Hovnanian Enterprises, Inc. Q1 FY2026 earnings call

Ara highlighted first quarter performance meeting/exceeding guidance despite market challenges. Total revenues $632M, adjusted gross margin 13.4%, SG&A 13.3%. Income from unconsolidated JVs $3M, slightly below midpoint but consolidation of certain JVs exceeded expectations. Brad mentioned taking control of 2 joint ventures, adding $27M other income. International operations in Saudi Arabia expected to have minor impact this year. 151 communities open for sale. Land position: 35,560 domestic controlled lots, 6.7-year supply. Liquidity $471M. Second quarter guidance: total revenues $625M - $725M, adjusted gross margin 13% - 14%, SG&A as % of revenue 12.5% - 13.5%, income from JVs breakeven - $10M, adjusted EBITDA $30M - $40M, adjusted pretax income breakeven - $10M. High inventory turnover rate and option lot percentage

Total revenues reached $632 million, approaching the high end of guidance range. Adjusted gross margin was 13.4% in the quarter, slightly shy of midpoint of expectations. SG&A was 13.3%, better than low end of guidance. Income from unconsolidated joint ventures was $3 million, slightly below midpoint, while income from consolidation of certain joint ventures exceeded expectations. Adjusted EBITDA was $63 million, significantly higher than guidance range. Adjusted pretax income was $31 million, also significantly above forecasted range. QMI sales comprised 71% of total sales, down from prior quarters but still above historical norms. To-be-built home sales increased from 21% to 29%, with higher margins

Guidance for second quarter of fiscal 2026: total revenues between $625M and $725M, adjusted gross margin 13% - 14%, SG&A as % of total revenues 12.5% - 13.5%, income from joint ventures between breakeven and $10M, adjusted EBITDA between $30M and $40M, adjusted pretax income between breakeven and $10M. Outlook assumes stable marketing conditions, with expectation of rebound in adjusted pretax income in latter half of fiscal 2026 and improved gross margins from newer higher-margin communities in fourth quarter

Risks include known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from forward-looking statements. Such risks described in Risk Factors and Management's Discussion and Analysis, particularly in annual report on Form 10-K and subsequent SEC filings. Risks related to market conditions, mortgage rates, affordability, cancellation rates, construction cycle times, etc.

Q: On the topic of incentives and their pressure on margins, wondering if there's opportunity to offer less incentives for higher margins.

A: Prefer focus on pace versus price, keep up incentives to burn through lower-margin land.

Q: On percentage of specs QMI versus built-to-order, what's the percentage and thinking of balance?

A: QMI sales dropped from 79% to 71%, to-be-built contracts yielding higher margins and growing as percentage of total sales, not through specific strategy but market reality