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Hovnanian Enterprises, Inc. (HOV)

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  • Hovnanian Enterprises, Inc.'s (NYSE:HOV) Popularity With Investors Under Threat
    Simply Wall St.

    Hovnanian Enterprises, Inc.'s (NYSE:HOV) Popularity With Investors Under Threat

    Hovnanian Enterprises, Inc.'s (NYSE:HOV) price-to-earnings (or "P/E") ratio of 24.1x might make it look like a sell...

  • GlobeNewswire

    Hovnanian Enterprises Reports Fiscal 2020 Third Quarter Results

    30% Year-over-Year Increase in Total Revenues $23 Million Year-over-Year Improvement in Pretax Income 47% Year-over-Year Improvement in Consolidated ContractsMATAWAN, N.J., Sept. 03, 2020 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal third quarter and nine months ended July 31, 2020.RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2020: * Total revenues increased 30.3% to $628.1 million in the third quarter of fiscal 2020, compared with $482.0 million in the same period of the prior year. For the nine months ended July 31, 2020, total revenues increased 27.4% to $1.66 billion compared with $1.30 billion in the same period during the prior fiscal year. * Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 13.6% for the three months ended July 31, 2020 compared with 14.0% during the same quarter a year ago. During the first nine months of fiscal 2020, homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 13.7% compared with 14.0% during the same period last year. * Homebuilding gross margin, before cost of sales interest expense and land charges, was $106.3 million, or 17.5% of sale of homes revenues, during the fiscal 2020 third quarter compared with $85.9 million, or 18.4% of sale of homes revenues, in last year’s third quarter. For both the nine months ended July 31, 2020 and the nine months ended July 31, 2019, homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 17.7%. * Total SG&A, including $2.9 million of severance expenses related to organizational changes, was $59.9 million, or 9.5% of total revenues, in the fiscal 2020 third quarter compared with $58.5 million, or 12.1% of total revenues, in the previous year’s third quarter. During the first nine months of fiscal 2020, total SG&A was $176.2 million, or 10.6% of total revenues, compared with $179.3 million, or 13.8% of total revenues, in the same period of the prior fiscal year. * Interest incurred (some of which was expensed and some of which was capitalized) was $45.1 million for the third quarter of fiscal 2020 compared with $42.1 million during the third quarter of fiscal 2019. For the nine months ended July 31, 2020, interest incurred (some of which was expensed and some of which was capitalized) was $134.8 million compared with $122.3 million during the same period last year. * Income from unconsolidated joint ventures was $5.7 million for the third quarter ended July 31, 2020 compared with $3.7 million in the fiscal 2019 third quarter. For the first nine months of fiscal 2020, income from unconsolidated joint ventures was $13.4 million compared with $20.6 million in the same period a year ago. * Income before income taxes for the third quarter of fiscal 2020 was $16.2 million compared with a loss of $7.1 million in the third quarter of the prior fiscal year. For the first nine months of fiscal 2020, income before income taxes was $13.0 million compared with a loss of $39.1 million during the same period of fiscal 2019. * Adjusted pretax income, which is income before income taxes, excluding land-related charges, joint venture write-downs and gain on extinguishment of debt, improved to $14.5 million in the third quarter of fiscal 2020 compared with a loss before these items of $4.8 million in the fiscal 2019 third quarter. For the nine months ended July 31, 2020, income before income taxes, excluding land-related charges, joint venture write-downs and gain on extinguishment of debt, was $5.8 million compared with a loss before these items of $34.6 million during the same period in fiscal 2019. * Net income was $15.4 million, or $2.27 per common share, for the three months ended July 31, 2020 compared with a net loss of $7.6 million, or $1.27 per common share, in the third quarter of the previous fiscal year. For the first nine months of fiscal 2020, net income was $10.3 million, or $1.52 per common share, compared with a net loss of $40.3 million, or $6.76 per common share, in the same period during fiscal 2019. * EBITDA increased 88.0% to $66.5 million for the third quarter of fiscal 2020 compared with $35.3 million in the same quarter of the prior year. For the first nine months of fiscal 2020, EBITDA was $154.3 million, a 107.6% increase, compared with $74.3 million in the first nine months of fiscal 2019. * Financial services income before income taxes was $10.8 million for the third quarter of fiscal 2020 compared with $3.8 million in the third quarter of fiscal 2019. For the first nine months of fiscal 2020, financial services income before income taxes was $20.0 million compared with $8.6 million in the same period one year ago. * Consolidated contracts per community increased 72.7% to 19.0 contracts per community for the third quarter ended July 31, 2020 compared with 11.0 contracts per community in last year’s third quarter. Contracts per community, including domestic unconsolidated joint ventures(1), increased 67.9% to 17.8 for the third quarter of fiscal 2020 compared with 10.6 for the third quarter of fiscal 2019. * The number of consolidated contracts increased 46.9% to 2,226 homes during the fiscal 2020 third quarter, compared with 1,515 homes in last year’s third quarter. The number of contracts, including domestic unconsolidated joint ventures, for the three months ended July 31, 2020, increased 42.9% to 2,415 homes from 1,690 homes during the same quarter a year ago. * For the first nine months of fiscal 2020, the number of consolidated contracts increased 26.0% to 5,035 homes compared with 3,995 homes in the first nine months of fiscal 2019. The number of contracts, including domestic unconsolidated joint ventures, for the nine months ended July 31, 2020, increased 23.4% to 5,549 homes from 4,497 homes during the same period a year ago. * Consolidated community count was 117 as of July 31, 2020, compared with 138 communities at the end of the previous year’s third quarter. The decline was primarily a result of selling out of communities at a faster than anticipated pace, 14 delayed community openings, primarily related to COVID-19, and contributing four consolidated communities to unconsolidated joint ventures earlier this year. As of the end of the third quarter of fiscal 2020, community count, including domestic unconsolidated joint ventures, was 136 communities, compared with 159 communities at July 31, 2019. * For August 2020, consolidated contracts per community increased 106.3% to 6.6 compared with 3.2 for the same month one year ago. During August 2020, the number of consolidated contracts increased 65.2% to 735 homes from 445 homes in August 2019. * The dollar value of consolidated contract backlog, as of July 31, 2020, increased 17.1% to $1.23 billion compared with $1.05 billion as of July 31, 2019. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of July 31, 2020, was $1.39 billion compared with $1.28 billion as of July 31, 2019. * Consolidated deliveries were 1,553 homes in the fiscal 2020 third quarter, a 31.1% increase compared with 1,185 homes in the previous year’s third quarter. For the fiscal 2020 third quarter, deliveries, including domestic unconsolidated joint ventures, increased 29.3% to 1,781 homes compared with 1,377 homes during the third quarter of fiscal 2019. * For the first nine months of fiscal 2020, consolidated deliveries increased 27.1% to 4,114 homes compared with 3,237 homes in the first nine months of the previous year. For the first nine months of fiscal 2020, deliveries, including domestic unconsolidated joint ventures, increased 24.0% to 4,679 homes compared with 3,772 homes during the same period of fiscal 2019. * The contract cancellation rate for consolidated contracts was 18% for the third quarter ended July 31, 2020 compared with 19% in the fiscal 2019 third quarter. The contract cancellation rate for contracts including domestic unconsolidated joint ventures was 18% for the third quarter of fiscal 2020 compared with 19% in the third quarter of the prior year.(1)When we refer to “Domestic Unconsolidated Joint Ventures”, we are excluding results from our single community unconsolidated joint venture in the Kingdom of Saudi Arabia (KSA).LIQUIDITY AND INVENTORY AS OF JULY 31, 2020: * Total liquidity at the end of the of the third quarter of fiscal 2020 was $334.3 million, after repurchasing $25.5 million of face value of 10.0% Senior Secured Notes due 2022 for $21.4 million of cash, leaving a balance of $111.2 million on those notes. The transaction resulted in a $4.1 million gain on extinguishment of debt. * During the third quarter of fiscal 2020, land and land development spending was $162.6 million, an increase compared with $147.4 million in last year’s third quarter. For the nine months ended July 31, 2020, land and land development spending was $394.9 million compared with $400.0 million for the same period one year ago. * In the third quarter of fiscal 2020, 1,700 lots were put under option or acquired in 21 consolidated communities. * As of July 31, 2020, consolidated lots controlled totaled 25,748, which, based on trailing twelve-month deliveries, equaled a 4.4 years’ supply.COMMENTS FROM MANAGEMENT: “During the third quarter of fiscal 2020 we saw a significant improvement in contracts, revenues, EBITDA, pretax income and liquidity as compared to the prior year’s third quarter and are pleased with our results,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “Amid the broader economic uncertainties related to the COVID-19 pandemic, the overall demand for new homes continues to be robust due to historically low mortgage rates, a nationwide low supply of existing homes and a strong consumer desire for more indoor and outdoor space. Given the recent strength of our operating results and our improved contract pace, we remain committed to pursuing our growth plans,” said Mr. Hovnanian.“Reacting to slower demand in the early stages of the COVID-19 crisis, we offered consumers additional incentives on spec homes deliverable in the third quarter. While these discounts adversely impacted our fiscal 2020 third quarter gross margin, our volume of home sales increased and resulted in higher third quarter profitability. Home demand began rebounding in May. Since June, we pivoted to increasing home prices in virtually all our markets. Going forward, these home price increases should both offset potential cost increases and result in improvements in gross margins. Assuming no material changes in market conditions, we expect to achieve meaningful improvements in revenues, EBITDA and profitability during fiscal 2021. We control virtually all the lots needed to meet the growth in deliveries we expect next year,” concluded Mr. Hovnanian.WEBCAST INFORMATION: Hovnanian Enterprises will webcast its fiscal 2020 third quarter financial results conference call at 11:00 a.m. E.T. on Thursday, September 3, 2020. The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Past Events” section of the Investor Relations page on the Hovnanian website at http://www.khov.com. The archive will be available for 12 months.ABOUT HOVNANIAN ENTERPRISES, INC.: Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Matawan, New Jersey and, through its subsidiaries, is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, Washington, D.C. and West Virginia. The Company’s homes are marketed and sold under the trade name K. Hovnanian® Homes. Additionally, the Company’s subsidiaries, as developers of K. Hovnanian’s® Four Seasons communities, make the Company one of the nation’s largest builders of active lifestyle communities.Additional information on Hovnanian Enterprises, Inc. can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com. NON-GAAP FINANCIAL MEASURES:  Consolidated earnings before interest expense and income taxes (“EBIT”) and before depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs and gain on extinguishment of debt (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net income (loss). The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income (loss) is presented in a table attached to this earnings release.Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. The reconciliation for historical periods of homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is presented in a table attached to this earnings release.Adjusted pretax income, which is defined as income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income (loss) before income taxes. The reconciliation for historical periods of adjusted pretax income to income (loss) before income taxes is presented in a table attached to this earnings release.Total liquidity is comprised of $198.1 million of cash and cash equivalents, $11.2 million of restricted cash required to collateralize letters of credit and $125.0 million availability under the senior secured revolving credit facility as of July 31, 2020.FORWARD-LOOKING STATEMENTSAll statements in this press release that are not historical facts should be considered as “Forward-Looking Statements” within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to statements related to the Company’s goals and expectations with respect to its financial results for future financial periods. Although we believe that our plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to, (1) the material and adverse disruption, and the expected continued disruption, to our business caused by the present outbreak and worldwide spread of COVID-19 and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it; (2) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (3) adverse weather and other environmental conditions and natural disasters; (4) high leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (5) availability and terms of financing to the Company; (6) the Company’s sources of liquidity; (7) changes in credit ratings; (8) the seasonality of the Company’s business; (9) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (10) shortages in, and price fluctuations of, raw materials and labor including due to changes in trade policies, such as the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; (11) reliance on, and the performance of, subcontractors; (12) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (13) increases in cancellations of agreements of sale; (14) fluctuations in interest rates and the availability of mortgage financing; (15) changes in tax laws affecting the after-tax costs of owning a home; (16) operations through unconsolidated joint ventures with third parties; (17) government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing processes, tax laws and the environment; (18) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (19) levels of competition; (20) successful identification and integration of acquisitions; (21) significant influence of the Company’s controlling stockholders; (22) availability of net operating loss carryforwards; (23) utility shortages and outages or rate fluctuations; (24) geopolitical risks, terrorist acts and other acts of war; (25) diseases, pandemics or other severe public health events; (26) loss of key management personnel or failure to attract qualified personnel; (27) information technology failures and data security breaches; (28) negative publicity; and (29) certain risks, uncertainties and other factors described in detail in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019 and the Company’s Quarterly Reports on Form 10-Q for the quarterly periods during fiscal 2020 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.   Hovnanian Enterprises, Inc. July 31, 2020 Statements of consolidated operations (In thousands, except per share data)   Three Months Ended Nine Months Ended   July 31, July 31,    2020   2019   2020   2019          (Unaudited) (Unaudited) Total revenues$628,136  $482,041  $1,660,543  $1,303,326  Costs and expenses (1) 621,633   492,847   1,674,340   1,362,964  Gain on extinguishment of debt 4,055   -   13,337   -  Income from unconsolidated joint ventures 5,658   3,742   13,419   20,556  Income (loss) before income taxes 16,216   (7,064)  12,959   (39,082) Income tax provision 853   537   2,665   1,228  Net income (loss)$15,363  $(7,601) $10,294  $(40,310)           Per share data:        Basic:         Net income (loss) per common share$2.27  $(1.27) $1.52  $(6.76) Weighted average number of common shares outstanding (2) 6,201   5,971   6,178   5,964  Assuming dilution:        Net income (loss) per common share$2.16  $(1.27) $1.44  $(6.76) Weighted average number of common shares outstanding (2) 6,518   5,971   6,502   5,964            (1)  Includes inventory impairment loss and land option write-offs. (2)  For periods with a net (loss), basic shares are used in accordance with GAAP rules.                     Hovnanian Enterprises, Inc. July 31, 2020 Reconciliation of income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt to income (loss) before income taxes (In thousands)   Three Months Ended Nine Months Ended   July 31, July 31,    2020   2019   2020   2019          (Unaudited) (Unaudited) Income (loss) before income taxes $16,216  $(7,064) $12,959  $(39,082) Inventory impairment loss and land option write-offs  2,364   1,435   6,202   3,601  Unconsolidated joint venture investment write-downs  -   854   -   854  Gain on extinguishment of debt  (4,055)  -   (13,337)  -  Income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt (1) $14,525  $(4,775) $5,824  $(34,627)           (1) Income (loss) before income taxes excluding land-related charges, joint venture write-downs and gain on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income (loss) before income taxes.     Hovnanian Enterprises, Inc. July 31, 2020 Gross margin (In thousands)   Homebuilding Gross Margin Homebuilding Gross Margin   Three Months Ended Nine Months Ended   July 31, July 31,    2020   2019   2020   2019          (Unaudited) (Unaudited) Sale of homes $605,933  $467,849  $1,608,513  $1,257,536  Cost of sales, excluding interest expense and land charges (1)  499,654   381,906   1,323,916   1,034,953  Homebuilding gross margin, before cost of sales interest expense and land charges (2)  106,279   85,943   284,597   222,583  Cost of sales interest expense, excluding land sales interest expense  21,794   18,824   58,467   42,964  Homebuilding gross margin, after cost of sales interest expense, before land charges (2)  84,485   67,119   226,130   179,619  Land charges  2,364   1,435   6,202   3,601  Homebuilding gross margin $82,121  $65,684  $219,928  $176,018            Gross margin percentage  13.6%  14.0%  13.7%  14.0% Gross margin percentage, before cost of sales interest expense and land charges (2)  17.5%  18.4%  17.7%  17.7% Gross margin percentage, after cost of sales interest expense, before land charges (2)  13.9%  14.3%  14.1%  14.3%             Land Sales Gross Margin Land Sales Gross Margin   Three Months Ended Nine Months Ended   July 31, July 31,    2020   2019   2020   2019          (Unaudited) (Unaudited) Land and lot sales $25  $542  $100  $8,050  Land and lot sales cost of sales, excluding interest and land charges (1)  41   33   161   7,390  Land and lot sales gross margin, excluding interest and land charges  (16)  509   (61)  660  Land and lot sales interest  20   205   72   205  Land and lot sales gross margin, including interest and excluding land charges $(36) $304  $(133) $455            (1) Does not include cost associated with walking away from land options or inventory impairment losses which are recorded as Inventory impairment loss and land option write-offs in the Condensed Consolidated Statements of Operations. (2) Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively.     Hovnanian Enterprises, Inc. July 31, 2020 Reconciliation of adjusted EBITDA to net income (loss) (In thousands)   Three Months Ended Nine Months Ended   July 31, July 31,    2020   2019   2020   2019          (Unaudited) (Unaudited) Net income (loss) $15,363  $(7,601) $10,294  $(40,310) Income tax provision  853   537   2,665   1,228  Interest expense  48,886   41,406   137,483   110,482  EBIT (1)  65,102   34,342   150,442   71,400  Depreciation and amortization  1,355   1,004   3,897   2,942  EBITDA (2)  66,457   35,346   154,339   74,342  Inventory impairment loss and land option write-offs  2,364   1,435   6,202   3,601  Gain on extinguishment of debt  (4,055)  -   (13,337)  -  Adjusted EBITDA (3) $64,766  $36,781  $147,204  $77,943            Interest incurred $45,140  $42,104  $134,797  $122,340            Adjusted EBITDA to interest incurred  1.43   0.87   1.09   0.64            (1)  EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBIT represents earnings before interest expense and income taxes. (2)  EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. (3)  Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs and gain on extinguishment of debt.     Hovnanian Enterprises, Inc. July 31, 2020 Interest incurred, expensed and capitalized (In thousands)   Three Months Ended Nine Months Ended   July 31, July 31,    2020   2019   2020   2019          (Unaudited) (Unaudited) Interest capitalized at beginning of period $67,744  $79,277  $71,264  $68,117  Plus interest incurred  45,140   42,104   134,797   122,340  Less interest expensed  48,886   41,406   137,483   110,482  Less interest contributed to unconsolidated joint venture (1)  -   1,978   4,580   1,978  Interest capitalized at end of period (2) $63,998  $77,997  $63,998  $77,997            (1) Represents capitalized interest which was included as part of the assets contributed to the joint venture the Company entered into in December 2019. There was no impact to the Condensed Consolidated Statement of Operations as a result of this transaction. (2) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.   HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands)  July 31,  October 31,     2020   2019    (Unaudited)   (1)  ASSETS       Homebuilding:       Cash and cash equivalents $198,098  $130,976  Restricted cash and cash equivalents  13,433   20,905  Inventories:       Sold and unsold homes and lots under development  928,840   993,647  Land and land options held for future development or sale  89,903   108,565  Consolidated inventory not owned  194,760   190,273              Total inventories  1,213,503   1,292,485  Investments in and advances to unconsolidated joint ventures  125,680   127,038  Receivables, deposits and notes, net  37,328   44,914  Property, plant and equipment, net  18,869   20,127  Prepaid expenses and other assets  63,499   45,704              Total homebuilding  1,670,410   1,682,149          Financial services  135,334   199,275  Total assets $1,805,744  $1,881,424          LIABILITIES AND EQUITY       Homebuilding:       Nonrecourse mortgages secured by inventory, net of debt issuance costs $179,767  $203,585  Accounts payable and other liabilities  320,420   320,193  Customers’ deposits  40,992   35,872  Liabilities from inventory not owned, net of debt issuance costs  144,922   141,033  Senior notes and credit facilities (net of discount, premium and debt issuance costs)  1,432,075   1,479,990  Accrued interest  50,328   19,081              Total homebuilding  2,168,504   2,199,754          Financial services  114,202   169,145  Income taxes payable  2,557   2,301  Total liabilities  2,285,263   2,371,200          Equity:       Hovnanian Enterprises, Inc. stockholders’ equity deficit:       Preferred stock, $0.01 par value - authorized 100,000 shares; issued and outstanding 5,600 shares with a liquidation preference of $140,000 at July 31, 2020 and October 31, 2019  135,299   135,299  Common stock, Class A, $0.01 par value – authorized 16,000,000 shares; issued 5,984,678 shares at July 31, 2020 and 5,973,727 shares at October 31, 2019  60   60  Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) – authorized 2,400,000 shares; issued 652,154 shares at July 31, 2020 and 650,363 shares at October 31, 2019  7   7  Paid in capital – common stock  715,404   715,504  Accumulated deficit  (1,215,679)  (1,225,973) Treasury stock – at cost – 470,430 shares of Class A common stock and 27,669 shares of Class B common stock at July 31, 2020 and October 31, 2019  (115,360)  (115,360) Total Hovnanian Enterprises, Inc. stockholders' equity deficit  (480,269)  (490,463) Noncontrolling interest in consolidated joint ventures  750   687  Total equity deficit  (479,519)  (489,776) Total liabilities and equity $1,805,744  $1,881,424  (1)     Derived from the audited balance sheet as of October 31, 2019 HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands Except Per Share Data) (Unaudited)  Three Months Ended July 31,  Nine Months Ended July 31,     2020   2019   2020   2019  Revenues:             Homebuilding:             Sale of homes $605,933  $467,849  $1,608,513  $1,257,536  Land sales and other revenues  908   1,428   2,360   11,111      Total homebuilding  606,841   469,277   1,610,873   1,268,647  Financial services  21,295   12,764   49,670   34,679      Total revenues  628,136   482,041   1,660,543   1,303,326                Expenses:             Homebuilding:             Cost of sales, excluding interest  499,695   381,939   1,324,077   1,042,343  Cost of sales interest  21,814   19,029   58,539   43,169  Inventory impairment loss and land option write-offs  2,364   1,435   6,202   3,601      Total cost of sales  523,873   402,403   1,388,818   1,089,113  Selling, general and administrative  40,608   43,559   121,887   130,474      Total homebuilding expenses  564,481   445,962   1,510,705   1,219,587                Financial services  10,493   8,927   29,677   26,079  Corporate general and administrative  19,321   14,959   54,340   48,792  Other interest  27,072   22,377   78,944   67,313  Other operations  266   622   674   1,193      Total expenses  621,633   492,847   1,674,340   1,362,964  Gain on extinguishment of debt  4,055   -   13,337   -  Income from unconsolidated joint ventures  5,658   3,742   13,419   20,556  Income (loss) before income taxes  16,216   (7,064)  12,959   (39,082) State and federal income tax provision:             State  853   537   2,665   1,228  Federal  -   -   -   -      Total income taxes  853   537   2,665   1,228  Net income (loss) $15,363  $(7,601) $10,294  $(40,310)               Per share data:             Basic:             Net income (loss) per common share $2.27  $(1.27) $1.52  $(6.76) Weighted-average number of common shares outstanding  6,201   5,971   6,178   5,964                Assuming dilution:             Net income (loss) per common share $2.16  $(1.27) $1.44  $(6.76) Weighted-average number of common shares outstanding  6,518   5,971   6,502   5,964                      HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES) (UNAUDITED)     Contracts (1)DeliveriesContract   Three Months EndedThree Months EndedBacklog   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)DeliveriesContract   Nine Months EndedNine Months EndedBacklog   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)DeliveriesContract   Three Months EndedThree Months EndedBacklog   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)DeliveriesContract   Nine Months EndedNine Months EndedBacklog   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 SorsbyJeffrey T. O’Keefe  Executive Vice President & CFOVice President, Investor Relations  732-747-7800732-747-7800

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