HOVNANIAN ENTERPRISES INC Q4 FY2024 earnings call

Ara Hovnanian reviewed fourth quarter and year-end results, commented on housing environment. Full-year revenues, gross margin, SG&A, EBITDA, and pretax income compared to guidance. Year-over-year comparisons of revenues, gross margin, EBITDA, and pretax income. Fourth quarter results impacted by hurricanes and tornado. Contracts growth: 48% YOY in Q4, 55% YOY in November. Mortgage rate trends and web traffic strength. Focus on pace vs price, use of mortgage rate buydowns. Brad O'Connor discussed community count (147 open for sale communities, 14% increase YOY), lot count (41,891 controlled lots, 7.8 year supply), land and land development spend ($318M in Q4, highest since 2010), balance sheet improvements, and guidance for Q1 2025.

Full-year revenues were $3 billion, slightly better than guidance midpoint. Adjusted gross margin was 22%, exactly at guidance midpoint. SG&A ratio was 11.4%, near guidance midpoint. Income from unconsolidated joint ventures was $52 million, slightly below guidance due to delayed deliveries. Adjusted EBITDA was $456 million, above high end of guidance range. Adjusted pretax income was $327 million, above high end of guidance range. Fourth quarter revenues were just under $1 billion, up 10% YOY. Gross margin was 21.7%, down YOY. Adjusted EBITDA was $159 million, adjusted pretax profits were $126 million. Fourth quarter contracts increased 48% YOY, contracts per community were 10.4, up 25% YOY. QMIs: 72% of sales in Q4, 7.9 per community, 72% of total sales in Q4, finished QMIs 233.

Fiscal 2025 expected substantial growth in deliveries and revenues. Q1 2025 guidance: total revenues between $650 million and $750 million. Adjusted gross margin expected to be in the range of 17.5% to 18.5%. SG&A as a percentage of total revenue expected to be between 13.5% and 14.5%. Income from joint ventures expected to be between $15 million and $30 million. Adjusted EBITDA expected to be between $55 million and $65 million. Adjusted pretax income expected to be between $25 million and $35 million.

Delayed deliveries in three communities due to utility connections. Subcontractor issues from rebuilding after hurricanes. Tornado damage to homes in a completed community. Volatility in mortgage rates affecting affordability and gross margins. Supply chain issues impacting construction cycle times. Prepayment penalties on debt affecting refinancing plans.

Q: Ara, drill in on pace vs price strategy and margin outlook.

A: Ara mentioned first quarter gross margins historically lowest, Brad noted SG&A will improve with growth.

Q: Alex Barron asked about debt refinancing and share buybacks.

A: Brad said they're looking at refinancing but prepayment penalties are high; no share buybacks in Q4.

Q: Austin Hopper asked about SG&A percentage trend.

A: Brad said as the company grows, SG&A could trend south of 10% over next few years if 10%+ growth is achieved