HOV - Earnings call transcript Q3 2024 | Hovnanian Enterprises, Inc.

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Operator

Good morning, and thank you for joining us today for Hovnanian Enterprises Fiscal 2024 Third Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded for rebroadcast [Operator Instructions] Management will make some opening remarks about the third quarter results, and then open the line for questions. The company will also be webcasting a slide presentation along with the opening comments from management. The slides are available on the investors page of the company's website at www.khov.com. President, like website. I along the would to O'Keefe, would on now call who Jeff the to like Vice listeners to should follow log over Those Relations. Investor to turn ahead. go Jeff, please

Jeffrey O'Keefe

safe this meaning Thank you, Liz, in risks, provisions uncertainties third Reform with to considered future thank to, achievements harbor statements facts implied but you this goals by to our performance company forward-looking be of limited conference the results, for within and materially All forward-looking company's are and as are and expectations morning's the different not Such not its should forward-looking Private financial results expressed participating periods. actual or statements. Such results historical unknown to the all future review quarter. Securities call other statements of or for that Act and the cause from statements in include, the related statements call achievements known statements involve of performance that the for may be or Litigation the financial of any respect to factors results, XXXX.

statements Harbor Factors results of to October and obligation factors. and not materially actual predict year update subject of those XXXX, other and could reasonable, uncertainties believe and Therefore, as date or result are by assurance and expectations such and or suggested Safe a assumptions events, and future Management's reason. revise XX, intentions publicly Discussion from Although forward-looking achieved. By to any the our security difficult Securities of are in as results Risk performance their give adversely on subsequent be that will speak new Form a the can expectations of result and/or a as statements that to particularly quantify. they made, undertake statements reflected that we forward-looking forward-looking future such and whether factors detail fiscal or laws, only plans, plans, or guarantees information, are our of variety otherwise Exchange ended we no filings uncertainties Commission. Except for by intentions entitled forward-looking nature, XX-K MD&A report other and risks, or are any risks, are as the are with entitled the circumstances portion Statement changed annual required no the Analysis, in section in of applicable described we statements, differ Such

Brad CFO today David Joining over me CEO; O'Connor, Chairman, and Controller. I'll turn and now Mikerson, and Vice Treasurer; President, to are President Corporate call Ara Hovnanian, Ara. the

Ara Hovnanian

question I'm on for Thanks, the and our answers follow up review environment. of me Brad, with course, results, CFO, And we'll comment third also open Jeff. I'll our quarter will details. housing current going more afterwards. to and

Slide on begin X. me Let

show compared of we slide, quarter million, top actual guidance $XXX midpoint guidance. the our the Here, which of the to revenues right third at our was on results. Starting our were

within guidance Our quarter, adjusted was XX.X% was the gross the for we which gave. also margin

the of XX.X%. was just was ratio above end we high guidance SG&A Our This gave. the

of incremental expense, which XX.X%, ignore have you slightly due stock price from the which If is stock million above solely would been our the gave. the top to $X.X SG&A range increases, impact phantom end we is the

for little of we advance in One new hires is have we're a and high community make is running a communities. to of the growth, our reasons up count that significant SG&A those gearing well

growth. In are for preparing community there count other to expenses addition, related

range high an our which end is higher-than-usual to we advertising $XXX was spend. Adjusted contributor of gave. above Another increase SG&A that the significantly is million quarter, for EBITDA the in the

our left-hand guidance obviously higher in XX% sales slightly Starting the to last of income which range average Phoenix, We're XX.X% XX.X%. the of that price show our sequential due the deliveries, upper to pleased revenues high in an the second profitability year's year-over-year quarter. Slide than quarter. the decreased to right-hand In decreased here of to increased end from sale also we pretax the you total adjusted is we in land for can $XXX that exceeded million, third X, quadrant and better our compared gave. increase see our $XXX slide, Finally, XX.X% 'XX. our upper a margin the basis, the slide, gross can quarter the was On see that we significantly in also that of a results portion million. to our you

decrease the We the for margin range risk we specifically, the results more good gross the to to cost buy year-over-year of in those given rates. decrease declines the mortgage rates is the that rates, cost the guidance news for advance the of mortgage in with in us that movements within may a in down The there was recent a future. rate buy in quarter Our that mortgage future downs previous more gave. and were offer in recognized seeing

can the third adjusted to portion this slide, the quarter. left-hand bottom EBITDA see million increased year's our Moving in XX% that you of to $XXX

detail been the of right-hand analysts that so time. $XXX a homebuilders, portion I'm discuss focus contracts increased bottom to the in to million. I greater new slide, much profit know Finally, this orders follow of in pre-tax adjusted XX% going have many

X. Turning to Slide

X top contracts of If the year. year-to-date start X% the first the the increased table, at you can see months our of for you that

quarter, In the that break we significantly see up we the XX%. quarter, were contracts However, third by the when it's can in choppy. down quarter, declined been second and up first quarter increased Contracts in you contracts it as X%, were XX%.

contracts substantially, X bottom our detail more which Even good trends the last a the over been in during I'll and we table, show moments. feel contracts X the very overall, of at upcoming this and about However, improved have though XX% in we weeks the ago. contracts year total increased weeks, a choppy, demand have little describe same

community decrease out. year-over-year quarter want third to contracts There for to can turn are the I If X.X. this on things couple you of Slide X, see a to per you slide point

close community average of per this achieved to per we year historically. quarter is First X.X community that third of contracts X.X contracts our all,

XX.X Secondly, contracts second best last year's past of the was third XX quarter years. community per per contracts the community over

in a level. see can the quarter 'XX of at the on also XX, comparison. is XX.X% COVID still last very per You were slide, third community high year's contracts with our an the unbelievably tough surge, But

per is July, of the make The of the I quarter. month the in our occurred to community increase hurts the contracts timing community point That's because last count in quarter third want our half of increase the of community. count calculation the in that

the a don't of less the get you full full the So much new contract communities, benefit quarter. during of month from those benefit

the Burl economic of in had during build-for-rent which to from there what choppiness, some began in responsible. Furthermore, third of of difficult across have and build-for-rent other from we quarter contracts, It's to particular, the to similar cause high all of the of during partially this of contracts last is to been build-for-rent operations, outperformance we disruption hesitancy home some them but pinpoint reporting. Finally, that that level our Hurricane extended in third type be Southeast the rate were geopolitical quarter, of mortgage deliveries. homebuilders had single of Texas one buyers was likely happen The week the since uncertainty were XXX referred 'XX and critical better our month contracts. Houston many the and quarter a sales quarter. deliveries. last to, the the largest to choppiness year's states part the of the a Dallas the associates power due our hurt I selling and quarter. Anecdotally, some Both during be was by our for offices sales without most third our of This buyer, quarter seemed to segment in causing

As in you'll back see have moment, manner strong very a recent a in weeks. jumped in sales

we 'XX. X, this you line of rates If August The happened last shows July rate between trends. gray slide 'XX turn on show and interest interest Slide to what year to

pickup mortgage whenever this what between rates saw little sales. decline 'XX a of year The during 'XX. this we blue past delayed after August rates eventually reaction, shows of During with happened and period, line a July in

of shown, at followed just similar this most year. they of decreases pattern and increases rates the time higher For coincidentally monthly slightly very a

past mortgage come are the qualify levels. for mortgages. to Whenever there mortgage potential reduced weeks, few down, rates lower rates that can we've Over obviously, seen more buyers,

first already time in than now rates a the while, the seen lower are rates. For We've the actually lower year. mortgage were of last benefits they

weeks, improved the trend environment. If over past recent contracts suggests have ago. positively year we show you already decreasing reacted the week This that the compared X a homebuyers increased XX% same have to to rate Slide turn to mortgage XX, that

very be strong. web addition, In continues traffic to

going we weeks we matched last peak in the As optimistic show X in XXXX. In ago. and compared about indicator trend in a leading the better monthly future back same makes August that me exception contracts a the were month That per XX, hit more all particularly XXXX August way surge than actually granularity robust that same give the with to levels fact, demand. On community of last XXXX. the weeks the the we even Slide time matter year visit week, however, website COVID of the the of of to

demographic of third sales the can impact this intact see compared the the a were year very for weeks. and of weakening positive quarter, you on prior this though to trend the existing rent outperformance good X the but last Even for fundamentals that overall we last June believe have in Here, led sales the that our over trends. of slightly remain change the in we contracts supply seen build still year's such sale, many low month of year. to lower to comparisons as Again, health a the market, positive homes of economy jobs

selling can Turning community Slide last ended compare are to results an as year-over-year for can period. On to even 'XX. our we community contracts quarter that per same among calendar XX our highest slides fourth still that the see XX-month X time peers. contracts this most Slide we ends. our months number per our we're community, of highest though homes community were above-average XX reported is peers. June the that was per to in public on growth contracts quarter of the that trailing compared among report show to our on sales period for of is community illustrate And this the in XX pace our that contracts At our sales these fourth recent per trying per XX, peers our homebuilders way, choppy, XX, also What you we

of quarter On see downs compared and year this XX% a you was indicate averaged our percentage that period. the sizable second continue which of rate of our of show on quarter slide third buydowns. monthly gives XX, usage affordability We first more to the current buydowns the deliveries used in trends rate bottom year, deliveries, the XX% XX%, utilize homebuyers levels. can the for buy beginning rate XX% seems the homebuyers has to quarter. The in The over the of granularity. combat at mortgage the Slide that on same been mortgage mortgage to top percentage in customers have consistently relying Since to buydown the the

will the buydowns at relatively assume Given high forward. levels we similar going mortgage environment, rate remain

the are We to of remain budgeting buydowns cost constant.

we the us philosophy XX, last a them, rate to It at QMIs on community we the that per Furthermore, increased QMIs that levels end X.X That's our our decline surprising use the move-in QMIs in to quarter, buydowns recently. In per the or in finished quick third comfortable we're basis of few but as we show of years. On of from quarter. had finished puts that the finished homes of community the not second remain XXX to with see order our per mortgage to very in to part finished in that level. elevated end than increase may the at call homebuyers' high at end finished it's slightly decrease count community that of but quarter. desires the due the Slide meet first we've mortgage QMIs X.X a it's QMI of with at the remains community cost lower However, homes, level, QMIs X at seen rates operating per up buydowns, community. new X.X quarter,

quarter our with 'XX, of of a quarter them percentage XX% in goal sell sales that second the about is from QMI obviously third XX% completion. In slight Our to before XX%. were about sales, increase Historically, of was total QMI 'XX. the

per community to schedule community So ourselves. to sales these per obviously, too level. is still demand with at We'll our start for a we QMIs homes We high. don't track manage current continue ahead make our pace get community our of far sure

communities. the were able that to current our to Chief the the quarter achieve even XX, you next you prices we our of choppiness, raise we choppiness in to several in see can the sales, it third over net over with the XX% Despite Slide growth If level turn the move still Brad O'Connor, now demand years. I'll support that Financial should Officer. to hope of

Brad O'Connor

Thank you, Ara.

I next income on other our Before want to on I income get the line the slide, to statement. comment

community a XX% final cash significant $XX existing future the consolidation we periods consolidation. Even line in for on recorded joint have During million ventures. cash fair we are years. Similarly, the the communities, assumed a GAAP, distribution, at required the next were again in wholly-owned of unconsolidated achieve of this to now are Under communities other distributions after gain $XX stepped-up joint the of the received partner in This happen reporting and And upon value, the we in their projected third partners million 'XX, expense venture the strong other we excess provide we and line consolidate third that venture. value. in few the based control joint different gain one 'XX, joint is on new finished. and quarter these expense ventures high-performing exceptionally income when of made of but final IRR future an to our before after a recorded upon a quarter our to profits performance income and of could of

Now getting were owned. you of units the open-for-sale slides. we quarter those back with can that ended a from last XX% a XXX On to XX, XXX Slide see of wholly total the communities, increase year.

a third opened community joint owned we wholly one wholly XX communities, from owned to a the owned joint contributed X During new to communities transitioned venture of communities, wholly out venture. XX and quarter, a sold

venture sequentially and from We a end also X XXX closed new communities 'XX. of joint count up meetings the consolidated fiscal or quarter. The opened X total on second XX% unconsolidated venture of joint compute also communities was XX the quarter during of

in half those July. in primarily experienced these month opening mentioned, of the with to this communities openings new growth The quarters. Even Ara subsequent place financial throughout the community of XX of in benefits in took begin As communities, utility delays due the quarter, community new count will still robust we hookups country.

in to continue in is count lots. a growth We which indicator XX,XXX the the count fourth of 'XX. can expect grow with X.X-year variety fiscal given ended community and Predicting Slide be for equates community count lots, shown further further leading XX. quarter a to controlled controlled We challenging community on to supply of quarter factors. The

count Our year-over-year. XX% lot increased sequentially X% and

We from our lots lots the now include you added XX communities X,XXX in XX,XXX unconsolidated ventures, lots. quarter. joint during third If we control

land parcels actively Our engaging for land our new standards. underwriting negotiating are sellers teams that with land and meet

third to This row X brings quarter. million a spend. than of levels the of quarter X XX% quarter average latest land increased $XXX $XXX fiscal and is That land million land year-over-year a to the in quarters higher and in development to Our typical spend with development land 'XX.

Our corporate is continues our calendar indication be in land committee always lot but an should line. busy, not time, continue a which to to straight increase count over that

current sales rate rate including the pace and current costs to plus construction a are We of prices, underwrite home current mortgage level internal buydowns, current XX% of using to return.

Our to in changes conditions. self-adjust underwriting automatically standards market any

the of the XXXX precedes growth quarter inventory XX% have in turnover option growth very percentage strategy. This quarter precedes deliveries. On we fiscal growth in We focus XX% a lines we the has XX, percentage long fiscal and the from and controlled in in increased lots finding is in land of highest in community term. This on the third third count, land-light high our of focused are bottom markets to ever via our and our lots is consistent Slide intentional show which opportunities lots many increase of our 'XX. been The growing of top are for controlled had. option

we pleased with are the progress have made. We

XX. Slide to now Turning

are higher our to periods. and highest key to have the have rate. terms High our we that believe options continue turnover We of strategy. controlled inventory inventory and option we improve opportunities overall one inventory continue peers, of a median. On see XX, component further turns to above compared of peers, we are we future to land compared are increase You of our to to second in tied via significantly land the on our our to use Slide percentages

in at shortening times COVID inventory 'XX. progress Another way cycle days XXX improve last construction the our times. cycle We our to peak our from good reducing is half by during in to days made turns the of XXX

work days But of the third days time quarter around first times able shorten cycle some cycle during quarters days, of boost to to 'XX. or of Our time substantial Returning XXX XX for XXX ROI significantly cycle remained we and XXX cycle were X still days. times we of 'XX, the ahead normal We months this progress. back are another X pre-pandemic us but our our average about to about by ROE. get to have should making to

with million stock, XX. in $XX to Slide on spending to million $XX liquidity, and end land the just of above debt our Turning we range. liquidity high land repurchase reduction $XXX ended development, still million the million and third after quarter targeted of Even $XXX

any to all are the cash invested, which our being capital closer puts of of interest reduces to burden excess fully work. We much and goal of our

of expense was by interest $XX beginning our the the annual million maturity the to of million. interest Slide as cash and of past ladder debt our the years. value most shows over recent steps July the is $X.X at we taken our face by XXXX. the lowered of This our slide our which approximately third $X.X This This XX. we reflective have reduced example now annual of improve the Turning XX, maturity to did ladder by exchange million, several quarter,

We are further still sheet. balance our committed strengthening to

grow equity the progress upper we over the equity, We in we Slide years the and our the Starting assuming right-hand to and debt recent 'XX guidance. since made as reducing few we've our as slide, the reductions in made of equity to including have upper our Turning in the part the million see fiscal show past most 'XX can growth our in we the progress well XX. the projected the to We date our portion, of the and fiscal the left-hand made of And on year-end you show debt the reduce reduced debt. midpoint 'XX. redemptions exchange. beginning on by debt, $XXX

last of year you achieve third of beginning from that to to net of quarter more assuming our cap have net end see bottom expect moment cap net our at XXX.X% which the and debt at the have of with 'XX. level. midpoint the was same XX%. the Using work to we cash the to can do the XX.X%, a end On fiscal we debt net goal significant still to the is slide, We a improvement guidance we at the of year, mid-XX% our our finished of

path Global to our and 'XX. progress, both S&P made target We have which are comfortable that rating a third evident Moody's upgrades quarter the of during achieve received credit soon. We've from we considerable by is we our

to expect balance has continue last to noteworthy moving forward. X significantly and make progress over we Our improved years, sheet the

approximately years as not Given significantly ability cash as This our earnings. debt. our will taxes deferred accelerate on come in pay pay to we down federal million income will benefit enhance of continue and to of to pretax growth will well plans to tax our remaining $XXX assets, future flow million our $XXX have

year 'XX deterioration Our further assumes in rates, financial supply or current adverse in the full mortgage guidance our cancellation or conditions, changes chain increases for of rates. in market no inflation no including material

makes X extended assumes that on construction sales, gross forecasting for cycle months compared also to Our which be our to difficult. guidance months. pre-COVID It time QMI more more margins times we assumes cycle averaging of continued X approximately continue construction reliant

movement total of end excludes expectations a stock of of from margin billion range Further, months. stock impact full SG&A the it stock the shows use mortgage of $X.X increased be revenues all to be be the to SG&A expense buydowns of total price rate year for We for the guidance gross We the quarter Our for assumes the XX%. percent to XX.X%, in and at to similar to $XXX.XX for range of tightened fiscal to the for XX kept price slightly continued between revenue we recent between and any $X.XX fiscal our the from related and 'XX. range adjusted XX% our XX.X% our phantom billion. 'XX. Slide third increased expense as solely guidance expected to

income We joint for are first from the providing time. guidance on ventures

the million. value year, joint guidance for we ventures from be expect income $XX increased We pretax and per income, share. $XX million to EPS between For and adjusted EBITDA book adjusted

book for midpoint and adjusted million, of increased Our be to we the be $XXX focus range value. regarding full our $XXX EBITDA share guidance, XXXX, $XX year and XX, share the to year-end per for the million. We pretax book miss per growth in adjusted by year's our At common expect value October rapid our point in returns and $XX for last share. share to guidance $XX. million anticipate on now the and and of $XXX XX% between per million earnings expectations year to industry-leading increase to full compared for our per $XXX price of book to increased diluted value the our to that range at at a between approximately income only $XXX about Analysts

on XX, our peers show on And show return our trailing of Slide one to have our we highest EBIT to compared We highest over XX.X%, months compared at on the we XX. which investment equity the the XX Slide was that XX.X%. returns Turning is that to consolidated that peers.

leverage a leverage, true peers. investment was performance regard of midsized homebuilding the is to our without measure operating our ROE and among helped our was our pure EBIT return on highest by While

EBIT last returns of Eventually, our Over the peers. consistently our superior investors capital balance improved among have recognize and highest years, sheet. had several we the on consistent one ROIs significantly will

based multiple on our a and establishing compared for a share. On of with book consider our we do the us $XXX.XX. more metrics, think midpoint Slide our growing price-to-earnings would months to multiple fair price return earnings when based book We our trailing at it We are value to we value. On of book guidance on including variety value multiple rapidly Given investment, EBITDA end to value, our on EBIT be XX, enterprise of peers. we stock ratio to appropriate XX, considered, to financial compare to our compelling grew we stock. is price our our for our when believe per fundamental X.XXx favorably our all of earnings value XX period in still $XXX the show price a yesterday's this price a approximately metric show expect on stock October metrics Slide of

visually we extremely This than show a A few at we higher homebuilders. I exists looking will EBIT that to peers entire our X further there most sheet, us. have to are how the public still homebuilders when emphasize ROE some book more slide at ROE, to looking in relative turn a Ara to to similar We the we group ROE slides to trading high the Slide and when the much ratio now the top XX% been that return price of undervalued remarks. to book. our to our continues our result our balance the our return on for XX, may that be at recognize very of point on our improving are earnings. These has equity, rapidly with given XX.X% our stock between investment, leverage, to discount stock ratio. P/E last a We combined our relationship because shrinking higher homebuilding trade quartile rapidly. On back at believe universe leverage it closing discount despite are price undervalued that demonstrates but industry other average price

Ara Hovnanian

this Thanks, joint joint been Brad. spend years. few On we unconsolidated a for a a our I of unconsolidated ventures long talking has fiscal our want Income X ventures operations. call. We minutes of past during joint our our for time. about joint ventures to part be to part XX, consider show operations Slide core important an from from the income ventures

bars the right-hand the venture million quarter ventures they've far gain level reach ventures on the the first $XX of on occur consolidation the should of from future the These from You of portion $XX guidance is can midpoint a be Keep of meaningful it as from fiscal million million. or full see third years. we ventures from reflect consolidation portion that already X for slide the not the very gains 'XX, current in year. Based of $XX was continue to from our these several mind, 'XX in earnings we in do performing the well. next million joint joint the to fiscal $XX million income could gave joint been for gain consolidation the believe during our the $XX for activity, months of and for joint that income

XX. engage reasons give Slide to joint we in Turning We some ventures.

high First and on focused foremost, return on extremely we're investment. a

IRR to upside high One to ventures. of us joint achieve with net over is joint key both focus multiple of communities part hit achieve on lot our larger capital, the been profit targets the hurdle leveraging limiting our the risk. our our always same joint risk allow ventures, community as light tool results, Slide of in for partners. We've for of alternate recent dollars a continue our always with done ventures typically strategy, joint of our light joint land share performance. benefits perspectives, ventures methods receive the with and offset we overhead our return we'll a performing They joint to said for Having considering to joint management for communities been these work capital venture, future rates, fee the a typically fixed our for XX, of in return from helps investment diversifying investment and XX% strategy. If also the to costs. on increased in paid utilizing contributing very from a longer to sense joint ventures communities. On use and Land our see which XX%, X to can a peak last venture that, to we capital, downside that XX% invest partners several certain We the and partners XX% venture share IRR When communities. we've company capital, some communities. but can the this joint metrics can to costs. amount particularly venture. for believe life our we a have a less disproportionate don't for build makes some seek high our achieve our we to This you years. An we're larger, our of improves We has is receive. By show of well these the

$XX owned million. on would community would be IRR million. life profit would be community transaction, this a As XX%, The peak the wholly capital and $XX the be

a forward community sense on can with it and it's this owned would this make you on see, wholly to basis. solid based transaction very As go a underwriting,

first peak capital and However, decrease blush were life our of IRR profit joint we to at get discouraging. profit XX%, venture if a community would million. The this be only seems $XX The still in instead, to $XX community we improve million. would

However, only example. X venture other peak for like if this entire one all our community the for wholly X capital $XX communities communities the owned be in joint one, would million, than less we add

wholly venture joint community Our that life just for owned than community. be more one the of would $XXX double million, profit

get we an of should addition, our the academic argument that all our communities. joint of In could we make risk. I venture benefit diversifying

ventures But strategy Now to frankly, of like that I'm trying wouldn't ventures be to deliveries that from be is feasible. United these the get ventures our majority all our point will and the across returns our operations. very of in States, years overall come. The compelling. domestic joint for to joint are of Joint are here continue part the

which middle-class expand will Ministry recent Saudi signed Saudi a our we understanding in and our formal given ourselves activities industry precipice of housing on happy and memorandum of find to of shareholders. That we of top-tier growing in and our growth for in our Housing population substantial young the community growth returns expand yesterday, allow us However, turn This to our concludes count to partnership, to over families. Overall, it growth, for continuing a the I'm lot our will deliver comments, now. count, increasing Arabia. continue with Q&A

Operator

Zelman question Instructions] of will the Associates. first & Alan come Ratner [Operator line Our with from

Alan Ratner

more also something a the far. -- it sounds My the love insight just for forward. I question an consolidation big the or make just a such more since pieces Nice here. for quarter, I'd the Brad in this repeats and like -- maybe so quarter going inconsistent basis to was upside on on little I and details is of at want be kind to and might get driver understand of that thanks the all least first it sure moving JV color

forward, homes going and will quarter the flowing this revenue gain margin... big gross line COGS be through a I booked of the you and sale and guess, your So

Brad O'Connor

correct. That's

Alan Ratner

your JV from million that's number offset, as you're $XX not look around forward gains and mean going running now at owned should that the your when The business? I income shipping that annual booking into like pretax, that does down project wholly come guess, I that

Brad O'Connor

but is other new JV JVs of Not exactly. also the reality we going forward. income provide that I it have have will which mean correctly, started, you're thinking

year owned through to through value at because so venture, or the comes to on one last returns, a that well, to specific the the our and described. And that income the recorded we had now land thing higher So that step-up is you go with we it consolidation. to add just respect record for had wholly like away will come that joint over

So that put to that gain the basically adds book value on our books. we

And so they higher have they deliveries, they the cost, did recognizing venture. land than those were costs in joint as when we're higher a

mind. So just keep in that

XX% As range. I do That's in the at record commented, value, calculating we when the we still fair IRR.

with seeing. expect what in provide as other JVs profits for you've coming been being kind continue of still commenting, of JV that Ara it was not that the generated said, are us, JV future online, because we to will good in income just was as like the what as high itself. But So

in as going IRR and phenomenon out, partner happen both that both end comment is venture when and get forward parties the I'll paid then to JV structure is happens parties occurs see distributions gain the their that until are the time this may gets partners we other a you structure so that's pari-passu first. to paid The this continue our over paid and of case the reason and the won't this prep where see And make occur. and a hits it becomes the some you out gets community. In ventures, when occur wholly-owned joint the and hurdle out, it's

more done recently, of as structures. our have So been more JVs preferred

JVs seeing in we happen. and you forward year, see you're still why and do place. think this joint some some that's cases, you But I year as those pari-passu, wouldn't from might of and last the have it this in see we going this So ventures

just I So want clarification. extra to that give

Alan Ratner

this that just on And it. one And appreciate Got more I color. topic. added

So step-up land basis, you mentioned a land obviously. the obviously, or in cost,

of relative this kind similar is --- up it's your I be rest forward project is going margin? business, margins the written dilutive obviously, or of Just -- to mean, only to it your to a your to going one

Brad O'Connor

at what existing It in higher community our would used they just actually that JV projects was It's similar a are we projects. our performing itself. the relatively much to IRR be similar that other because underwriting margins do for margin --

owned performing be other So we're wholly what will of now all with doing it at kind communities.

Alan Ratner

you. Got

That's Okay. helpful.

business bit for guess know a high your being little question, Second sequentially. still uncertainty that I fourth pretty around a you the And dipped mentioned range wide margin tightened, X/X range gross the level, I spec a from it today. your just of with margins quarter. but implies you

You're going land imagine pretty off are of elevated. the costs profile would steady, you've reported the third I pieces see with going seem Incentives quarter you the moving recent business vis-a-vis results just all do on? margin the but got the highs. Where you of up.

think You could directionally a or rate considerations of 'XX communities. your quarter other? the fourth forward? like still kind mix Or considerations into have XX% there and decent margin the move some should about pricing power that of that run we going or this in into one are X/X Is way that cost about

Brad O'Connor

you're think which is Speaking specifically I holding where quarter, right talked be, similar on stable. that about construction XX%-ish pretty the a think we've much think but range been that pretty I would fourth that's is buydown would mortgage about, cetera. From cost we et rate I costs, given to perspective, the caveats we've

some some areas has helped. which from decreases including benefits In fact, had we've in [indiscernible],

Our we land those get and our costs, deals. as new as probably you pointed from communities out, new from should newer will open communities deliveries increase

XXXX. pressure some put in margins could that on So

then On makes the anticipate potentially go moves, to other might if will mortgage down have rates think when incentives to cost amount perhaps give Fed the that. of and buydowns people as we as their well I offset change the hand, the of

we're answer guidance, 'XX by your talking question 'XX is about So we're range pretty quarter that the giving that but not XX% I really we can fourth saying reasonable. feel

Alan Ratner

and on here. one just could comments ROE much in are Ara, Perfect. squeak And understood. I more the very if appreciated then

You the guys are the highest industry. in

the your well somewhere think your ROE builders and do they years, the on think average a somewhat your forward by has to elevated X ago -- think ROE when is, admittedly the of a over the value at and basis. Is that years of thinking they're accreted about next were sustainable the the book more business asking And I business the rate next about the ROE probably book investors business? fact long-run targeting XX% kind the XX% XX% around X you and today last ROE, value just think given the depressed been you bit, standpoint having things so to years, I driven guess a to we X XX%. going forecast we've once activity struggled of about X ROE it years with you're a has had you're has industry where the there few is as obviously way -- at the been from X, think several one is say an not of over it's but over valuation compressed run once that little you I'm year a of normalized way I a ago,

Ara Hovnanian

Well, Alan. Sure. the thanks for question,

We single pure one of we're I almost we important our everybody, pure every with think has outperformed EBIT nothing to our performer about leverage. peers. say our and second And ROI. highest is talk also homebuilding It to to the or that definitely ROI midsized because performance. do equity proud it's on I'm outperformed EBIT

several been thing, by for So I'd way. that proud not a say years onetime it's We've we're -- the now. doing

So I'd feel we outperformance years. debt-to-cap last to everyone we else given a up on over leverage, will performance get be as assuming whatever the our few outperforming we ROI, than higher a I'd our say long-term on peers you basis. been say should on ROE of comparable we've the end That's an once our EBIT ROE continue

Alan Ratner

it. Appreciate

Operator

question line Management of the will next Francisco. Hymowitz with Philadelphia come San Our Jordan from of Financial

Jordon Hymowitz

note recent they said questions. in look below got couple XX%. their A Moody's of your would to upgrade debt-to-capital

XX% year. will next projection crazy, unless year. XXs something by in this end by goes the it be of is Your own And the

with is So does think discussion paydown when is you I couldn't a that question they role? negative happen you soon. debt but recently, again only play the has is somewhat When guess Do the my them? upgraded dramatic so the -- been next that

Brad O'Connor

clear, cap, debt a they Just cap Jordan, the is cash takes is comment to the gross made to debt play. basis and net so be it that a XX% to into net

XX%. to to we'll to So XX% don't point, by year-end, want be be the by confused getting close your you just the I but

having about another be And upgrade. that so another next hopeful fiscal conversation would certainly we're I during year,

Jordon Hymowitz

of sorry, the number, head gross your the What's ]? [ top on

Brad O'Connor

We're time. ahead it prepare looking, and of didn't we

So time, we'll in if the we it add -- grab I'll make comment.

Jordon Hymowitz

Xs debt up out at Is a the in To of lower that ends XX. bunch that are occurs, year point? and next to there possibility that at lockouts you hoping be that that Fine. put call that some you but could level or refinance to was extent of a a XX the being originally the

Brad O'Connor

possible, It's, I prohibitive. would say, It's but cost cost prohibitive.

it's But and do were able interest. we really be more do to lower we're want certainly global want on to, we we unsecured, is not delta near being transition save to it because paying to future. refinancing we the secured Jordan, we're from if close in to going something right unless likely able think getting year could when now, attention to, the Next rates to which than dramatically do something

XX%. And paying the on to cost to debt I to say. coming so over I'll year-end the cap gross years, be projection at calculation for the year around certainly, X.X attention get the we'll did or rate trade-off

be XX%, our won't but we on So still way. at we'll be

Jordon Hymowitz

detail will way? be Okay. an Or When number? Saudi impactful you any income any to do the And final you on guidance in any that question that start venture? think is, from can

Brad O'Connor

new I away. the say, well. I'll But We it's that still right are delivering a starting years of couple let or we're X at have X would as communities. moment. now, don't Ara comment just any

So I probably it's any would profit, meaningful 'XX. before real say late there's 'XX fiscal early

Ara Hovnanian

think to should have refinance great I we've opportunity at to us substantially lower cost of save that and of because to That than peers, of that a prepayment been is compared we couple a add dramatically so in dramatically once costs leverage the And quite higher been rates. performance most a our question. interest we'll improving high our bit is paying. future the has is had I'll comments that leverage, of higher first Jordan, our what improving our but happen, your debt

cushion bonds. as interest debt on. credit with have suspect That that, and the our to the that substantially financing near large enhance peers. with ROE between like because think That more have gross top debt and of I to future, a paying difference achieve cap our be interest right don't but cash away substantial that will will able dollars reason of line better we regular we're to we peers even a performance. an refinance also the we in as been we'll have that get revolving our will has now, it similar we're Our save transition go a the high once cap net we outstanding to unsecured to our big interest, should big even we I operating is more peers. On like

Jordon Hymowitz

what a probably 'XX. that's like. second That's But it half sounds

Brad O'Connor

or like Yes, something early that. 'XX, Yes.

Operator

Barron of Housing line Research the from come will Alex question next Our with Center.

Alex Barrón

ask to something the some about or ongoing quarter-to-quarter? termination impact. that share it's just wanted date that Is I has phantom

Brad O'Connor

are shares. this -- another year additional fiscal in There December of phantom grant grants. with there's been There's

is. So we're what be there in that forward. quarter, see And each impact will providing just the some going impact the appendix so obviously, you can

The quarter significantly, price it's highlight if $X.X the was just But and the stock be to little means impact. million We're quarter, the everybody, that's million. it why this trying good went a have This $X.X that for it change. up that price can doesn't will particular stock forward. we is, very but news something going in that was

Ara Hovnanian

as add, couple just number. it's moves. substantial Brad I'll but mentioned, and will impact just -- And the the there it's continue, a hasn't quarter-by-quarter is of A in not been appendix. It

Brad O'Connor

scenarios hit. we've have Alex, earnings for stock even looked increasing more from that, done The as still dramatically. make, to because the shares the price quick you occurred pretty the comment earnings actually actually would at than shareholders And better it's be the with that under the would an impactful and had perspective other dilution impact

attention what phantom shares. we've it's paid So given we've something to some

Alex Barrón

paid it Did And came me bit it. like down you Got little a down guys balance then some Okay. this debt? looks to quarter. the debt

Brad O'Connor

exchange debt in actually Yes. second that our We did the the May. happened call, did -- quarter we talked about it in but we

it quarter a So was event. third

restructuring the debt in did is you're So back that's a the May. change what we in debt seeing

Alex Barrón

that's an Okay. using it of will you it or or it than that? as And couple pertains then been it. you're asset down on sheet, Do it. balance obviously goes away? coming Is years of number have a guys anticipated deferred take years tax your years faster X to Got as before that the

Brad O'Connor

the think I deferred think way at asset earnings the this of what point. $XXX that's about pretax to tax mean by million we I is, that said it's protected

year this pretax. we're so $XXX-ish of million projecting And

would rate, given in our will at up. growth we go growth we profit hope So we're that at anticipating we years, talking about X the and run run our if we're that stay rate, it's count, Canadian

a in a it's X maybe something X- little frame. time less So years, than X.X-year to

Alex Barrón

is doing PE a given considered have cheap And is your that stock that? stock? buying Or Okay. you something basis, there back restricts how on guys

Brad O'Connor

buy back -- spent We briefly. did quarter. We -- talked We about we it shares in the didn't

Ara Hovnanian

$XX million.

Brad O'Connor

$XXX the $XX during million quarter, and under average for buyback. availability some Board an price still have we approval at the of

certainly do when So we to at think it. it, it's opportune look we'll

Ara Hovnanian

add benefit. tax I'll one on comment other the

is active While we build. are that we're earning tax in homes something decreasing on. we will the energy focused I much, because benefits the tax we're be energy-efficient think deferred from And asset increasingly the so

So away. advantages the even deferred we some forward NOI tax goes have after will going benefit

Operator

turn I'd [Operator queue in no remarks. back call for further Ara questions the closing Instructions] showing to at I'm Hovnanian to this time. like

Ara Hovnanian

future, Thank look and quarter you well. a to the questions. very Thank you. forward about the much. We're as fabulous we enjoyed fourth reporting We excited

Operator

This concludes parties conference you for All for have Thank call participating, disconnect. may all today. our day. nice and now a

Hovnanian Enterprises (HOV) 22 Aug 242024 Q3 Earnings call transcript