Hovnanian Enterprises — Fiscal 2026 Third Quarter Earnings Summary

Financial Performance

• Total revenues were $705.7 million for the third quarter of fiscal 2026, down from $800.6 million in the prior year quarter; for the nine months ended July 31, 2026, revenues were $2.01 billion compared to $2.16 billion in the prior year.
• Domestic unconsolidated joint venture home sales revenues were $155.6 million (225 homes) in the third quarter, down from $165.0 million (245 homes) in the prior year; for the nine months, revenues were $353.9 million (524 homes) versus $441.2 million (649 homes).
• Homebuilding gross margin percentage (after cost of sales, interest, and land charges) was 11.8% in the third quarter, up from 11.7% in the prior year; for the nine months, it was 10.8% versus 13.5%.
• Homebuilding gross margin percentage (before cost of sales, interest, and land charges) was 14.6% in the third quarter, down from 17.3% in the prior year; for the nine months, it was 14.2% versus 17.6%.
• Total SG&A was $86.9 million (12.3% of revenue) in the third quarter, compared to $90.8 million (11.3% of revenue) in the prior year; for the nine months, it was $254.9 million (12.7% of revenue) versus $258.3 million (12.0% of revenue).
• Total interest expense was $30.5 million (4.3% of revenue) in the third quarter, down from $34.0 million (4.2% of revenue) in the prior year; for the nine months, it was $87.7 million (4.4% of revenue) versus $92.0 million (4.3% of revenue).
• Loss before income taxes was $2.8 million in the third quarter, compared to income of $23.8 million in the prior year; for the nine months, income before taxes was $26.3 million versus $90.2 million.
• Net loss available to common stockholders was $4.5 million ($0.70 per diluted share) in the third quarter, compared to net income of $13.9 million ($1.99 per diluted share) in the prior year; for the nine months, net income was $10.8 million ($1.55 per diluted share) versus $56.5 million ($7.94 per diluted share).
• EBITDA was $31.4 million in the third quarter, down from $61.0 million in the prior year; for the nine months, it was $124.5 million versus $190.7 million.
• Adjusted EBITDA was $31.9 million in the third quarter, down from $77.1 million in the prior year; for the nine months, it was $136.1 million versus $210.4 million.
• Consolidated domestic contracts decreased 4.6% to 1,155 homes ($622.6 million) in the third quarter compared to 1,211 homes ($619.6 million) in the prior year.
• Consolidated domestic contract backlog increased 5.1% to $881.9 million as of July 31, 2026, compared to $838.8 million in the prior year.
• Total liquidity was $379.8 million as of July 31, 2026.

Guidance and Future Outlook

• For the fourth quarter of fiscal 2026, total revenues are expected to be between $800 million and $900 million.
• Adjusted homebuilding gross margin is expected to be between 15.0% and 16.5% for the fourth quarter.
• Adjusted income before income taxes is expected to be between $15 million and $30 million for the fourth quarter.
• Adjusted EBITDA is expected to be between $50 million and $65 million for the fourth quarter.
• Management expects a growing percentage of deliveries to come from newer communities acquired and underwritten under current market assumptions, supporting improved margins and returns over time.

Business Segments and Product Lines

• Consolidated domestic contracts per community decreased 4.1% year-over-year to 9.4 in the third quarter.
• As of July 31, 2026, there were 123 consolidated domestic communities, compared to 124 in the prior year.
• Domestic land and land development spending was $231.9 million in the third quarter, up from $192.6 million in the prior year; for the nine months, spending was $644.9 million versus $660.0 million.
• Approximately 3,000 lots were put under option or acquired in 38 domestic consolidated communities during the third quarter.
• Total domestic controlled consolidated lots were 34,373 as of July 31, 2026, down from 40,246 in the prior year; 87% of lots were optioned, the highest percentage in company history.
• Total domestic QMIs were 820 as of July 31, 2026, a 19.3% decline from 1,016 in the prior year; total domestic finished QMIs were 194, a 39.9% decline from 323.
• HOV Global (Kingdom of Saudi Arabia) operations contributed 23 contracts ($5.5 million) and 0 deliveries in the third quarter; backlog was 788 homes ($191.4 million).

Market and Competitive Landscape

• The gross domestic contract cancellation rate for consolidated contracts was unchanged at 19% year-over-year for the quarter.
• The company reported the second highest Adjusted EBIT ROI (13.1%) compared to eight publicly traded midsized homebuilder peers for the trailing twelve-month period.
• Net income return on inventory was 1.0% for the trailing twelve-month period.

Risks and Challenges

• The housing market is challenged by affordability concerns, elevated mortgage rates, and inconsistent consumer confidence due to geopolitical and economic uncertainty.
• Adjusted income before income taxes fell below the guided range for the first time in over five years, primarily due to income from unconsolidated joint ventures coming in at the lower end of the guidance range.
• Forward-looking statements note risks including changes in economic conditions, supply chain shortages, interest rate fluctuations, inflation, adverse weather, cancellation rates, and regulatory changes.

Management Commentary and Tone

• Ara K. Hovnanian, Chairman and CEO, stated that results were generally in line with guidance on revenues, gross margin, SG&A, income from unconsolidated joint ventures, and Adjusted EBITDA.
• Management expressed disappointment regarding the adjusted pretax income shortfall but emphasized a focus on improving execution.
• Management noted the company is well-positioned for future success with a healthier inventory position, a land portfolio aligned with market conditions, and a strong balance sheet.
• The company highlighted its disciplined land-light strategy and focus on maintaining an appropriate sales pace to support capital efficiency and long-term value creation.

Analyst Questions and Answers

• No specific analyst questions and answers were included in the provided press release text.

Other Key Points

• The company acquired a controlling financial interest in a previously unconsolidated joint venture in the Kingdom of Saudi Arabia in the first quarter of fiscal 2026.
• Preferred stock dividends were $2,669,000 in the third quarter and $8,007,000 for the nine months.
• Goodwill of $31.7 million was recorded as of July 31, 2026, compared to zero in the prior fiscal year end.
• The company reported a gain on consolidation of joint ventures of $26.8 million for the nine months ended July 31, 2026.