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21-05-2025
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Q2 2025 Hovnanian Enterprises Inc Earnings Call
Jeffrey O'Keefe; Vice President, Investor Relations; Hovnanian Enterprises Inc Ara Hovnanian; Chairman of the Board, President, Chief Executive Officer; Hovnanian Enterprises Inc Brad O'Connor; Chief Financial Officer, Senior Vice President, Treasurer; Hovnanian Enterprises Inc David Mitrisin; Vice President, Corporate Controller; Hovnanian Enterprises Inc Unidentified Participant Alex Barron; Analyst; Housing Research Center Jay McCanless; Analyst; Wedbush Operator Good morning and thank you for joining us today for Hovnanian Enterprise fiscal 2025 second-quarter earnings conference call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded for rebroadcast, and all participants are currently in a listen-only mode. Management will make some opening remarks about the second-quarter results and then open the line for questions. The company will also be webcasting a slide presentation along with the opening remarks from management. The slides are available on the Investors page of the company's website at Those listeners who would like to follow along will now log on to the website. I'll now turn the call over to Jeff O'Kefe, Vice President of Investor Relations. Jeff, please go ahead. Jeffrey O'Keefe Thank you Marvin, and thank you all for participating in this morning's call to review the results for our second quarter. All statements on this conference call 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 financial results for future financial periods. 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 speak only as of the date they are made, are not guarantees of future performance or results, and 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 are described in detail in the sections entitled Risk Factors and Management Discussion and Analysis, particularly the portion of MD&A entitled Safe Harbor Statement in our annual report on Form 10-K for the fiscal year ended October 30, 2024, and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable security laws, we undertake no obligation to publicly update r review any forward-looking statements whether as a result of new information, future events, changed circumstances or any other reasons. Joining me today are Ara Hovnanian, Chairman, President and CEO; Brad O'Connor, CFO; David Mitrisin, Vice President, Corporate Controller; and Paul Eberly, Vice President, Finance and Treasurer. Ara, I'll turn the call over to you now. Ara Hovnanian Thanks, Jeff. I'm going to review our second-quarter results, and I'll also comment on the current housing environment. Brad will follow me with more details as usual, and of course, we'll open it up to Q&A afterwards. Let me begin on slide 5. Here, we show our second-quarter guidance compared to our actual results. Overall, we are satisfied that everything except gross margin was within or better than the guidance range that we provided. Needless to say, there was a lot of political and economic uncertainty during the quarter. Starting at the top of the slide, revenues were $686 million which was closer to the low end of our guidance. This was primarily due to the mix of deliveries with some higher price home deliveries slipping into future quarters. Our adjusted gross margin was 17.3% for the quarter, which was just below the low end of the guidance range that we gave. If incentives had remained at the then current levels, which averaged 9.7% in the first quarter, then we would have been around the midpoint of the guidance range. However, as the quarter went on, we had to increase incentives. For the second quarter, incentives increased 80 basis points sequentially to 10.5%. Our SG&A ratio was 11.7%, which was near the midpoint of the guidance we gave. Our income from unconsolidated joint ventures was $9 million, which was at the high end of the guidance that we gave. Adjusted EBITDA was $61 million for the quarter, which is slightly above the high end of the guidance range that we gave. And finally, our adjusted pre-tax income was $29 million, which was near the high end of the range that we gave. Again, given the challenging operating environment, we're satisfied with these results. On slide 6, we show our second-quarter results compared to last year's second quarter. Keep in mind that last year was a very strong second quarter from both a profitability and sales pace perspective. In today's operating environment, it's no surprise that all of these metrics experience year-over-year declines. Starting in the upper left-hand portion of the slide, you can see that our total revenues were down year over year despite flat deliveries. The year-over-year decline in revenues was primarily due to lower average sales prices. Moving across the top to gross margin, our gross margin was down year by year, mainly due to increased incentives, which is somewhat related to the greater focus on pace versus price. I'll elaborate more on that shortly. During this year's second quarter, incentives were 10.5% of the average sales price. This is up 240 basis points from a year ago, 80 basis points from the first quarter of 2025, and 750 basis points higher than fiscal '22, which was prior to the mortgage rate spike impacting deliveries. Other than the extraordinary cost to buy down mortgages to make our homes affordable, our gross margins would have been very healthy. Moving to the bottom left, you can see that our total SG&A as a percentage of total revenue, increased slightly. This was primarily due to the growth in our community count, and in the bottom right-hand portion of the slide, you can see the negative impact that all of these metrics had on our year-over-year profitability. If you turn to slide 7, you can see that contracts for the second quarter, including domestic unconsolidated joint ventures, decreases 7% year over year. Once again there were considerable differences in monthly sales, which you can see on slide 8. Contracts were down 17% in February, then bounced back with a 3% increase in March, and this was followed by a 9% decline in April. On slide 9, you can see that the most recent three months continued a trend of choppiness. And frankly, this volatility is not unique to this year as we discussed before. If you turn to slide 10, you can see that contracts per community were lower this year compared to the second quarters of the past several years, but at 11.2 contracts per community, our contract pace compares well to pre-COVID levels and is higher than our quarterly average of 10.3% for the second quarter since 2008. On slide 11, we give more granularity and show the trend of monthly contracts per community compared to the same month a year ago. Here, you can see that this year's sales pace was lower than last year. However, you can also see the current sales pace in March and April was higher than the average pace for those months since '08, and even February was not that far off from the monthly average pace since. Turn into slide 12, we show contracts per community as if we had a March 31 quarter end. This way we can compare our results to our peers that report contracts per community on a calendar quarter end. At 10.8 contracts per community, our sales pace is the third highest among the public builders. On slide 13, you can see that year-over-year contracts per community declined for all but one of our peers shown on this slide. We are right around the median. Again, this was as if our quarter ended in March so that we could compare our results to these other companies. What we're trying to illustrate in these last two slides is that even though the spring selling season has not played out the way everyone had hoped, our focus on pace over price resulted in an above average number of contracts per community compared to our peers. Given the monthly volatility we've experienced, we don't get overly excited or concerned about the performance in any one month. We continue to monitor our sales on a community-by-community basis and make adjustments in real time based on current sales data. We remain confident in both our strategy and the long-term fundamentals of the new home market. On slide 14, you can see that a considerable percentage -- for a considerable percentage of our deliveries, our home buyers continue to utilize mortgage rate buydowns. The percentage of home buyers using buydowns in this year's second quarter was 75%. The buydown usage in our deliveries indicates that buyers continue to rely on these rate buydowns to combat affordability at the current mortgage rates. Given the persistently high mortgage rate environment, we assume buydowns will remain at similar levels going forward. In order to meet home buyers' desires to use cost effective mortgage rate buydowns, we're intentionally operating at an elevated level of quick move-in homes, or QMIs as we call them, so that we can offer affordable mortgage rate buy downs in the near term and give more certainty in an uncertain market. On slide 15, we show that we had 8.6 QMIs per community at the end of the second quarter, which is down sequentially from 9.3% in the first quarter of '25. We define QMIs as any unsold home where we've begun framing. In the second quarter of '25, QMI sales were 79% of our total sales. This was the highest quarter since we started reporting this number 11 quarters ago and significantly higher than the previous highest quarter, which was 72% in the fourth quarter of '24. Historically, that percentage was 40%, about half. Obviously, the demand for QMIs remains high, so we're comfortable with the current level of QMIs. We ended the second quarter with 304 finished QMIs on a per community basis that puts us at 2.4 finished QMIs per community. That's down from 2.6 finished QMIs at the end of the first quarter. We've cut back on the number of homes we've started to match the current sales pace. Sequentially, when compared to the first quarter of '25, the total number of QMIs decreased by 8%, similar to the drop in our sales pace, and the number of our finished QMIs decreased by 5%. The focus on quick move-in homes results in more contracts that are signed and delivered in the same quarter. That leads to lower levels of backlog at quarter ends, but a higher backlog conversion. During the second quarter of '25, 39% of our homes delivered in the quarter were contracted in the same quarter. This obviously makes it more challenging when providing guidance for the next quarter. It also resulted in a high backlog conversion ratio of 80%, which is significantly higher than the second quarter average backlog conversion ratio of 58% since '98. We continue to manage our QMIs on a community level and are highly focused on matching our QMI start space with our QMI sales space. If you move to slide 16, you can see that even with higher mortgage rates and a slower sales pace, we're still able to raise net prices in 31% of our communities during the second quarter. 63% of the communities with price increases were in Delaware, Maryland, New Jersey, North Carolina, Virginia, and West Virginia, which are our better performing markets. While the sales environment has been difficult, we've been focusing on pace versus price, but we're still raising prices and lowering incentives when our sales pace warrants it. Economic uncertainty, high mortgage rates, affordability, and low consumer confidence have caused many consumers to delay purchasing a new home. To increase our sales pace and make our homes affordable, we continue to offer mortgage rate buydowns. While our contract pace per community is consistent with historical averages, it remains lower than in the recent months. Further, our gross margins, ignoring the mortgage rate incentives are actually quite strong. However, offering mortgage rate buydowns is expensive and it certainly has impacted our gross margins in the current quarters. We've reviewed all land transactions to ensure that they remain economically viable. This did result in walking away from a few land option positions during due diligence that no longer met our return hurdles. Slide 17 illustrates the vintage of our land position. The percentage above each bar shows the percentage of lots controlled in each year compared to the total. The percentage below the bar shows the incentives for closing that year. On this slide, you can see that 74% of the land was originally controlled when we were using an elevated level of incentives to underwrite the land. These lots are typically performing near our pro forma metrics. As time has gone on, particularly in regard with land that was controlled in fiscal '25, we and the rest of the industry have been using more and more incentives, and the lots controlled then underwrote with a higher percentage of incentives. As far as underperformance goes, it's our 22 vintage that is the most impacted as land prices had increased, but incentives had not yet fully kicked in. Some of the 21 vintage land primarily on the West Coast can also be margin challenged, but we're burning through the difficult vintages and replacing them with more current vintages with better returns. In this more challenging environment, we are working with some of our land sellers currently under option agreements to find win-win solutions in a difficult market where we both share a bit of the pain in a slow market. We've made a strategic decision to burn through the less profitable land parcels at lower gross margins to clear the way for recent land acquisitions which meet our target return metrics. Fortunately, we're finding plenty of new land opportunities that meet our return hurdles even with the current level of incentives and sales pace. While we're satisfied with our performance given the difficult environment, we expect that we will return to more favorable performance metrics as we replace certain land positions with newer land positions that we're finding today. Finally, as an update to our Saudi Arabian joint venture last week, we signed a memorandum of understanding with the Ministry of Housing in Saudi Arabia. This will expand our activities and our partnership in Saudi Arabia, increasing housing for a growing population of young middle-class families. I'll now turn it over to Brad O'Connor, our Chief Financial Officer. Brad O'Connor Thank you, Ara. Let me start with slide 18 where we show the progress we've made in reducing our base construction cost per square foot. Here, we show that from the first quarter of fiscal '23, when we first started attacking costs from our suppliers and trade partners until the second quarter of '25, we have lowered our base construction cost per square foot by 7%. Much of the progress was made in the first few quarters of this analysis, and we have been holding fairly steady since then. As the market has softened, we are digging in and looking for additional savings. Turning to slide 19, you can see that we ended the quarter with a total of 148 open for sale communities, a 12% increase from last year's second quarter. 125 of those communities were wholly owned. During the second quarter, we opened 11 new wholly owned communities and sold out of 11 wholly owned communities. Additionally, we had 23 domestic unconsolidated joint venture communities at the end of the second quarter. We opened 3 new unconsolidated joint venture communities and closed 3 during the quarter. We continue to experience delays in opening new communities, primarily related to utility hookups and permitting delays throughout the country. We expect community count to continue to grow further in fiscal '25. The leading indicator for further community account growth is shown on slide 20. We ended the quarter with 42,440 controlled lots, which equates to a 7.7 year supply of controlled lots. Our lot count increased 15% year over year. If you include lots from our unconsolidated joint ventures, we now control 45,582 lots. We added 3,000 lots in 46 future communities during the second quarter. Our land teams are actively engaging with land sellers, negotiating for new land parcels that meet our underwriting standards, even with high incentives and the current sales pace. In fiscal '24, we began talking about our pivot to growth. This followed a stretch of several years where we had used a significant amount of the cash generated to pay down debt. It's significant to note that while our total lots controlled grew over the two years, our lot options grew by more than 15,000 and our lots owned shrunk by more than 1800 as we focus on our land light strategies. On the far-right side of slide 21, you can see that our lot count decreased sequentially this quarter. This is partially due to being more selective with the new lots that we control during the quarter, as well as walking away from 2,463 lots, primarily during the due diligence period. We are re-underwriting deals right before land takes with current levels of incentives included. On slide 22, we show our land and land development spend for each quarter going back 5 years. You can see how that pivot to growth has impacted our land and land development spent. However, during the second quarter of '25, our land and land developments then was the lowest it has been in three quarters. This is another indication of our increased focus on ensuring it makes sense to move forward with existing land deals. Again, we are using current home prices, including the current high level of mortgage rate buy downs and other incentives, current construction costs, and current sales space to underwrite to a 20% loss internal rate of return. And then right before we are about to acquire the lots, we are re-underwriting them based on the then current conditions just to be sure that it still makes sense to go forward with the land purchase. We feel good that our new acquisitions will yield solid IRRs since we are building in huge incentives and slower paces. Our underwriting standards automatically self-adjust to any changes in market conditions. We are finding many opportunities in our markets and are very focused on growing our top and bottom lines for the long term. And this growth in lots controlled precedes growth and community count, which precedes growth and deliveries. We are very pleased with the trends. On slide 23, we show the percentage of our lots controlled via option increased from 45% in the second quarter of fiscal '15 to 85% in the second quarter of fiscal '25. This is the highest percentage of option lots we've ever had, continuing our strategic focus on land light. Turning now to slide 24, you see that we continue to have one of the highest percentages of land controlled via options compared to our peers. Needless to say, with the fourth highest percentage of option lots, we are significantly above the median. I want to clarify a point about our land position. If we were to exclude our own lots in backlog and QMIs as some of our peers do, our percentage would increase to 91%. On slide 25, compared to our peers, we have the third highest inventory turnover rate. High inventory terms are a key component of our overall strategy. We believe we have opportunities to continue to increase our use of land options and further improve our inventory terms in future periods. Our focus on pays versus price is evident here. Turning to slide 26, even after spending $220 million on land and land development, $27 million to retire our highest coupon debt, and $12 million on repurchasing common stock, we ended the second quarter with $202 million of liquidity, which is within our targeted liquidity range. This is the second quarter in a row that we have been fully invested. Turning now to slide 27, this slide shows our maturity ladder as of April 30, 2025. During the second quarter, we paid off early the remaining $27 million of the 13.5% notes, our highest cost debt that was scheduled to mature in February of 2026. This is the latest example of the steps we have taken over the past several years to improve our maturity ladder and reduce our interest costs. We remain committed to further strengthening our balance sheet going forward. Turning to slide 28, we show the progress we have made to date to grow our equity and reduce our debt. Starting on the upper left-hand part of the slide, we show the $1.3 billion growth in equity over the past few years. During the same period on the upper right-hand portion, you can see the $742 million reduction in debt. On the bottom of the slide, you can see that our net debt to net cap at the end of the second quarter of fiscal '25 was 51.4%, which is a significant improvement from our 146.2% at the beginning of fiscal '20. We still have more work to do to achieve our goal of 30%, but we are comfortable that we are on a path to achieve our targets soon. Given our remaining $225 million of deferred tax assets, we will not have to pay federal income taxes on approximately $700 million of future pre-tax earnings. This benefit will continue to significantly enhance our cash flow in years to come and will accelerate our growth plans. Regarding guidance, given the volatility and the difficulty in projecting margins with moving interest rates and volatility in general, we will focus our guidance only on the next quarter. Our financial guidance assumes no adverse changes in current market conditions, including no further deterioration in our supply chain or material increases in mortgage rates, tariffs, inflation, or cancellation rates. Keep in mind, some materials have already increased in cost in anticipation of tariffs. Our guidance assumes continued extended construction cycle times, averaging five months compared to our pre-COVID cycle times for construction of approximately four months. It also seems that we continue to be more reliant on QMI sales, which makes forecasting gross margins more difficult. Our guidance assumes continued use of mortgage rate buydowns and other incentives similar to recent months. Further, it excludes any impact to SG&A expense from our Phantom stock expense related solely to the stock price movement from the $96.80 stock price at the end of the second quarter of fiscal $25. Slide 29 shows our guidance for the third quarter of fiscal '25 compared to actual results for the second quarter of '25. Our expectation for total revenues for the third quarter is between $750 million and $850 million. The midpoint of our total revenue guidance would be up 17% compared to the second quarter. Adjusted gross margin is expected to be in the range of 17% to 18%. At the midpoint, it would be up slightly compared to the second quarter. This is lower than a typical gross margin, particularly because of the increased cost of mortgage rate buydowns and our focus on pace versus price. We expect the range of SG&A as a percentage of total revenues to be between 11% and 12%, which is still higher than usual. One of the reasons our SG&A is running a little high is that we are gearing up for significant community count growth, and we have to make new hires in advance of those communities. Our expectations for adjusted pre-tax income for the third quarter is between $30 million and $40 million dollars, which would be higher than the second quarter. Moving to slide 30, we show all of the guidance we gave in the third quarter. The only two lines on here that we have not mentioned are income from unconsolidated joint ventures and adjusted EBITDA. We expect income from joint ventures to be between $15 million and $25 million, and our guidance for adjusted EBITDA is between $60 million and $70 million. Turning to slide 31, we show that our return on equity was 27%. Over the last 12 months, we are the second highest amongst our mid-sized peers shown in the dark green on the slide, and the third highest, including the larger peer group. Obviously, this is helped by our higher leverage. On slide 32, we show that compared to our peers, we have one of the highest adjusted EBITDA returns on investment at 26.1%. On this basis, we are the highest amongst the mid-sized peers and fourth highest overall. While our ROE was helped by our leverage, our adjusted EBIT return on investment is a true measure of pure home building operating performance. With the highest among our mid-sized peers and among the highest of all peers regardless of size, we believe we are striking a good balance between pace and price, which is delivering industry leading ROIs and ROEs. As our leverage continues to come down, we believe we will not only have industry leading EBIT ROIs, but also have one of the leading pre-tax ROIs as well. Over the last several years, we've consistently had one of the highest even ROIs among our peers. Eventually, investors will recognize our consistent superior returns on capital and significantly improved balance sheet. Given our rapidly growing book value, we think it would be appropriate to consider a variety of metrics including EBIT return on investment, enterprise value to EBITDA, and our price to earnings multiple when establishing a fair value for our stock. We believe when all of the fundamental financial metrics are considered, our stock is one of the most compelling values in the industry. On slide 33, we show our price to book multiples compared to our peers, and we are right around the median for mid-size mid-sized home builders. On slide 34, we show the trailing 12-month price to earnings ratio for us and our peer group based on our price to earnings multiple of 3.89 times at Monday's stock price of $109.85. We are trading at a 53% discount to the home building industry average PE ratio if you consider all public builders and a 41% discount from considering our mid-sized peers. We recognize that our stock may trade at a discount to the group because of our higher leverage, but our leverage has been shrinking, and our equity has been growing rapidly. On slide 35, we show that despite our extremely high ROE, there are a number of peers that have a higher price to book ratio than us. This slide more visually demonstrates how much we are undervalued relative to other builders when looking at the relationship between ROE and price to book. A very similar result exists when looking at ROE to price to earnings. On slide 36, you can see an even more glaring disconnect with our high even ROI and our PE. We have the fourth highest EBIT ROI, and yet our stock trades at the lowest multiple earnings -- multiple to earnings of the group. These last 4 slides further emphasize our point that gives our high return on equity and return on investment combined with our rapidly improving balance sheet, we believe our stock continues to be the most undervalued in the entire universe of public home builders. I'll now turn it back over to Ara for some closing remarks. Ara Hovnanian Thanks, Brad. While we met most expectations this quarter, we remain vigilant given the uncertainty in the broader economy. We're closely monitoring our communities and adjusting our local strategies accordingly. One particular area of focus that we talked about quite a bit is burning through assets that are underperforming because of when we control the lots and replacing them with lots being underwritten with current levels of incentives. Those should produce better returns. While we are still performing well compared to our peers, whether you look at sales absorption levels, ROE or ROI, as we move forward, we continue to be very disciplined in our underwriting process for all new land deals. Fortunately, with 85% to 91% of our lots controlled through options, we have the ability to find win-win alternatives with our land sellers. We're rapidly replenishing our land supply with more profitable new communities. You have to look at our historical ROIs and believe that we can replenish our land with good returns. We're continuing to monitor and adjust home pricing on a community-by-community basis. We're hyperfocused on improving our inventory turnover and continuing to deliver strong ROE and ROI. That concludes our formal comments, and we'll be happy to turn it over for Q&A. Operator (Operator Instructions) (inaudible) Unidentified Participant Hey, good morning. Thanks for all the detail on vintage land relative to incentives. So I understand that you're now assuming a higher level of incentives on recent land purchases, but does this mean you've actually seen lower land prices on lease and acquisitions? Because that seems a little surprising based on the commentary we've gotten from other builders about land prices still remaining sticky. Otherwise, it seems that you would have a tough time making deals to meet your own driving hurdles. Ara Hovnanian Land sellers are definitely the last to adjust prices, but we're able to find enough opportunities to replenish our land supply at dramatically better returns. It obviously varies by market. It's tougher in some markets. It's easier in other markets, so we're focused on getting a good geographic mix. But we're definitely able to find parcels that meet our historic return hurdles, which are still our current return targets in new land acquisitions even with our assumed 10.5% average incentive and with the current sales pace. Unidentified Participant Okay, thanks, that makes sense. Are you able to maybe provide a bit more detail on what market you're specifically seeing like easier terms I guess with the landfill? Ara Hovnanian Well, markets that I mentioned that historically, well, I shouldn't say historically, that currently are yielding better results include Delaware, Virginia, Southeast Coastal, Charleston areas, New Jersey and Maryland as examples. Definitely finding it easier to pencil opportunities there at the moment. But having said that, even the more difficult markets, we're finding opportunities that yield appropriate returns. Unidentified Participant Okay, got it, thank you. And your margin guidance for next quarter in the flat trend, but given that the demand environment has not materially improved since the previous quarter, and I'm guessing your incentives are still running at EBIT levels, is there anything besides the typical seasonal uplift in margins that gives you the confidence to achieve this? Ara Hovnanian Well, I mean, again, part of it is based on a community-by-community analysis looking at our backlog and also knowing our efforts in cost reduction, which is definitely an opportunity right now. Brad O'Connor But keep in mind the range we gave is 17% to 18% and the quarter that just ended with 17.3%. So it's not like that midpoint is significantly different than what we just performed. I think what you said is probably the right way to think about it, it's kind of stayed where it's been, it's running where it's where you've seen it from the second quarter, maybe a slight uplift in the next, but not much. Operator Alex Barron, Housing Research Center. Alex Barron Thank you, gentlemen, and congrats on a good performance, I guess in a tough environment. I wanted to ask about the current incentive structure that you guys have. Is it primarily still like closing costs and rate buy downs, or are you guys doing some price adjustments as well? Ara Hovnanian All of the above, the mortgage rate buydowns are typically on homes that can deliver in 90 days for homes that are -- because, by the way, it becomes cost prohibitive to do it further out. But on homes that do deliver out beyond the 90 days, we offer a cost price reduction or some other kind of incentive on upgrades and options in lieu of a mortgage rate buydown. So it's typically one or the other, but in some cases, we offer no incentives in some of our prime properties. Alex Barron And I know a couple of years ago you guys kind of switched to focus more heavily on spec building than in the past. Has that thought process changed? Are you guys moving back towards more balance between built to order or you guys sticking with a heavy focus on spec building and what's the thought process there? Ara Hovnanian As we mentioned, we actually hit our peak, our highest level of QMI sales. We call them QMIs, quick move-in homes at 79%, and that is still part of our strategy going forward. And one of the main reasons is that, when it's within 90 days of delivery you can affordably pay for a mortgage rate buydown. It's difficult if you can't deliver it in 90 days and looking at a new build contract, that's difficult to achieve in 90 days. So I'd say at the moment, it's still absolutely part of our strategy. Alex Barron Got it. And if I could ask one more, as far as the impairments, even though it was only $3 million, how many communities were involved and what markets, if you can answer that? Brad O'Connor David, you want to answer that one? David Mitrisin Yeah, it was just one community in Ohio. It was the impairment for [$1 million] and the rest was related to walkaways (inaudible) -- Brad O'Connor And the walkaways were primarily during the due diligence periods. Operator Jay McCanless, Wedbush. Jay McCanless The first one, could you give us a little commentary on what you've seen so far in May and any improvements or otherwise relative to what you saw in April? Ara Hovnanian I'd say overall, May is pretty much status quo with what we reported for April. Jay McCanless And then Ara, you were talking about some of the older vintage land I guess at the current sales pace, assuming no change in incentives or rates, how long do you think it's going to take you to clear out the 22 and I think you said West Coast for 21. How long to clear that out you think? Ara Hovnanian Oh, we haven't done that exact analysis. Obviously, in some geographies, we're already cleared out. In others, we may have two or three years out. So it's a community-by-community thing and to be honest, we just haven't looked at how that clears the system and when, but needless to say, I mean, it's only -- I believe the 22 vintage was about 10% of our lots, somewhere around that number. So it's just not a huge part. 21 on the West Coast is a lower percentage than 10%. So we're just balancing and looking to burn through those. Now having said that, the 23 and 24 vintages were typically underwritten at close to 8% margin, 8% incentives versus our 10%. So they're a little bit below our target ROIs but not dramatically below. Jay McCanless And as part of that and part of the reason I asked that is, we're all, I think not only for Hovnanian but for the group looking for when gross margins might bottom and just any type of commentary you can give on that and especially, I know it's tough because you are all doing QMIs and a lot of option deals, but is there any visibility in sight for bottom-end gross margins for Hovnanian? Ara Hovnanian Well, I would hope that we're near a bottom now and then, we've kind of given our guidance for next quarter, which is pretty flat with our second quarter in terms of gross margins, up slightly at the midpoint. So if you could call that a bottom, then we're there, but as you pointed out, with a QMI strategy and with a quarter like this where we sell almost 40% of our quarterly deliveries in the quarter, it's hard to really accurately project and as you get further out a quarter or beyond a quarter, it's even more difficult. Right now, we're just doing the same playbook that we've done for years, underwriting at current levels and we're marking to market to move the older inventory if it's performing under our current target levels. Jay McCanless If I could sneak one more in, kind of thinking about the back half of the calendar year. Potential increases in lumber prices may be coming, but at the same time we're hearing from some of your competitors that labor costs are getting cheaper. We saw drywall prices came down today, I guess, you guys have done a great job getting the build cost down, but with some of these cross currents, and I think especially with the lumber one probably being most likely to occur, how are you thinking about construction costs in the back half of the year? Ara Hovnanian I think other than the unknown of lumber, we feel pretty good about it. Some of the material costs may be impacted by tariffs. On the other hand, labor recognizes the slower market, so we're making some gains on that. So at the moment, I'd say we're optimistic that other than lumber, which is a big unknown, that we can continue to slightly reduce our construction costs. Jay McCanless Okay, great. That's all I have. Thank you. Brad O'Connor Okay, thank you. Operator Thank you. I'm showing no further questions at this time. I'll now come back to Ara Hovnanian for closing remarks. Ara Hovnanian Great. Well, thank you very much. Again, we're satisfied with the quarter given the difficult environment, but we look forward to producing higher returns, more in keeping with our historic standards as we replenish our land supply underwritten at today's market. Thank you, and we look forward to reporting better results. Thanks. Operator This concludes our conference call for today. Thank you for participating. Have a nice day. All parties may now disconnect. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
06-05-2025
- Business
- Yahoo
Hovnanian Enterprises Announces Second Quarter Fiscal 2025 Earnings Release and Conference Call
Hovnanian Enterprises, Inc. MATAWAN, N.J., May 06, 2025 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, will release financial results for the second quarter ended April 30, 2025, the morning of Tuesday, May 20, 2025. The Company will webcast its second quarter earnings conference call at 11:00 a.m. (ET) on Tuesday, May 20, 2025. The conference call and accompanying slide presentation will be webcast live through the 'Investor Relations' section of Hovnanian Enterprises' website at It is suggested that participants access the webcast event page at least five minutes before the live event. 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 A replay of the call will be available via webcast on the Investor Relations section of the website 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 To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@ or sign up at Contact: Brad G. O'Connor Chief Financial Officer 732-747-7800 Jeffrey T. O'Keefe Vice President of Investor Relations 732-747-7800
Yahoo
25-02-2025
- Business
- Yahoo
Hovnanian Enterprises First Quarter 2025 Earnings: EPS Beats Expectations, Revenues Lag
Revenue: US$673.6m (up 13% from 1Q 2024). Net income: US$25.5m (up 26% from 1Q 2024). Profit margin: 3.8% (up from 3.4% in 1Q 2024). The increase in margin was driven by higher revenue. EPS: US$3.92 (up from US$3.11 in 1Q 2024). All figures shown in the chart above are for the trailing 12 month (TTM) period Revenue missed analyst estimates by 4.6%. Earnings per share (EPS) exceeded analyst estimates by 32%. Looking ahead, revenue is forecast to grow 9.8% p.a. on average during the next 2 years, compared to a 5.6% growth forecast for the Consumer Durables industry in the US. Performance of the American Consumer Durables industry. The company's shares are down 22% from a week ago. You should always think about risks. Case in point, we've spotted 1 warning sign for Hovnanian Enterprises you should be aware of. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
25-02-2025
- Business
- Yahoo
Hovnanian Enterprises First Quarter 2025 Earnings: EPS Beats Expectations, Revenues Lag
Revenue: US$673.6m (up 13% from 1Q 2024). Net income: US$25.5m (up 26% from 1Q 2024). Profit margin: 3.8% (up from 3.4% in 1Q 2024). The increase in margin was driven by higher revenue. EPS: US$3.92 (up from US$3.11 in 1Q 2024). All figures shown in the chart above are for the trailing 12 month (TTM) period Revenue missed analyst estimates by 4.6%. Earnings per share (EPS) exceeded analyst estimates by 32%. Looking ahead, revenue is forecast to grow 9.8% p.a. on average during the next 2 years, compared to a 5.6% growth forecast for the Consumer Durables industry in the US. Performance of the American Consumer Durables industry. The company's shares are down 22% from a week ago. You should always think about risks. Case in point, we've spotted 1 warning sign for Hovnanian Enterprises you should be aware of. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
