Hovnanian Enterprises Reports Fiscal 2020 Third Quarter Results

Rhea-AI Summary

Hovnanian Enterprises (HOV) reported a 30.3% year-over-year increase in total revenues for Q3 FY2020, totaling $628.1 million, and a 47% rise in consolidated contracts. Pretax income improved to $16.2 million, up from a loss of $7.1 million the previous year. The company achieved a gross margin of 13.6% for Q3, slightly down from 14.0% a year ago. Despite the impact of COVID-19, demand remains strong due to low mortgage rates. Hovnanian expects meaningful improvements in 2021, controlling sufficient lots for anticipated delivery growth.

Positive

• 30.3% increase in total revenues to $628.1 million for Q3 FY2020.
• Pretax income improved to $16.2 million from a loss of $7.1 million in Q3 FY2019.
• Consolidated contracts increased by 46.9% to 2,226 homes in Q3 FY2020.
• EBITDA rose 88% to $66.5 million in Q3 FY2020.
• Total liquidity reached $334.3 million after debt repurchase.
• Management expects meaningful improvements in revenues and profitability in FY2021.

Negative

• Homebuilding gross margin percentage decreased to 13.6% from 14.0% year-over-year.
• Net income for the first nine months of FY2020 was only $10.3 million compared to a loss of $40.3 million in FY2019.

30% Year-over-Year Increase in Total Revenues
$23 Million Year-over-Year Improvement in Pretax Income
47% Year-over-Year Improvement in Consolidated Contracts

MATAWAN, N.J., Sept. 03, 2020 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal third quarter and nine months ended July 31, 2020.

RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2020:

• Total revenues increased 30.3% to $628.1 million in the third quarter of fiscal 2020, compared with $482.0 million in the same period of the prior year. For the nine months ended July 31, 2020, total revenues increased 27.4% to $1.66 billion compared with $1.30 billion in the same period during the prior fiscal year.

• Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 13.6% for the three months ended July 31, 2020 compared with 14.0% during the same quarter a year ago. During the first nine months of fiscal 2020, homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 13.7% compared with 14.0% during the same period last year.

• Homebuilding gross margin, before cost of sales interest expense and land charges, was $106.3 million, or 17.5% of sale of homes revenues, during the fiscal 2020 third quarter compared with $85.9 million, or 18.4% of sale of homes revenues, in last year’s third quarter. For both the nine months ended July 31, 2020 and the nine months ended July 31, 2019, homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 17.7%.

• Total SG&A, including $2.9 million of severance expenses related to organizational changes, was $59.9 million, or 9.5% of total revenues, in the fiscal 2020 third quarter compared with $58.5 million, or 12.1% of total revenues, in the previous year’s third quarter. During the first nine months of fiscal 2020, total SG&A was $176.2 million, or 10.6% of total revenues, compared with $179.3 million, or 13.8% of total revenues, in the same period of the prior fiscal year.

• Interest incurred (some of which was expensed and some of which was capitalized) was $45.1 million for the third quarter of fiscal 2020 compared with $42.1 million during the third quarter of fiscal 2019. For the nine months ended July 31, 2020, interest incurred (some of which was expensed and some of which was capitalized) was $134.8 million compared with $122.3 million during the same period last year.

• Income from unconsolidated joint ventures was $5.7 million for the third quarter ended July 31, 2020 compared with $3.7 million in the fiscal 2019 third quarter. For the first nine months of fiscal 2020, income from unconsolidated joint ventures was $13.4 million compared with $20.6 million in the same period a year ago.

• Income before income taxes for the third quarter of fiscal 2020 was $16.2 million compared with a loss of $7.1 million in the third quarter of the prior fiscal year. For the first nine months of fiscal 2020, income before income taxes was $13.0 million compared with a loss of $39.1 million during the same period of fiscal 2019.

• Adjusted pretax income, which is income before income taxes, excluding land-related charges, joint venture write-downs and gain on extinguishment of debt, improved to $14.5 million in the third quarter of fiscal 2020 compared with a loss before these items of $4.8 million in the fiscal 2019 third quarter. For the nine months ended July 31, 2020, income before income taxes, excluding land-related charges, joint venture write-downs and gain on extinguishment of debt, was $5.8 million compared with a loss before these items of $34.6 million during the same period in fiscal 2019.

• Net income was $15.4 million, or $2.27 per common share, for the three months ended July 31, 2020 compared with a net loss of $7.6 million, or $1.27 per common share, in the third quarter of the previous fiscal year. For the first nine months of fiscal 2020, net income was $10.3 million, or $1.52 per common share, compared with a net loss of $40.3 million, or $6.76 per common share, in the same period during fiscal 2019.

• EBITDA increased 88.0% to $66.5 million for the third quarter of fiscal 2020 compared with $35.3 million in the same quarter of the prior year. For the first nine months of fiscal 2020, EBITDA was $154.3 million, a 107.6% increase, compared with $74.3 million in the first nine months of fiscal 2019.

• Financial services income before income taxes was $10.8 million for the third quarter of fiscal 2020 compared with $3.8 million in the third quarter of fiscal 2019. For the first nine months of fiscal 2020, financial services income before income taxes was $20.0 million compared with $8.6 million in the same period one year ago.

• Consolidated contracts per community increased 72.7% to 19.0 contracts per community for the third quarter ended July 31, 2020 compared with 11.0 contracts per community in last year’s third quarter. Contracts per community, including domestic unconsolidated joint ventures⁽¹⁾, increased 67.9% to 17.8 for the third quarter of fiscal 2020 compared with 10.6 for the third quarter of fiscal 2019.

• The number of consolidated contracts increased 46.9% to 2,226 homes during the fiscal 2020 third quarter, compared with 1,515 homes in last year’s third quarter. The number of contracts, including domestic unconsolidated joint ventures, for the three months ended July 31, 2020, increased 42.9% to 2,415 homes from 1,690 homes during the same quarter a year ago.

• For the first nine months of fiscal 2020, the number of consolidated contracts increased 26.0% to 5,035 homes compared with 3,995 homes in the first nine months of fiscal 2019. The number of contracts, including domestic unconsolidated joint ventures, for the nine months ended July 31, 2020, increased 23.4% to 5,549 homes from 4,497 homes during the same period a year ago.

• Consolidated community count was 117 as of July 31, 2020, compared with 138 communities at the end of the previous year’s third quarter. The decline was primarily a result of selling out of communities at a faster than anticipated pace, 14 delayed community openings, primarily related to COVID-19, and contributing four consolidated communities to unconsolidated joint ventures earlier this year. As of the end of the third quarter of fiscal 2020, community count, including domestic unconsolidated joint ventures, was 136 communities, compared with 159 communities at July 31, 2019.

• For August 2020, consolidated contracts per community increased 106.3% to 6.6 compared with 3.2 for the same month one year ago. During August 2020, the number of consolidated contracts increased 65.2% to 735 homes from 445 homes in August 2019.

• The dollar value of consolidated contract backlog, as of July 31, 2020, increased 17.1% to $1.23 billion compared with $1.05 billion as of July 31, 2019. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of July 31, 2020, was $1.39 billion compared with $1.28 billion as of July 31, 2019.

• Consolidated deliveries were 1,553 homes in the fiscal 2020 third quarter, a 31.1% increase compared with 1,185 homes in the previous year’s third quarter. For the fiscal 2020 third quarter, deliveries, including domestic unconsolidated joint ventures, increased 29.3% to 1,781 homes compared with 1,377 homes during the third quarter of fiscal 2019.

• For the first nine months of fiscal 2020, consolidated deliveries increased 27.1% to 4,114 homes compared with 3,237 homes in the first nine months of the previous year. For the first nine months of fiscal 2020, deliveries, including domestic unconsolidated joint ventures, increased 24.0% to 4,679 homes compared with 3,772 homes during the same period of fiscal 2019.

• The contract cancellation rate for consolidated contracts was 18% for the third quarter ended July 31, 2020 compared with 19% in the fiscal 2019 third quarter. The contract cancellation rate for contracts including domestic unconsolidated joint ventures was 18% for the third quarter of fiscal 2020 compared with 19% in the third quarter of the prior year.

⁽¹⁾When we refer to “Domestic Unconsolidated Joint Ventures”, we are excluding results from our single community unconsolidated joint venture in the Kingdom of Saudi Arabia (KSA).

LIQUIDITY AND INVENTORY AS OF JULY 31, 2020:

• Total liquidity at the end of the of the third quarter of fiscal 2020 was $334.3 million, after repurchasing $25.5 million of face value of 10.0% Senior Secured Notes due 2022 for $21.4 million of cash, leaving a balance of $111.2 million on those notes. The transaction resulted in a $4.1 million gain on extinguishment of debt.

• During the third quarter of fiscal 2020, land and land development spending was $162.6 million, an increase compared with $147.4 million in last year’s third quarter. For the nine months ended July 31, 2020, land and land development spending was $394.9 million compared with $400.0 million for the same period one year ago.

• In the third quarter of fiscal 2020, 1,700 lots were put under option or acquired in 21 consolidated communities.

• As of July 31, 2020, consolidated lots controlled totaled 25,748, which, based on trailing twelve-month deliveries, equaled a 4.4 years’ supply.

COMMENTS FROM MANAGEMENT:

“During the third quarter of fiscal 2020 we saw a significant improvement in contracts, revenues, EBITDA, pretax income and liquidity as compared to the prior year’s third quarter and are pleased with our results,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “Amid the broader economic uncertainties related to the COVID-19 pandemic, the overall demand for new homes continues to be robust due to historically low mortgage rates, a nationwide low supply of existing homes and a strong consumer desire for more indoor and outdoor space. Given the recent strength of our operating results and our improved contract pace, we remain committed to pursuing our growth plans,” said Mr. Hovnanian.

“Reacting to slower demand in the early stages of the COVID-19 crisis, we offered consumers additional incentives on spec homes deliverable in the third quarter. While these discounts adversely impacted our fiscal 2020 third quarter gross margin, our volume of home sales increased and resulted in higher third quarter profitability. Home demand began rebounding in May. Since June, we pivoted to increasing home prices in virtually all our markets. Going forward, these home price increases should both offset potential cost increases and result in improvements in gross margins. Assuming no material changes in market conditions, we expect to achieve meaningful improvements in revenues, EBITDA and profitability during fiscal 2021. We control virtually all the lots needed to meet the growth in deliveries we expect next year,” concluded Mr. Hovnanian.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2020 third quarter financial results conference call at 11:00 a.m. E.T. on Thursday, September 3, 2020. The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Past Events” section of the Investor Relations page on the Hovnanian website at http://www.khov.com. The archive will be available for 12 months.

ABOUT HOVNANIAN ENTERPRISES, INC.:

Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Matawan, New Jersey and, through its subsidiaries, is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, Washington, D.C. and West Virginia. The Company’s homes are marketed and sold under the trade name K. Hovnanian^® Homes. Additionally, the Company’s subsidiaries, as developers of K. Hovnanian’s^® Four Seasons communities, make the Company one of the nation’s largest builders of active lifestyle communities.

Additional information on Hovnanian Enterprises, Inc. can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.

NON-GAAP FINANCIAL MEASURES:

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

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 earnings release.

Adjusted pretax income, which is defined as income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income (loss) before income taxes. The reconciliation for historical periods of adjusted pretax income to income (loss) before income taxes is presented in a table attached to this earnings release.

Total liquidity is comprised of $198.1 million of cash and cash equivalents, $11.2 million of restricted cash required to collateralize letters of credit and $125.0 million availability under the senior secured revolving credit facility as of July 31, 2020.

FORWARD-LOOKING STATEMENTS

All statements in this press release 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. 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) the material and adverse disruption, and the expected continued disruption, to our business caused by the present outbreak and worldwide spread of COVID-19 and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it; (2) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (3) adverse weather and other environmental conditions and natural disasters; (4) high leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (5) availability and terms of financing to the Company; (6) the Company’s sources of liquidity; (7) changes in credit ratings; (8) the seasonality of the Company’s business; (9) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (10) shortages in, and price fluctuations of, raw materials and labor including due to changes in trade policies, such as the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; (11) reliance on, and the performance of, subcontractors; (12) 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; (13) increases in cancellations of agreements of sale; (14) fluctuations in interest rates and the availability of mortgage financing; (15) changes in tax laws affecting the after-tax costs of owning a home; (16) operations through unconsolidated joint ventures with third parties; (17) government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing processes, tax laws and the environment; (18) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (19) levels of competition; (20) successful identification and integration of acquisitions; (21) significant influence of the Company’s controlling stockholders; (22) availability of net operating loss carryforwards; (23) utility shortages and outages or rate fluctuations; (24) geopolitical risks, terrorist acts and other acts of war; (25) diseases, pandemics or other severe public health events; (26) loss of key management personnel or failure to attract qualified personnel; (27) information technology failures and data security breaches; (28) negative publicity; and (29) 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, 2019 and the Company’s Quarterly Reports on Form 10-Q for the quarterly periods during fiscal 2020 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.

Hovnanian Enterprises, Inc.
July 31, 2020
Statements of consolidated operations
(In thousands, except per share data)
		Three Months Ended								Nine Months Ended
		July 31,								July 31,
			2020				2019				2020				2019
		(Unaudited)								(Unaudited)
Total revenues		$628,136				$482,041				$1,660,543				$1,303,326
Costs and expenses (1)			621,633				492,847				1,674,340				1,362,964
Gain on extinguishment of debt			4,055				-				13,337				-
Income from unconsolidated joint ventures			5,658				3,742				13,419				20,556
Income (loss) before income taxes			16,216				(7,064	)			12,959				(39,082	)
Income tax provision			853				537				2,665				1,228
Net income (loss)		$15,363				$(7,601		)		$10,294				$(40,310		)
Per share data:
Basic:
Net income (loss) per common share		$2.27				$(1.27		)		$1.52				$(6.76		)
Weighted average number of common shares outstanding (2)			6,201				5,971				6,178				5,964
Assuming dilution:
Net income (loss) per common share		$2.16				$(1.27		)		$1.44				$(6.76		)
Weighted average number of common shares outstanding (2)			6,518				5,971				6,502				5,964
(1)  Includes inventory impairment loss and land option write-offs.
(2)  For periods with a net (loss), basic shares are used in accordance with GAAP rules.
Hovnanian Enterprises, Inc.
July 31, 2020
Reconciliation of income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt to income (loss) before income taxes
(In thousands)
		Three Months Ended								Nine Months Ended
		July 31,								July 31,
			2020				2019				2020				2019
		(Unaudited)								(Unaudited)
Income (loss) before income taxes		$16,216				$(7,064		)		$12,959				$(39,082		)
Inventory impairment loss and land option write-offs			2,364				1,435				6,202				3,601
Unconsolidated joint venture investment write-downs			-				854				-				854
Gain on extinguishment of debt			(4,055	)			-				(13,337	)			-
Income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt (1)		$14,525				$(4,775		)		$5,824				$(34,627		)
(1) Income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income (loss) before income taxes.

Hovnanian Enterprises, Inc.
July 31, 2020
Gross margin
(In thousands)
		Homebuilding Gross Margin								Homebuilding Gross Margin
		Three Months Ended								Nine Months Ended
		July 31,								July 31,
			2020				2019				2020				2019
		(Unaudited)								(Unaudited)
Sale of homes		$605,933				$467,849				$1,608,513				$1,257,536
Cost of sales, excluding interest expense and land charges (1)			499,654				381,906				1,323,916				1,034,953
Homebuilding gross margin, before cost of sales interest expense and land charges (2)			106,279				85,943				284,597				222,583
Cost of sales interest expense, excluding land sales interest expense			21,794				18,824				58,467				42,964
Homebuilding gross margin, after cost of sales interest expense, before land charges (2)			84,485				67,119				226,130				179,619
Land charges			2,364				1,435				6,202				3,601
Homebuilding gross margin		$82,121				$65,684				$219,928				$176,018
Gross margin percentage			13.6	%			14.0	%			13.7	%			14.0	%
Gross margin percentage, before cost of sales interest expense and land charges (2)			17.5	%			18.4	%			17.7	%			17.7	%
Gross margin percentage, after cost of sales interest expense, before land charges (2)			13.9	%			14.3	%			14.1	%			14.3	%
		Land Sales Gross Margin								Land Sales Gross Margin
		Three Months Ended								Nine Months Ended
		July 31,								July 31,
			2020				2019				2020				2019
		(Unaudited)								(Unaudited)
Land and lot sales		$25				$542				$100				$8,050
Land and lot sales cost of sales, excluding interest and land charges (1)			41				33				161				7,390
Land and lot sales gross margin, excluding interest and land charges			(16	)			509				(61	)			660
Land and lot sales interest			20				205				72				205
Land and lot sales gross margin, including interest and excluding land charges		$(36		)		$304				$(133		)		$455
(1) Does not include cost associated with walking away from land options or inventory impairment losses which are recorded as Inventory impairment loss and land option write-offs in the Condensed Consolidated Statements of Operations.
(2) 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.

Hovnanian Enterprises, Inc.
July 31, 2020
Reconciliation of adjusted EBITDA to net income (loss) (In thousands)
		Three Months Ended								Nine Months Ended
		July 31,								July 31,
			2020				2019				2020				2019
		(Unaudited)								(Unaudited)
Net income (loss)		$15,363				$(7,601		)		$10,294				$(40,310		)
Income tax provision			853				537				2,665				1,228
Interest expense			48,886				41,406				137,483				110,482
EBIT (1)			65,102				34,342				150,442				71,400
Depreciation and amortization			1,355				1,004				3,897				2,942
EBITDA (2)			66,457				35,346				154,339				74,342
Inventory impairment loss and land option write-offs			2,364				1,435				6,202				3,601
Gain on extinguishment of debt			(4,055	)			-				(13,337	)			-
Adjusted EBITDA (3)		$64,766				$36,781				$147,204				$77,943
Interest incurred		$45,140				$42,104				$134,797				$122,340
Adjusted EBITDA to interest incurred			1.43				0.87				1.09				0.64
(1)  EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBIT represents earnings before interest expense and income taxes.
(2)  EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBITDA represents earnings before interest expense, income taxes, depreciation and amortization.
(3)  Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs and gain on extinguishment of debt.
Hovnanian Enterprises, Inc.
July 31, 2020
Interest incurred, expensed and capitalized
(In thousands)
		Three Months Ended								Nine Months Ended
		July 31,								July 31,
			2020				2019				2020				2019
		(Unaudited)								(Unaudited)
Interest capitalized at beginning of period		$67,744				$79,277				$71,264				$68,117
Plus interest incurred			45,140				42,104				134,797				122,340
Less interest expensed			48,886				41,406				137,483				110,482
Less interest contributed to unconsolidated joint venture (1)			-				1,978				4,580				1,978
Interest capitalized at end of period (2)		$63,998				$77,997				$63,998				$77,997
(1) Represents capitalized interest which was included as part of the assets contributed to the joint venture the Company entered into in December 2019. There was no impact to the Condensed Consolidated Statement of Operations as a result of this transaction.
(2) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

		July 31,				October 31,
			2020				2019
		(Unaudited)					(1)
ASSETS
Homebuilding:
Cash and cash equivalents		$198,098				$130,976
Restricted cash and cash equivalents			13,433				20,905
Inventories:
Sold and unsold homes and lots under development			928,840				993,647
Land and land options held for future development or sale			89,903				108,565
Consolidated inventory not owned			194,760				190,273
Total inventories			1,213,503				1,292,485
Investments in and advances to unconsolidated joint ventures			125,680				127,038
Receivables, deposits and notes, net			37,328				44,914
Property, plant and equipment, net			18,869				20,127
Prepaid expenses and other assets			63,499				45,704
Total homebuilding			1,670,410				1,682,149
Financial services			135,334				199,275
Total assets		$1,805,744				$1,881,424
LIABILITIES AND EQUITY
Homebuilding:
Nonrecourse mortgages secured by inventory, net of debt issuance costs		$179,767				$203,585
Accounts payable and other liabilities			320,420				320,193
Customers’ deposits			40,992				35,872
Liabilities from inventory not owned, net of debt issuance costs			144,922				141,033
Senior notes and credit facilities (net of discount, premium and debt issuance costs)			1,432,075				1,479,990
Accrued interest			50,328				19,081
Total homebuilding			2,168,504				2,199,754
Financial services			114,202				169,145
Income taxes payable			2,557				2,301
Total liabilities			2,285,263				2,371,200
Equity:
Hovnanian Enterprises, Inc. stockholders’ equity deficit:
Preferred stock, $0.01 par value - authorized 100,000 shares; issued and outstanding 5,600 shares with a liquidation preference of $140,000 at July 31, 2020 and October 31, 2019			135,299				135,299
Common stock, Class A, $0.01 par value – authorized 16,000,000 shares; issued 5,984,678 shares at July 31, 2020 and 5,973,727 shares at October 31, 2019			60				60
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) – authorized 2,400,000 shares; issued 652,154 shares at July 31, 2020 and 650,363 shares at October 31, 2019			7				7
Paid in capital – common stock			715,404				715,504
Accumulated deficit			(1,215,679	)			(1,225,973	)
Treasury stock – at cost – 470,430 shares of Class A common stock and 27,669 shares of Class B common stock at July 31, 2020 and October 31, 2019			(115,360	)			(115,360	)
Total Hovnanian Enterprises, Inc. stockholders' equity deficit			(480,269	)			(490,463	)
Noncontrolling interest in consolidated joint ventures			750				687
Total equity deficit			(479,519	)			(489,776	)
Total liabilities and equity		$1,805,744				$1,881,424

(1)     Derived from the audited balance sheet as of October 31, 2019

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)

		Three Months Ended July 31,								Nine Months Ended July 31,
			2020				2019				2020				2019
Revenues:
Homebuilding:
Sale of homes		$605,933				$467,849				$1,608,513				$1,257,536
Land sales and other revenues			908				1,428				2,360				11,111
Total homebuilding			606,841				469,277				1,610,873				1,268,647
Financial services			21,295				12,764				49,670				34,679
Total revenues			628,136				482,041				1,660,543				1,303,326
Expenses:
Homebuilding:
Cost of sales, excluding interest			499,695				381,939				1,324,077				1,042,343
Cost of sales interest			21,814				19,029				58,539				43,169
Inventory impairment loss and land option write-offs			2,364				1,435				6,202				3,601
Total cost of sales			523,873				402,403				1,388,818				1,089,113
Selling, general and administrative			40,608				43,559				121,887				130,474
Total homebuilding expenses			564,481				445,962				1,510,705				1,219,587
Financial services			10,493				8,927				29,677				26,079
Corporate general and administrative			19,321				14,959				54,340				48,792
Other interest			27,072				22,377				78,944				67,313
Other operations			266				622				674				1,193
Total expenses			621,633				492,847				1,674,340				1,362,964
Gain on extinguishment of debt			4,055				-				13,337				-
Income from unconsolidated joint ventures			5,658				3,742				13,419				20,556
Income (loss) before income taxes			16,216				(7,064	)			12,959				(39,082	)
State and federal income tax provision:
State			853				537				2,665				1,228
Federal			-				-				-				-
Total income taxes			853				537				2,665				1,228
Net income (loss)		$15,363				$(7,601		)		$10,294				$(40,310		)
Per share data:
Basic:
Net income (loss) per common share		$2.27				$(1.27		)		$1.52				$(6.76		)
Weighted-average number of common shares outstanding			6,201				5,971				6,178				5,964
Assuming dilution:
Net income (loss) per common share		$2.16				$(1.27		)		$1.44				$(6.76		)
Weighted-average number of common shares outstanding			6,518				5,971				6,502				5,964

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
		Contracts (1)							Deliveries							Contract
		Three Months Ended							Three Months Ended							Backlog
		July 31,							July 31,							July 31,
			2020		2019	% Change				2020		2019	% Change				2020		2019	% Change
Northeast
(NJ, PA)	Home		102		65		56.9%			95		35		171.4%			113		192		(41.1)%
	Dollars	$51,586		$37,560			37.3%		$41,354		$20,694			99.8%		$61,002		$119,347			(48.9)%
	Avg. Price	$505,745		$577,846			(12.5)%		$435,305		$591,257			(26.4)%		$539,841		$621,599			(13.2)%
Mid-Atlantic
(DE, MD, VA, WV)	Home		307		197		55.8%			213		159		34.0%			523		402		30.1%
	Dollars	$152,511		$99,807			52.8%		$111,160		$86,811			28.0%		$269,972		$242,958			11.1%
	Avg. Price	$496,775		$506,635			(1.9)%		$521,878		$545,981			(4.4)%		$516,199		$604,373			(14.6)%
Midwest
(IL, OH)	Home		263		197		33.5%			197		158		24.7%			534		505		5.7%
	Dollars	$79,394		$58,794			35.0%		$62,901		$47,261			33.1%		$149,016		$136,713			9.0%
	Avg. Price	$301,878		$298,442			1.2%		$319,294		$299,120			6.7%		$279,056		$270,719			3.1%
Southeast
(FL, GA, SC)	Home		172		147		17.0%			155		121		28.1%			304		296		2.7%
	Dollars	$79,846		$58,648			36.1%		$65,595		$50,217			30.6%		$145,947		$128,571			13.5%
	Avg. Price	$464,221		$398,966			16.4%		$423,194		$415,017			2.0%		$480,089		$434,361			10.5%
Southwest
(AZ, TX)	Home		814		589		38.2%			641		449		42.8%			938		788		19.0%
	Dollars	$260,891		$202,553			28.8%		$214,608		$152,615			40.6%		$308,918		$277,263			11.4%
	Avg. Price	$320,506		$343,893			(6.8)%		$334,802		$339,900			(1.5)%		$329,337		$351,857			(6.4)%
West
(CA)	Home		568		320		77.5%			252		263		(4.2)%			644		372		73.1%
	Dollars	$258,067		$131,483			96.3%		$110,315		$110,251			0.1%		$299,564		$149,654			100.2%
	Avg. Price	$454,343		$410,884			10.6%		$437,758		$419,205			4.4%		$465,161		$402,296			15.6%
Consolidated Total
	Home		2,226		1,515		46.9%			1,553		1,185		31.1%			3,056		2,555		19.6%
	Dollars	$882,295		$588,845			49.8%		$605,933		$467,849			29.5%		$1,234,419		$1,054,506			17.1%
	Avg. Price	$396,359		$388,676			2.0%		$390,169		$394,809			(1.2)%		$403,933		$412,723			(2.1)%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		189		175		8.0%			228		192		18.8%			264		357		(26.1)%
	Dollars	$106,857		$107,579			(0.7)%		$132,014		$119,704			10.3%		$150,660		$226,778			(33.6)%
	Avg. Price	$565,381		$614,737			(8.0)%		$579,009		$623,458			(7.1)%		$570,682		$635,232			(10.2)%
Grand Total
	Home		2,415		1,690		42.9%			1,781		1,377		29.3%			3,320		2,912		14.0%
	Dollars	$989,152		$696,424			42.0%		$737,947		$587,553			25.6%		$1,385,079		$1,281,284			8.1%
	Avg. Price	$409,587		$412,085			(0.6)%		$414,344		$426,691			(2.9)%		$417,192		$440,001			(5.2)%
KSA JV Only
	Home		185		97		90.7%			0		3		(100.0)%			766		131		484.7%
	Dollars	$29,012		$15,346			89.1%		$0		$719			(100.0)%		$120,562		$20,800			479.6%
	Avg. Price	$156,821		$158,205			(0.9)%		$0		$239,667			(100.0)%		$157,392		$158,777			(0.9)%
DELIVERIES INCLUDE EXTRAS
Notes:
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income from unconsolidated joint ventures”.

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
		Contracts (1)							Deliveries							Contract
		Nine Months Ended							Nine Months Ended							Backlog
		July 31,							July 31,							July 31,
			2020		2019	% Change				2020		2019	% Change				2020		2019	% Change
Northeast
(NJ, PA)	Home		231		221		4.5%			270		80		237.5%			113		192		(41.1)%
	Dollars	$107,855		$135,090			(20.2)%		$133,409		$46,239			188.5%		$61,002		$119,347			(48.9)%
	Avg. Price	$466,905		$611,267			(23.6)%		$494,107		$577,988			(14.5)%		$539,841		$621,599			(13.2)%
Mid-Atlantic
(DE, MD, VA, WV)	Home		737		547		34.7%			536		412		30.1%			523		402		30.1%
	Dollars	$374,865		$299,566			25.1%		$288,426		$220,808			30.6%		$269,972		$242,958			11.1%
	Avg. Price	$508,636		$547,653			(7.1)%		$538,108		$535,942			0.4%		$516,199		$604,373			(14.6)%
Midwest
(IL, OH)	Home		624		559		11.6%			540		448		20.5%			534		505		5.7%
	Dollars	$192,171		$164,584			16.8%		$165,836		$135,020			22.8%		$149,016		$136,713			9.0%
	Avg. Price	$307,966		$294,426			4.6%		$307,104		$301,384			1.9%		$279,056		$270,719			3.1%
Southeast
(FL, GA, SC)	Home		436		397		9.8%			379		352		7.7%			304		296		2.7%
	Dollars	$195,512		$163,880			19.3%		$158,592		$143,446			10.6%		$145,947		$128,571			13.5%
	Avg. Price	$448,422		$412,796			8.6%		$418,449		$407,517			2.7%		$480,089		$434,361			10.5%
Southwest
(AZ, TX)	Home		1,924		1,510		27.4%			1,649		1,245		32.4%			938		788		19.0%
	Dollars	$626,817		$510,521			22.8%		$548,796		$414,112			32.5%		$308,918		$277,263			11.4%
	Avg. Price	$325,788		$338,093			(3.6)%		$332,805		$332,620			0.1%		$329,337		$351,857			(6.4)%
West
(CA)	Home		1,083		761		42.3%			740		700		5.7%			644		372		73.1%
	Dollars	$488,317		$309,117			58.0%		$313,454		$297,911			5.2%		$299,564		$149,654			100.2%
	Avg. Price	$450,893		$406,198			11.0%		$423,586		$425,587			(0.5)%		$465,161		$402,296			15.6%
Consolidated Total
	Home		5,035		3,995		26.0%			4,114		3,237		27.1%			3,056		2,555		19.6%
	Dollars	$1,985,537		$1,582,758			25.4%		$1,608,513		$1,257,536			27.9%		$1,234,419		$1,054,506			17.1%
	Avg. Price	$394,347		$396,185			(0.5)%		$390,985		$388,488			0.6%		$403,933		$412,723			(2.1)%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		514		502		2.4%			565		535		5.6%			264		357		(26.1)%
	Dollars	$296,664		$318,350			(6.8)%		$330,559		$338,599			(2.4)%		$150,660		$226,778			(33.6)%
	Avg. Price	$577,167		$634,163			(9.0)%		$585,060		$632,895			(7.6)%		$570,682		$635,232			(10.2)%
Grand Total
	Home		5,549		4,497		23.4%			4,679		3,772		24.0%			3,320		2,912		14.0%
	Dollars	$2,282,201		$1,901,108			20.0%		$1,939,072		$1,596,135			21.5%		$1,385,079		$1,281,284			8.1%
	Avg. Price	$411,281		$422,750			(2.7)%		$414,420		$423,153			(2.1)%		$417,192		$440,001			(5.2)%
KSA JV Only
	Home		564		133		324.1%			0		7		(100.0)%			766		131		484.7%
	Dollars	$88,246		$21,426			311.9%		$0		$1,627			(100.0)%		$120,562		$20,800			479.6%
	Avg. Price	$156,465		$161,101			(2.9)%		$0		$232,383			(100.0)%		$157,392		$158,777			(0.9)%
DELIVERIES INCLUDE EXTRAS
Notes:
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income from unconsolidated joint ventures”.

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)
(UNAUDITED)
		Contracts (1)							Deliveries							Contract
		Three Months Ended							Three Months Ended							Backlog
		July 31,							July 31,							July 31,
			2020		2019	% Change				2020		2019	% Change				2020		2019	% Change
Northeast
(unconsolidated joint ventures)	Home		39		65		(40.0)%			67		62		8.1%			33		111		(70.3)%
(excluding KSA JV)	Dollars	$33,759		$52,932			(36.2)%		$50,895		$49,496			2.8%		$31,571		$92,909			(66.0)%
(NJ, PA)	Avg. Price	$865,615		$814,338			6.3%		$759,627		$798,323			(4.8)%		$956,697		$837,018			14.3%
Mid-Atlantic
(unconsolidated joint ventures)	Home		36		9		300.0%			33		19		73.7%			48		36		33.3%
(DE, MD, VA, WV)	Dollars	$17,349		$4,490			286.4%		$16,665		$13,847			20.4%		$23,817		$21,075			13.0%
	Avg. Price	$481,917		$498,889			(3.4)%		$505,000		$728,789			(30.7)%		$496,188		$585,417			(15.2)%
Midwest
(unconsolidated joint ventures)	Home		1		5		(80.0)%			4		8		(50.0)%			0		2		(100.0)%
(IL, OH)	Dollars	$461		$2,509			(81.6)%		$1,825		$4,487			(59.3)%		$0		$885			(100.0)%
	Avg. Price	$461,000		$501,800			(8.1)%		$456,250		$560,875			(18.7)%		$0		$442,500			(100.0)%
Southeast
(unconsolidated joint ventures)	Home		66		39		69.2%			74		46		60.9%			129		117		10.3%
(FL, GA, SC)	Dollars	$31,843		$20,919			52.2%		$35,528		$23,064			54.0%		$64,865		$64,147			1.1%
	Avg. Price	$482,470		$536,385			(10.1)%		$480,108		$501,391			(4.2)%		$502,829		$548,265			(8.3)%
Southwest
(unconsolidated joint ventures)	Home		31		24		29.2%			31		37		(16.2)%			46		55		(16.4)%
(AZ, TX)	Dollars	$17,928		$15,072			18.9%		$20,141		$21,841			(7.8)%		$27,759		$34,764			(20.2)%
	Avg. Price	$578,323		$628,000			(7.9)%		$649,710		$590,297			10.1%		$603,457		$632,073			(4.5)%
West
(unconsolidated joint ventures)	Home		16		33		(51.5)%			19		20		(5.0)%			8		36		(77.8)%
(CA)	Dollars	$5,517		$11,657			(52.7)%		$6,960		$6,969			(0.1)%		$2,648		$12,998			(79.6)%
	Avg. Price	$344,813		$353,242			(2.4)%		$366,316		$348,450			5.1%		$331,000		$361,056			(8.3)%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		189		175		8.0%			228		192		18.8%			264		357		(26.1)%
	Dollars	$106,857		$107,579			(0.7)%		$132,014		$119,704			10.3%		$150,660		$226,778			(33.6)%
	Avg. Price	$565,381		$614,737			(8.0)%		$579,009		$623,458			(7.1)%		$570,682		$635,232			(10.2)%
KSA JV Only
	Home		185		97		90.7%			0		3		(100.0)%			766		131		484.7%
	Dollars	$29,012		$15,346			89.1%		$0		$719			(100.0)%		$120,562		$20,800			479.6%
	Avg. Price	$156,821		$158,205			(0.9)%		$0		$239,667			(100.0)%		$157,392		$158,777			(0.9)%
DELIVERIES INCLUDE EXTRAS
Notes:
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income from unconsolidated joint ventures”.

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)
(UNAUDITED)
		Contracts (1)							Deliveries							Contract
		Nine Months Ended							Nine Months Ended							Backlog
		July 31,							July 31,							July 31,
			2020		2019	% Change				2020		2019	% Change				2020		2019	% Change
Northeast
(unconsolidated joint ventures)	Home		130		188		(30.9)%			173		191		(9.4)%			33		111		(70.3)%
(excluding KSA JV)	Dollars	$104,142		$150,396			(30.8)%		$136,250		$150,853			(9.7)%		$31,571		$92,909			(66.0)%
(NJ, PA)	Avg. Price	$801,092		$799,979			0.1%		$787,572		$789,806			(0.3)%		$956,697		$837,018			14.3%
Mid-Atlantic
(unconsolidated joint ventures)	Home		70		26		169.2%			64		43		48.8%			48		36		33.3%
(DE, MD, VA, WV)	Dollars	$35,223		$19,158			83.9%		$32,381		$33,267			(2.7)%		$23,817		$21,075			13.0%
	Avg. Price	$503,182		$736,846			(31.7)%		$505,953		$773,651			(34.6)%		$496,188		$585,417			(15.2)%
Midwest
(unconsolidated joint ventures)	Home		11		12		(8.3)%			14		19		(26.3)%			0		2		(100.0)%
(IL, OH)	Dollars	$5,109		$6,472			(21.1)%		$6,394		$11,663			(45.2)%		$0		$885			(100.0)%
	Avg. Price	$464,455		$539,333			(13.9)%		$456,714		$613,842			(25.6)%		$0		$442,500			(100.0)%
Southeast
(unconsolidated joint ventures)	Home		185		122		51.6%			179		127		40.9%			129		117		10.3%
(FL, GA, SC)	Dollars	$90,547		$65,530			38.2%		$86,255		$64,638			33.4%		$64,865		$64,147			1.1%
	Avg. Price	$489,442		$537,131			(8.9)%		$481,872		$508,961			(5.3)%		$502,829		$548,265			(8.3)%
Southwest
(unconsolidated joint ventures)	Home		76		86		(11.6)%			75		98		(23.5)%			46		55		(16.4)%
(AZ, TX)	Dollars	$47,147		$52,455			(10.1)%		$47,706		$58,155			(18.0)%		$27,759		$34,764			(20.2)%
	Avg. Price	$620,355		$609,942			1.7%		$636,080		$593,418			7.2%		$603,457		$632,073			(4.5)%
West
(unconsolidated joint ventures)	Home		42		68		(38.2)%			60		57		5.3%			8		36		(77.8)%
(CA)	Dollars	$14,496		$24,339			(40.4)%		$21,573		$20,023			7.7%		$2,648		$12,998			(79.6)%
	Avg. Price	$345,143		$357,926			(3.6)%		$359,550		$351,281			2.4%		$331,000		$361,056			(8.3)%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		514		502		2.4%			565		535		5.6%			264		357		(26.1)%
	Dollars	$296,664		$318,350			(6.8)%		$330,559		$338,599			(2.4)%		$150,660		$226,778			(33.6)%
	Avg. Price	$577,167		$634,163			(9.0)%		$585,060		$632,895			(7.6)%		$570,682		$635,232			(10.2)%
KSA JV Only
	Home		564		133		324.1%			0		7		(100.0)%			766		131		484.7%
	Dollars	$88,246		$21,426			311.9%		$0		$1,627			(100.0)%		$120,562		$20,800			479.6%
	Avg. Price	$156,465		$161,101			(2.9)%		$0		$232,383			(100.0)%		$157,392		$158,777			(0.9)%
DELIVERIES INCLUDE EXTRAS
Notes:
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income from unconsolidated joint ventures”.

Contact:	J. Larry Sorsby	Jeffrey T. O’Keefe
	Executive Vice President & CFO	Vice President, Investor Relations
	732-747-7800	732-747-7800

FAQ

What are the total revenues reported by Hovnanian for Q3 FY2020?

Hovnanian reported total revenues of $628.1 million for Q3 FY2020.

How did Hovnanian's pretax income change in Q3 FY2020?

Hovnanian's pretax income improved to $16.2 million in Q3 FY2020 from a loss of $7.1 million in Q3 FY2019.

What was the year-over-year increase in consolidated contracts for Hovnanian?

Consolidated contracts increased by 46.9% to 2,226 homes in Q3 FY2020.

What is the expected outlook for Hovnanian in FY2021?

Hovnanian expects meaningful improvements in revenues, EBITDA, and profitability during FY2021.

What was the EBITDA for Hovnanian in Q3 FY2020?

Hovnanian's EBITDA for Q3 FY2020 was $66.5 million, an 88% increase compared to the prior year.