Hovnanian Enterprises(US:HOV) Yahoo Finance·2026-02-28 12:36Core Viewpoint - Hovnanian Enterprises reported mixed financial results for the first quarter of fiscal 2026, with revenue declining 6% year-over-year primarily due to a 12% drop in home deliveries, while adjusted profitability fell 24% due to increased incentives [1][7]. Financial Performance - Total revenue for the first quarter was $632 million, near the high end of the company's guidance range [3]. - Adjusted EBITDA was reported at $63 million and adjusted pretax income at $31 million, both significantly exceeding prior guidance [2][7]. - The adjusted gross margin was 13.4%, slightly below expectations, while SG&A expenses were 13.3% of revenue, better than the low end of guidance [3]. Market Conditions and Strategy - The housing market remains challenging, characterized by affordability pressures and low consumer confidence [4]. - Incentives accounted for 12.6% of the average sales price, with a significant portion tied to mortgage rate buydowns, reflecting a 290 basis point increase year-over-year [8]. - The company is prioritizing sales volume over profit margins, maintaining incentives to sell older, lower-margin land [9]. Sales Trends and Buyer Engagement - Contract activity showed signs of improvement, with January contracts up 11% year-over-year and February month-to-date contracts up 13% [12]. - Quick move-in homes (QMIs) represented 71% of total sales, although this was a decrease from previous quarters [15]. - The backlog conversion ratio improved to 88%, the highest since 2023, with 41% of homes delivered sold and closed within the same quarter [16]. Balance Sheet and Capital Management - The company ended the quarter with $471 million in liquidity and a net debt-to-capital ratio of 41.4%, significantly improved from 146.2% in early fiscal 2020 [6][21]. - Hovnanian has a disciplined land-light strategy, controlling 35,560 domestic lots, which represents a 6.7-year supply [22]. - The company recorded a one-time $27 million gain from joint ventures, reflecting a normal part of its operational cycle [18]. Future Outlook - Guidance for the second quarter includes total revenue expectations of $625 million to $725 million and adjusted pretax income ranging from breakeven to $10 million [26]. - Management anticipates improved contract activity and contributions from higher-margin communities in the latter half of fiscal 2026 [23].