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.“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.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.
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