Hovnanian Enterprises, Inc. · NYSE:HOV
Hovnanian Enterprises — Q3 2024 Earnings Presentation
47 slides from Hovnanian Enterprises's earnings presentation, Dec 5, 2023
Slide 1: Review of Financial Results Third Quarter Fiscal 2024
Review of Financial Results Third Quarter Fiscal 2024
Slide 2: Forward-Looking Statements
Forward-Looking Statements All statements in this presentation 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 risk
Slide 3: Non-GAAP Financial Measures
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 loss (gain) on extinguishment of debt, net (“Adjusted EBITDA”) are not U.S. general
Slide 4: Recent company performance
Recent company performance
Slide 5: Third Quarter Results Compared to Guidance
Third Quarter Results Compared to Guidance ($ in millions) Guidance Actuals Q3 2024(1) Q3 2024 Total Revenues $675 - $775 $723 Adjusted Homebuilding Gross Margin(2) 21.5% - 23.5% 22.1% Total SG&A as Percentage of Total Revenues(3) 11.0% - 12.0% 12.4% Adjusted EBITDA(4) $97 - $107 $131 Adjusted Incom
Slide 6: Third Quarter Results Compared to Last Year
Third Quarter Results Compared to Last Year ($ in millions) Total Revenues Adjusted Gross Margin(1) $723 23.2% 22.1% $650 Q3 2023 Q3 2024 Q3 2023 Q3 2024 Adjusted EBITDA(2) Adjusted Income Before Income Taxes(3) $131 $100 $109 $75 Q3 2023 Q3 2024 Q3 2023 Q3 2024 (1) Adjusted homebuilding gross margi
Slide 7: Contracts, including domestic unconsolidated joint ventures
Contracts, including domestic unconsolidated joint ventures Y-o-Y % 2024 2023 Change YTD 4,436 4,107 8% Q1 1,279 893 43% Q2 1,761 1,614 9% Q3 1,396 1,600 -13% Last five weeks 587 479 23% 7
Slide 8: Quarterly Contracts Per Community
Quarterly Contracts Per Community Excluding Build for Rent Including Build for Rent 14.2 9.5 19.0 7.4 11.4 11.0 11.6 11.6 9.9 9.4 10.0 9.1 7.3 1997 - Third Q3 2017 Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022 Q3 2023 Q3 2024 2002 Quarter Third Average Quarter Since Average 1997 Note: Excludes unconsolida
Slide 9: Mortgage Rate Movements
Mortgage Rate Movements 8.00% 7.50% 7.00% 6.50% 6.00% 5.50% 5.00% 4.50% July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug July 2023 - Aug. 2024 July 2022 - Aug. 2023 Source: Freddie Mac. 9
Slide 10: Contracts Last Five Weeks
Contracts Last Five Weeks 587 479 2023 2024 Note: Includes unconsolidated joint ventures but excludes our multi-community unconsolidated joint venture in the Kingdom of Saudi Arabia. Note: 2024 contracts are from the week ending July 21, 2024 through the week ending August 18, 2024. The 2023 contrac
Slide 11: Contracts Per Community
Contracts Per Community Excluding Build for Rent Including Build for Rent 6.0 4.3 3.8 3.5 3.4 3.2 4.2 3.7 3.6 3.2 3.3 3.1 May May June June July July Number 2023 2024 2023 2024 2023 2024 Of 4 4 4 5 5 4 Sundays Note: Excludes unconsolidated joint ventures. 11
Slide 12: Contracts Per Community – Trailing Twelve Months
Contracts Per Community – Trailing Twelve Months For the trailing twelve months ended June 30, 2024 51.1 51.2 52.3 40.4 40.4 42.0 39.2 35.5 36.0 30.6 31.8 27.3 Hovnanian (as if June TRI Pointe (Jun Q2) Pulte (Jun Q2) MDC (Jun Q2) Meritage (Jun Q2) Communities (Jun Q2) Finders (Jun Q2) LGI Homes (Jun
Slide 13: Contracts Per Community – Year-Over-Year Change
Contracts Per Community – Trailing Twelve Months Year-Over-Year Change For the trailing twelve months ended June 30, 2024, compared with the trailing twelve months ended June 30, 2023 82% 28% 29% 31% 12% 13% 13% 18% 5% 5% 7% -23% Communities (Jun Q2) TRI Pointe (Jun Q2) Pulte (Jun Q2) Meritage (Jun
Slide 14: Percentage of Our Homebuyers That Used Buydowns
Percentage of Our Homebuyers That Used Buydowns 79% 73% 71% Q1 2024 Q2 2024 Q3 2024 87% 82% 72% 75% 72% 72% 72% 72% 68% November December January February March April May June July 2023 2023 2024 2024 2024 2024 2024 2024 2024 Note: The percentages represent the usage of buydowns on our deliveries. 1
Slide 15: Quick Move In Homes Per Community
# Homes / Community Jan-18 3.9 Apr-18 4.2 Jul-18 4.5 Oct-18 4.6 Jan-19 4.4 Apr-19 4.4 Jul-19 5.3 Note: Excluding unconsolidated joint ventures and models. Oct-19 5.4 Jan-20 5.8 Apr-20 4.7 Jul-20 2.5 Oct-20 2.3 Jan-21 2.0 o 192 finished QMIs at 07/31/24 Apr-21 1.4 Jul-21 1.5 Oct-21 1.5 Jan-22 1.6 o 1
Slide 16: Raising Home Prices in Many of Our Communities
Raising Home Prices in Many of Our Communities Percentage of communities where we raised prices 69% 71% 59% 54% 37% 30% 33% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 16
Slide 17: Community Count
Community Count Community count expected to grow further in fiscal 2025. 146 132 20 122 23 20 126 109 102 Q3 2023 Q2 2024 Q3 2024 Wholly Owned Unconsolidated Joint Ventures Note: Excludes our multi-community unconsolidated joint venture in the Kingdom of Saudi Arabia. 17
Slide 18: Lots Controlled
Lots Controlled Including domestic unconsolidated joint ventures, our total lots controlled were 39,516 42,580 as of July 31, 2024. 36,841 33,576 31,726 29,123 28,657 29,487 32,336 29,584 25,867 20,789 21,598 24,389 20,402 8,334 8,255 7,889 7,337 7,709 7,257 7,180 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1
Slide 19: Percentage of Optioned Lots
Percentage of Optioned Lots 82% 73% 66% 68% 59% 60% 61% 52% 46% 48% Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Q3 2020 Q3 2021 Q3 2022 Q3 2023 Q3 2024 Note: Excludes unconsolidated joint ventures. 19
Slide 20: Percentage of Lots Optioned vs Peers
LGI Homes (Jun Q2) 22% MDC (Jun Q2) 24% Meritage (Jun Q2) 34% KB Home (May Q2) 39% Note: Excludes unconsolidated joint ventures. TRI Pointe (Jun Q2) 48% Source: Peer SEC filings and press releases as of 08/22/2024. % of Lots Optioned Toll (Jan Q1) M/I Homes (Jun Q2) 48% 53% Pulte (Jun Q2) 53% Beazer
Slide 21: Inventory Turns (COGS), Last Twelve Months
Inventory Turns (COGS), Last Twelve Months 2.8x 1.7x 1.7x 1.5x 1.2x 1.3x 1.0x 1.0x 1.0x 1.0x 1.0x 1.1x 0.8x 0.9x 0.9x 0.5x TRI Pointe (Jun Q2) Toll (Jan Q1) Meritage (Jun Q2) Lennar (May Q2) Pulte (Jun Q2) MDC (Jun Q2) Communities (Jun Q2) Finders (Jun Q2) LGI Homes (Jun Q2) M/I Homes (Jun Q2) NVR (
Slide 22: Liquidity Position and Target
Liquidity Position and Target ($ in millions) $564 $464 $125 $457 $456 $125 $399 $381 $125 $125 $357 $366 $353 $334 $125 $306 $308 $313 $311 $125 $282 $125 $271 $125 $125 $125 $251 $125 $125 $439 $125 $125 $245 Target $125 liquidity $125 $332 $339 $331 $125 range $170 $241 $256 $274 $228 $232 $209 $
Slide 23: Debt Maturity Profile
Debt Maturity Profile July 31, 2024 ($ in millions) Total Debt Outstanding $882 $430 Annual Interest Incurred $90.8 11.75% $225 8.00% $175 10.00% $125(1) $27 $25 13.50% 5.00% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q4 Q4 Q2 '24 '24 '24 '25 '25 '25 '25 '26 '26 '26 '26 '27 '27 '27 '27 '28 '28
Slide 24: Balance Sheet Metrics
Balance Sheet Metrics ($ in millions) Equity value (book) Total debt $794 $703 $582 $1,684 $1,566 $383 $1,373 $1,291 $175 $1,143 $1,014 $1,014 $(437) $(490) FYE FYE FYE FYE FYE Q3 2024 FYE FYE FYE FYE FYE FYE Q3 FYE 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 2024 Proj. Proj. Net deb
Slide 25: Guidance for Fiscal 2024
Guidance for Fiscal 2024 ($ in millions) Actuals Old Guidance New Guidance FY 2023 FY 2024(1) FY 2024(1) Total Revenues $2,756 $2,750 - $3,000 $2,900 - $3,050 Adjusted Homebuilding Gross 22.7% 21.5% - 23.0% 21.5% - 22.5% Margin(2) Total SG&A as Percentage of Total 11.1% 11.0% - 12.0% 11.0% - 12.0% R
Slide 26: ROE, Last Twelve Months
LGI Homes (Jun Q2) MDC (Jun Q2) 10.6% 10.8% Beazer (Jun Q3) Century Communities (Jun Q2) Taylor Morrison (Jun Q2) Source: Peer SEC filings and press releases as of 08/22/2024. TRI Pointe (Jun Q2) 12.8% 13.7% 13.8% 14.2% KB Home (May Q2) ROE, Last Twelve Months Lennar (May Q2) 15.7% 15.8% Meritage (J
Slide 27: Consolidated EBIT ROI, Last Twelve Months
Consolidated EBIT ROI, Last Twelve Months 76.5% 32.2% 32.7% 33.7% 20.8% 22.7% 23.5% 24.3% 25.2% 25.8% 16.7% 17.7% 17.7% 9.3% 12.5% 16.2% Toll (Jan Q1) Communities (Jun Q2) TRI Pointe (Jun Q2) NVR (Jun Q2) Meritage (Jun Q2) Lennar (May Q2) MDC (Jun Q2) Pulte (Jun Q2) Finders (Jun Q2) LGI Homes (Jun Q
Slide 28: Price to Book Value
Price to Book Value 6.54 3.01 2.09 2.31 2.33 1.75 1.87 1.25 1.26 1.38 1.48 1.51 1.18 1.19 0.78 Toll (Jan Q1) Communities (Jun Q2) TRI Pointe (Jun Q2) NVR (Jun Q2) Meritage (Jun Q2) Lennar (May Q2) Pulte (Jun Q2) Finders (Jun Q2) LGI Homes (Jun Q2) Hovnanian (Jul Q3) Beazer (Jun Q3) DR Horton (Jun Q3
Slide 29: Price to Earnings Ratio
Price to Earnings Ratio 18.16 11.86 12.09 12.49 10.62 9.22 9.25 9.35 9.51 9.52 9.57 8.05 8.15 6.40 6.48 Toll (Jan Q1) Communities (Jun Q2) TRI Pointe (Jun Q2) NVR (Jun Q2) Meritage (Jun Q2) Lennar (May Q2) Pulte (Jun Q2) Finders (Jun Q2) Hovnanian (Jul Q3) Beazer (Jun Q3) DR Horton (Jun Q3) M/I Home
Slide 30: ROE to Price to Book
ROE Price to Book NVR 3.5 6.5 (38.7%, 6.5) Dream 3.0 Finders DR Horton 2.5 Price to Book Value Pulte Lennar Hovnanian 2.0 Toll TRI KB Home 1.5 Century Pointe M/I Homes Communities Meritage 1.0 LGI Homes Taylor Morrison 0.5 Beazer 0.0 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% Return o
Slide 31: Income from Unconsolidated Joint Ventures
Income from Unconsolidated Joint Ventures ($ in millions) $60 $43 $37 $29 $29 $24 $17 $9 FY FY FY FY FY FY FY 2018 2019 2020 2021 2022 2023 2024 Nine month ended July 31, 2024 Mid-Point of FY 2024 Guidance 31
Slide 32: Why we use joint ventures?
Why we use joint ventures? Another method to get superior return on investments, similar to land light We receive a disproportionate share of upside performance, improving IRR and Net Profit dollars Additional capital allows us to invest in more communities, diversifying risk and leveraging fi
Slide 33: Land Light Deals: Joint Venture Single Community
Land Light Deals: Joint Venture Single Community Theoretical Wholly After Joint 5-Community Owned Venture Joint Venture Peak Capital $74M $14M $70M Return (IRR) 31% 47% 47% Community $82M $33M $165M Life Profit We could joint venture 4 additional deals with less peak capital and we can earn signific
Slide 34: Appendix
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Slide 35: ROI to Price to Book
ROI to Price to Book NVR 3.5 6.5 (76.5, 6.5) Dream 3.0 Finders DR Horton 2.5 Price to Book Value Pulte Toll Hovnanian 2.0 Lennar KB Home 1.5 Century M/I Homes Communities LGI Homes Meritage 1.0 Taylor TRI Pointe Morrison Beazer 0.5 0.0 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 76.5% 40.0% Consol
Slide 36: ROE to Price to Earnings Ratio
ROE to PE 16.0 18.2 NVR 38.7%, 18.2 14.0 Lennar LGI Homes KB Home DR Horton 12.0 Dream Price to Earnings Ratio TRI Pointe Finders 10.0 Century Pulte Communities Toll Taylor 8.0 Morrison M/I Homes Meritage Hovnanian 6.0 Beazer 4.0 2.0 0.0 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% Return on
Slide 37: Profitable financial services business
Profitable financial services business Financial services overview Origination portfolio for the nine months ended July 31, 2024 Complements HOV’s homebuilding operations 0.6% Prime Allows ability for interest rate buy- VHA / FHA down programs for homebuilder 34.1% customers Nonconforming Prov
Slide 38: Credit Quality of Homebuyers
Credit Quality of Homebuyers Fiscal Year 2023 Third Quarter 2024 o Average LTV: 82% o Average LTV: 82% o Average CLTV: 82% o Average CLTV: 82% o ARMs: 0.9% o ARMs: 0.0% o FICO Score: 743 o FICO Score: 748 o Capture Rate: 70% o Capture Rate: 81% Note: Loans originated by our wholly-owned mortgage ban
Slide 39: Monthly Contracts and Contracts Per Community
Monthly Number of contracts Sundays 735 Aug-20 5 Aug-20 6.6 383 Aug-21 5 Aug-21 3.7 215 Aug-22 4 Aug-22 2.0 352 Aug-23 4 Aug-23 3.5 634 Sep-20 4 Sep-20 5.7 390 Sep-21 4 Sep-21 3.5 192 Sep-22 4 Sep-22 1.7 324 Sep-23 4 Sep-23 3.2 549 Oct-20 4 Oct-20 4.7 Note: Excludes unconsolidated joint ventures. 49
Slide 40: Land Positions by Geographic Segment
Land Positions by Geographic Segment July 31, 2024 Owned Excluding Segment Mothballed Lots Optioned Lots Total Lots Mothballed Lots Northeast 1,986 6 16,424 18,416 Southeast 860 - 6,013 6,873 West 3,938 390 9,899 14,227 Consolidated Total 6,784 396 32,336 39,516 Unconsolidated Joint Ventures 2,223 -
Slide 41: Phantom Stock Impact
Phantom Stock Impact ($ in millions, except stock prices) Incremental Total SG&A Total SG&A Ratio Stock Price at Reported Reported Total Phantom Stock Adjusted for Adjusted for end of quarter Total SG&A SG&A Ratio Benefit (Expense) Phantom Stock Phantom Stock Q1 2021 $51.16 - - - - - Q2 2021 $132.59
Slide 42: Reconciliation of income before income taxes
Reconciliation of income before income taxes excluding land- related charges and gain on extinguishment of debt, net to income before income taxes Hovnanian Enterprises, Inc. July 31, 2024 Reconciliation of income before income taxes excluding land-related charges and loss (gain) on extinguishment o
Slide 43: Reconciliation of Gross Margin
Reconciliation of Gross Margin Hovnanian Enterprises, Inc. July 31, 2024 Gross margin (In thousands) Homebuilding Homebuilding Gross Margin Homebuilding Gross Margin Gross Margin Three Months Three Months Ended Nine Months Ended Ended July 31, July 31, April 30, 2024 2023 2024 2023 2024 (Unaudited)
Slide 44: Reconciliation of Adjusted EBITDA to Net Income
Reconciliation of Adjusted EBITDA to Net Income Hovnanian Enterprises, Inc. July 31, 2024 Reconciliation of adjusted EBITDA to net income (In thousands) Three Months Ended Nine Months Ended July 31, July 31, 2024 2023 2024 2023 (Unaudited) (Unaudited) Net income $ 72,919 $ 55,764 $ 147,659 $ 108,626
Slide 45: Reconciliation of Inventory Turnover
Reconciliation of Inventory Turnover Hovnanian Enterprises, Inc. July 31, 2024 Calculation of Inventory Turnover(1) TTM For the quarter ended ended (Dollars in thousands) 10/31/2023 1/31/2024 4/30/2024 7/31/2024 7/31/2024 Cost of sales, excluding interest $637,148 $449,213 $531,502 $547,332 $2,165,1
Slide 46: Key credit and balance sheet metrics reconciliations
Key credit and balance sheet metrics reconciliations October 31, July 31, 2019 2020 2021 2022 2023 2024 Nonrecourse mortgages secured by inventory, net of debt issuance costs $203,585 $135,122 $125,089 $144,805 $91,539 $115,357 Senior notes and credit facilities (net of discounts, premiums and debt
Slide 47: Hovnanian Enterprises, Inc.
ovnanian Enterprises: Inc.
Hovnanian Enterprises — Q3 2024 Earnings Presentation on 6ix