Hovnanian Enterprises : Investor Presentation June 2021

Investor Presentation

Confidential | June 2021

DISCLAIMER

This presentation has been prepared by or on behalf of Hovnanian Enterprises, Inc. (the "Company") for your exclusive use on a confidential basis and for informational purposes only. You may not take away, reproduce, redistribute or pass on this presentation, in whole or in part, directly or indirectly, to any other person (whether within or outside your organization/firm) or publish it, in whole or in part, for any purpose. By attending this presentation, you are agreeing to be bound by the foregoing restrictions and to maintain absolute confidentiality regarding the information disclosed in these materials. Any failure to comply with these restrictions may constitute a violation of applicable securities laws.

Although the Company believes the information is accurate in all material respects, the materials in this presentation have not been independently verified and the Company does not make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this presentation. Any estimates or projections contained in this presentation as to events that may occur in the future (including projections of future financial performance and forward looking statements) are based upon the reasonable judgment of the Company. Historical performance is not indicative of future performance, and no assurance can be given regarding future performance. Nothing contained herein is, or shall be relied upon as, a promise or representation as to the past or future. In addition, the information contained in this presentation is as of the date hereof, and the Company has no obligation to update such information, including in the event that such information becomes inaccurate or if estimates change.

This presentation does not constitute an offer to sell, or the solicitation of any offer to buy, any securities and may not be relied upon in connection with the purchase or sale of any security. No securities of the Company may be sold without registration under the United States Securities Act of 1933, as amended (the "Securities Act"), or an exemption from such registration.

Non-GAAP Financial Measures

1. Adjusted homebuilding gross margin percentage before cost of sales interest expense and land charges is a non-GAAP financial measure. See appendix for a reconciliation to the most directly comparable GAAP measure.
2. Total SG&A includes homebuilding selling, general and administrative costs and corporate general and administrative costs. Ratio calculated as a percentage of total revenues. SG&A excluding the impact of incremental phantom stock expense is a non-GAAP financial measure, the reconciliation of which to SG&A is included herein.
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 loss (gain) on extinguishment of debt. See appendix for a reconciliation to the most directly comparable GAAP measure.
4. Adjusted income (loss) before income taxes excludes land‐related charges, joint venture write‐downs and loss (gain) on extinguishment of debt. See appendix for a reconciliation to the most directly comparable GAAP measure.
5. Adjusted homebuilding EBIT to Inventory defined as LTM Homebuilding EBIT before land‐related charges divided by five quarter average inventory, excluding capitalized interest and inventory not owned.

	Source: Company SEC filings and press releases as of 06/03/21. See appendix for calculation.
(6)	Inventory turns (COGS) defined as inventory turns derived by dividing cost of sales, excluding capitalized interest, by the five quarter average homebuilding inventory, excluding inventory not	1
	owned and capitalized interest. See appendix for calculation.

Source: Company SEC filings and press releases as of 06/03/21.

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.

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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

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Successfully implementing strategies for long-term profitability and value creation

strategy	Grow revenues
oriented-		to improve
	scale and
		enhance
Growth	margin profile
undertaken		Streamline
		Actively manage
		sales pace, ASP and
		community count
Actions		organizational
	reduce overhead
		structure and

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
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