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 SUBSIDIARIESCONDENSED 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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In Thousands Except Per Share Data)(Unaudited)

    Three Months EndedJuly 31,     Nine Months EndedJuly 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