Hovnanian Enterprises, Inc. (NYSE:HOV), on Thursday reported a net loss of $8.5 million, or $0.06 per common share, for the second quarter of fiscal 2016, compared with a net loss of $19.6 million, or $0.13 per common share, in the second quarter of the previous year. Analysts were expecting a profit of $0.02 per share.

For the six months ended April 30, 2016, the net loss was $24.6 million, or $0.17 per common share, compared with a net loss of $33.9 million, or $0.23 per common share, in the first half of fiscal 2015.

Share of HOV were trading down 11.4% in heavy volume late in the session Thursday.

"While it is discouraging to report a loss for the first half of fiscal 2016, it is nevertheless a significantly reduced loss, and we anticipate our profitability in the second half of the year will more than offset this loss," said Ara K. Hovnanian, chairman, CEO and president. "Along with increasing our land and land development spend during the second quarter to $187 million, we have taken the steps we outlined in March to increase our cash position and paid off the $87 million principal amount of debt that matured on May 15, 2016. Since October 15, 2015, we have paid off $320 million of debt. More importantly, we continue to believe that we will have the liquidity to pay off the remaining debt maturities through the end of 2017."

Ara Hovnanian
Ara Hovnanian

Total revenue was $654.7 million in the second quarter, up 39.6% compared from the same quarter last year. For the six months ended April 30, 2016, total revenue increased 34.5% to $1.23 billion, up from $914.7 million in the first half of the prior year.

Operating highlights:

  • Consolidated deliveries were 1,598 homes in the second quarter of fiscal 2016, a 30.7% increase compared with 1,223 homes in the second quarter of fiscal 2015. For the three months ended April 30, 2016, deliveries, including unconsolidated joint ventures, increased 27.8% to 1,647 homes compared with 1,289 homes in the second quarter of the prior year.
  • Consolidated deliveries were 3,020 homes in the first half of fiscal 2016, a 27.3% increase compared with 2,372 homes in the same period in fiscal 2015. For the six months ended April 30, 2016, deliveries, including unconsolidated joint ventures, increased 24.1% to 3,113 homes compared with 2,509 homes in the first half of the prior year.
  • The contract cancellation rate, including unconsolidated joint ventures, for the second quarter of fiscal 2016 was 20%, compared with 17% in the second quarter of fiscal 2015.
  • The dollar value of consolidated net contracts increased 9.6% to $768.1 million for the three months ended April 30, 2016 compared with $700.7 million during the same quarter a year ago. The dollar value of net contracts, including unconsolidated joint ventures, during the second quarter of fiscal 2016 increased 5.1% to $789.3 million compared with $750.9 million in last year's second quarter.
  • The dollar value of consolidated net contracts increased 16.0% to $1.40 billion for the first six months of fiscal 2016 compared with $1.20 billion in the first half of the previous year. The dollar value of net contracts, including unconsolidated joint ventures, for the six months ended April 30, 2016 increased 14.6% to $1.46 billion compared with $1.27 billion in the first six months of fiscal 2015.
  • The number of consolidated net contracts, during the second quarter of fiscal 2016, increased 0.9% to 1,812 homes compared with 1,796 homes in the prior year's second quarter. In the second quarter of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, decreased 1.7% to 1,862 homes from 1,894 homes during the second quarter of fiscal 2015.
  • The number of consolidated net contracts, during the six month period ended April 30, 2016, increased 7.3% to 3,343 homes compared with 3,115 homes in the same period of the previous year. During the first half of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, was 3,454 homes, an increase of 6.0% from 3,260 homes during the first six months of fiscal 2015.
  • Consolidated net contracts per active selling community increased 5.7% to 9.2 net contracts per active selling community for the second quarter of fiscal 2016 compared with 8.7 net contracts per active selling community in the second quarter of fiscal 2015. Net contracts per active selling community, including unconsolidated joint ventures, increased 2.3% to 9.0 net contracts per active selling community for the quarter ended April 30, 2016 compared with 8.8 net contracts, including unconsolidated joint ventures, per active selling community in the second quarter of fiscal 2015.
  • As of April 30, 2016, consolidated active selling communities decreased 5.3% to 196 communities compared with 207 communities at the end of the prior year's second quarter. As of end of the second quarter of fiscal 2016, active selling communities, including unconsolidated joint ventures, decreased 3.7% to 208 communities compared with 216 communities at April 30, 2015.
  • As of April 30, 2016, the dollar value of contract backlog, including unconsolidated joint ventures, was $1.58 billion, an increase of 27.8% compared with $1.23 billion as of April 30, 2015. The dollar value of consolidated contract backlog, as of April 30, 2016, increased 22.1% to $1.43 billion compared with $1.17 billion as of April 30, 2015.
  • As of April 30, 2016, the number of homes in contract backlog, including unconsolidated joint ventures, increased 11.7% to 3,453 homes compared with 3,092 homes as of April 30, 2015. The number of homes in consolidated contract backlog, as of April 30, 2016, increased 8.6% to 3,228 homes compared with 2,972 homes as of the end of the second quarter of fiscal 2015.
  • Total SG&A was $69.0 million, or 10.5% of total revenues, a 420 basis point improvement during the second quarter of fiscal 2016 compared with $69.1 million, or 14.7% of total revenues, in last year's second quarter. Total SG&A was $132.8 million, or 10.8% of total revenues, a 380 basis point improvement for the first six months of fiscal 2016 compared with $133.7 million, or 14.6% of total revenues, in the first half of the prior year.
  • Home building gross margin percentage, before interest expense and land charges included in cost of sales, was 16.1% for both the second quarter ended April 30, 2016 and 2015. During the first six months of fiscal 2016, home building gross margin percentage, before interest expense and land charges included in cost of sales, was 16.3% compared with 17.1% in the same period of the previous year.
  • After paying off $233.5 million of debt that matured in October 2015 and January 2016, total liquidity at the end of the second quarter of fiscal 2016 was $125.6 million.
  • During the second quarter of fiscal 2016, land and land development spending was $186.7 million compared with $108.1 million in last year's second quarter and $116.6 million during the first quarter of fiscal 2016.
  • As of April 30, 2016, the land position, including unconsolidated joint ventures, was 34,997 lots, consisting of 15,622 lots under option and 19,375 owned lots, compared with a total of 37,140 lots as of April 30, 2015.
  • During the second quarter of fiscal 2016, approximately 800 lots, including unconsolidated joint ventures, were put under option or acquired in 22 communities.