Hovnanian Enterprises(US:HOV)2022-06-05 16:00Home Sales Performance - Home sales revenue for the three and six months ended April 30, 2022, remained relatively flat, with average prices increasing by 20.7% and 19.4%, respectively, while home deliveries decreased by 16.4% and 15.9%[143]. - Home sales revenue increased by 0.9% to $685.8 million for the three months ended April 30, 2022, compared to $679.5 million in the prior year[197]. - Homes delivered decreased by 16.4% for the three months ended April 30, 2022, compared to the same period in 2021[198]. - Total homebuilding gross margin increased due to rising home prices across nearly all operating segments, contributing to improved profitability[208]. - Total revenues for the three months ended April 30, 2022, were $702.5 million, a slight decrease of 0.1% compared to $703.2 million in the same period of 2021[197]. Financial Performance - Pre-tax income rose to $80.9 million for the three months ended April 30, 2022, compared to $31.0 million in the same period of the prior year, while net income decreased to $62.4 million from $488.7 million[147]. - Selling, general and administrative costs decreased to $68.2 million, or 9.7% of total revenues, for the three months ended April 30, 2022, down from $82.6 million, or 11.7% of total revenues, in the same period of the prior year[145]. - Financial services reported a pretax profit of $4.9 million and $7.8 million for the three and six months ended April 30, 2022, down from $10.4 million and $19.5 million in the same periods of fiscal 2021, attributed to decreased homebuilding deliveries and loan spread reductions[242]. - Total income tax expense for the three and six months ended April 30, 2022, was $18.5 million and $29.1 million, respectively, primarily due to federal and state tax expenses related to pretax income[247]. Inventory and Contracts - Net contracts decreased by 13.9% and 13.3% for the three and six months ended April 30, 2022, respectively, compared to the same periods of the prior year[148]. - Contract backlog slightly decreased from 3,897 homes at April 30, 2021, to 3,796 homes at April 30, 2022, but the dollar value of the backlog increased by 16.1% to $2.1 billion[152]. - Customers' deposits increased by $32.2 million to $100.4 million at April 30, 2022, reflecting an increase in backlog[194]. - The company reported a net contract backlog of $860.5 million as of April 30, 2022, an increase from $820.4 million in the same period of 2021[201]. Costs and Expenses - Other interest expenses decreased to $12.4 million and $25.8 million for the three and six months ended April 30, 2022, respectively, from $22.0 million and $46.0 million in the same periods of the prior year[146]. - The total cost of sales included expenses for consolidated housing and land and lot sales, impacting overall gross margin[205]. - The company recorded inventory impairment losses of $0.6 million and $0.7 million during the three and six months ended April 30, 2022, respectively, compared to $0.1 million and $2.0 million in the same periods last year[209]. Debt and Liquidity - The company spent $349.6 million on land purchases and development during the six months ended April 30, 2022, while maintaining total liquidity of $282.2 million[153]. - Total Senior Secured Notes decreased from $953.1 million as of October 31, 2021, to $853.1 million as of April 30, 2022, a reduction of approximately 10.5%[162]. - The company had nonrecourse mortgage loans totaling $196.2 million as of April 30, 2022, compared to $125.1 million as of October 31, 2021[170]. - The company is currently limited in the amount of debt it can incur due to covenant restrictions in its Debt Instruments, impacting its ability to grow the business[168]. Market Conditions - The annual inflation rate in the U.S. reached 8.3% in April 2022, impacting costs of land, materials, and labor, which may affect home sale prices and gross margins[248]. - Construction costs for residential buildings accounted for approximately 57.0% of homebuilding cost of sales for the six months ended April 30, 2022[249]. Segment Performance - The Northeast segment saw a significant revenue increase of 91.9% to $55.0 million, with homes delivered rising by 85.7% to 78 homes[199]. - The Midwest segment experienced a revenue decline of 11.4% to $56.7 million, with homes delivered decreasing by 23.6% to 155 homes[199]. - Homebuilding revenue in the Northeast segment increased by 82.6% to $55.1 million for the three months ended April 30, 2022, with income before income taxes rising by 66.2% to $8.4 million[213]. - The Southwest segment reported homebuilding revenue of $231.9 million, a 6.7% increase, with an average sales price rising by 21.7% to $417,396[213].