Forward-Looking Statements

Note: All statements in this presentation that are not historical facts should be considered as "Forward-Looking Statements" within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to statements related to the Company's goals and expectations with respect to its financial results for future financial periods and statements regarding demand for homes, mortgage rates, inflation, supply chain issues, customer incentives and underlying factors. Although we believe that our plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (2)

shortages in, and price fluctuations of, raw materials and labor, including due to geopolitical events, changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products and related trade disputes with and retaliatory measures taken by other countries; (3) fluctuations in interest rates and the availability of mortgage financing, including as a result of instability in the banking sector; (4) adverse weather and other environmental conditions and natural disasters; (5) the seasonality of the Company's business; (6) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (7) reliance on, and the performance of, subcontractors; (8) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (9) increases in cancellations of agreements of sale; (10) increases in inflation; (11) changes in tax laws affecting the after-tax costs of owning a home; (12) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (13) levels of competition; (14) utility shortages and outages or rate fluctuations; (15) information technology failures and data security breaches; (16) negative publicity; (17) high leverage and restrictions on the Company's operations and activities imposed by the agreements governing the Company's outstanding indebtedness; (18) availability and terms of financing to the Company; (19) the Company's sources of liquidity; (20) changes in credit ratings; (21) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment; (22) operations through unconsolidated joint ventures with third parties; (23) significant influence of the Company's controlling stockholders; (24) availability of net operating loss carryforwards; (25) loss of key management personnel or failure to attract qualified personnel; (26) public health issues such as major epidemic or pandemic; and (27)

certain risks, uncertainties and other factors described in detail in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2023 and the Company's Quarterly Reports on Form 10-Q for the quarterly periods during fiscal 2023 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

NON-GAAP FINANCIAL MEASURES:

Consolidated earnings before interest expense and income taxes ("EBIT") and before depreciation and amortization ("EBITDA") and before inventory impairments and land option write-offs and gain on extinguishment of debt, net ("Adjusted EBITDA") are not U.S. generally accepted accounting principles ("GAAP") financial measures. The most directly comparable GAAP financial measure is net income. The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income is presented in a table attached to this presentation.

Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. The reconciliation for historical periods of homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is presented in a table attached to this presentation.

Adjusted income before income taxes, which is defined as income before income taxes excluding land-related charges and gain on extinguishment of debt, net is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes. The reconciliation for historical periods of adjusted income before income taxes to income before income taxes is presented in a table attached to this presentation.

SG&A excluding the impact of incremental phantom stock expense is a non-GAAP financial measure. The most directly comparable GAAP financial measure is SG&A, to which SG&A excluding the impact of incremental phantom stock expense is reconciled herein.

Income before income taxes excluding the impact of incremental phantom stock expense is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes, to which income before income taxes excluding the impact of incremental phantom stock expense is reconciled herein.

Total liquidity is comprised of $183.1 million of cash and cash equivalents, $5.0 million of restricted cash required to collateralize letters of credit and $125.0 million availability under the senior secured revolving credit facility as of January 31, 2024.

Homebuilding revenues by region

(TTM ended January 31, 2024)

  • (1) Includes unconsolidated joint ventures deliveries.

  • (2) Company SEC filings and press release of 02/22/24.

  • (3) Excludes unconsolidated joint ventures.

Lots controlled by region (3)

(As of January 31, 2024)

Northeast 45%

5

Guidance for Fiscal 2024 First Quarter

($ in millions)

ActualsGuidance Q1 2024(1)Actuals Q1 2024

Q1 2024 Excluding Incremental

Phantom Expense

Total Revenues

$525 - $625

$594

$594

Adjusted Homebuilding Gross Margin(2)

22.0% - 23.5%

21.8% 21.8%

Total SG&A as Percentage of Total Revenues(3)

12.5% - 13.5%

14.5% 13.2%

Adjusted EBITDA(4)

$55 - $70

$63 $71

Adjusted Income Before Income Taxes(5)

$25 - $40

$31 $39

(1) The Company cannot provide a reconciliation between its non-GAAP projections and the most directly comparable GAAP measures without unreasonable efforts because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items required for the reconciliation. These items include, but are not limited to, land-related charges, inventory impairments and land option write-offs and loss (gain) on extinguishment of debt, net. These items are uncertain, depend on various factors and could have a material impact on GAAP reported results.

(2) Adjusted homebuilding gross margin percentage is before cost of sales interest expense and land charges and is a non-GAAP financial measure. See appendix for a reconciliation of the historic measure to the most directly comparable GAAP measure.

(3) Total SG&A includes homebuilding selling, general and administrative costs and corporate general and administrative costs. Ratio calculated as a percentage of total revenues. The SG&A guidance assumes that the stock remains at $69.48, which was the price at the end of the fourth quarter of fiscal year 2023.

(4) Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income. Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, land-related charges and loss (gain) on extinguishment of debt, net. See appendix for a reconciliation of the historic measure to the most directly comparable GAAP measure. (5) Adjusted Income Before Income Taxes excludes land-related charges, joint venture write-downs and loss (gain) on extinguishment of debt, net and is a non-GAAP financial measure. See appendix for a reconciliation of the historic measure to the most directly comparable GAAP measure.

Q1 2023 Q1 2024

Q1 2023 Q1 2024

EBITDA(2) Income Before Income Taxes

$72 $40

Q1 2023

Q1 2024

Q1 2023

Q1 2024

2023

2024

2024 Excluding Incremental Phantom Expense

20232024

2024 Excluding Incremental Phantom Expense

(1) Adjusted homebuilding gross margin percentage is before cost of sales interest expense and land charges and is a non-GAAP financial measure. See appendix for a reconciliation of the historic measure to the most directly comparable GAAP measure.

(2) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. See appendix for a reconciliation of the historic measure to the most directly comparable GAAP measure.

Number of Monthly Contracts Per Community, Excludes Unconsolidated Joint Ventures

Number of

Sundays

Monthly contracts

  • Feb-20 4 Feb-20 4.8

  • Feb-21 4 Feb-21 6.1

  • Feb-22 4 Feb-22 5.0

  • Feb-23 4 Feb-23 4.1

  • Mar-20 5 Mar-20 3.5

  • Mar-21 4 Mar-21 6.1

  • Mar-22 4 Mar-22 4.9

  • Mar-23 4 Mar-23 3.7

  • Apr-20 4 Apr-20 2.9

  • Apr-21 4 Apr-21 5.5

  • Apr-22 4 Apr-22 4.5

  • Apr-23 5 Apr-23 4.7

  • May-20 5 May-20 5.3

  • May-21 5 May-21 4.3

  • May-22 5 May-22 3.3

  • May-23 4 May-23 4.3

  • Jun-20 4 Jun-20 6.0

  • Jun-21 4 Jun-21 4.0

  • Jun-22 4 Jun-22 2.1

  • Jun-23 4 Jun-23 6.0

  • Jul-20 4 Jul-20 6.8

  • Jul-21 4 Jul-21 4.0

  • Jul-22 5 Jul-22 2.1

  • Jul-23 5 Jul-23 3.8

  • Aug-20 5 Aug-20 6.6

  • Aug-21 5 Aug-21 3.7

  • Aug-22 4 Aug-22 2.0

  • Aug-23 4 Aug-23 3.5

  • Sep-20 4 Sep-20 5.7

  • Sep-21 4 Sep-21 3.5

  • Sep-22 4 Sep-22 1.7

  • Sep-23 4 Sep-23 3.2

  • Oct-20 4 Oct-20 4.7

  • Oct-21 5 Oct-21 4.0

  • Oct-22 5 Oct-22 1.6

  • Oct-23 5 Oct-23 2.3

  • Nov-20 5 Nov-20 4.3

  • Nov-21 4 Nov-21 4.1

  • Nov-22 4 Nov-22 1.5

  • Nov-23 4 Nov-23 2.3

  • Dec-20 4 Dec-20 5.1

  • Dec-21 4 Dec-21 4.5

  • Dec-22 4 Dec-22 2.0

  • Dec-23 4 Dec-23 3.5

  • Jan-21 5 Jan-21 7.0

  • Jan-22 5 Jan-22 5.4

  • Jan-23 5 Jan-23 3.0

  • Jan-24 4 Jan-24 4.2

647 613 548 504

463 620 519 442

377 538 458 531

687 413 336 456

745 384 232 603

794 414 231 385

735 383 215 352

634 390 192 324

549 490 195 262

493 467 182 260

551 486 238 374

734 598 368 493

Note: Excludes unconsolidated joint ventures.

10

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Hovnanian Enterprises Inc. published this content on 26 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 March 2024 17:43:07 UTC.