HOV - Earnings call transcript Q1 2020 | Hovnanian Enterprises, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and thank you for joining us for Hovnanian Enterprises Fiscal 2020 First Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded for rebroadcast and all participants are currently in a listen-only mode.

Management will be making some opening remarks about the first quarter results and then opening the line for questions. The company will also be webcasting a slide presentation along with our opening comments from management. on page available website the are www.khov.com. at slides the of Investor's company's The would follow like log who listeners Those to the on along website. to now should

Vice call I ahead. to turn like Relations. the would Jeff please to O'Keefe, President, go Investor Jeff, over

Jeffrey O'Keefe

Kathreen. all XXXX. for the morning review the this participating XX, Thank you you, ended for January our in results to first Thank call quarter, which

future of this XXXX. statements forward-looking Reform or by facts limited in to or statements meaning company's or results Safe and should implied factors within Such results, statements. to cause expressed the results, goals achievements but conference forward-looking unknown considered with as Act involve the that from are of expectations performance historical All statements provisions to actual of other achievements and call are performance not the company be statements be Litigation forward-looking the for uncertainties the periods. Such the Harbor respect include, Securities and materially risks, to may known future that not financial Private financial related statements of any it's different

in a risks, a subject materially or forward-looking are of performance and result the can such as not quantify. they are such be and Although or Discussion XXXX, filings differ results October results, required to to no by that described subsequent in Analysis, as plans, date reasonable, uncertainties Except laws, their nature, actual or statement, forward-looking events, By uncertainties in reason. with risks, give as variety from and achieved. could entitled only plans, otherwise any no and detail that Annual Exchange Management's we XX-K update new for are year of result a the are obligation we statements forward-looking future entitled whether speak intentions sections in ended and made, information, expectations guarantees Report of assurance publicly intentions revise XX, as suggested securities factors Commission. fiscal or are Risk those factors. future will the to Therefore, Safe Form believe other of applicable any particularly assumptions portion our Factors undertake Harbor by that circumstances reflected in our changed MD&A expectations statements forward-looking or the on statements and are the of and of Securities adversely other difficult Such we statements, predict or and

Larry Officer are CFO; Sorsby, today President, Brad and and Finance, Chief me Vice David Vice President, Joining Ara and Executive Chairman, and CEO; Treasurer. Vice President O'Connor, President Accounting Hovnanian, and Controller; Bachstetter,

Ara. over now the I'll Ara, call turn go ahead. to please

Ara Hovnanian

detail. our Jeff. me am of more I going and will quarter to results first review with Sorsby follow Larry usual, Thanks, as the

we results X, compare On quarter. Slide first for a the year-over-year

quarter; this our X% seen to We're in see a with the in our hand a million substantial we've can first this past the is XX% left year's quarters. more in pleased by grew in increase a increase and you in the driven upper quarter. increase to $XXX portion during price. growth was revenues line over As of The sales deliveries, revenues slide, two in XX% total increases the see this average contracts

In the This during right, anticipated, specs. is have the to greater of as to we less of due market winter top growing inventory of quarter spec seen we on been season. weeks, discounting the to the compared XXXX. that XX.X% recent XXXX, far stronger, there slower partially the through some move has Moving quarter margin during was first the you for discounting than first lower see our XX.X% gross can was to and

of ratio portion lower hand was compared XXXX, our XX.X% SG&A see to can quarter. year's first total slide, quarter first you the that last in the the of left XX.X% In for

total Our the for flat quarter. million were year-over-year $XX first at SG&A dollars

a our for resulted of higher flat dollars SG&A expenses SG&A lower revenues. benefits and ratio leveraging SG&A of increased the revenue with certainly first Our levels in demonstrates quarter. the This

grow able costs to be to consolidated range As a to leverage revenues, get we back we overtime, annual expect our and more ratio XX%. continue of to our SG&A normalized our better

million the first EBITDA to compared last reduction right quadrant $XX quarter. hand an In slide, adjusted This in to this we that occurred lower million year's year, of show the $XX despite increased million $X will and in expense detail quarter ventures a quarter. first We this offset greater higher in in experience which year's this moment. talk Larry, did income venture interest interest joint in joint about improvement EBITDA. partially the in

can you $XX to year's for reduced that this pre-tax million, was first and X, first $X Slide our was for it quarter, million. the loss On see quarter

If million this slides $XX slightly extinguishment less loss the of the Again, you our improvement you ratio of debt was than any this solid EBITDA charges, pre-tax SG&A revenues, related the our ignore of and that right gain last land on on showed million quarter. see loss an of can $XX year hand portion year. the all adjusted

by the in a expense partially offset in income. improvements interest resulting pre-tax However, were improvement more moderate

four in quarter On that have in higher trend quarters steadily of each was improvement new strong the very Slide in quarterly contracts. contracts. a consolidated show We've progressed year-over-year strongest X, The we quarter. seen increases

in the a in was it increase which quarter XX% was strongest XX% a was yet. increase quarter, fourth quarter, quarter, fourth year-over-year by year's XX% this increase the third in a and XX%, up quarter the The followed second then

granular of more contracts on number the gives X consolidated Slide a of the for with the basis month monthly plus detail February. quarter

in a showed same month last compared the every excess of quarter, first strong year. month XX% to increase the During

contracts increased increase the That positive XXXX, in last second continued had February in fact, quarter; of In month year. trend a month our every XX% for year-over-year of we've first year-over-year. the contracts

quarter. -- On worth first on the to focus show X, community. per absolute per related contracts community The previous of relate we now three contracts, slides for to contracts Slide I'll years' consolidated

see, metric quarter. to from year's can also XX% X.X first increasing in improved you last this As X.X

strong first XXXX. year, against comparison also last was compared Some were easy an the pleased of may increase that say quarter to I'm to we up XX% say the

level pace clear the of demand to was highest the for quarter homes community any first high sales XXXX. for gain per and momentum. that rebounding our our Additionally, is housing continues It's market since contracts

including compared community ago some than with XX in during February same month been we months contracts contracts Slide each monthly Clearly, contracts community per two is but is more and last get X, prior in in per year. past well. the in is last month gray; year of most a same of On only XX month granularity row to consolidated X.X February easier 'XX, recent as last same the years ago XX 'XX of shows or better equal months The the X.X for months. say blue, the community month year's they're the up to four the an improvement have up months, would the XX the what comparisons, page at also substantially not over sales per 'XX. to last a

to for you term If Slide can you another XX, contracts turn see view longer community trends. with of

period housing per was XXXX see for you the in community the On averaged show several from period, annual years. again, the during steady bust contracts neither this it for past boom to of a contracts each per industry. a our community We can of the In middle the for hand nor growth we contracts left the XXXX. and side, XX community slide,

right XX.X the show the On net community a to for was of ago. ended trailing hand per the XXXX we slide, year January the contracts that months side compared XX XX

the last over substantially improved has norms, pace historical at quite year, market contract peaks. the alone While still not we're let

since time a first contracts that trailing basis. the community per XXXX is XX above it However, we're XX-month on

XX, shown community gray, we of essentially count can some that faster last at the with first This through the due see flat If consolidated to you turn community to anticipated. communities Slide count, than year's quarter. was you selling was in our end

traditional communities; actively selling amenity communities rate adult We them also four a for our than intensive joint joint market unconsolidated makes season's of package, be four to more to quarter four new resort XXXX. the their to open contributed candidates capital style that communities venture seasons' during Due first active age-restricted ventures. prime tend and

scheduled the place plan and We to have open we additional later into venture. to four seasons joint communities three them same this year,

moment. account quarter end of the same into X% communities, of will total Larry year-over-year pleased to venture XXX We're see total end more our XXX talk in counts a community at our to our joint last growth to continuing increased communities year. communities just community taking at the count compared in the grow. to the our joint venture our about After first quarter is

we ultimately, overall higher higher them begun in land position years. These of levels growth levels our making we've the to have future investments result is profitability. few the produce result to to last revenue, of over of been and investments counts The in community expect

to over Sorsby, Larry it President and our Vice Chief turn Officer. Executive I'll Financial

Larry Sorsby

with the about a year-over-year Thanks, interest in Ara. discussion I'll increase expense. start our

a homebuilding XXXX. of As see, down interest in third you driven X.X% was an run sales increase higher both, XX, of first volumes. of there year's in X% on this fiscal can and quarters Cost of $X interest the sales percent million this rate of for is rates increase Slide cost fourth much year-over-year the quarter, from as was slightly first by in revenues of which was quarter, the delivery

than first year. a compared interest first year's prior this percentage the quarter last year, what saw while up less on So cost quarter we of expense for sales the was of last half basis the it was than to

and this higher debt levels, October million the Additionally, other increased Other interest bottom year-over-year, $X incurred the incurred $X to the this that in we was $X and show non-recourse increase portion related due expensed. half completed debt increase in of half as to was interest exchanges increase of interest million on the we of December expense, the of was slide, million XXXX. which

joint Turning update going I venture to XX; you our activity. unconsolidated Slide am on to

in fiscal and XX XXXX joint fiscal the age-restricted from venture of XXXX, six mentioned the declined. domestic XXXX, joint we communities we to During four communities venture communities increased venture fiscal Ara joint and XX opened new year-over-year. quarter In joint earlier. venture into contributed number communities of domestic XXXX, first Total the

income we once $X non-reoccurring result, to most our contracts, Primarily income quarter beginning a first the quarter. our to fiscal domestic due As decreased million joint from last in up venture joint first joint again increases in of are recent from year-over-year year's venture were in ventures our in quarter, Arabia XXXX. XX% see in Saudi the which

about of debt offer recent on we quarter and portion unsecured debt certain I of XXXX XXXX exchanges pushing out most completed a remaining during and the the discounts exchange Next, that instruments. capturing first fiscal This on XXXX. will talk debt maturities focused

ladder $XX XX, quarter $XXX into And debt of XXXX. as on July on October bottom one looked Slide it July profile of and debt of half million; XXXX. the show top the million $XXX maturity maturity a the XXXX half million, shows we slide, thus XX, it was [ph] our million, by in as of three new reduced the a XXXX exchanged debt by XX, maturity reduced January note XXXX. lien due On our We our November debt $XXX on

unsecured of XXXX; to this for Additionally, $XXX million February [ph] we three $XX $XX and one by loan exchanged quarter our allowed term us an XXXX debt loan February lien term reduce million, million. due of due

in first For GAAP. model our debt note, during exchanges performance, modifications as the with those were of please we treated quarter that financially you that future completed these accordance

$X of interest result, expense on [ph] lien most that is debt. by the will debt simplified cash maturities having debt in loan million exchange XX% loan, structure, and XXXX. capital interest Keep quarter successfully maturities three our these or these for a the of The mind, us improved of $XX exchanging over heels of the extended payments. million related in more recent transactions balance on debt life than sheet, refinancing zero have one have combination new the term $XXX the of closely October and P&L our all As our followed extending despite billion

to explore We sheet. strengthen will our continue to transactions balance structure and capital evaluate further our analyze and

X,XXX orders strong growth the now on the the Turning you consolidated homes see from our slide new of at that end can homes to has growth contract of XX% in in XX; first of led end the half quarter. year's first this to a last Slide X,XXX left the year's backlog to quarter at

on million a in to $XXX side of last XX% we XXXX. contract On million This dollars year's indicator January we the slide, consolidated leading show a of end first from occur hand of the right backlog to increase at next over quarters. XX, the quarter growth the revenues and $XXX few expect the is

XXXX added we lots controlled X,XXX newly that here quarter home first we XX; the Turning Slide to for show blocks we delivered. compared and with

exceeded deliveries by quarter XXX. box For home controlled the our newly

growth the lots, XX% forecast. to end our fiscal XX; to approximately including required Slide control quarter control XX,XXX of XXXX, meet XXXX the this this we XXX% would percentage controlled fiscal XXXX; our in our meet expecting for fiscal we of than to more modest needed have we significantly lots we're far substantial growth of year. the higher of during the of lots at control following under typically Turning delivery is already Further, the assumptions and lots advance already deliveries we a

controlling Our controlled costs standards We of sales parcels. home remain price, current lots when pace, strong. underwriting purchasing current construction sales home supply disciplined our remains using and land current to new and/or

to assumptions for land rosy acquisitions. stretch optimistic using not are We

lots. throughout teams right those continue the remain seek and land opportunities, When opportunities country the we find busy. acquisition land new control We to seek we acquisition our

On second percent of via options. peers that controlled Slide our you to have highest compared can see XX; land the we

as We use on our continue order land inventory achieve returns enhance risk. possible much reduce options land turns, to to high capital, our in as and

Looking inventory net owned, not of at the we including $XXX have communities of communities aggregate, our mothballed in $X.X book inventory impairments. million million and all value of $XXX billion the of an consolidated

XX-months. to Turning now our that inventory the highest turnover you over XX; the compared second to Slide trailing we have rate see peers,

Although lag us. next turns leading our XX% we High highest tier industry of overall turnover our a inventory are strategy. component number, higher turns are the key than NVRs below

asset. is discussion for area to deferred our tax Another related

because and numerous to deferred not tax this it significant, by reflected asset. steps sheet; is very balance fully our is for reserved on is allowance, it evaluation asset we've Our currently taken protect

million. was As XXXX, $XXX aggregate of deferred our January asset XX, the tax in

pay We will cash not on income taxes $X.X federal pre-tax to approximately future earnings. billion have of

ended shareholders quarter XX; million. with of show $XXX that we a Slide the we On first deficit

our this back valuation our allowances that add will equity slide on be done positive you million. If a we've shareholders $XX

comment liquidity current our position. me Now, on let

we and quarter spent the During development. on first land land $XXX million

towards seen on XX, we of million. with liquidity range $XXX ended upper of between Slide liquidity million and end the is $XXX $XXX which As first the quarter our targeted [ph] million,

trends, current we a last of conditions, expect and improvement better and Assuming in debt. revenues, XXXX to on pre-tax weaker related fourth second for growth and expect stronger to with land half adverse no in begin Similar gains XX.X% the any meaningful or or before changes added margin charges year performance, the year's in first losses fiscal our year extinguishment [indiscernible] in of income historical our we than quarter gross quarter, we with market the the performance, particularly in second quarter.

sales turn many impact for Ara the what I'm impact nobody predict have the markets positive February, are when on XX%, week XX% wondering seen potential you last in reported I we to the can of declined not that continued up we To encouraged of sales we accurately the sure his it for both US contracts our will quarter. chain. during our final the industry. are In our experienced first clearly week coronavirus XX% were increase back of we disruption supply concerns, coronavirus any industry, coronavirus last the equity date, have in Before month on spite that comments, weekly Well, our sales momentum year-over-year. the and

We to continue returning coronavirus, the is impacts normal stated carefully for chain well. about components from encouraging On factories industry and of impact duration are that that any China housing an cautious potential any sign supply monitor factories short the production; CEO, situation. China Friday, remain to quickly the US maybe Apple's Tim producing their Cook, we'll that as from

remarks. some brief closing turn I'll to back it Ara for now

Ara Hovnanian

incentives for contracts the Larry. great less use month spring season our to Thanks, contracts per May is well the start increase that's achieved in of off with monthly in several X.X February. definitely highest the increase XX% sales and in bode operating over community February The along a the contracts by next we've in XX% selling increases, of is results and quarters. the evident pace quarter, The of These in XXXX. since should first

improve. specifically, EBITDA getting market, see back revenues to our the US to us path to continue we'll that and performance we will continue economy, signs the from overall to on strength lead growing steps housing expect take -- given continue more of the the of We to Signs higher levels our profitability. our and sustainable

That comments, and open questions. formal concludes happy our it we're to up for

Operator

Zelman. And first Alan from you. Ratner our Thank with will The Instructions] [Operator answer comes now questions. company question

line Your open. is

Alan Ratner

minds morning. everybody's that's [ph] top think the Hey wave on good guys, Nice at results, color for specifically, I of there. thanks certainly of and coronavirus; -- the

we I curious what I'm as mentioned fears order Yes, the may quarter ultimately the economy good some either very hear. back pulling to -- but So you obviously, activity, these guess have numbers strong went know impact order on incentives -- on question don't that or the on.

change the at corner? less here does maybe around on sit or thinking bit the surrounding about back you just side business being today know those all? the you aggressive incentives, does given As a coronavirus, how likely price Are thinking about pricing uncertainty we of to what's the that pushing you're that come pulling really don't on little

Ara Hovnanian

feel going we're communities We're and [ph] different week now, and certainly geographies surprisingly right we'll in right steady sales continue doing and on monitor Alan. we've been different so wanted every particularly not But actions. right solid, and community, now, to sales as perhaps every Obviously, now.

Alan Ratner

good hear. to good, that's it's Right,

we were that the homes guidance of a lighter but than those you when visibility bit when mentioned, sold, couple margin have had question, presume might incentives ago. guys a a had that would know of gave months you And been little a you the I higher little some I in bit dig know, can expected. you obviously, you gross bit Second on little more, if in coming

we the of kind first that the So, half Maybe a we as because similar were I'm broadly, about think curious in that margin? sold came seen should you of they exactly, year, specs? lighter? remainder bit in, in ramp gross the expect home know, came you Was a versus some the guess the why mix number years it lower your back in that more half I couple inter-quarter? impact we've of last that And,

Ara Hovnanian

was, quarter Brad take guidance to the part Larry But And Alan, then, specs the really perhaps and or and difference the I'll second last delivered that had a sell. we guidance still and tackle first quarter, some to part. first. gave will but And significantly. the it little the just that specs we the sold that incentives was affected enough greater make lower it not we than

Larry Sorsby

encouraged heavily we're the clawback sales. Alan, incenting as certainly of able mentioned incentives Ara that been haven't just So, doing we're some to and that spec

we I as portion just that's haven't and being in is the year gross what gross of half hint than prices can to certainly to lead as as that with raise clawback year better my the second long might any for respect demand margins the continue this a going in projections As of strong, you margins because year. to mentioned second made incentives but yeah, script, And we future. the last the gives to quarter margins think I to do in

Alan Ratner

Larry. that, Appreciate

Ara Hovnanian

comment. might I Alan,

now it sales; what then feeling that you terrorist the time attack, continued you was a far pretty Trade Center brief thought -- hiccup, a Just would with mind we're the to know, basis while the asked reflecting horrific just very ago. brings on strong a housing but events pullback so market significant And one this, that's long sales, the housing know, the the World coronavirus. you'd and questions of have it right coronavirus; on as on you about see a

-- far to Center to you'd but really expect so ago. impact, to effect related while widespread events have instead, repeating the Trade the World it's the horrific Something similar a

Alan Ratner

just Got specs housekeeping, current the just dragged you built, it last, Larry, quarter what to in between and maybe margin? to so I those this appreciate the margin and spread the impact. that kind have sales margin I extra be ahead just on quantify perspective. One kind of of on understand do

Brad O'Connor

for basis XXX about was and the It points specs O'Connor. Brad between first to is be spread quarter. builds This

Alan Ratner

Brad. guys. Okay, Good luck, got Thanks. it. Thanks,

Operator

Thank you. with next [Operator Alex Research comes from Instructions] Center. question Baron Our Housing

open. is line Your

Alex Barron

to there Yes, SG&A more in year? a thanks, ask guys. nature, is Good job the I last is run little the It corporate on rate up portion. to be this about the of year, quarters all bit versus that something a one-time was for wanted that's orders. taking

Larry Sorsby

resources also bit year and etcetera. higher prior doing we related work year, being compared the we've performance This outside a stock little to cyber-security that expenses had compensation metrics been depending some with on hit, vary can last to some years,

you what first say is, I would year; last I it you than know the higher versus little do what for is higher probably last it's model first So and best quarter. year trend will similar this a can it see quarter to probably the

Alex Barron

Got it.

versus then, the quarter Okay, question bit Can bit there you the went guess income dropped why expect past you forward can last And on more that's was; ventures. this joint the little on I year? helpful. for little going other and a what me a we elaborate

Ara Hovnanian

related in primarily venture in Arabia, again… a quarter, non-reoccurring had what first -- we it last was we to joint and event; one-time a It's profit year's Saudi have

Brad O'Connor

It's million. about $X

Ara Hovnanian

$X and on back on in the the and profitability. revenues again, the And certainly that million once higher seeing gearing, that'll community improving of and we're joint result million ventures we're counts orders. up related to as again, was that. Ultimately, $X

Brad O'Connor

at moment, But off are costs and startup have some starting the the ventures extra joint associated.

Alex Barron

Okay.

as of a guess for And shouldn't look so, to we here? the year expect kind for what I last at model near-term,

Larry Sorsby

to but in Yes. not worth try specific it. at that's you would looking say given We're model I sitting just shoes, guidance as your

Alex Barron

Got it.

guys. thanks Okay,

Operator

any for like I'm remarks. And the you. questions this back turn showing no time. to call at Thank closing further I'd Ara to

Ara Hovnanian

to updates in quarters everyone in many safe positive very pleased you performance And forward strong Great. come. hands your metrics. wash Thank meantime, and to look on you. We the giving much. stay Thank the lot. to We're report you more a

Operator

now parties a disconnect. nice today's concludes Thank for participating, conference All this gentlemen, may and and day. have call. Ladies you

Hovnanian Enterprises (HOV) 5 Mar 202020 Q1 Earnings call transcript