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OFFON

HOVNANIAN ENTERPRISES, INC.

(HOV)
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Hovnanian Enterprises Reports Fiscal 2021 Third Quarter Results

09/09/2021 | 09:16am EDT

Pretax Profit Increased 281% to $62 Million
Gross Margin Percentage Increased 560 Basis Points Year-over-Year
42% Year-over-Year Increase in Consolidated Backlog Dollars to $1.75 Billion
Paid Off $111 Million of Senior Secured Notes in the Third Quarter and an Additional $70 Million Early in the Fourth Quarter

MATAWAN, N.J., Sept. 09, 2021 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal third quarter and nine-month period ended July 31, 2021.

RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2021:

  • Total revenues increased 10.0% to $690.7 million in the third quarter of fiscal 2021, compared with $628.1 million in the same quarter of the prior year. For the nine months ended July 31, 2021, total revenues increased 18.5% to $1.97 billion compared with $1.66 billion in the same period during the prior fiscal year.

  • Homebuilding gross margin percentage, after cost of sales interest expense and land charges, increased 560 basis points to 19.2% for the three months ended July 31, 2021 compared with 13.6% during the same period a year ago. During the first nine months of fiscal 2021, homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 18.3%, up 460 basis points, compared with 13.7% during the same period last year.

  • Homebuilding gross margin percentage, before cost of sales interest expense and land charges, increased 460 basis points to 22.1% during the fiscal 2021 third quarter compared with 17.5% in last year’s third quarter. For the nine months ended July 31, 2021, homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 21.4%, up 370 basis points, compared with 17.7% in the same period of the previous fiscal year.

  • Total SG&A was $60.3 million, or 8.7% of total revenues, in the fiscal 2021 third quarter compared with $59.9 million, or 9.5% of total revenues, in the previous year’s third quarter. During the first nine months of fiscal 2021, total SG&A was $206.6 million, or 10.5% of total revenues, compared with $176.2 million, or 10.6% of total revenues, in the same period of the prior fiscal year.

  • Total interest expense declined 21.5% to $38.4 million for the third quarter of fiscal 2021 compared with $48.9 million during the third quarter of fiscal 2020. For the nine months ended July 31, 2021, total interest expense was $123.3 million compared with $137.5 million during the same period last year.

  • Income from unconsolidated joint ventures was $5.0 million for the third quarter ended July 31, 2021 compared with $5.7 million in the fiscal 2020 third quarter. For the first nine months of fiscal 2021, income from unconsolidated joint ventures was $9.6 million compared with $13.4 million in the same period a year ago.

  • Income before income taxes for the third quarter of fiscal 2021 was $61.8 million, up 281.1% or $45.6 million, compared with $16.2 million in the third quarter of the prior fiscal year. For the first nine months of fiscal 2021, income before income taxes increased 767.5% to $112.4 million compared with $13.0 million during the same period of fiscal 2020.

  • Net income was $47.7 million, or $6.72 per diluted common share, for the three months ended July 31, 2021 compared with net income of $15.4 million, or $2.16 per diluted common share, in the third quarter of the previous fiscal year. For the first nine months of fiscal 2021, net income, including the $468.6 million benefit from the valuation allowance reduction, was $555.3 million, or $78.51 per diluted common share, compared with $10.3 million, or $1.44 per diluted common share, in the same period during fiscal 2020.

  • EBITDA increased 52.7% to $101.5 million for the third quarter of fiscal 2021 compared with $66.5 million in the same quarter of the prior year. For the first nine months of fiscal 2021, EBITDA was $239.8 million, a 55.4% increase, compared with $154.3 million in the first nine months of fiscal 2020.

  • Financial services income before income taxes was $8.6 million for the third quarter of fiscal 2021 compared with $10.8 million in the third quarter of fiscal 2020. For the first nine months of fiscal 2021, financial services income before income taxes increased 40.6% to $28.1 million compared with $20.0 million in the same period one year ago.
  • Consolidated contracts per community decreased 38.9% to 11.6 contracts per community for the third quarter ended July 31, 2021 compared with the unprecedented COVID-19 surge in home demand of 19.0 contracts per community in last year’s third quarter. However, consolidated contracts per community for the third quarter of fiscal 2021 were up slightly compared to the more historically average pace of 11.0 contracts per community in the fiscal 2019 third quarter. Contracts per community, including domestic unconsolidated joint ventures(1), decreased 35.4% to 11.5 for the third quarter of fiscal 2021 compared with 17.8 for the third quarter of fiscal 2020, but increased compared to 10.6 for the fiscal 2019 third quarter.

  • As a result of metering sales, selling out of communities ahead of schedule, COVID-19 related delays for new community openings and unprecedented demand after the initial COVID-19 shutdown last year, consolidated contract dollars decreased 31.0% in the third quarter of fiscal 2021 to $609.1 million (1,211 homes) compared with $882.3 million (2,226 homes) in the same quarter last year. Contract dollars, including domestic unconsolidated joint ventures, for the three months ended July 31, 2021, decreased 27.6% to $716.2 million (1,376 homes) compared with $989.2 million (2,415 homes) in the third quarter of fiscal 2020.

  • For the nine months ended July 31, 2021, consolidated contract dollars increased 12.2% to $2.23 billion (4,760 homes) compared with $1.99 billion (5,035 homes) in the same period of the prior year. Contract dollars, including domestic unconsolidated joint ventures, for the first nine months of fiscal 2021 increased 11.6% to $2.55 billion (5,298 homes) compared with $2.28 billion (5,549 homes) in the same period of fiscal 2020.

  • Due to consciously metering sales in many of our communities in recent months and a difficult comparison to a very strong August last year, consolidated contracts per community for August 2021 decreased 43.9% to 3.7 compared with the unprecedented COVID demand surge of 6.6 for the same month one year ago. That said, consolidated contracts per community for August 2021 still represented an increase compared to a more typical 3.2 for August 2019. The dollar value of August 2021 consolidated contracts decreased 36.3% to $203.1 million compared with $318.8 million in August last year. The dollar value of August 2021 consolidated contracts represented an increase compared to $166.7 million in August 2019.

  • The dollar value of consolidated contract backlog, as of July 31, 2021, increased 41.8% to $1.75 billion compared with $1.23 billion as of July 31, 2020. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of July 31, 2021, increased 43.8% to $1.99 billion compared with $1.39 billion as of July 31, 2020.

  • Consolidated deliveries decreased 3.5% to 1,498 homes in the fiscal 2021 third quarter compared with 1,553 homes in the previous year’s third quarter. For the fiscal 2021 third quarter, deliveries, including domestic unconsolidated joint ventures, decreased 5.8% to 1,677 homes compared with 1,781 homes during the third quarter of fiscal 2020.

  • For the first nine months of fiscal 2021, consolidated deliveries increased 9.4% to 4,501 homes compared with 4,114 homes in the first nine months of the previous year. For the first nine months of fiscal 2021, deliveries, including domestic unconsolidated joint ventures, increased 5.9% to 4,954 homes compared with 4,679 homes during the same period of fiscal 2021.

  • The contract cancellation rate for consolidated contracts was 16% for the third quarter ended July 31, 2021 compared with 18% in the fiscal 2020 third quarter. The contract cancellation rate for contracts including domestic unconsolidated joint ventures was 15% for the third quarter of fiscal 2021 compared with 18% 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, 2021: 

  • During the third quarter of fiscal 2021, land and land development spending was $177.6 million, an increase of 9.2% compared with $162.6 million in last year’s third quarter. For the first nine months of fiscal 2021, land and land development spending was $531.2 million, an increase of 34.5% compared with $394.9 million in the same period one year ago.

  • After paying off in full with cash on hand the remaining balance of $111 million of our 10.0% senior secured notes due July 2022, the total liquidity at the end of the third quarter of fiscal 2021 was $307.7 million, well above our targeted liquidity range of $170 million to $245 million.

  • On August 2, 2021, we paid off in full with cash on hand the remaining $70 million principal amount of our 10.5% senior secured notes due July 2024 at a purchase price of 102.625% of the principal amount thereof plus accrued and unpaid interest to, but excluding, the redemption date. Other than our undrawn senior secured revolving credit facility, we do not have any bond issuances maturing before the first quarter of fiscal 2026.

  • In the third quarter of fiscal 2021, approximately 4,900 lots were put under option or acquired in 35 consolidated communities.

  • As of July 31, 2021, the total controlled consolidated lots increased 20.4% to 31,002 compared with 25,748 lots at the end of the previous year’s third quarter. Based on trailing twelve-month deliveries, the current position equaled a 5.1 years’ supply.

FINANCIAL GUIDANCE(2):

Financial guidance for both the fourth quarter and full year for fiscal 2021 assumes no adverse changes in current market conditions and excludes further impact to SG&A expenses from phantom stock expense related solely to stock price movements from the closing price of $104.39 at July 30, 2021. Every $4 increase or decrease in common stock price from the end of the third quarter, results in an approximate $1 million increase or decrease, respectively, of phantom stock expense.

  • For the fourth quarter of fiscal 2021, total revenues are expected to be between $830 million and $880 million, adjusted pretax income is expected to be between $60 million and $75 million and adjusted EBITDA is expected to be between $100 million and $115 million.

  • For all of fiscal 2021, we are increasing our guidance. Total revenues are expected to be between $2.80 billion and $2.85 billion, adjusted pretax income to be between $175 million and $190 million and adjusted EBITDA to be between $345 million and $360 million.

  • On October 31, 2021, we expect our community count, including domestic unconsolidated joint ventures, to grow from 120 as of the end of our third quarter to roughly the same level of 135 communities open at the end of the fourth quarter last year. Community count is expected to continue to grow in fiscal 2022.

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

COMMENTS FROM MANAGEMENT:

“Given the significant COVID-19 supply chain disruptions and labor challenges our industry has been experiencing, we are very pleased with our strong performance during the third quarter of fiscal 2021. We exceeded our third quarter guidance on almost every financial metric,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “As expected, sales have slowed to a more historically typical sales pace following our efforts to meter homes available for sale and through significant home price increases. The average price in our deliveries went from $390,000 in last year’s third quarter, to $443,000 in this year’s third quarter. Our third quarter average price for new contracts increased even further to $503,000. Those efforts, combined with a slowdown in demand from the white-hot sales pace we experienced last year, have allowed us to better align starting home construction with our sales pace. Last year’s COVID-19 sales frenzy has given way to a more rational sales pace, which we believe is more sustainable.”

“On a positive note, lumber prices have begun to decline substantially. We expect the recent decrease in lumber costs to benefit gross margins on homes we are starting now for future deliveries, including many of the homes that are currently in backlog for 2022 deliveries. Due to a strong economy, positive long-term demographic trends and our strong cash flow, we continue to invest in land and are making strong progress on acquiring additional land parcels which bodes well for future community count growth. We believe that we are well positioned to take advantage of these positive long-term trends. We continue to expect fiscal 2021 to be an outstanding year. As we look forward, we believe that today’s more rational, healthy contract pace, which has higher home prices and gross margins, along with an increase in community count, should lead to further growth in both total revenues and adjusted pretax income in fiscal 2022,” concluded Mr. Hovnanian.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2021 third quarter financial results conference call at 11:00 a.m. E.T. on Thursday, September 9, 2021. 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 loss (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. The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income 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 before income taxes excluding land-related charges and loss (gain) on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes. The reconciliation for historical periods of adjusted pretax income to income before income taxes is presented in a table attached to this earnings release.

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.

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 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.

Hovnanian Enterprises, Inc.
July 31, 2021
Statements of consolidated operations
(In thousands, except per share data)
    Three Months Ended Nine Months Ended
    July 31, July 31,
     2021   2020   2021   2020 
    (Unaudited) (Unaudited)
Total revenues$690,683  $628,136  $1,968,509  $1,660,543 
Costs and expenses (1) 633,589   621,633   1,865,355   1,674,340 
(Loss) gain on extinguishment of debt (306)  4,055   (306)  13,337 
Income from unconsolidated joint ventures 5,011   5,658   9,568   13,419 
Income before income taxes 61,799   16,216   112,416   12,959 
Income tax provision (benefit) 14,097   853   (442,921)  2,665 
Net income$47,702  $15,363  $555,337  $10,294 
           
Per share data:       
Basic:        
 Net income per common share$6.85  $2.27  $80.02  $1.52 
 Weighted average number of       
  common shares outstanding 6,315   6,201   6,263   6,178 
Assuming dilution:       
 Net income per common share$6.72  $2.16  $78.51  $1.44 
 Weighted average number of       
  common shares outstanding 6,434   6,518   6,370   6,502 
           
(1) Includes inventory impairment loss and land option write-offs.
 
 
 
Hovnanian Enterprises, Inc.
July 31, 2021
Reconciliation of income before income taxes excluding land-related charges and loss (gain) on extinguishment of debt to income before income taxes
(In thousands)
    Three Months Ended Nine Months Ended
    July 31, July 31,
     2021   2020   2021   2020 
    (Unaudited) (Unaudited)
Income before income taxes$61,799  $16,216  $112,416  $12,959 
Inventory impairment loss and land option write-offs 1,309   2,364   3,267   6,202 
Loss (gain) on extinguishment of debt 306   (4,055)  306   (13,337)
Income before income taxes excluding land-related       
  charges and loss (gain) on extinguishment of debt (1)$63,414  $14,525  $115,989  $5,824 
           
(1) Income before income taxes excluding land-related charges and loss (gain) on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes.


Hovnanian Enterprises, Inc.
July 31, 2021
Gross margin
(In thousands)
  Homebuilding Gross Margin Homebuilding Gross Margin
  Three Months Ended Nine Months Ended
  July 31, July 31,
   2021   2020   2021   2020 
  (Unaudited) (Unaudited)
Sale of homes $663,279  $605,933  $1,894,159  $1,608,513 
Cost of sales, excluding interest expense and land charges (1)  516,530   499,654   1,488,919   1,323,916 
Homebuilding gross margin, before cost of sales interest expense and land charges (2)  146,749   106,279   405,240   284,597 
Cost of sales interest expense, excluding land sales interest expense  17,821   21,794   56,242   58,467 
Homebuilding gross margin, after cost of sales interest expense, before land charges (2)  128,928   84,485   348,998   226,130 
Land charges  1,309   2,364   3,267   6,202 
Homebuilding gross margin $127,619  $82,121  $345,731  $219,928 
         
Homebuilding Gross margin percentage  19.2%  13.6%  18.3%  13.7%
Homebuilding Gross margin percentage, before cost of sales interest expense and land charges (2)  22.1%  17.5%  21.4%  17.7%
Homebuilding Gross margin percentage, after cost of sales interest expense, before land charges (2)  19.4%  13.9%  18.4%  14.1%
 
  Land Sales Gross Margin Land Sales Gross Margin
  Three Months Ended Nine Months Ended
  July 31, July 31,
   2021   2020   2021   2020 
  (Unaudited) (Unaudited)
Land and lot sales $6,819  $25  $11,730  $100 
Land and lot sales cost of sales, excluding interest and land charges (1)  5,338   41   9,121   161 
Land and lot sales gross margin, excluding interest and land charges  1,481   (16)  2,609   (61)
Land and lot sales interest  1,419   20   1,888   72 
Land and lot sales gross margin, including interest and excluding land charges $62  $(36) $721  $(133)
 
 
(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, 2021
Reconciliation of adjusted EBITDA to net income
(In thousands)
 Three Months Ended Nine Months Ended
 July 31, July 31,
  2021  2020   2021   2020 
 (Unaudited) (Unaudited)
Net income$47,702 $15,363  $555,337  $10,294 
Income tax provision (benefit) 14,097  853   (442,921)  2,665 
Interest expense 38,398  48,886   123,296   137,483 
EBIT (1) 100,197  65,102   235,712   150,442 
Depreciation and amortization 1,269  1,355   4,091   3,897 
EBITDA (2) 101,466  66,457   239,803   154,339 
Inventory impairment loss and land option write-offs 1,309  2,364   3,267   6,202 
Loss (gain) on extinguishment of debt 306  (4,055)  306   (13,337)
Adjusted EBITDA (3)$103,081 $64,766  $243,376  $147,204 
 
Interest incurred$39,181 $45,140  $122,508  $134,797 
 
Adjusted EBITDA to interest incurred 2.63  1.43   1.99   1.09 
 
 
(1) EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income. 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. 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. Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs and (loss) gain on extinguishment of debt.
 
 
Hovnanian Enterprises, Inc.
July 31, 2021
Interest incurred, expensed and capitalized
(In thousands)
 Three Months Ended Nine Months Ended
 July 31, July 31,
  2021  2020   2021   2020 
 (Unaudited) (Unaudited)
Interest capitalized at beginning of period$59,772 $67,744  $65,010  $71,264 
Plus interest incurred 39,181  45,140   122,508   134,797 
Less interest expensed 38,398  48,886   123,296   137,483 
Less interest contributed to unconsolidated joint venture (1) -  -   3,667   4,580 
Plus interest acquired from unconsolidated joint venture (2) 3,118  -   3,118   - 
Interest capitalized at end of period (3)$63,673 $63,998  $63,673  $63,998 
 
(1) Represents capitalized interest which was included as part of the assets contributed to joint ventures the company entered into in April 2021 and December 2019 during the nine months ended July 31, 2021 and 2020, respectively. There was no impact to the Condensed Consolidated Statement of Operations as a result of this transaction.
(2) Represents capitalized interest which was included as part of the assets purchased from a joint venture the company exited out of in June 2021 during the nine months ended July 31, 2021. There was no impact to the Condensed Consolidated Statement of Operations as a result of this transaction.
(3) 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, 
  2021  2020 
ASSETS (Unaudited)  (1) 
Homebuilding:        
Cash and cash equivalents  $172,748   $262,489 
Restricted cash and cash equivalents   15,100    14,731 
Inventories:        
Sold and unsold homes and lots under development   1,119,876    921,594 
Land and land options held for future development or sale   95,416    91,957 
Consolidated inventory not owned   98,053    182,224 
Total inventories   1,313,345    1,195,775 
Investments in and advances to unconsolidated joint ventures   68,900    103,164 
Receivables, deposits and notes, net   37,735    33,686 
Property, plant and equipment, net   17,974    18,185 
Prepaid expenses and other assets   58,571    58,705 
Total homebuilding   1,684,373    1,686,735 
         
Financial services   180,218    140,607 
         
Deferred tax assets, net   447,453    - 
Total assets  $2,312,044   $1,827,342 
         
LIABILITIES AND EQUITY        
Homebuilding:        
Nonrecourse mortgages secured by inventory, net of debt issuance costs  $118,020   $135,122 
Accounts payable and other liabilities   401,283    359,274 
Customers’ deposits   76,729    48,286 
Liabilities from inventory not owned, net of debt issuance costs   69,627    131,204 
Senior notes and credit facilities (net of discounts, premiums and debt issuance costs)   1,317,524    1,431,110 
Accrued Interest   47,460    35,563 
Total homebuilding   2,030,643    2,140,559 
         
Financial services   158,226    119,045 
Income taxes payable   2,484    3,832 
Total liabilities   2,191,353    2,263,436 
         
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, 2021 and October 31, 2020   135,299    135,299 
Common stock, Class A, $0.01 par value - authorized 16,000,000 shares; issued 6,064,070 shares at July 31, 2021 and 5,990,310 shares at October 31, 2020   61    60 
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) - authorized 2,400,000 shares; issued 686,888 shares at July 31, 2021 and 649,886 shares at October 31, 2020   7    7 
Paid in capital - common stock   719,770    718,110 
Accumulated deficit   (619,708)   (1,175,045)
Treasury stock - at cost – 470,430 shares of Class A common stock and 27,669 shares of Class B common stock at July 31, 2021 and October 31, 2020   (115,360)   (115,360)
Total Hovnanian Enterprises, Inc. stockholders’ equity (deficit)   120,069    (436,929)
Noncontrolling interest in consolidated joint ventures   622    835 
Total equity (deficit)   120,691    (436,094)
Total liabilities and equity  $2,312,044   $1,827,342 

(1) Derived from the audited balance sheet as of October 31, 2020.

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, 
  2021  2020  2021  2020 
Revenues:                
Homebuilding:                
Sale of homes  $663,279   $605,933   $1,894,159   $1,608,513 
Land sales and other revenues   7,559    908    13,280    2,360 
Total homebuilding   670,838    606,841    1,907,439    1,610,873 
Financial services   19,845    21,295    61,070    49,670 
Total revenues   690,683    628,136    1,968,509    1,660,543 
                 
Expenses:                
Homebuilding:                
Cost of sales, excluding interest   521,868    499,695    1,498,040    1,324,077 
Cost of sales interest   19,240    21,814    58,130    58,539 
Inventory impairment loss and land option write-offs   1,309    2,364    3,267    6,202 
Total cost of sales   542,417    523,873    1,559,437    1,388,818 
Selling, general and administrative   42,988    40,608    125,417    121,887 
Total homebuilding expenses   585,405    564,481    1,684,854    1,510,705 
                 
Financial services   11,238    10,493    32,953    29,677 
Corporate general and administrative   17,284    19,321    81,149    54,340 
Other interest   19,158    27,072    65,166    78,944 
Other operations   504    266    1,233    674 
Total expenses   633,589    621,633    1,865,355    1,674,340 
(Loss) gain on extinguishment of debt   (306)   4,055    (306)   13,337 
Income from unconsolidated joint ventures   5,011    5,658    9,568    13,419 
Income before income taxes   61,799    16,216    112,416    12,959 
State and federal income tax provision (benefit):                
State   1,476    853    (89,272)   2,665 
Federal   12,621    -    (353,649)   - 
Total income taxes   14,097    853    (442,921)   2,665 
Net income  $47,702   $15,363   $555,337   $10,294 
                 
Per share data:                
Basic:                
Net income per common share  $6.85   $2.27   $80.02   $1.52 
Weighted-average number of common shares outstanding   6,315    6,201    6,263    6,178 
Assuming dilution:                
Net income per common share  $6.72   $2.16   $78.51   $1.44 
Weighted-average number of common shares outstanding   6,434    6,518    6,370    6,502 

See notes to condensed consolidated financial statements (unaudited).


HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
 
  Contracts (1)DeliveriesContract
  Three Months EndedThree Months EndedBacklog
  July 31,July 31,July 31,
   2021 2020% Change 2021 2020% Change 2021 2020% Change
Northeast          
(NJ, PA)Home 62 102(39.2)%  44 95(53.7)%  160 11341.6% 
 Dollars$52,066$51,5860.9% $35,255$41,354(14.7)% $122,638$61,002101.0% 
 Avg. Price$839,774$505,74566.0% $801,250$435,30584.1% $766,488$539,84142.0% 
Mid-Atlantic           
(DE, MD, VA, WV)Home 176 307(42.7)%  189 213(11.3)%  572 5239.4% 
 Dollars$117,341$152,511(23.1)% $106,195$111,160(4.5)% $361,329$269,97233.8% 
 Avg. Price$666,710$496,77534.2% $561,878$521,8787.7% $631,694$516,19922.4% 
Midwest           
(IL, OH)Home 165 263(37.3)%  190 197(3.6)%  648 53421.3% 
 Dollars$56,848$79,394(28.4)% $60,588$62,901(3.7)% $205,101$149,01637.6% 
 Avg. Price$344,533$301,87814.1% $318,884$319,294(0.1)% $316,514$279,05613.4% 
Southeast          
(FL, GA, SC)Home 124 172(27.9)%  139 155(10.3)%  440 30444.7% 
 Dollars$58,522$79,846(26.7)% $61,978$65,595(5.5)% $211,859$145,94745.2% 
 Avg. Price$471,952$464,2211.7% $445,885$423,1945.4% $481,498$480,0890.3% 
Southwest          
(AZ, TX)Home 469 814(42.4)%  593 641(7.5)%  1,292 93837.7% 
 Dollars$196,481$260,891(24.7)% $212,773$214,608(0.9)% $524,029$308,91869.6% 
 Avg. Price$418,936$320,50630.7% $358,808$334,8027.2% $405,595$329,33723.2% 
West           
(CA)Home 215 568(62.1)%  343 25236.1%  561 644(12.9)% 
 Dollars$127,872$258,067(50.5)% $186,490$110,31569.1% $325,472$299,5648.6% 
 Avg. Price$594,753$454,34330.9% $543,703$437,75824.2% $580,164$465,16124.7% 
Consolidated Total          
 Home 1,211 2,226(45.6)%  1,498 1,553(3.5)%  3,673 3,05620.2% 
 Dollars$609,130$882,295(31.0)% $663,279$605,9339.5% $1,750,428$1,234,41941.8% 
 Avg. Price$502,998$396,35926.9% $442,776$390,16913.5% $476,566$403,93318.0% 
Unconsolidated Joint Ventures (2)          
(excluding KSA JV)Home 165 189(12.7)%  179 228(21.5)%  399 26451.1% 
 Dollars$107,111$106,8570.2% $102,262$132,014(22.5)% $241,346$150,66060.2% 
 Avg. Price$649,158$565,38114.8% $571,296$579,009(1.3)% $604,877$570,6826.0% 
Grand Total          
 Home 1,376 2,415(43.0)%  1,677 1,781(5.8)%  4,072 3,32022.7% 
 Dollars$716,241$989,152(27.6)% $765,541$737,9473.7% $1,991,774$1,385,07943.8% 
 Avg. Price$520,524$409,58727.1% $456,494$414,34410.2% $489,139$417,19217.2% 
 
KSA JV Only          
 Home 215 18516.2%  0 00.0%  1,666 766117.5% 
 Dollars$33,802$29,01216.5% $0$00.0% $261,653$120,562117.0% 
 Avg. Price$157,219$156,8210.3% $0$00.0% $157,055$157,392(0.2)% 
 
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)
           
  Contracts (1)DeliveriesContract
  Nine Months EndedNine Months EndedBacklog
  July 31,July 31,July 31,
   2021 2020% Change 2021 2020% Change 2021 2020% Change
Northeast          
(NJ, PA)Home 169 231(26.8)%  139 270(48.5)%  160 11341.6% 
 Dollars$135,684$107,85525.8% $95,157$133,409(28.7)% $122,638$61,002101.0% 
 Avg. Price$802,864$466,90572.0% $684,583$494,10738.5% $766,488$539,84142.0% 
Mid-Atlantic           
(DE, MD, VA, WV)Home 647 737(12.2)%  581 5368.4%  572 5239.4% 
 Dollars$414,059$374,86510.5% $311,230$288,4267.9% $361,329$269,97233.8% 
 Avg. Price$639,968$508,63625.8% $535,680$538,108(0.5)% $631,694$516,19922.4% 
Midwest           
(IL, OH)Home 628 6240.6%  576 5406.7%  648 53421.3% 
 Dollars$216,775$192,17112.8% $181,191$165,8369.3% $205,101$149,01637.6% 
 Avg. Price$345,183$307,96612.1% $314,568$307,1042.4% $316,514$279,05613.4% 
Southeast          
(FL, GA, SC)Home 487 43611.7%  408 3797.7%  440 30444.7% 
 Dollars$223,201$195,51214.2% $188,489$158,59218.9% $211,859$145,94745.2% 
 Avg. Price$458,318$448,4222.2% $461,983$418,44910.4% $481,498$480,0890.3% 
Southwest          
(AZ, TX)Home 2,034 1,9245.7%  1,808 1,6499.6%  1,292 93837.7% 
 Dollars$783,924$626,81725.1% $620,120$548,79613.0% $524,029$308,91869.6% 
 Avg. Price$385,410$325,78818.3% $342,987$332,8053.1% $405,595$329,33723.2% 
West           
(CA)Home 795 1,083(26.6)%  989 74033.6%  561 644(12.9)% 
 Dollars$453,557$488,317(7.1)% $497,972$313,45458.9% $325,472$299,5648.6% 
 Avg. Price$570,512$450,89326.5% $503,511$423,58618.9% $580,164$465,16124.7% 
Consolidated Total          
 Home 4,760 5,035(5.5)%  4,501 4,1149.4%  3,673 3,05620.2% 
 Dollars$2,227,200$1,985,53712.2% $1,894,159$1,608,51317.8% $1,750,428$1,234,41941.8% 
 Avg. Price$467,899$394,34718.7% $420,831$390,9857.6% $476,566$403,93318.0% 
Unconsolidated Joint Ventures (2)          
(excluding KSA JV)Home 538 5144.7%  453 565(19.8)%  399 26451.1% 
 Dollars$318,824$296,6647.5% $264,442$330,559(20.0)% $241,346$150,66060.2% 
 Avg. Price$592,610$577,1672.7% $583,757$585,060(0.2)% $604,877$570,6826.0% 
Grand Total          
 Home 5,298 5,549(4.5)%  4,954 4,6795.9%  4,072 3,32022.7% 
 Dollars$2,546,024$2,282,20111.6% $2,158,601$1,939,07211.3% $1,991,774$1,385,07943.8% 
 Avg. Price$480,563$411,28116.8% $435,729$414,4205.1% $489,139$417,19217.2% 
 
KSA JV Only          
 Home 574 5641.8%  0 00.0%  1,666 766117.5% 
 Dollars$89,980$88,2462.0% $0$00.0% $261,653$120,562117.0% 
 Avg. Price$156,760$156,4650.2% $0$00.0% $157,055$157,392(0.2)% 
 
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)
 
  Contracts (1)DeliveriesContract
  Three Months EndedThree Months EndedBacklog
  July 31,July 31,July 31,
   2021  2020% Change 2021 2020% Change 2021 2020% Change
Northeast          
(unconsolidated joint ventures)Home 10  39(74.4)%  16 67(76.1)%  8 33(75.8)% 
(excluding KSA JV)Dollars$14,506 $33,759(57.0)% $21,845$50,895(57.1)% $10,500$31,571(66.7)% 
(NJ. PA)Avg. Price$1,450,600 $865,61567.6% $1,365,313$759,62779.7% $1,312,500$956,69737.2% 
Mid-Atlantic          
(unconsolidated joint ventures)Home 41  3613.9%  45 3336.4%  123 48156.3% 
(DE, MD, VA, WV)Dollars$26,890 $17,34955.0% $24,726$16,66548.4% $77,565$23,817225.7% 
 Avg. Price$655,854 $481,91736.1% $549,467$505,0008.8% $630,610$496,18827.1% 
Midwest          
(unconsolidated joint ventures)Home 0  1(100.0)%  0 4(100.0)%  0 00.0% 
(IL, OH)Dollars$0 $461(100.0)% $0$1,825(100.0)% $0$00.0% 
 Avg. Price$0 $461,000(100.0)% $0$456,250(100.0)% $0$00.0% 
Southeast          
(unconsolidated joint ventures)Home 92  6639.4%  70 74(5.4)%  231 12979.1% 
(FL, GA, SC)Dollars$55,830 $31,84375.3% $32,842$35,528(7.6)% $137,907$64,865112.6% 
 Avg. Price$606,848 $482,47025.8% $469,171$480,108(2.3)% $597,000$502,82918.7% 
Southwest          
(unconsolidated joint ventures)Home 0  31(100.0)%  21 31(32.3)%  0 46(100.0)% 
(AZ, TX)Dollars$(8) $17,928(100.0)% $12,750$20,141(36.7)% $0$27,759(100.0)% 
 Avg. Price$0 $578,323(100.0)% $607,143$649,710(6.6)% $0$603,457(100.0)% 
West          
(unconsolidated joint ventures)Home 22  1637.5%  27 1942.1%  37 8362.5% 
(CA)Dollars$9,893 $5,51779.3% $10,099$6,96045.1% $15,374$2,648480.6% 
 Avg. Price$449,682 $344,81330.4% $374,037$366,3162.1% $415,514$331,00025.5% 
Unconsolidated Joint Ventures (2)          
(excluding KSA JV)Home 165  189(12.7)%  179 228(21.5)%  399 26451.1% 
 Dollars$107,111 $106,8570.2% $102,262$132,014(22.5)% $241,346$150,66060.2% 
 Avg. Price$649,158 $565,38114.8% $571,296$579,009(1.3)% $604,877$570,6826.0% 
 
KSA JV Only          
 Home 215  18516.2%  0 00.0%  1,666 766117.5% 
 Dollars$33,802 $29,01216.5% $0$00.0% $261,653$120,562117.0% 
 Avg. Price$157,219 $156,8210.3% $0$00.0% $157,055$157,392(0.2)% 
 
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)
 
  Contracts (1)DeliveriesContract
  Nine Months EndedNine Months EndedBacklog
  July 31,July 31,July 31,
   2021 2020% Change 2021 2020% Change 2021 2020% Change
Northeast          
(unconsolidated joint ventures)Home 37 130(71.5)%  47 173(72.8)%  8 33(75.8)% 
(excluding KSA JV)Dollars$49,318$104,142(52.6)% $63,353$136,250(53.5)% $10,500$31,571(66.7)% 
(NJ, PA)Avg. Price$1,332,919$801,09266.4% $1,347,936$787,57271.2% $1,312,500$956,69737.2% 
Mid-Atlantic          
(unconsolidated joint ventures)Home 90 7028.6%  108 6468.8%  123 48156.3% 
(DE, MD, VA, WV)Dollars$55,178$35,22356.7% $57,050$32,38176.2% $77,565$23,817225.7% 
 Avg. Price$613,089$503,18221.8% $528,241$505,9534.4% $630,610$496,18827.1% 
Midwest          
(unconsolidated joint ventures)Home 1 11(90.9)%  1 14(92.9)%  0 00.0% 
(IL, OH)Dollars$409$5,109(92.0)% $409$6,394(93.6)% $0$00.0% 
 Avg. Price$409,000$464,455(11.9)% $409,000$456,714(10.4)% $0$00.0% 
Southeast          
(unconsolidated joint ventures)Home 336 18581.6%  191 1796.7%  231 12979.1% 
(FL, GA, SC)Dollars$182,950$90,547102.0% $93,394$86,2558.3% $137,907$64,865112.6% 
 Avg. Price$544,494$489,44211.2% $488,974$481,8721.5% $597,000$502,82918.7% 
Southwest          
(unconsolidated joint ventures)Home 4 76(94.7)%  50 75(33.3)%  0 46(100.0)% 
(AZ, TX)Dollars$3,127$47,147(93.4)% $29,930$47,706(37.3)% $0$27,759(100.0)% 
 Avg. Price$781,750$620,35526.0% $598,600$636,080(5.9)% $0$603,457(100.0)% 
West          
(unconsolidated joint ventures)Home 70 4266.7%  56 60(6.7)%  37 8362.5% 
(CA)Dollars$27,842$14,49692.1% $20,306$21,573(5.9)% $15,374$2,648480.6% 
 Avg. Price$397,743$345,14315.2% $362,607$359,5500.9% $415,514$331,00025.5% 
Unconsolidated Joint Ventures (2)          
(excluding KSA JV)Home 538 5144.7%  453 565(19.8)%  399 26451.1% 
 Dollars$318,824$296,6637.5% $264,442$330,559(20.0)% $241,346$150,66060.2% 
 Avg. Price$592,610$577,1672.7% $583,757$585,060(0.2)% $604,877$570,6826.0% 
 
KSA JV Only          
 Home 574 5641.8%  0 00.0%  1,666 766117.5% 
 Dollars$89,980$88,2462.0% $0$00.0% $261,653$120,562117.0% 
 Avg. Price$156,760$156,4650.2% $0$00.0% $157,055$157,392(0.2)% 
 
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 SorsbyJeffrey T. O’Keefe
 Executive Vice President & CFOVice President, Investor Relations
 732-747-7800732-747-7800
   

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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 501 M 501 M -
EV / Sales 2019 0,91x
EV / Sales 2020 0,68x
Nbr of Employees 1 697
Free-Float 69,8%
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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
Sector and Competitors
1st jan.Capi. (M$)
HOVNANIAN ENTERPRISES, INC.167.77%501
LENNAR CORPORATION24.69%29 766
NVR, INC.19.46%17 890
MERITAGE HOMES CORPORATION22.65%3 931
M.D.C. HOLDINGS, INC.-0.47%3 470
TRI POINTE HOMES, INC.36.46%2 679