AMREP Corporation (AXR) reported its financial results for the fiscal year ended April 30, 2024. The company delivered robust top-line performance, with revenues reaching $51.4 million, up 5.5% year-over-year. However, the bottom line faced challenges, as net income declined 69.3% to $6.7 million.

Land Development Segment Sees Mixed Results

AMREP's land development segment generated $26.8 million in revenues for fiscal 2024, down 12.5% from the prior year. This decline was primarily due to a decrease in revenues from the sale of developed land, which was partially offset by an increase in revenues from the sale of undeveloped land. The company reported that land sale revenues in fiscal 2024 included $7.2 million from the sale of a 147-acre property in Brighton, Colorado to a single purchaser.

The land sale gross margin for the fiscal year was 36%, compared to 42% in the prior year. This change was mainly attributable to higher-than-estimated costs associated with certain completed projects, as well as the location, size, and mix of properties sold.

Homebuilding Segment Performs Well

The homebuilding segment contributed $17.2 million in revenues for fiscal 2024, up 2.9% from the previous year. This increase was primarily driven by a higher number of homes sold, partially offset by a decrease in average selling prices and the impact of affordability challenges, supply chain constraints, and delays in municipal approvals and inspections.

Home sale gross margins were 25% for fiscal 2024, compared to 28% in the prior year. The change in gross margin was mainly due to the location, size, and mix of homes sold.

As of April 30, 2024, AMREP had 64 homes in production, including 20 homes under contract, representing $8.7 million in expected home sale revenues when closed, subject to customer cancellations and change orders.

Other Revenues Surge

AMREP's other revenues, which include the sale of investment assets, landscaping services, and miscellaneous sources, reached $7.4 million in fiscal 2024, a significant increase of 461.2% from the prior year. This growth was primarily driven by the sale of two buildings leased to commercial tenants.

Increased General and Administrative Expenses

General and administrative expenses increased 25.6% to $6.9 million in fiscal 2024, compared to the previous year. This rise was mainly due to increases in the accrual for property taxes, the payment of broker commissions related to a commercial lease, and pension benefit expenses in connection with the termination of the company's pension plan.

Strong Operating Income, Declining Net Income

Despite the challenges, AMREP's income from operations totaled $7.6 million in fiscal 2024, up 30.4% from the prior year. However, the company's net income declined 69.3% to $6.7 million, primarily due to the decrease in land sale revenues and gross margins, as well as the increase in general and administrative expenses.

Solid Cash Position and Cash Flow

AMREP ended fiscal 2024 with a strong cash and cash equivalents position of $29.7 million, compared to $19.9 million at the end of the previous fiscal year. The company's cumulative net cash provided by operating activities for the fiscal year was $10.7 million, up from $6.4 million a year ago. Free cash flow for the fiscal year was $10.3 million.

Quarterly Performance

In the fourth quarter of fiscal 2024, AMREP reported revenues of $12.7 million, up from $9.1 million in the same period of the prior year. Net income for the quarter was $92,000, compared to $16.6 million in the fourth quarter of fiscal 2023. The company's operating income for the quarter was a loss of $148,000, compared to a loss of $475,000 in the prior-year period.

Outlook

AMREP did not provide any specific guidance for the upcoming fiscal year. However, the company noted that it has reduced the number and scope of its active land development projects and delayed proceeding with certain new land development projects due to market headwinds and uncertainty. This is expected to result in reduced developed residential revenues in the land development business segment during the remainder of fiscal 2025 as compared to fiscal 2024.

Business Overview

AMREP Corporation is primarily engaged in two business segments: land development and homebuilding. The company's land development operations involve the acquisition, planning, and development of land for residential, commercial, and other purposes. The homebuilding segment focuses on the construction and sale of single-family homes in the Albuquerque, New Mexico metropolitan area.

AMREP has a long history, dating back to its founding in 1961. The company has navigated various market conditions and has adapted its strategies to address changing industry dynamics. AMREP's land development and homebuilding activities are primarily concentrated in New Mexico and Colorado.

Financials

As of April 30, 2024, AMREP's current ratio stood at 20.48, indicating a strong liquidity position. The quick ratio was 6.58, and the cash ratio was 6.26, further demonstrating the company's ability to meet its short-term obligations.

AMREP's gross profit margin for fiscal 2024 was 28%, while the operating profit margin was 15% and the net profit margin was 13%. The company's return on assets was 5%, and the return on equity was 6%.

Risks and Challenges

AMREP faces several risks and challenges, including the impact of macroeconomic conditions on the real estate and homebuilding industries, supply chain disruptions, labor shortages, and the availability of land and development approvals. The company is also exposed to the volatility of the housing market, which can affect both its land development and homebuilding operations.

Conclusion

AMREP Corporation delivered a mixed performance in fiscal 2024, with solid top-line growth but a decline in net income. The land development segment faced challenges, while the homebuilding segment performed relatively well. The company's strong cash position and improved cash flow provide a solid foundation for navigating the current market environment. However, the company's outlook remains cautious, as it has reduced the scope of its land development projects due to market uncertainties. Investors will be closely monitoring AMREP's ability to navigate these challenges and capitalize on any opportunities that arise in the coming fiscal year.