Hovnanian Enterprises(US:HOV)2024-02-22 20:48Financial Data and Key Metrics Changes - Total revenues increased by 15% to $594 million compared to the previous year [32] - Adjusted EBITDA rose by 30% to $65 million, and would have increased by 45% to $72 million without the impact of phantom stock expense [32][49] - Net debt to net capitalization improved to 58% from 146% at the beginning of fiscal 2020, with a target of mid-30% [5][9] Business Line Data and Key Metrics Changes - Quick Move-In (QMI) homes accounted for 63% of sales in Q1 2024, up from approximately 40% historically [82][64] - Contracts per community increased by 48% year-over-year, with a current average of 9.6 contracts per community [35][51] - The company ended the quarter with 135 open-for-sale communities, having opened 19 new communities [55] Market Data and Key Metrics Changes - Total website visits increased by over 100,000 year-over-year, with a 43% month-over-month increase from December [37] - Existing homes for sale remain low at about 900,000, less than half of the historical average [53] - The company has one of the lowest year supply of owned lots at 1.5 years [3] Company Strategy and Development Direction - The company is focused on increasing community count and has a disciplined approach to land acquisition, with a land spend of $230 million in Q1 2024, the highest since 2010 [4][85] - The strategy includes a high percentage of lots controlled via options to mitigate land risk and improve inventory turnover [2][87] - The company aims to balance growth with debt reduction, targeting a mid-30% net debt-to-cap ratio [9][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the spring selling season due to declining mortgage rates and tight existing home inventory [62] - The company anticipates continued demand for new homes driven by demographic trends and a strong employment market [62] - Management noted that while they are focused on growth, they remain committed to reducing leverage [9][22] Other Important Information - The company has a significant amount of deferred tax assets, allowing for approximately $1.1 billion of future pre-tax earnings without federal income tax [89] - The adjusted gross margin for the quarter was 21.8%, slightly lower than expected due to fluctuating mortgage rate buy down costs [48] Q&A Session Summary Question: What percent of the business now whether on orders or deliveries is QMIs? - Management indicated that QMIs currently account for 63% of sales, compared to around 40% historically [64] Question: Could you talk about the horizontal development timelines and constraints? - Management noted that land development has been behind schedule due to industry-wide issues, particularly related to transformers [66] Question: Is there a plan to continue reducing debt? - Management confirmed that they will continue to focus on both significant growth and reducing debt, targeting a mid-30% net debt-to-cap ratio [22]