Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal first quarter ended January 31, 2025.
RESULTS FOR THE THREE-MONTHS ENDED JANUARY 31, 2025:
Total revenues increased 13.4% to $673.6 million in the first quarter of fiscal 2025, compared with $594.2 million in the same quarter of the prior year.
Sale of homes revenues increased 12.8% to $646.9 million (1,254 homes) in the fiscal 2025 first quarter compared with $573.6 million (1,063 homes) in the previous year’s first quarter.
Domestic unconsolidated joint ventures(1) sale of homes revenues for the first quarter of fiscal 2025 was $131.8 million (197 homes) compared with $116.9 million (167 homes) for the three months ended January 31, 2024.
Sale of homes revenues, including domestic unconsolidated joint ventures, increased 12.8% to $778.7 million (1,451 homes) in the first quarter of fiscal 2025 compared with $690.6 million (1,230 homes) during the first quarter of fiscal 2024.
Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 15.2% for the three months ended January 31, 2025, compared with 18.3% during the first quarter a year ago.
Homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 18.3% during the fiscal 2025 first quarter, which was near the high end of the guidance range we provided, compared with 21.8% in last year’s first quarter.
Total SG&A was $86.9 million, or 12.9% of total revenues, in the first quarter of fiscal 2025 compared with $86.1 million, or 14.5% of total revenues, in the first quarter of fiscal 2024.
Total interest expense as a percent of total revenues decreased to 4.3% for the first quarter of fiscal 2025, as we continue to reduce our leverage, compared with 5.1% for the first quarter of fiscal 2024.
Income before income taxes for the first quarter of fiscal 2025 increased 22.4% to $39.9 million compared with $32.6 million in the first quarter of the prior fiscal year. The year-over-year increase illustrates that delivery growth, SG&A ratio improvements, lower interest and contributions from unconsolidated joint ventures can offset lower gross margins.
Income before income taxes excluding land-related charges and gain on extinguishment of debt, net increased 29.9% to $40.9 million in the first quarter of fiscal 2025 compared with income before these items of $31.5 million in the first quarter of fiscal 2024.
Net income was $28.2 million, or $3.58 per diluted common share, for the three months ended January 31, 2025, compared with net income of $23.9 million, or $2.91 per diluted common share, in the same period of the previous fiscal year.
EBITDA was $71.0 million for the first quarter of fiscal 2025 compared with $64.5 million for the first quarter of the prior year.
Consolidated contracts in the first quarter of fiscal 2025 increased 6.9% to 1,205 homes ($643.3 million) compared with 1,127 homes ($624.4 million) in the same quarter last year. Contracts, including domestic unconsolidated joint ventures, for the three months ended January 31, 2025, increased 9.5% to 1,400 homes ($770.8 million) compared with 1,279 homes ($724.5 million) in the first quarter of fiscal 2024.
As of January 31, 2025, consolidated community count increased 5.9% to 125 communities, compared with 118 communities as of January 31, 2024. Community count, including domestic unconsolidated joint ventures, increased 9.6% to 148 as of January 31, 2025, compared with 135 communities as of January 31, 2024.
Consolidated contracts per community were 9.6 in both the first quarter of fiscal 2025 and the first quarter of fiscal 2024. This is significantly higher than our historical quarterly average for the first quarter since 1997 of 8.0 contracts per community. Contracts per community, including domestic unconsolidated joint ventures, were 9.5 in both the three months ended January 31, 2025 and the same quarter one year ago.
The dollar value of consolidated contract backlog, as of January 31, 2025, decreased 16.1% to $931.9 million compared with $1.11 billion as of January 31, 2024. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of January 31, 2025, decreased 9.1% to $1.23 billion compared with $1.35 billion as of January 31, 2024. The year-over-year decrease in backlog is partly due to increased sales of quick move in homes, which are in backlog for a very short period of time.
The gross contract cancellation rate for consolidated contracts was 16% for the first quarter ended January 31, 2025, compared with 14% in the fiscal 2024 first quarter. The gross contract cancellation rate for contracts, including domestic unconsolidated joint ventures, was 16% for the first quarter of fiscal 2025 compared with 14% in the first quarter of the prior year.
For the trailing twelve-month period our return on equity (ROE) was 33.0%. For the trailing twelve-month period our net income return on inventory was 15.7% and our adjusted earnings before interest and income taxes return on investment (Adjusted EBIT ROI) was 29.8%. We believe that for the most recently reported trailing twelve-month periods, we had the second highest ROE, and the third highest Adjusted EBIT ROI compared to 14 of our publicly traded peers.
(1)When we refer to “Domestic Unconsolidated Joint Ventures”, we are excluding results from our multi-community unconsolidated joint venture in the Kingdom of Saudi Arabia (KSA).
