Favorable market conditions led Hovnanian Enterprises to financial results that outperformed the home builder’s guidance. Total revenues, adjusted EBITDA, and profit per share all exceeded the upper end of the company’s guidance, according to president and CEO Ara Hovnanian.
“Demand for new homes remains healthy and is supported by strong demographic trends, a resilient job market, and a low supply of existing homes for sale,” Hovnanian said. “Our sales pace declined in the fourth quarter as mortgage rates rose and affordability worsened.”
The builder reported revenues of $887 million on 1,517 deliveries in the fourth quarter, ended Oct. 31, compared with revenues of $886.8 million on 1,599 deliveries in the same quarter of the prior year. For the full fiscal year, Hovnanian reported revenues of $2.76 billion on 4,878 deliveries compared with revenues of $2.92 billion on 5,538 deliveries in fiscal 2022.
Profits in the fourth quarter were $97.3 million, or $13.05 per share, compared with $55.6 million, or $7.24 per share, in the fourth quarter of 2022. For the full fiscal year, profits and profits per share decreased to $205.9 million, or $26.88 per share, from $225.5 million, or $29 per share, in 2022.
Despite the sales pace declining in the latter part of the fourth quarter, Hovnanian said the builder had an ample supply of quick move-in homes that, when combined with rate buydowns, allowed the company to offer incentives that made homes more affordable for prospective buyers.
“This led to a 66% year-over-year improvement in contracts per community for the quarter,” Hovnanian said. “We will continue to adjust incentives to maintain an acceptable sales pace. Fortunately, while sales slowed during the quarter, gross margins remained high, which helps absorb the higher costs of incentives and rate buydowns.”
Consolidated contracts increased 55.8% year over year in the fourth quarter to 938 homes. Contracts per community increased to 8.3 in the fourth quarter compared with 5 contracts per community for the fourth quarter of fiscal 2022. The gross contract cancellation rate in the fourth quarter was 25%, an improvement from 41% in the fourth quarter of 2022.
The dollar value of contract backlog for Hovnanian Enterprises was $1.06 billion in the fourth quarter, a 16.4% year-over-year decline.
Land and Liquidity Update
Hovnanian Enterprises ended the fiscal year with $564 million of total liquidity, more than twice the high end of the home builder’s target range.
“Our excess liquidity will allow us to further grow our land position and thus increase our community count, which should result in higher levels of profitability in future years,” Hovnanian said. “At the same time, our strong cash flow allows us to continue to strengthen our balance sheet. As we look ahead, we are excited about our prospects given the strength of long-term fundamentals underlying the new-home market.”
During the fourth quarter, Hovnanian Enterprises reported land and land development spend of $219.6 million, an increase from $205.2 million in the same quarter a year ago. For the full year, though, land spend decreased to $679.3 million from $759.3 million in fiscal 2022.
