HOVNANIAN ENTERPRISES : REPORTS FISCAL 2022 SECOND QUARTER RESULTS - Form 8-K

HOVNANIAN ENTERPRISES REPORTS FISCAL 2022 SECOND QUARTER RESULTS

161% Year-over-Year Increase in Pretax Profit

Gross Margin Percentage Increased 520 Basis Points Year-over-Year

5% Increase in Consolidated Dollar Amount of Contracts

16% Increase in Consolidated Backlog Dollars to $2.06 Billion

Early Retirement of $100 Million of Senior Secured Notes

MATAWAN, NJ, June 1, 2022 - Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal second quarter and six-month period ended April 30, 2022.

RESULTS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED APRIL 30, 2022:

●

Total revenues were $702.5 million in the second quarter of fiscal 2022, compared with $703.2 million in the same quarter of the prior year. For the six months ended April 30, 2022, total revenues were $1.27 billion compared with $1.28 billion in the same period during the prior year.

●

Homebuilding gross margin percentage, after cost of sales interest expense and land charges, increased 520 basis points to 23.3% for the three months ended April 30, 2022 compared with 18.1% during the same period a year ago. During the first half of fiscal 2022, homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 21.8%, up 410 basis points, compared with 17.7% during the same period a year ago.

●

Homebuilding gross margin percentage, before cost of sales interest expense and land charges, increased 530 basis points to 26.6% during the fiscal 2022 second quarter compared with 21.3% in last year's second quarter. For the six months ended April 30, 2022, homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 24.7%, up 370 basis points, compared with 21.0% in the same period of the previous year.

●

Total SG&A was $68.2 million, or 9.7% of total revenues, in the fiscal 2022 second quarter compared with $82.6 million, or 11.7% of total revenues, in the previous year's second quarter. During the first six months of fiscal 2022, total SG&A was $140.4 million, or 11.1% of total revenues, compared with $146.3 million, or 11.4% of total revenues, in the same period of the prior fiscal year.

●

Total interest expense as a percent of total revenues improved by 130 basis points to 4.9% for the second quarter of fiscal 2022 compared with 6.2% during the second quarter of fiscal 2021. For the first half of fiscal 2022, total interest expense as a percent of total revenues improved 180 basis points to 4.8% compared with 6.6% in the first half of the previous fiscal year.

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●

Income before income taxes for the second quarter of fiscal 2022 was $80.9 million, up 160.8%, compared with $31.0 million in the second quarter of the prior fiscal year. For the first six month of fiscal 2022, income before income taxes increased 129.9% to $116.3 million compared with $50.6 million during the same period of the prior fiscal year.

●

Adjusted pretax income, which is income before income taxes excluding $0.6 million of land-related charges and $6.8 million loss on extinguishment of debt, was $88.3 million in the second quarter of fiscal 2022 compared with $31.1 million in the fiscal 2021 second quarter. For the six months ended April 30, 2022, adjusted pretax income was $123.8 million compared with $52.6 million during the first six months of fiscal 2021.

●

Net income was $62.4 million, or $8.39 per diluted common share, for the three months ended April 30, 2022 compared with net income, including the $468.6 million benefit of the valuation allowance reduction, of $488.7 million, or $69.65 per diluted common share, in the second quarter of the previous fiscal year. For the first six months of fiscal 2022, net income was $87.2 million, or $11.44 per diluted common share, compared with net income, including the $468.6 million benefit of the valuation allowance reduction, of $507.6 million, or $72.71 per diluted common share in the same period during fiscal 2021.

●

Net income was $62.4 million, or $8.39 per diluted common share, for the three months ended April 30, 2022 compared with net income, excluding the $468.6 million benefit of the valuation allowance reduction, of $20.0 million or $2.85 per diluted common share in the second quarter of the previous fiscal year. For the first six months of fiscal 2022, net income was $87.2 million, or $11.44 per diluted common share, compared with net income, excluding the $468.6 million benefit of the valuation allowance reduction, of $39.0 million, or $5.58 per diluted common share in the same period during fiscal 2021.

●

Consolidated contract dollars in the second quarter of fiscal 2022 increased 4.9% to $860.5 million (1,525 homes) compared with $820.4 million (1,771 homes) in the same quarter last year. Contract dollars, including domestic unconsolidated joint ventures(1), for the three months ended April 30, 2022 were $975.2 million (1,689 homes) compared with $930.2 million (1,960 homes) in the second quarter of fiscal 2021.

●

Consolidated contract dollars in the first half of fiscal 2022 increased 2.5% to $1.66 billion (3,076 homes) compared with $1.62 billion (3,549 homes) in the same period last year. Contract dollars, including domestic unconsolidated joint ventures(1), for the six months ended April 30, 2022 were $1.85 billion (3,348 homes) compared with $1.83 billion (3,922 homes) in the first half of fiscal 2021.

●

Consolidated contracts per community were at a strong, above historical average pace of 15.0 for the second quarter ended April 30, 2022 compared to the white-hot pace of 18.3 contracts per community in last year's second quarter. Contracts per community, including domesticunconsolidated joint ventures, decreased to 14.1 contracts per community for the second quarter of fiscal 2022, which is above the historical average pace, compared with 16.8 contracts per community for the second quarter of fiscal 2021.

●

As of the end of the second quarter of fiscal 2022, consolidated community count was up 5.2% to 102 communities, compared with 97 communities at April 30, 2021. Community count, including domesticunconsolidated joint ventures, was 120 as of April 30, 2022, compared with 117 communities at the end of the previous year's second quarter.

●

The dollar value of consolidated contract backlog, as of April 30, 2022, increased 16.1% to $2.06 billion compared with $1.77 billion as of April 30, 2021. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of April 30, 2022, increased 14.6% to $2.34 billion compared with $2.04 billion as of April 30, 2021.

2

●

Sale of home revenues increased to $685.8 million (1,353 homes) in the fiscal 2022 second quarter compared with $679.5 million (1,618 homes) in the previous year's second quarter. During the fiscal 2022 second quarter, sale of homes revenues, including domestic unconsolidated joint ventures, increased to $772.8 million (1,495 homes) compared with $770.6 million (1,773 homes) during the second quarter of fiscal 2021.

●

For the first half of fiscal 2022, sale of homes revenues were $1.24 billion (2,527 homes) compared with $1.24 billion (3,003) homes in the first six months of the previous year. For the first half of the fiscal 2022, sale of homes revenues, including domestic unconsolidated joint ventures, were $1.39 billion (2,778 homes) compared with $1.39 billion (3,277 homes) during the same period of fiscal 2021.

●

The contract cancellation rate for consolidated contracts was 17% for the second quarter ended April 30, 2022 compared with 16% in the fiscal 2021 second quarter. The contract cancellation rate for contracts including domestic unconsolidated joint ventures was 16% for the second quarter of fiscal 2022 compared with 15% in the second 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 APRIL 30, 2022:

●

During the second quarter of fiscal 2022, land and land development spending was $154.8 million compared with $175.0 million in the same quarter one year ago. For the first half of fiscal 2022, land and land development spending was $349.6 million compared with $353.6 million in the same period one year ago.

●

After early retirement of $100 million of senior secured notes in the second quarter of fiscal 2022 in addition to the $181 million of senior secured notes retired in fiscal 2021, total liquidity as of April 30, 2022 was $282.2 million, above our targeted liquidity range of $170 million to $245 million.

●

In the second quarter of fiscal 2022, approximately 3,200 lots were put under option or acquired in 28 consolidated communities.

●

As of April 30, 2022, the total controlled consolidated lots increased 19.3% to 33,501 compared with 28,077 lots at the end of the second quarter of the previous year. Based on trailing twelve-month deliveries, the current position equaled a 5.8 years' supply.

FINANCIAL GUIDANCE(2):

The Company is reiterating its financial guidance for the full year of fiscal 2022 and is providing guidance for the third quarter of 2022. Financial guidance below assumes no adverse changes in current market conditions, including further deterioration in the supply chain, material increase in mortgage rates, or increased inflation and excludes further impact to SG&A expenses from phantom stock expense related solely to stock price movements from the closing price of $46.02 at April 29, 2022.

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●

For the third quarter of fiscal 2022, total revenues are expected to be between $780 million and $830 million, gross margin, before cost of sales interest expense and land charges, is expected to be between 24.0% and 26.0% and adjusted pretax income is expected to be between $70 million and $85 million.

●

For fiscal 2022, total revenues are expected to be between $2.80 billion and $3.00 billion, gross margin, before cost of sales interest expense and land charges, is expected to be between 23.5% and 25.5%, adjusted pretax income is expected to be between $260 million and $310 million, adjusted EBITDA is expected to be between $410 million and $460 million and fully diluted earnings per share is expected to be between $26.50 and $32.00. At the midpoint of our guidance, we anticipate our shareholders' equity to increase by approximately 105% by October 31, 2022.

●

Continue to focus on leverage levels and anticipate reducing senior secured notes by at least an additional $100 million during the second half of 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:

"Despite continued challenges due to supply chain disruptions, labor tightness, increasing mortgage rates and permitting/inspection delays, we are pleased our adjusted pretax income increased 184% year over year and was above the high end of our guidance range. We also reduced our senior secured notes by an additional $100 million during the second quarter of fiscal 2022," stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "New homes sales face a persistent headwind from rising mortgage rates, increasing home prices and fears of a recession. Despite those concerns, demand for our homes throughout the second quarter of fiscal 2022 remained strong. During the second quarter of 2022 our contracts per community were 15.0, which was above the pre-Covid 2019 second quarter pace of 10.5 and the normal historical average (1997 through 2002) second quarter pace of 13.5 contracts per community."

"We already have over 100% of our expected third and fourth quarter deliveries in contract backlog and we are beginning to build our fiscal 2023 backlog. This provides us with a high level of confidence that we are on track to achieve our adjusted profit guidance for fiscal 2022. Since August of 2021, we have paid off $281 million of senior secured notes prior to their maturity and anticipate paying off at least another $100 million of senior secured notes in the second half of fiscal 2022. Additionally, by the end of 2022, we expect our equity to increase year over year by more than 100% to approximately $365 million. We remain focused on increasing profitability and further strengthening our balance sheet," concluded Mr. Hovnanian.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2022 second quarter financial results conference call at 11:00 a.m. E.T. on Wednesday, June 1, 2022. 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 [e-mail] or sign up at http://www.khov.com.

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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 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 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 $149.4 million of cash and cash equivalents, $7.8 million of restricted cash required to collateralize letters of credit and $125.0 million availability under the senior secured revolving credit facility as of April 30, 2022.

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) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (2) shortages in, and price fluctuations of, raw materials and labor, including due to geopolitical events, changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products and related trade disputes with and retaliatory measures taken by other countries; (3) the outbreak and spread of COVID-19 and the measures that governments, agencies, law enforcement and/or health authorities implement to address it, as well as continuing macroeconomic effects of the pandemic; (4) adverse weather and other environmental conditions and natural disasters; (5) the seasonality of the Company's business; (6) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (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; (26) increases in inflation; and (27) 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, 2021 and the Company's Quarterly Reports on Form 10-Q for the quarterly periods during fiscal 2022 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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Hovnanian Enterprises, Inc.

April 30, 2022

Statements of consolidated operations

(In thousands, except per share data)

		Three Months Ended			Six Months Ended
		April 30,			April 30,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)
Total revenues			$702,537				$703,162				$1,267,850				$1,277,826
Costs and expenses (1)			617,968				674,771				1,156,071				1,231,766
Loss on extinguishment of debt			(6,795	)			-				(6,795	)			-
Income from unconsolidated joint ventures			3,171				2,641				11,362				4,557
Income before income taxes			80,945				31,032				116,346				50,617
Income tax provision (benefit)			18,510				(457,644	)			29,103				(457,018	)
Net income			62,435				488,676				87,243				507,635
Less: preferred stock dividends			2,669				-				5,338				-
Net income available to common stockholders			$59,766				$488,676				$81,905				$507,635
Per share data:
Basic:
Net income per common share			$8.50				$71.11				$11.62				$74.00
Weighted average number of common shares outstanding			6,396				6,248				6,392				6,236
Assuming dilution:
Net income per common share			$8.39				$69.65				$11.44				$72.71
Weighted average number of common shares outstanding			6,477				6,368				6,492				6,331

(1) Includes inventory impairment loss and land option write-offs.

Hovnanian Enterprises, Inc.

April 30, 2022

Reconciliation of income before income taxes excluding land-related charges and loss on extinguishment of debt to income before income taxes

(In thousands)

		Three Months Ended			Six Months Ended
		April 30,			April 30,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)
Income before income taxes			$80,945				$31,032				$116,346				$50,617
Inventory impairment loss and land option write-offs			565				81				664				1,958
Loss on extinguishment of debt			6,795				-				6,795				-
Income before income taxes excluding land-related charges and loss on extinguishment of debt (1)			$88,305				$31,113				$123,805				$52,575

(1) Income before income taxes excluding land-related charges and loss on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income before income taxes.

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Hovnanian Enterprises, Inc.

April 30, 2022

Gross margin

(In thousands)

		Homebuilding Gross Margin			Homebuilding Gross Margin
		Three Months Ended			Six Months Ended
		April 30,			April 30,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)
Sale of homes			$685,823				$679,515				$1,237,189				$1,230,880
Cost of sales, excluding interest expense and land charges (1)			503,466				535,017				931,339				972,389
Homebuilding gross margin, before cost of sales interest expense and land charges (2)			182,357				144,498				305,850				258,491
Cost of sales interest expense, excluding land sales interest expense			21,678				21,704				35,402				38,421
Homebuilding gross margin, after cost of sales interest expense, before land charges (2)			160,679				122,794				270,448				220,070
Land charges			565				81				664				1,958
Homebuilding gross margin			$160,114				$122,713				$269,784				$218,112
Homebuilding Gross margin percentage			23.3	%			18.1	%			21.8	%			17.7	%
Homebuilding Gross margin percentage, before cost of sales interest expense and land charges (2)			26.6	%			21.3	%			24.7	%			21.0	%
Homebuilding Gross margin percentage, after cost of sales interest expense, before land charges (2)			23.4	%			18.1	%			21.9	%			17.9	%

		Land Sales Gross Margin			Land Sales Gross Margin
		Three Months Ended			Six Months Ended
		April 30,			April 30,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)
Land and lot sales			$365				$1,549				$399				$4,911
Land and lot sales cost of sales, excluding interest and land charges (1)			216				1,517				260				3,783
Land and lot sales gross margin, excluding interest and land charges			149				32				139				1,128
Land and lot sales interest			-				21				21				469
Land and lot sales gross margin, including interest and excluding land charges			$149				$11				$118				$659

(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.

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Hovnanian Enterprises, Inc.

April 30, 2022

Reconciliation of adjusted EBITDA to net income (loss)

(In thousands)

		Three Months Ended			Six Months Ended
		April 30,			April 30,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)
Net income			$62,435				$488,676				$87,243				$507,635
Income tax provision (benefit)			18,510				(457,644	)			29,103				(457,018	)
Interest expense			34,103				43,758				61,241				84,898
EBIT (1)			115,048				74,790				177,587				135,515
Depreciation and amortization			1,314				1,484				2,489				2,822
EBITDA (2)			116,362				76,274				180,076				138,337
Inventory impairment loss and land option write-offs			565				81				664				1,958
Loss on extinguishment of debt			6,795				-				6,795				-
Adjusted EBITDA (3)			$123,722				$76,355				$187,535				$140,295
Interest incurred			$33,872				$41,870				$66,655				$83,327
Adjusted EBITDA to interest incurred			3.65				1.82				2.81				1.68

(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 on extinguishment of debt.

Hovnanian Enterprises, Inc.

April 30, 2022

Interest incurred, expensed and capitalized

(In thousands)

		Three Months Ended			Six Months Ended
		April 30,			April 30,
		2022			2021			2022			2021
		(Unaudited)			(Unaudited)
Interest capitalized at beginning of period			$63,804				$65,327				$58,159				$65,010
Plus interest incurred			33,872				41,870				66,655				83,327
Less interest expensed			34,103				43,758				61,241				84,898
Less interest contributed to unconsolidated joint venture (1)			-				3,667				-				3,667
Interest capitalized at end of period (2)			$63,573				$59,772				$63,573				$59,772

(1) Represents capitalized interest which was included as part of the assets contributed to the joint venture the company entered into during the six months ended April 30, 2021. There was no impact to the 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.

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HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

		April 30,			October 31,
		2022			2021
		(Unaudited)				(1)
ASSETS
Homebuilding:
Cash and cash equivalents			$149,431				$245,970
Restricted cash and cash equivalents			14,283				16,089
Inventories:
Sold and unsold homes and lots under development			1,140,199				1,019,541
Land and land options held for future development or sale			152,796				135,992
Consolidated inventory not owned			199,172				98,727
Total inventories			1,492,167				1,254,260
Investments in and advances to unconsolidated joint ventures			67,344				60,897
Receivables, deposits and notes, net			39,420				39,934
Property, plant and equipment, net			21,559				18,736
Prepaid expenses and other assets			61,155				56,186
Total homebuilding			1,845,359				1,692,072
Financial services			138,253				202,758
Deferred tax assets, net			400,557				425,678
Total assets			$2,384,169				$2,320,508
LIABILITIES AND EQUITY
Homebuilding:
Nonrecourse mortgages secured by inventory, net of debt issuance costs			$196,192				$125,089
Accounts payable and other liabilities			407,926				426,381
Customers' deposits			100,445				68,295
Liabilities from inventory not owned, net of debt issuance costs			123,793				62,762
Senior notes and credit facilities (net of discounts, premiums and debt issuance costs)			1,149,129				1,248,373
Accrued Interest			28,367				28,154
Total homebuilding			2,005,852				1,959,054
Financial services			116,980				182,219
Income taxes payable			2,938				3,851
Total liabilities			2,125,770				2,145,124
Equity:
Hovnanian Enterprises, Inc. stockholders' equity:
Preferred stock, $0.01 par value - authorized 100,000 shares; issued and outstanding 5,600 shares with a liquidation preference of $140,000 at April 30, 2022 and October 31, 2021			135,299				135,299
Common stock, Class A, $0.01 par value - authorized 16,000,000 shares; issued 6,105,811 shares at April 30, 2022 and 6,066,164 shares at October 31, 2021			61				61
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) - authorized 2,400,000 shares; issued 704,215 shares at April 30, 2022 and 686,876 shares at October 31, 2021			7				7
Paid in capital - common stock			723,319				722,118
Accumulated deficit			(485,323	)			(567,228	)
Treasury stock - at cost - 470,430 shares of Class A common stock and 27,669 shares of Class B common stock at April 30, 2022 and October 31, 2021			(115,360	)			(115,360	)
Total Hovnanian Enterprises, Inc. stockholders' equity			258,003				174,897
Noncontrolling interest in consolidated joint ventures			396				487
Total equity			258,399				175,384
Total liabilities and equity			$2,384,169				$2,320,508

(1) Derived from the audited balance sheet as of October 31, 2021

9

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Data)

(Unaudited)

		Three Months Ended April 30,			Six Months Ended April 30,
		2022			2021			2022			2021
Revenues:
Homebuilding:
Sale of homes			$685,823				$679,515				$1,237,189				$1,230,880
Land sales and other revenues			1,008				1,919				1,646				5,721
Total homebuilding			686,831				681,434				1,238,835				1,236,601
Financial services			15,706				21,728				29,015				41,225
Total revenues			702,537				703,162				1,267,850				1,277,826
Expenses:
Homebuilding:
Cost of sales, excluding interest			503,682				536,534				931,599				976,172
Cost of sales interest			21,678				21,725				35,423				38,890
Inventory impairment loss and land option write-offs			565				81				664				1,958
Total cost of sales			525,925				558,340				967,686				1,017,020
Selling, general and administrative			46,501				42,204				89,247				82,429
Total homebuilding expenses			572,426				600,544				1,056,933				1,099,449
Financial services			10,792				11,361				21,192				21,715
Corporate general and administrative			21,684				40,382				51,119				63,865
Other interest			12,425				22,033				25,818				46,008
Other operations			641				451				1,009				729
Total expenses			617,968				674,771				1,156,071				1,231,766
Loss on extinguishment of debt			(6,795	)			-				(6,795	)			-
Income from unconsolidated joint ventures			3,171				2,641				11,362				4,557
Income before income taxes			80,945				31,032				116,346				50,617
State and federal income tax provision (benefit):
State			2,587				(91,374	)			5,130				(90,748	)
Federal			15,923				(366,270	)			23,973				(366,270	)
Total income taxes			18,510				(457,644	)			29,103				(457,018	)
Net income			62,435				488,676				87,243				507,635
Less: preferred stock dividends			2,669				-				5,338				-
Net income available to common stockholders			$59,766				$488,676				$81,905				$507,635
Per share data:
Basic:
Net income per common share			$8.50				$71.11				$11.62				$74.00
Weighted-average number of common shares outstanding			6,396				6,248				6,392				6,236
Assuming dilution:
Net income per common share			$8.39				$69.65				$11.44				$72.71
Weighted-average number of common shares outstanding			6,477				6,368				6,492				6,331

10

HOVNANIAN ENTERPRISES, INC.

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

(SEGMENT DATAEXCLUDES UNCONSOLIDATED JOINT VENTURES)

		Contracts (1)		Deliveries		Contract
		Three Months Ended		Three Months Ended		Backlog
		April 30,		April 30,		April 30,
		2022	2021	% Change		2022	2021	% Change		2022	2021	% Change
Northeast
(NJ, PA)	Home		87		64		35.9	%		78		42		85.7	%		249		142		75.4	%
	Dollars		$64,464		$49,948		29.1	%		$55,048		$28,686		91.9	%		$197,523		$105,828		86.6	%
	Avg. Price		$740,966		$780,438		(5.1	)%		$705,744		$683,000		3.3	%		$793,265		$745,268		6.4	%
Mid-Atlantic
(DE, MD, VA, WV)	Home		264		242		9.1	%		191		216		(11.6	)%		618		585		5.6	%
	Dollars		$162,134		$152,237		6.5	%		$128,704		$112,124		14.8	%		$407,936		$350,183		16.5	%
	Avg. Price		$614,144		$629,079		(2.4	)%		$673,843		$519,093		29.8	%		$660,091		$598,603		10.3	%
Midwest
(IL, OH)	Home		144		225		(36.0	)%		155		203		(23.6	)%		599		673		(11.0	)%
	Dollars		$55,041		$80,541		(31.7	)%		$56,690		$64,010		(11.4	)%		$197,667		$208,841		(5.4	)%
	Avg. Price		$382,229		$357,960		6.8	%		$365,742		$315,320		16.0	%		$329,995		$310,314		6.3	%
Southeast
(FL, GA, SC)	Home		213		153		39.2	%		150		167		(10.2	)%		608		392		55.1	%
	Dollars		$132,871		$66,485		99.9	%		$73,154		$80,863		(9.5	)%		$352,101		$185,139		90.2	%
	Avg. Price		$623,808		$434,542		43.6	%		$487,693		$484,210		0.7	%		$579,113		472,293		22.6	%
Southwest
(AZ, TX)	Home		541		829		(34.7	)%		555		633		(12.3	)%		1,220		1,416		(13.8	)%
	Dollars		$273,858		$319,618		(14.3	)%		$231,656		$217,165		6.7	%		$597,783		$540,321		10.6	%
	Avg. Price		$506,207		$385,546		31.3	%		$417,396		$343,073		21.7	%		$489,986		$381,583		28.4	%
West
(CA)	Home		276		258		7.0	%		224		357		(37.3	)%		502		689		(27.1	)%
	Dollars		$172,177		$151,571		13.6	%		$140,571		$176,667		(20.4	)%		$307,315		$384,089		(20.0	)%
	Avg. Price		$623,830		$587,484		6.2	%		$627,549		$494,866		26.8	%		$612,181		$557,459		9.8	%
Consolidated Total
	Home		1,525		1,771		(13.9	)%		1,353		1,618		(16.4	)%		3,796		3,897		(2.6	)%
	Dollars		$860,545		$820,400		4.9	%		$685,823		$679,515		0.9	%		$2,060,325		$1,774,401		16.1	%
	Avg. Price		$564,292		$463,241		21.8	%		$506,891		$419,972		20.7	%		$542,762		$455,325		19.2	%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		164		189		(13.2	)%		142		155		(8.4	)%		396		476		(16.8	)%
	Dollars		$114,673		$109,806		4.4	%		$86,974		$91,067		(4.5	)%		$278,006		$266,673		4.2	%
	Avg. Price		$699,226		$580,984		20.4	%		$612,493		$587,529		4.2	%		$702,035		$560,237		25.3	%
Grand Total
	Home		1,689		1,960		(13.8	)%		1,495		1,773		(15.7	)%		4,192		4,373		(4.1	)%
	Dollars		$975,218		$930,206		4.8	%		$772,797		$770,582		0.3	%		$2,338,331		$2,041,074		14.6	%
	Avg. Price		$577,394		$474,595		21.7	%		$516,921		$434,620		18.9	%		$557,808		$466,745		19.5	%
KSA JV Only
	Home		51		146		(65.1	)%		0		0		0.0	%		2,191		1,451		51.0	%
	Dollars		$7,895		$22,805		(65.4	)%		$0		$0		0.0	%		$344,026		$227,851		51.0	%
	Avg. Price		$154,804		$156,199		(0.9	)%		$0		$0		0.0	%		$157,018		$157,030		(0.0	)%

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".

11

HOVNANIAN ENTERPRISES, INC.

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

(SEGMENT DATAEXCLUDES UNCONSOLIDATED JOINT VENTURES)

		Contracts (1)		Deliveries		Contract
		Six Months Ended		Six Months Ending		Backlog
		April 30,		April 30,		April 30,
		2022	2021	% Change		2022	2021	% Change		2022	2021	% Change
Northeast
(NJ, PA)	Home		183		107		71.0	%		106		95		11.6	%		249		142		75.4	%
	Dollars		$134,532		$83,618		60.9	%		$75,405		$59,902		25.9	%		$197,523		$105,828		86.6	%
	Avg. Price		$735,148		$781,477		(5.9	)%		$711,368		$630,547		12.8	%		$793,265		$745,268		6.4	%
Mid-Atlantic
(DE, MD, VA, WV)	Home		469		471		(0.4	)%		359		392		(8.4	)%		618		585		5.6	%
	Dollars		$293,850		$296,718		(1.0	)%		$228,104		$205,035		11.3	%		$407,936		$350,183		16.5	%
	Avg. Price		$626,546		$629,975		(0.5	)%		$635,387		$523,048		21.5	%		$660,091		$598,603		10.3	%
Midwest
(IL, OH)	Home		311		463		(32.8	)%		317		386		(17.9	)%		599		673		(11.0	)%
	Dollars		$114,834		$159,927		(28.2	)%		$111,612		$120,603		(7.5	)%		$197,667		$208,841		(5.4	)%
	Avg. Price		$369,241		$345,417		6.9	%		$352,088		$312,443		12.7	%		$329,995		$310,314		6.3	%
Southeast
(FL, GA, SC)	Home		441		363		21.5	%		254		269		(5.6	)%		608		392		55.1	%
	Dollars		$259,325		$164,679		57.5	%		$128,649		$126,511		1.7	%		$352,101		$185,139		90.2	%
	Avg. Price		$588,039		$453,661		29.6	%		$506,492		$470,301		7.7	%		$579,113		$472,293		22.6	%
Southwest
(AZ, TX)	Home		1,197		1,565		(23.5	)%		1,053		1,215		(13.3	)%		1,220		1,416		(13.8	)%
	Dollars		$563,948		$587,443		(4.0	)%		$425,986		$407,347		4.6	%		$597,783		$540,321		10.6	%
	Avg. Price		$471,135		$375,363		25.5	%		$404,545		$335,265		20.7	%		$489,986		$381,583		28.4	%
West
(CA)	Home		475		580		(18.1	)%		438		646		(32.2	)%		502		689		(27.1	)%
	Dollars		$292,318		$325,685		(10.2	)%		$267,433		$311,482		(14.1	)%		$307,315		$384,089		(20.0	)%
	Avg. Price		$615,406		$561,524		9.6	%		$610,578		$482,170		26.6	%		$612,181		$557,459		9.8	%
Consolidated Total
	Home		3,076		3,549		(13.3	)%		2,527		3,003		(15.9	)%		3,796		3,897		(2.6	)%
	Dollars		$1,658,807		$1,618,070		2.5	%		$1,237,189		$1,230,880		0.5	%		$2,060,325		$1,774,401		16.1	%
	Avg. Price		$539,274		$455,923		18.3	%		$489,588		$409,883		19.4	%		$542,762		$455,325		19.2	%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		272		373		(27.1	)%		251		274		(8.4	)%		396		476		(16.8	)%
	Dollars		$186,981		$211,714		(11.7	)%		$150,594		$162,180		(7.1	)%		$278,006		$266,673		4.2	%
	Avg. Price		$687,430		$567,598		21.1	%		$599,976		$591,897		1.4	%		$702,035		$560,237		25.3	%
Grand Total
	Home		3,348		3,922		(14.6	)%		2,778		3,277		(15.2	)%		4,192		4,373		(4.1	)%
	Dollars		$1,845,788		$1,829,784		0.9	%		$1,387,783		$1,393,060		(0.4	)%		$2,338,331		$2,041,074		14.6	%
	Avg. Price		$551,310		$466,544		18.2	%		$499,562		$425,102		17.5	%		$557,808		$466,745		19.5	%
KSA JV Only
	Home		278		359		(22.6	)%		0		0		0.0	%		2,191		1,451		51.0	%
	Dollars		$43,642		$56,178		(22.3	)%		$0		$0		0.0	%		$344,026		$227,851		51.0	%
	Avg. Price		$156,986		$156,485		0.3	%		$0		$0		0.0	%		$157,018		$157,030		(0.0	)%

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".

12

HOVNANIAN ENTERPRISES, INC.

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)

		Contracts (1)		Deliveries		Contract
		Three Months Ended		Three Months Ended		Backlog
		April 30,		April 30,		April 30,
		2022	2021		% Change		2022	2021	% Change		2022	2021	% Change
Northeast
(unconsolidated joint ventures)	Home		19		14			35.7	%		0		17		(100.0	)%		38		14		171.4	%
(excluding KSA JV)	Dollars		$19,932		$16,977			17.4	%		$0		$23,813		(100.0	)%		$32,233		$17,839		80.7	%
(NJ, PA)	Avg. Price		$1,049,053		$1,212,643			(13.5	)%		$0		$1,400,765		(100.0	)%		$848,237		$1,274,214		(33.4	)%
Mid-Atlantic
(unconsolidated joint ventures)	Home		63		26			142.3	%		46		33		39.4	%		143		127		12.6	%
(DE, MD, VA, WV)	Dollars		$42,226		$14,962			182.2	%		$31,159		$17,923		73.8	%		$93,893		$75,401		24.5	%
	Avg. Price		$670,254		$575,462			16.5	%		$677,369		$543,121		24.9	%		$656,594		$593,709		10.6	%
Midwest
(unconsolidated joint ventures)	Home		0		0			0.0	%		0		0		0.0	%		0		0		0.0	%
(IL, OH)	Dollars		$0		$0			0.0	%		$0		$0		0.0	%		$0		$0		0.0	%
	Avg. Price		$0		$0			0.0	%		$0		$0		0.0	%		$0		$0		0.0	%
Southeast
(unconsolidated joint ventures)	Home		49		127			(61.4	)%		74		70		5.7	%		172		272		(36.8	)%
(FL, GA, SC)	Dollars		$35,101		$69,362			(49.4	)%		$45,621		$33,510		36.1	%		$130,093		$145,096		(10.3	)%
	Avg. Price		$716,347		$546,157			31.2	%		$616,500		$478,714		28.8	%		$756,355		$533,441		41.8	%
Southwest
(unconsolidated joint ventures)	Home		0		0			0.0	%		0		14		(100.0	)%		0		21		(100.0	)%
(AZ, TX)	Dollars		$0		$(17	)		(100.0	)%		$0		$8,441		(100.0	)%		$0		$12,758		(100.0	)%
	Avg. Price		$0		$0			0.0	%		$0		$602,929		(100.0	)%		$0		$607,524		(100.0	)%
West
(unconsolidated joint ventures)	Home		33		22			50.0	%		22		21		4.8	%		43		42		2.4	%
(CA)	Dollars		$17,414		$8,522			104.3	%		$10,194		$7,380		38.1	%		$21,787		$15,579		39.8	%
	Avg. Price		$527,697		$387,364			36.2	%		$463,363		$351,429		31.9	%		$506,674		$370,929		36.6	%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		164		189			(13.2	)%		142		155		(8.4	)%		396		476		(16.8	)%
	Dollars		$114,673		$109,806			4.4	%		$86,974		$91,067		(4.5	)%		$278,006		$266,673		4.2	%
	Avg. Price		$699,226		$580,984			20.4	%		$612,493		$587,529		4.2	%		$702,035		$560,237		25.3	%
KSA JV Only
	Home		51		146			(65.1	)%		0		0		0.0	%		2,191		1,451		51.0	%
	Dollars		$7,895		$22,805			(65.4	)%		$0		$0		0.0	%		$344,026		$227,851		51.0	%
	Avg. Price		$154,804		$156,199			(0.9	)%		$0		$0		0.0	%		$157,018		157,030		(0.0	)%

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".

13

HOVNANIAN ENTERPRISES, INC.

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)

		Contracts (1)		Deliveries		Contract
		Six Months Ended		Six Months Ended		Backlog
		April 30,		April 30,		April 30,
		2022	2021	% Change		2022	2021	% Change		2022	2021	% Change
Northeast
(unconsolidated joint ventures)	Home		32		27		18.5	%		4		31		(87.1	)%		38		14		171.4	%
(excluding KSA JV)	Dollars		$27,738		$34,812		(20.3	)%		$5,695		$41,508		(86.3	)%		$32,233		$17,839		80.7	%
(NJ, PA)	Avg. Price		$866,813		$1,289,333		(32.8	)%		$1,423,750		$1,338,968		6.3	%		$848,237		$1,274,214		(33.4	)%
Mid-Atlantic
(unconsolidated joint ventures)	Home		100		49		104.1	%		73		63		15.9	%		143		127		12.6	%
(DE, MD, VA, WV)	Dollars		$65,964		$28,288		133.2	%		$48,679		$32,324		50.6	%		$93,893		$75,401		24.5	%
	Avg. Price		$659,640		$577,306		14.3	%		$666,836		$513,079		30.0	%		$656,594		$593,709		10.6	%
Midwest
(unconsolidated joint ventures)	Home		0		1		(100.0	)%		0		1		(100.0	)%		0		0		0.0	%
(IL, OH)	Dollars		$0		$409		(100.0	)%		$0		$409		(100.0	)%		$0		$0		0.0	%
	Avg. Price		$0		$409,000		(100.0	)%		$0		$409,000		(100.0	)%		$0		$0		0.0	%
Southeast
(unconsolidated joint ventures)	Home		87		244		(64.3	)%		126		121		4.1	%		172		272		(36.8	)%
(FL, GA, SC)	Dollars		$66,626		$127,120		(47.6	)%		$74,304		$60,552		22.7	%		$130,093		$145,096		(10.3	)%
	Avg. Price		$765,816		$520,984		47.0	%		$589,714		$500,430		17.8	%		$756,355		$533,441		41.8	%
Southwest
(unconsolidated joint ventures)	Home		0		4		(100.0	)%		0		29		(100.0	)%		0		21		(100.0	)%
(AZ, TX)	Dollars		$0		$3,135		(100.0	)%		$0		$17,180		(100.0	)%		$0		$12,758		(100.0	)%
	Avg. Price		$0		$783,750		(100.0	)%		$0		$592,414		(100.0	)%		$0		$607,524		(100.0	)%
West
(unconsolidated joint ventures)	Home		53		48		10.4	%		48		29		65.5	%		43		42		2.4	%
(CA)	Dollars		$26,653		$17,949		48.5	%		$21,916		$10,207		114.7	%		$21,787		$15,579		39.8	%
	Avg. Price		$502,887		$373,938		34.5	%		$456,583		$351,966		29.7	%		$506,674		$370,929		36.6	%
Unconsolidated Joint Ventures (2)
(excluding KSA JV)	Home		272		373		(27.1	)%		251		274		(8.4	)%		396		476		(16.8	)%
	Dollars		$186,981		$211,713		(11.7	)%		$150,594		$162,180		(7.1	)%		$278,006		$266,673		4.2	%
	Avg. Price		$687,430		$567,595		21.1	%		$599,976		$591,898		1.4	%		$702,035		$560,237		25.3	%
KSA JV Only
	Home		278		359		(22.6	)%		0		0		0.0	%		2,191		1,451		51.0	%
	Dollars		$43,642		$56,178		(22.3	)%		$0		$0		0.0	%		$344,026		$227,851		51.0	%
	Avg. Price		$156,986		$156,485		0.3	%		$0		$0		0.0	%		$157,018		$157,030		(0.0	)%

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".

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