Hovnanian Enterprises, Inc. (NYSE:HOV) Q4 2023 Earnings Call Transcript

Alan Ratner : That’s really helpful Brad.

Ara Hovnanian : The additional color I’ll add is we tend to see more incentives on the West Coast than the East Coast, and the East Coast is certainly an important part of our business. The other thing is we see a little more incentive in the entry-level buyer and the entry level product, who is very dependent on qualifying. So the mortgage rate buy-downs really help, but those mean more incentives. We also have a significant part of our business which is active adult. There we use far fewer incentives. Most of our active adult buyers get a no mortgage or a very small mortgage, and they are not worried about giving up a 3% mortgage, because they probably paid up – paid off their old 3% mortgage. So we’re seeing a lot less incentive there compared to the first time. And we’ve got a sizable chunk in the middle on our move-up homes. So overall we’re feeling pretty good about the trend in incentives.

Alan Ratner : Got it. If I could just squeeze in one follow-up then on that margin point. And Brad, thank you for all the moving pieces there. I know you’re not guiding beyond 1Q, but is it fair to assume you did roughly a 23% gross margin this year as a whole? That’s kind of roughly where your 1Q guide is. Is it safe to assume that that’s kind of where you see the business for the foreseeable future, plus or minus, absent any significant changes in marketing conditions or are there any significant mix factors that we should be aware of?

Ara Hovnanian: Alan, I’d say there’s no significant mix factors. We are trying to introduce a few more active adults, but it’s not meaningful enough to make a huge difference. I mean, frankly, the market has moved around a lot and the rates have moved around a lot. So we’re extremely hesitant to provide more guidance than we’re providing. I think a quarter out is fairly reasonable. Margins are going to be very dependent on what we have to do with incentives, what happens with lumber costs, and a variety of other factors. But on the whole, I don’t know what we can tell you. Fourth quarter, our sales are up dramatically compared to last year, and we’re giving you a first quarter, which is almost double last year. So you can reach whatever conclusions you want. Our crystal ball is not so clear to give longer guidance than a quarter.

Alan Ratner: Understood. I appreciate that guys. Thanks a lot.

Ara Hovnanian: Thank you.

Operator: Thank you. [Operator Instructions]. I’m showing no further questions, and I’d like to turn the conference back over to Ara Hovnanian for any further remarks.

Ara Hovnanian: Great. Well, thanks so much. We’re pleased with a good quarter. We think we’ve got some more good news in quarters to come and look forward to sharing those with you. Thank you.

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