Hovnanian Enterprises, Inc. · NYSE:HOV
Hovnanian Enterprises — Q2 2024 Earnings Presentation
43 slides from Hovnanian Enterprises's earnings presentation, May 22, 2024
Slide 1: Review of Financial Results Second Quarter Fiscal 2024
Review of Financial Results Second 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 gain on extinguishment of debt, net (“Adjusted EBITDA”) are not U.S. generally acce
Slide 4: Recent company performance
Recent company performance
Slide 5: Second Quarter Results Compared to Guidance
Second Quarter Results Compared to Guidance ($ in millions) Guidance Actuals Q2 2024(1) Q2 2024 Total Revenues $675 - $775 $708 Adjusted Homebuilding Gross Margin(2) 21.5% - 23.0% 22.6% Total SG&A as Percentage of Total Revenues(3) 11.0% - 12.0% 11.2% Adjusted EBITDA(4) $80 - $90 $102 Adjusted Incom
Slide 6: Second Quarter Results Compared to Last Year
Second Quarter Results Compared to Last Year ($ in millions) Total Revenues Adjusted Gross Margin(1) $704 $708 20.9% 22.6% Q2 2023 Q2 2024 Q2 2023 Q2 2024 Adjusted EBITDA(2) Adjusted Income Before Income Taxes(3) $102 $70 $87 $46 Q2 2023 Q2 2024 Q2 2023 Q2 2024 (1) Adjusted homebuilding gross margin
Slide 7: Quarterly Contracts Per Community
Quarterly Contracts Per Community 18.3 15.0 13.5 13.9 13.0 11.4 10.9 10.6 11.3 10.5 1997 - Second Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2 2021 Q2 2022 Q2 2023 Q2 2024 2002 Quarter Second Average Quarter Since Average 1997 Note: Excludes unconsolidated joint ventures. 7
Slide 8: 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 July 2023 - May 2024 July 2022 - May 2023 Source: Freddie Mac. 8
Slide 9: Contracts Per Community
Contracts Per Community Excluding Build for Rent Including Build for Rent 4.7 4.7 4.4 4.5 4.1 4.3 4.2 4.0 4.0 3.7 3.7 February February March March April April 2023 2024 2023 2024 2023 2024 Number Of 4 4 4 5 5 4 Sundays Note: Excludes unconsolidated joint ventures. 9
Slide 10: Contracts Per Community vs Peers
Dream 7.4 Finders (Mar Q1) Beazer (Mar Q2) 9.0 Pulte (Mar Q1) 9.0 Taylor 11.1 Morrison (Mar Q1) Note: Only peers with March quarter ends are shown on this slide. Century Communities (Mar 11.3 Q1) Contracts Per Community MDC (Mar Q1) 11.5 TRI Pointe (Mar Q1) 11.6 M/I Homes (Mar Q1) 11.6 Hovnanian 13.
Slide 11: Farmhouse
- Farmhouse 11
Slide 12: Contracts Per Community Year-Over-Year Change
Contracts Per Community Year-Over-Year Change For the three months ended March 31, 2024, compared with the three months ended March 31, 2023 53% 31% 26% 26% 12% 16% 6% 7% -3% -1% -8% -32% Finders (Mar Q1) Meritage (Mar Q1) Pulte (Mar Q1) MDC (Mar Q1) Communities (Mar Q1) LGI Homes (Mar Q1) Beazer (M
Slide 13: Total Website Visits in April
Total Website Visits in April 916,810 936,241 826,050 809,591 737,847 755,845 April 2019 April 2020 April 2021 April 2022 April 2023 April 2024 13
Slide 14: Percentage of Our Homebuyers That Used Buydowns
Percentage of Our Homebuyers That Used Buydowns 79% 73% Q1 2024 Q2 2024 87% 82% 72% 75% 72% 72% November 2023 December 2023 January 2024 February 2024 March 2024 April 2024 14
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 01/31/24 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 Apr-21 1.4 Jul-21 1.5 Oct-21 1.5 o 789 QMIs at 04/30/24, excluding mod
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 Many communities have had multiple price increases. 69% 71% 59% 54% 37% 30% Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 16
Slide 17: Community Count
Community Count Community count expected to grow further in fiscal 2024. 135 132 128 129 122 17 14 16 23 20 114 118 113 109 102 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Wholly Owned Unconsolidated Joint Ventures Note: Excludes our multi-community unconsolidated joint venture in the Kingdom of Saudi A
Slide 18: Lots Controlled
Lots Controlled 36,841 33,576 31,726 29,123 28,657 29,487 29,584 25,867 20,789 21,598 24,389 20,402 8,334 8,255 7,889 7,337 7,709 7,257 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Owned Optioned Note: Excludes unconsolidated joint ventures. 18
Slide 19: Percentage of Optioned Lots
Percentage of Optioned Lots 80% 69% 71% 60% 60% 63% 49% 51% 53% 45% Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 2019 Q2 2020 Q2 2021 Q2 2022 Q2 2023 Q2 2024 Note: Excludes unconsolidated joint ventures. 19
Slide 20: Percentage of Lots Optioned vs Peers
MDC (Mar Q1) 19% LGI Homes (Mar Q1) 22% KB Home (Feb Q2) 28% Meritage (Mar Q1) 31% Note: Excludes unconsolidated joint ventures. TRI Pointe (Mar Q1) 46% Source: Peer SEC filings and press releases as of 05/22/2024. % of Lots Optioned Toll (Jan Q1) M/I Homes (Mar Q1) 49% 50% Beazer (Mar Q2) 50% Pulte
Slide 21: Inventory Turns, Last Twelve Months
Inventory Turns (COGS), Last Twelve Months 2.8x 1.7x 1.8x 1.3x 1.4x 1.1x 1.2x 0.9x 1.0x 1.0x 1.0x 1.0x 1.0x 1.0x 0.8x 0.6x Toll (Jan Q1) Lennar (Feb Q1) Communities (Mar Q1) Finders (Mar Q1) Beazer (Mar Q2) DR Horton (Mar Q2) Morrison (Mar Q1) KB Home (Feb Q2) Hovnanian (Apr Q2) Meritage (Mar Q1) Pu
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 $125 $439 $125 $125 $245 $125 Target $125 liquidity $125 $332 $339 $331 range $170 $241 $256 $274 $228 $232 $209 $181 $183 $
Slide 23: Debt Maturity Profile
Debt Maturity Profile April 30, 2024 $430 ($ in millions) 11.75% Total Debt Outstanding $957 Annual Interest Incurred $95.4 $225 8.00% $91 $125 (1) $81 $90 13.50% 10.00% 5.00% $40 5.00% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q4 Q4 Q2 '24 '24 '24 '25 '25 '25 '25 '26 '26 '26 '26 '27 '27 '27 '
Slide 24: Balance Sheet Metrics
Balance Sheet Metrics ($ in millions) Equity value (book) Total debt $647 $1,684 $582 $1,566 $383 $1,373 $1,291 $1,143 $175 $943 $(437) $(490) FYE 2019 FYE 2020 FYE 2021 FYE 2022 FYE 2023 Q2 2024 FYE 2019 FYE 2020 FYE 2021 FYE 2022 FYE 2023 Q2 2024 Note: total debt is reflective of the May 2024 debt
Slide 25: Guidance for Fiscal 2024 Third Quarter
Guidance for Fiscal 2024 Third Quarter ($ in millions) Actuals Guidance Q3 2023 Q3 2024(1) Total Revenues $650 $675 - $775 Adjusted Homebuilding Gross Margin(2) 23.2% 21.5% - 23.5% Total SG&A as Percentage of Total Revenues(3) 11.6% 11.0% - 12.0% Adjusted EBITDA(4) $109 $97 - $107 Adjusted Income Be
Slide 26: Guidance for Fiscal 2024
Guidance for Fiscal 2024 ($ in millions) Actuals Guidance FY 2023 FY 2024(1) Total Revenues $2,756 $2,750 - $3,000 Adjusted Homebuilding Gross Margin(2) 22.7% 21.5% - 23.0% Total SG&A as Percentage of Total Revenues(3) 11.1% 11.0% - 12.0% Adjusted EBITDA(4) $427 $395 - $430 Adjusted Income Before In
Slide 27: ROE, Last Twelve Months
LGI Homes (Mar Q1) TRI Pointe (Mar Q1) 10.6% 12.5% Century Communities (Mar Q1) MDC (Mar Q1) 12.6% 12.7% Beazer (Mar Q2) Source: Peer SEC filings and press releases as of 05/22/2024. Taylor Morrison (Mar Q1) Lennar (Feb Q1) ROE, Last Twelve Months KB Home (Feb Q2) 14.8% 14.8% 15.8% 15.9% Meritage (M
Slide 28: Consolidated EBIT ROI, Last Twelve Months
Consolidated EBIT ROI, Last Twelve Months 77.0% 31.9% 33.5% 33.6% 20.1% 20.8% 23.3% 24.4% 24.9% 25.8% 18.0% 18.9% 14.2% 15.3% 17.7% 9.4% Toll (Jan Q1) Lennar (Feb Q1) Finders (Mar Q1) Beazer (Mar Q2) Meritage (Mar Q1) MDC (Mar Q1) Pulte (Mar Q1) Communities (Mar Q1) LGI Homes (Mar Q1) DR Horton (Mar
Slide 29: Price to Book Value
Price to Book Value 5.54 3.32 2.33 1.94 2.03 2.05 1.43 1.69 1.16 1.17 1.24 1.30 1.38 1.40 0.80 Toll (Jan Q1) Lennar (Feb Q1) Finders (Mar Q1) Beazer (Mar Q2) Meritage (Mar Q1) Pulte (Mar Q1) Communities (Mar Q1) LGI Homes (Mar Q1) DR Horton (Mar Q2) Morrison (Mar Q1) M/I Homes (Mar Q1) NVR (Mar Q1)
Slide 30: Price to Earnings Ratio
Price to Earnings Ratio 16.00 12.90 11.49 9.81 9.98 10.12 10.15 10.22 10.60 9.56 8.51 8.57 7.54 5.67 5.69 Toll (Jan Q1) Lennar (Feb Q1) Finders (Mar Q1) Beazer (Mar Q2) Meritage (Mar Q1) Pulte (Mar Q1) Communities (Mar Q1) DR Horton (Mar Q2) LGI Homes (Mar Q1) M/I Homes (Mar Q1) Morrison (Mar Q1) NV
Slide 31: Comparison to Dream Finders
Comparison to Dream Finders Hovnanian Dream Finders % of optioned lots 80% 82% Inventory turnover 1.7 1.8 Net debt to cap 55.1% 44.0% ROE (trailing twelve-months) 39.5% 32.3% EBIT ROI (trailing twelve-months) 33.5% 25.8% PE 5.69 10.12 Price to book 2.05 3.32 Note: net debt to cap is reflective of th
Slide 32: Appendix
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Slide 33: Profitable financial services business
Profitable financial services business Financial services overview Origination portfolio for the six months ended April 30, 2024 Complements HOV’s homebuilding operations 0.3% Prime Allows ability for interest rate buy- VHA / FHA down programs for homebuilder 34.2% customers Nonconforming Prov
Slide 34: Credit Quality of Homebuyers
Credit Quality of Homebuyers Fiscal Year 2023 Second Quarter 2024 o Average LTV: 82% o Average LTV: 83% o Average CLTV: 82% o Average CLTV: 83% o ARMs: 0.9% o ARMs: 0.0% o FICO Score: 743 o FICO Score: 743 o Capture Rate: 70% o Capture Rate: 79% Note: Loans originated by our wholly-owned mortgage ba
Slide 35: Monthly Contracts Per Community
Monthly Number of contracts Sundays 687 May-20 5 May-20 5.3 413 May-21 5 May-21 4.3 336 May-22 5 May-22 3.3 456 May-23 4 May-23 4.3 745 Jun-20 4 Jun-20 6.0 384 Jun-21 4 Jun-21 4.0 232 Jun-22 4 Jun-22 2.1 603 Jun-23 4 Jun-23 6.0 794 Jul-20 4 Jul-20 6.8 Note: Excludes unconsolidated joint ventures. 41
Slide 36: Land Positions by Geographic Segment
Land Positions by Geographic Segment April 30, 2024 Owned Excluding Segment Mothballed Lots Optioned Lots Total Lots Mothballed Lots Northeast 1,703 6 15,134 16,843 Southeast 896 0 6,372 7,268 West 4,262 390 8,078 12,730 Consolidated Total 6,861 396 29,584 36,841 Unconsolidated Joint Ventures 2,742
Slide 37: Phantom Stock Impact
Phantom Stock Impact ($ in millions, except stock prices) Reported Incremental Total SG&A Total SG&A Ratio Stock Price at Reported Total SG&A Phantom Stock Adjusted for Adjusted for end of quarter Total SG&A Ratio Benefit (Expense) Phantom Stock Phantom Stock Q1 2021 $51.16 - - - - - Q2 2021 $132.59
Slide 38: Reconciliation of income before income taxes excluding land-related charges
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. April 30, 2024 Reconciliation of income before income taxes excluding land-related charges and gain on extinguishment of debt
Slide 39: Reconciliation of Gross Margin
Reconciliation of Gross Margin Hovnanian Enterprises, Inc. April 30, 2024 Gross margin (In thousands) Homebuilding Gross Margin Homebuilding Gross Margin Three Months Ended Six Months Ended April 30, April 30, 2024 2023 2024 2023 (Unaudited) (Unaudited) Sale of homes $ 686,929 $ 670,708 $ 1,260,565
Slide 40: Reconciliation of Adjusted EBITDA to Net Income
Reconciliation of Adjusted EBITDA to Net Income Hovnanian Enterprises, Inc. April 30, 2024 Reconciliation of adjusted EBITDA to net income (In thousands) Three Months Ended Six Months Ended April 30, April 30, 2024 2023 2024 2023 (Unaudited) (Unaudited) Net income $ 50,836 $ 34,146 $ 74,740 $ 52,862
Slide 41: Reconciliation of Inventory Turnover
Reconciliation of Inventory Turnover Hovnanian Enterprises, Inc. April 30, 2024 Calculation of Inventory Turnover(1) TTM For the quarter ended ended (Dollars in thousands) 7/31/2023 10/31/2023 1/31/2024 4/30/2024 4/30/2024 Cost of sales, excluding interest $483,990 $637,148 $449,213 $531,502 $2,101,
Slide 42: Key credit and balance sheet metrics reconciliations
Key credit and balance sheet metrics reconciliations October 31, April 30, 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 $85,557 Senior notes and credit facilities (net of discounts, premiums and debt
Slide 43: Hovnanian Enterprises, Inc.
ovnanian Enterprises: Inc.
Hovnanian Enterprises — Q2 2024 Earnings Presentation on 6ix