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OFFON

HOVNANIAN ENTERPRISES, INC.

(HOV)
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Hovnanian Enterprises : Investor Presentation October 2021

10/06/2021 | 08:46am EST

Investor Presentation

October 2021

Forward-Looking Statements

Note: All statements in this presentation that are not historical facts should be considered as "Forward-Looking Statements" within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to statements related to the Company's targets, goals and expectations with respect to its financial results for future financial periods such as its statements related to its key metric targets for total consolidated revenue, homebuilding gross margin percentage before cost of sales interest expense and land charges, total SG&A ratio, adjusted pre-tax earnings, adjusted EBITDA, average inventory and inventor turns. Although we believe that our targets, plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such targets, 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 outbreak and spread of COVID-19 and the measures that 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) the seasonality of the Company's business; (5) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (6) shortages in, and price fluctuations of, raw materials and labor, including due to changes in trade policies and the imposition of tariffs and duties on homebuilding materials and products and related trade disputes with, and retaliatory measures taken by, other countries; (7) reliance on, and the performance of, subcontractors; (8) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (9) increases in cancellations of agreements of sale; (10) fluctuations in interest rates and the availability of mortgage financing; (11) changes in tax laws affecting the after-tax costs of owning a home; (12) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (13) levels of competition; (14) utility shortages and outages or rate fluctuations; (15) information technology failures and data security breaches; (16) negative publicity; (17) high leverage and restrictions on the Company's operations and activities imposed by the agreements governing the Company's outstanding indebtedness; (18) availability and terms of financing to the Company; (19) the Company's sources of liquidity; (20) changes in credit ratings; (21) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment; (22) operations through unconsolidated joint ventures with third parties; (23) significant influence of the Company's controlling stockholders; (24) availability of net operating loss carryforwards; (25) loss of key management personnel or failure to attract qualified personnel; and (26) 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, 2020 and the Company's Quarterly Reports on Form 10-Q for the quarterly periods during fiscal 2021 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.

2

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 loss (gain) on extinguishment of debt ("Adjusted EBITDA") are not U.S. generally accepted accounting principles (GAAP) financial measures. This earnings release also presents EBITDA and Adjusted EBITDA adjusted to exclude the impact of incremental phantom stock expense. The most directly comparable GAAP financial measure is net income. The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income is presented in a table attached to this earnings release or elsewhere in 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 before income taxes excluding land-related charges and loss (gain) on extinguishment of debt is a non- GAAP financial measure. This earnings release also presents adjusted pretax income adjusted to exclude the impact of incremental phantom stock expense. The most directly comparable GAAP financial measure is income before income taxes. The reconciliation for historical periods of adjusted pretax income to income before income taxes is presented in a table attached to this earnings release or elsewhere in this earnings release.

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

Total liquidity is comprised of $172.7 million of cash and cash equivalents, $10.0 million of restricted cash required to collateralize letters of credit and $125.0 million availability under the senior secured revolving credit facility as of July 31, 2021.

3

What's new about the Hovnanian story?

Footprint

Profitability and margin improvement

Cash flow

generation

Inventory

strategy

Maturity profile

Then

Now

Multiple underperforming markets

Focused on stronger markets with

improving share

Unprofitable

Profitable

Insufficient to adequately address

Material excess operating cash flow

debt maturities and grow business

after land reinvestment

Over-reliance on costly on- and off-

Increased inventory efficiency driving

balance sheet financing to acquire lots,

high turnover and ROI

reducing returns

Short dated; difficulty extending

Significant runway, strategic

near term maturities

priority to repay debt

4

Successfully implementing strategies for long-term profitability and value creation

Growth-oriented strategy

Actions undertaken

Grow revenues

to improve

scale and

enhance

margin profile

  • Actively manage sales pace, ASP and community count
  • Streamline organizational structure and reduce overhead

Risk-adverse land strategy and maintain multi-year lot supply

  • Control land with minimal cash investment
  • Target 1-2 years of owned lot supply

High return on

invested

capital and

sharpened

asset

efficiency

Accelerate inventory

turnover to unlock

capital

Reactivate formerly

mothballed

inventory

Generate

excess cash

flow and

improve

balance sheet

flexibility

Maintain ample

liquidity

Prioritize debt

repayment

opportunities

Proactively extend

and ladder

maturities

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Hovnanian Enterprises Inc. published this content on 06 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 October 2021 12:45:04 UTC.


© Publicnow 2021
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Financials (USD)
Sales 2020 2 344 M - -
Net income 2020 50,9 M - -
Net Debt 2020 1 412 M - -
P/E ratio 2020 4,52x
Yield 2020 -
Capitalization 515 M 515 M -
EV / Sales 2019 0,91x
EV / Sales 2020 0,68x
Nbr of Employees 1 697
Free-Float 65,9%
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Ara K. Hovnanian Chairman, President & Chief Executive Officer
J. Larry Sorsby Chief Financial Officer, Director & Executive VP
Paul Marabella Chief Information Officer & Vice President
Edward A. Kangas Independent Director
Robert B. Coutts Independent Director
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