Hovnanian Enterprises, Inc. (NYSE: HOV) on Thursday morning reported a net loss of $17.5 million, or $0.12 per common share, in the first quarter of fiscal 2019 compared with a net loss of $30.8 million, or $0.21 per common share, during the same quarter a year ago. Analysts were expecting a loss of $0.10 per share.
Among the results:

- Total revenues decreased to $380.6 million in the first quarter of fiscal 2019, compared with $417.2 million in the first quarter of fiscal 2018.
- While total revenues decreased $36.6 million, home building revenues for unconsolidated joint ventures increased $37.2 million to $95.8 million for the first quarter ended January 31, 2019, compared with $58.6 million in last year's first quarter.
- Home building gross margin percentage, after cost of sales interest expense and land charges, was 14.8% for both the first quarter of fiscal 2019 and the prior year's first quarter.
- Home building gross margin percentage, before cost of sales interest expense and land charges was 17.8% for the first quarter of fiscal 2019 compared with 17.9% in the same quarter one year ago.
- For the first quarter of 2019, total SG&A decreased by $2.0 million, or 3.2%, year over year. Total SG&A was $60.4 million, or 15.9% of total revenues, in the first quarter of fiscal 2019 compared with $62.4 million, or 14.9% of total revenues, in the first quarter of fiscal 2018.
- Total interest expense was $32.5 million in the first quarter of fiscal 2019 compared with $41.4 million in the first quarter of fiscal 2018.
- Interest incurred (some of which was expensed and some of which was capitalized) was $38.9 million for the first quarter of fiscal 2019 compared with $41.2 million in the same quarter one year ago.
- Income from unconsolidated joint ventures was $9.6 million for the quarter ended January 31, 2019 compared with a loss of $5.2 million in the first quarter of the previous year.
- Loss before income taxes for the quarter ended January 31, 2019 was $17.1 million compared with $30.5 million during the first quarter of fiscal 2018.
- Loss before income taxes excluding land-related charges and joint venture write-downs was $16.4 million during the first quarter of fiscal 2019 compared with a loss before these items of $29.4 million in the first quarter of fiscal 2018.
- Contracts per community, including unconsolidated joint ventures, decreased 7.9% to 7.0 contracts per community for the quarter ended January 31, 2019compared with 7.6 contracts per community, including unconsolidated joint ventures, in last year's first quarter. Consolidated contracts per community decreased 6.8% to 6.8 contracts per community for the first quarter of fiscal 2019 compared with 7.3 contracts per community in the first quarter of fiscal 2018.
- As of the end of the first quarter of fiscal 2019, community count, including unconsolidated joint ventures, was 153 communities. This was a 7.7% sequential increase compared with 142 communities at October 31, 2018 and a 7.3% year-over-year decrease from 165 communities at January 31, 2018. The consolidated community count was 137 as of January 31, 2019. This was an 11.4% sequential increase compared with 123 communities at October 31, 2018 and a 2.1% year-over-year decrease from 140 communities at the end of the prior year's first quarter.
- The number of contracts, including unconsolidated joint ventures, for the first quarter ended January 31, 2019, decreased 14.6% to 1,068 homes from 1,250 homes for the same quarter last year. The number of consolidated contracts decreased 9.1% to 934 homes, during the first quarter of fiscal 2019, compared with 1,027 homes during the first quarter of fiscal 2018.
- For February 2019, contracts per community, including unconsolidated joint ventures, was 3.4 compared with 3.3 for the same month one year ago. During February 2019, the number of contracts, including unconsolidated joint ventures, increased to 533 homes from 528 homes in February 2018. As of February 28, 2019, community count, including unconsolidated joint ventures, was 159 communities compared with 158 communities as of February 28, 2018.
- The dollar value of contract backlog, including unconsolidated joint ventures, as of January 31, 2019, was $972.0 million, a decrease of 16.8% compared with$1.17 billion as of January 31, 2018. The dollar value of consolidated contract backlog, as of January 31, 2019, decreased 7.9% to $749.8 million compared with$814.4 million as of January 31, 2018.
- For the quarter ended January 31, 2019, deliveries, including unconsolidated joint ventures, decreased 1.9% to 1,119 homes compared with 1,141 homes during the first quarter of fiscal 2018. Consolidated deliveries were 967 homes for the first quarter of fiscal 2019, a 5.7% decrease compared with 1,025 homes during the same quarter a year ago.
- The contract cancellation rate, including unconsolidated joint ventures, was 23% in the first quarter of fiscal 2019 compared with 20% in the first quarter of fiscal 2018. The consolidated contract cancellation rate was 24% for the three months ended January 31, 2019 compared with 18% for the same quarter in fiscal 2018.
- Total liquidity at the end of the of the first quarter of fiscal 2019 was $215.0 million, well within our target range.
- In the first quarter of fiscal 2019, approximately 2,500 lots were put under option or acquired in 26 communities, including unconsolidated joint ventures.
- As of January 31, 2019, consolidated lots controlled increased by 11.3% to 30,262 year over year from 27,183 lots at January 31, 2018. The consolidated lots under option at the end of the first quarter of fiscal 2019 were 17,416 lots compared with 14,260 optioned lots at the end of last year's first quarter. As of January 31, 2019, the Company owned 12,846 lots compared with 12,923 owned lots at the end of the first quarter of fiscal 2018.
"Our first quarter results were in line with our expectations. During the quarter, when compared to the prior year, we increased our consolidated land position, grew our earnings from unconsolidated joint ventures and improved our pretax results," stated Ara K. Hovnanian, chairman and CEO. "After our weak November net contracts, we are pleased that contracts per community for December, January and February have rebounded to levels similar to last year's strong results. In fact, for February, contracts per community, community count and absolute net contracts increased compared with the prior year."
"We continue to move forward towards our goal of growing our community count and revenues, which ultimately should lead to substantially improved levels of profitability. During the first quarter, we increased our consolidated community count 11% compared to October 31, 2018 and grew our consolidated land position by 11% year over year as well. Our growth in land position this quarter was entirely driven by an increase in our option lot position, while our owned land position declined slightly. In keeping with our strategy of high inventory turns and risk mitigation, we now control 58% of our land via options. We remain disciplined in our approach to underwriting new land opportunities and believe that the strong U.S. economy, along with positive demographic trends, should bode well for the housing market going forward," concluded Hovnanian.
