AVHI Achari Ventures Holdings Corporation I

Third Quarter 2016 Highlights - as compared to the prior year third quarter (unless otherwise noted)

AV Homes, Inc. (Nasdaq:AVHI), a developer and builder of residential communities in Florida, Arizona and the Carolinas, today announced results for its third quarter ended September 30, 2016.  Total revenue for the third quarter of 2016 increased 34% to $205.4 million from $153.8 million in the third quarter of 2015.  Net income and diluted earnings per share increased to $11.9 million and $0.49 per share, respectively, compared to net income of $5.5 million and $0.25 per share in the third quarter of 2015.

“We had another very good quarter highlighted by strong increases in revenue and a 116% increase in net income,” said Roger A. Cregg, President and Chief Executive Officer.  “Homes delivered in the third quarter increased 23% over the prior year period and revenue improved by 34%.  Our gross margins improved 80 basis points sequentially compared to the second quarter, and we improved our overhead leverage by 270 basis points compared to the third quarter of last year.  With our year to date results and a backlog sales value for the quarter of $347 million, we are confident in achieving our improved 2016 financial outlook.”

The increase in total revenue was driven by volume increases due to a greater number of communities with deliveries in each of our existing markets, and higher average selling prices due to price increases and improvements in the mix of homes sold.  During the third quarter of 2016, the Company delivered 635 homes, a 23% increase from the 515 homes delivered during the third quarter of 2015, and the average unit price per closing improved 8.5% to approximately $318,000 from approximately $293,000 in the third quarter of 2015. 

Homebuilding gross margin was 18.8% in the third quarter of 2016 compared to 19.9% in the third quarter of 2015.  Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.7% and 1.9% in the 2016 and 2015 periods, respectively.  On a sequential basis, homebuilding gross margins improved 80 basis points compared to the second quarter of 2016.

Total SG&A expense as a percent of homebuilding revenue improved to 12.6% in the third quarter of 2016 from 15.3% in the third quarter of 2015.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 10.8% in the third quarter of 2016 compared to 12.8% in the third quarter of 2015.  The improvement was primarily due to the increased scale of the business in each of our divisions, which allows us to leverage the cost base.  Corporate general and administrative expenses as a percentage of homebuilding revenue improved to 1.8% in the third quarter of 2016 from 2.5% in the same period a year ago primarily driven by the continued achievement of favorable cost leverage by effectively managing costs while growing the revenue of the business.

The number of new housing contracts signed, net of cancellations, during the three months ended September 30, 2016 increased 3% to 572, compared to 555 units during the same period in 2015.  The increase in housing contracts was primarily attributable to the increase in selling communities to 63 from 60.  The average sales price on contracts signed in the third quarter of 2016 increased 9.8% to approximately $324,000 from approximately $295,000 in the third quarter of 2015.  The aggregate dollar value of the contracts signed during the third quarter increased 13% to $185.4 million, compared to $164.0 million during the same period one year ago.  The backlog value of homes under contract but not yet closed as of September 30, 2016 increased 13% to $347.1 million on 1,081 units, compared to $307.5 million on 1,026 units as of September 30, 2015.

Improved 2016 Outlook

The Company affirmed its previously issued outlook for the full year 2016 and upwardly revised the following items:

• Closings are expected to increase to approximately 2,400, an improvement from the previous range of 2,300 to 2,400 units;
• Interest expense is expected to be approximately $4 million after capitalization, an improvement from the previous $5 million; and
• Pre-tax income is expected to increase to approximately $30 million to $32 million, an improvement from the previous range of $28 million to $30 million.

The Company will hold a conference call and webcast on Friday, October 28, 2016 to discuss its third quarter financial results.  The conference call will begin at 8:30 a.m. EDT.  The conference call can be accessed live over the telephone by dialing (877) 643-7158 or for international callers by dialing (914) 495-8565; please dial-in 10 minutes before the start of the call. A replay will be available on October 28, 2016 beginning at 11:30 a.m. EDT and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the conference ID is 99271067. The telephonic replay will be available until November 4, 2016. The webcast, which can be accessed by going to the Investor Relations section of AV Homes’ website at www.avhomesinc.com, is accompanied by an Investor Presentation.  A replay of the original webcast will be available shortly after the call.

AV Homes, Inc. is engaged in homebuilding and community development in Florida, Arizona and the Carolinas. Its principal operations are conducted in the greater Orlando, Jacksonville, Phoenix, Charlotte and Raleigh markets. The Company builds communities that serve both active adults (55 years and older) as well as people of all ages. AV Homes common shares trade on NASDAQ under the symbol AVHI. For more information, visit www.avhomesinc.com. 

This news release, the conference call, webcast and other related items contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward looking statements, involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the cyclical nature of the homebuilding industry and its dependence on broader economic conditions; availability and suitability of undeveloped land and improved lots; ability to develop communities within expected timeframes; increases in interest rates and availability of mortgage financing; our ability to access sufficient capital; our ability to generate sufficient cash to service our indebtedness and potential need for additional financing; terms of our financing documents that may restrict our operations and corporate actions; fluctuations in interest rates; our ability to purchase outstanding notes upon certain fundamental changes; our ability to obtain letters of credit and surety bonds; cancellations of home sale orders; competition for home buyers, properties, financing, raw materials and skilled labor; declines in home prices in our primary regions; inflation affecting homebuilding costs or deflation affecting declines in spending and borrowing levels; the prices and supply of building materials and skilled labor; the availability and skill of subcontractors; elimination or reduction of tax benefits associated with home ownership; warranty and construction defect claims; health and safety incidents in homebuilding activities; the seasonal nature of our business; impacts of weather conditions and natural disasters; resource shortages and rate fluctuations; value and costs related to our land and lot inventory; overall market supply and demand for new homes; our ability to recover our costs in the event of reduced home sales; conflicts of interest involving our largest stockholder; contractual restrictions under a stockholders agreement with our largest stockholder; dependence on our senior management; effect of our expansion efforts on our cash flows and profitability; effects of government regulation of development and homebuilding projects; raising healthcare costs; development liabilities that may impose payment obligations on us; our ability to utilize our deferred income tax asset; costs of environmental compliance; impact of environmental changes; dependence on digital technologies and potential interruptions; future sales or dilution of our equity; impairment of intangible assets; and other factors described in our most recent Annual Report on Form 10-K for and our other filings with the Securities and Exchange Commission, which filings are available on www.sec.gov.  Forward-looking statements are based on the expectations, estimates, or projections of management as of the date of this news release, the conference call, the Investor Presentation and the webcast. AV Homes disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events and circumstances, except to the extent required by applicable law. 

AV HOMES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
		September 30,					December 31,
		2016					2015
Assets		(unaudited)
Cash and cash equivalents		$		16,289			$		46,898
Restricted cash				1,139					26,948
Land and other inventories				630,909					582,531
Receivables				8,248					7,178
Property and equipment, net				34,223					34,973
Investments in unconsolidated entities				1,177					1,172
Prepaid expenses and other assets				13,033					17,144
Deferred tax assets, net				110,501					—
Goodwill				19,285					19,295
Total assets		$		834,804			$		736,139
Liabilities and Stockholders' Equity
Liabilities
Accounts payable		$		37,060			$		33,606
Accrued and other liabilities				29,389					38,826
Customer deposits				12,223					8,629
Estimated development liability				32,257					32,551
Senior notes, net				290,258					320,846
Total liabilities				401,187					434,458
Stockholders' equity
Common stock, par value $1 per share				22,692					22,444
Additional paid-in capital				401,358					399,719
Accumulated earnings (deficit)				12,586					(117,463	)
				436,636					304,700
Treasury stock				(3,019	)				(3,019	)
Total stockholders’ equity				433,617					301,681
Total liabilities and stockholders' equity		$		834,804			$		736,139

AV HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
(unaudited)
		Three Months Ended							Nine Months Ended
		September 30,							September 30,
		2016			2015				2016				2015
Revenues
Homebuilding		$	201,821		$	151,130			$	507,659			$	280,381
Amenity and other			3,315			2,691				8,834				8,195
Land sales			291			6				1,120				3,470
Total revenues			205,427			153,827				517,613				292,046
Expenses
Homebuilding cost of revenues			163,911			121,089				414,290				228,911
Amenity and other			3,101			2,221				8,057				7,034
Land sales			295			2				685				385
Total real estate expenses			167,307			123,312				423,032				236,330
Selling, general and administrative expenses			25,484			23,191				71,639				52,492
Interest income and other			—			(36	)			(1	)			(325	)
Interest expense			701			1,840				2,853				7,503
Income (loss) before income taxes			11,935			5,520				20,090				(3,954	)
Income tax expense (benefit)			38			—				(109,959	)			—
Net income (loss) and comprehensive income (loss)		$	11,897		$	5,520			$	130,049			$	(3,954	)
Basic income (loss) per share		$	0.53		$	0.25			$	5.81			$	(0.18	)
Diluted income (loss) per share		$	0.49		$	0.25			$	5.02			$	(0.18	)

Note: Selling, general and administrative expenses related to homebuilding previously included in Homebuilding expenses have been combined with corporate general and administrative expenses and reclassified into a separate new line item called "Selling, general and administrative expenses" to enhance the visibility to our core homebuilding operations and conform with standard industry presentation. For the three and nine months ended September 30, 2015, selling, general and administrative costs of $19.4 million and $40.7 million, respectively, were previously presented in Homebuilding expenses are now included in Selling, general and administrative expenses.

The following table provides a comparison of certain financial data related to our operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):

		Three Months Ended										Nine Months Ended
		September 30,										September 30,
		2016					2015					2016					2015
Operating income:
Florida
Revenues:
Homebuilding		$		96,943			$		86,892			$		251,587			$		185,484
Amenity and other				3,315					2,691					8,834					8,195
Land sales				26					6					670					3,470
Total revenues				100,284					89,589					261,091					197,149
Expenses:
Homebuilding cost of revenues				74,872					68,409					196,045					149,033
Homebuilding selling, general and administrative				12,189					11,419					33,374					26,172
Amenity and other				3,075					2,199					7,978					6,938
Land sales				6					2					225					385
Segment operating income		$		10,142			$		7,560			$		23,469			$		14,621
Arizona
Revenues:
Homebuilding		$		42,014			$		20,012			$		104,255			$		45,196
Land sales				—					—					185					—
Total revenues				42,014					20,012					104,440					45,196
Expenses:
Homebuilding cost of revenues				35,236					16,497					87,672					38,704
Homebuilding selling, general and administrative				3,854					3,009					10,773					7,846
Amenity and other				26					22					79					96
Land sales				—					—					171					—
Segment operating income (loss)		$		2,898			$		484			$		5,745			$		(1,450	)
Carolinas
Revenues:
Homebuilding		$		62,864			$		44,226			$		151,817			$		49,701
Land sales				265					—					265					—
Total revenues				63,129					44,226					152,082					49,701
Expenses:
Homebuilding cost of revenues				53,803					36,182					130,573					41,174
Homebuilding selling, general and administrative				5,744					4,944					15,525					6,718
Land sales				289					—					289					—
Segment operating income		$		3,293			$		3,100			$		5,695			$		1,809
Operating income		$		16,333			$		11,144			$		34,909			$		14,980
Unallocated income (expenses):
Interest income and other				—					36					1					325
Corporate general and administrative expenses				(3,697	)				(3,820	)				(11,967	)				(11,756	)
Interest expense				(701	)				(1,840	)				(2,853	)				(7,503	)
Income (loss) before income taxes				11,935					5,520					20,090					(3,954	)
Income tax expense (benefit)				38					—					(109,959	)				—
Net income (loss)		$		11,897			$		5,520			$		130,049			$		(3,954	)

Data from closings for the Florida, Arizona and the Carolinas segments for the three and nine months ended September 30, 2016 and 2015 is summarized as follows (dollars in thousands):

							Average
		Number					Price
For the three months ended September 30,		of Units		Revenues			Per Unit
2016
Florida		340		$	96,943		$	285
Arizona		129			42,014			326
Carolinas		166			62,864			379
Total		635		$	201,821			318
2015
Florida		317		$	86,892		$	274
Arizona		71			20,012			282
Carolinas		127			44,226			348
Total		515		$	151,130			293

							Average
		Number					Price
For the nine months ended September 30,		of Units		Revenues			Per Unit
2016
Florida		904		$	251,587		$	278
Arizona		340			104,255			307
Carolinas		413			151,817			368
Total		1,657		$	507,659			306
2015
Florida		704		$	185,483		$	263
Arizona		170			45,196			266
Carolinas		145			49,702			343
Total		1,019		$	280,381			275

Data from contracts signed for the Florida, Arizona and the Carolinas segments for the three and nine months ended September 30, 2016 and 2015 is summarized as follows (dollars in thousands):

		Gross
		Number						Contracts					Average
		of Contracts						Signed, Net of		Dollar			Price Per
For the three months ended September 30,		Signed		Cancellations				Cancellations		Value			Unit
2016
Florida		373			(68	)		305		$	89,076		$	292
Arizona		125			(29	)		96			31,896			332
Carolinas		191			(20	)		171			64,457			377
Total		689			(117	)		572		$	185,429			324
2015
Florida		335			(57	)		278		$	75,308		$	271
Arizona		173			(31	)		142			40,425			285
Carolinas		152			(17	)		135			48,229			357
Total		660			(105	)		555		$	163,962			295

		Gross
		Number						Contracts					Average
		of Contracts						Signed, Net of		Dollar			Price Per
For the nine months ended September 30,		Signed		Cancellations				Cancellations		Value			Unit
2016
Florida		1,245			(201	)		1,044		$	294,413		$	282
Arizona		465			(108	)		357			113,427			318
Carolinas		591			(53	)		538			200,827			373
Total		2,301			(362	)		1,939		$	608,667			314
2015
Florida		1,143			(176	)		967		$	260,492		$	269
Arizona		460			(79	)		381			110,189			289
Carolinas		209			(26	)		183			63,635			348
Total		1,812			(281	)		1,531		$	434,316			284

Backlog for the Florida, Arizona and the Carolinas segments as of September 30, 2016 and 2015 is summarized as follows (dollars in thousands):

							Average
		Number		Dollar			Price
As of September 30,		of Units		Volume			Per Unit
2016
Florida		556		$	160,007		$	288
Arizona		250			81,834			327
Carolinas		275			105,302			383
Total		1,081		$	347,143			321
2015
Florida		536		$	147,085		$	274
Arizona		263			78,799			300
Carolinas		227			81,635			360
Total		1,026		$	307,519			300

Investor Contact:

Mike Burnett
EVP, Chief Financial Officer
480-214-7408
m.burnett@avhomesinc.com