30% Year-over-Year Increase in Total Revenues
Consolidated Contracts Grew 42% Year-over-YearMATAWAN, N.J., March 05, 2020 (GLOBE NEWSWIRE) — Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal first quarter ended January 31, 2020.RESULTS FOR THE THREE-MONTH PERIOD ENDED JANUARY 31, 2020: Total revenues increased 29.8% to $494.1 million in the first quarter of fiscal 2020, compared with $380.6 million in the same period of the prior year.Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 12.9% for the three months ended January 31, 2020 compared with 14.8% during the same quarter a year ago.Homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 17.3% during the fiscal 2020 first quarter compared with 17.8% in last year’s first quarter.Total SG&A was $60.4 million, or 12.2% of total revenues, in the fiscal 2020 first quarter compared with $60.4 million, or 15.9% of total revenues, in the previous year’s first quarter.Interest incurred (some of which was expensed and some of which was capitalized) was $44.3 million for the first quarter of fiscal 2020 compared with $38.9 million during the first quarter of fiscal 2019.Income from unconsolidated joint ventures was $1.5 million for the first quarter ended January 31, 2020 compared with $9.6 million in the fiscal 2019 first quarter.Including a $9.5 million gain on extinguishment of debt, loss before income taxes for the first quarter of fiscal 2020 was $7.4 million compared with a loss of $17.1 million in the first quarter of the prior year.Net loss was $9.1 million, or $1.49 per common share, for the three months ended January 31, 2020 compared with a net loss of $17.5 million, or $2.93 per common share, in the first quarter of the previous year.Adjusted EBITDA increased to $30.4 million in the first quarter ended January 31, 2020 compared with $17.1 million in the same quarter one year ago. EBITDA increased to $37.0 million for the first quarter of fiscal 2020 compared with $16.4 million in the same quarter of the prior year.Loss before income taxes excluding land-related charges and gain on extinguishment of debt, was $14.1 million in the first quarter of fiscal 2020 compared with a loss before these items of $16.4 million in the fiscal 2019 first quarter.Consolidated contracts per community increased 42.6% to 9.7 contracts per community for the first quarter ended January 31, 2020 compared with 6.8 contracts per community in last year’s first quarter. Contracts per community, including domestic unconsolidated joint ventures(1), increased 32.9% to 9.3 contracts per community during the first quarter of fiscal 2020 compared with 7.0 contracts per community, including domestic unconsolidated joint ventures, in the same period of the prior year.The number of consolidated contracts increased 41.5% to 1,322 homes, during the fiscal 2020 first quarter, compared with 934 homes in last year’s first quarter. The number of contracts, including domestic unconsolidated joint ventures, for the three months ended January 31, 2020, increased 40.0% to 1,492 homes from 1,066 homes during the same quarter a year ago.Due to stronger than expected contracts, causing us to sell through communities faster than anticipated, and after contributing four consolidated communities to unconsolidated joint ventures, the consolidated community count was 136 as of January 31, 2020, essentially unchanged compared with 137 communities at the end of the previous year’s first quarter. As of the end of the first quarter of fiscal 2020, community count, including domestic unconsolidated joint ventures, was 160 communities, up 5.3% compared with 152 communities at January 31, 2019.For February 2020, consolidated contracts per community were 4.8 compared with 3.2 for the same month one year ago. During February 2020, the number of consolidated contracts increased 44.1% to 647 homes from 449 homes in February 2019.The dollar value of consolidated contract backlog, as of January 31, 2020, increased 20.0% to $899.6 million compared with $749.8 million as of January 31, 2019. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of January 31, 2020, was $1.10 billion, an increase of 13.7% compared with $971.2 million as of January 31, 2019.Consolidated deliveries were 1,236 homes in the fiscal 2020 first quarter a 27.8% increase compared with 967 homes in the previous year’s first quarter. For the fiscal 2020 first quarter, deliveries, including domestic unconsolidated joint ventures, increased 24.1% to 1,385 homes compared with 1,116 homes during the first quarter of fiscal 2019.The contract cancellation rate for consolidated contracts was 19% for the first quarter ended January 31, 2020 compared with 24% in the fiscal 2019 first quarter. The contract cancellation rate for contracts including domestic unconsolidated joint ventures was 19% for the first quarter of fiscal 2020 compared with 23% in the first 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 JANUARY 31, 2020: Total liquidity at the end of the of the first quarter of fiscal 2020 was $224.9 million.In the first quarter of fiscal 2020, 2,026 lots were put under option or acquired in 25 consolidated communities, which is 790 lots more than the 1,236 consolidated first quarter deliveries.As of January 31, 2020, consolidated lots controlled totaled 27,701; which, based on trailing twelve-month deliveries, equaled a 5.3 years’ supply.COMMENTS FROM MANAGEMENT:
“Both the overall U.S. economy and the current housing market continue to exhibit signs of strength. With more than 40% growth in contracts and contracts per community during the first quarter of fiscal 2020, we have seen the continuation of the positive momentum that began in the spring selling season last year,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “Furthermore, we are pleased that our revenue gains have begun to catch up to the increases in contracts that we have seen over the past six months and are also pleased with the substantial growth we reported in EBITDA. The magnitude of the improvement in our revenues gives us confidence that we are making solid progress towards achieving our revenue growth goals, which ultimately should lead to higher levels of profitability.”WEBCAST INFORMATION: Hovnanian Enterprises will webcast its fiscal 2020 first quarter financial results conference call at 11:00 a.m. E.T. on Thursday, March 5, 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 (loss). The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net (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.(Loss) before income taxes excluding land-related charges and gain on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is (loss) before income taxes. The reconciliation for historical periods of (loss) before income taxes excluding land-related charges and gain on extinguishment of debt to (loss) before income taxes is presented in a table attached to this earnings release.Total liquidity is comprised of $81.4 million of cash and cash equivalents, $18.5 million of restricted cash required to collateralize letters of credit and $125.0 million of availability under the senior secured revolving credit facility as of January 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) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (2) adverse weather and other environmental conditions and natural disasters; (3) high leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (4) availability and terms of financing to the Company; (5) the Company’s sources of liquidity; (6) changes in credit ratings; (7) the seasonality of the Company’s business; (8) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (9) 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; (10) reliance on, and the performance of, subcontractors; (11) 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; (12) increases in cancellations of agreements of sale; (13) fluctuations in interest rates and the availability of mortgage financing; (14) changes in tax laws affecting the after-tax costs of owning a home; (15) operations through unconsolidated joint ventures with third parties; (16) government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing processes, tax laws and the environment; (17) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (18) levels of competition; (19) successful identification and integration of acquisitions; (20) significant influence of the Company’s controlling stockholders; (21) availability of net operating loss carryforwards; (22) utility shortages and outages or rate fluctuations; (23) geopolitical risks, terrorist acts and other acts of war; (24) diseases, pandemics or other severe public health events; (25) loss of key management personnel or failure to attract qualified personnel; (26) information technology failures and data security breaches; (27) negative publicity; and (28) 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 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.(Financial Tables Follow)
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)(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)
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