs, interest rates, and geopolitical tensions. These factors create a volatile environment, causing sales to vary significantly from month to month.