Hovnanian Enterprises, Inc. (HOV) Q2 2020 Earnings Report, Transcript and Summary

Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2020 Second 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 and all participants are currently in a listen-only mode. Management will make some opening remarks about the second 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 Investor's page of the Company's website at www.khov.com. Those listeners who would like to follow along should now log on to the website. I would like to turn the call over to Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead.

Thank you, Joelle, and thank you all for participating in this morning’s conference call to review the results for our second quarter, which ended April 30, 2020. All statements in this conference call that are not historical facts should be considered as forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include, but are not limited to statements related to the company's goals and expectations with respect to its financial results for future financial periods. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements speak only as of the date they are made, are not guarantees of future performance or results, and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors are described in detail in the sections entitled Risk Factors in Management's Discussion and Analysis, particularly the portion of MD&A entitled Safe Harbor statement, in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019, and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Joining me today are Ara Hovnanian, Chairman, President and CEO; Larry Sorsby, Executive Vice President and CFO; and Brad O'Connor, Senior Vice President, Chief Accounting Officer and Treasurer. I'll now turn the call over to Ara. Ara, please go ahead.

Thanks, Jeff. I hope that all of you and your families remain safe and healthy during these challenging times. To say the least, the COVID-19 events of the past several months have been unprecedented, and the impact the virus will have on the economy and the industry over the long-term is difficult to predict. I am going to address the current market environment, including the steps we have taken to navigate these unprecedented times and then review our second quarter results. As usual, Larry Sorsby will follow me with more detail, and we’ll have an opportunity for Q&A. COVID has changed the way we do almost everything. Our primary focus throughout the past several months of the pandemic and as we prepare for the future has first and always been the safety and well-being of our associates, customers, and trade partners. We have had four associates out of approximately 2,000 test positive for the virus. Three have fully recovered and the fourth is quite recent. I feel good that our safety protocols seem to have been effective and that we have better ratios than the country at large. From an operations perspective, homebuilding was deemed an essential business in virtually all of the markets where we operate. Our construction sites remained open and our sales offices were by appointment only. We implemented CDC and OSHA COVID-19 safety guidelines and protocols throughout the company. However, we asked all of our associates in our corporate, divisional mortgage, and title offices to work from home during the shutdown. I am pleased to say we were extremely well prepared from a systems perspective and the transition was relatively seamless. We’ve begun the gradual phased reopening of our offices in some states and we look forward to the remaining state guidelines for reopening. Warranty work in general was more challenging. We cut back on much of the non-emergency warranty work. That was based on requests from customers and from our traders. Regarding materials, so far, we have not seen any major disruptions in our supply chain. In mid-March, we instituted a daily call with the presidents of all of our business units. On the call, we discussed COVID-related challenges and protocols. I am very proud of how our teams were able to perform during these extenuating circumstances. Given the uncertain economic environment and consistent with many national homebuilders, we took measures to preserve cash by delaying certain land purchases and land development activity. We also delayed starts on unsold homes as we will discuss in a moment. However, given the strong recent sales results, we’ve begun to loosen our purse strings. Our second quarter was certainly affected by the Coronavirus. Considering the challenging effects that COVID-19 had on the last half of our second quarter, we’re pleased with our performance. On Slide 4, we compare year-over-year results for our second quarter. As you can see in the upper left-hand quadrant of the slide, total revenues grew 22% to $538 million during this year’s second quarter. The growth was entirely driven by an increase in deliveries as average sales price was essentially the same year-over-year. Moving to the upper right-hand portion of the slide, you can see that our gross margin was up. It was 18.2% for the second quarter of 2020, compared to 16.9% during the second quarter of 2019. It was also up compared to 17.3% in the first quarter of 2020. This was in line with our expectations of improved gross margins for the quarter. In the lower left-hand quadrant of the slide, you can see our total SG&A ratio. Our SG&A dollars were down 7% while revenues were up 22%. As a result, our SG&A ratio for the second quarter this year declined to 10.4%, 330 basis points below last year’s second quarter. In the lower right-hand quadrant of the slide, we show that adjusted EBITDA more than doubled to $52 million this year, compared to $24 million in last year’s second quarter. On Slide 5, you can see that for the second quarter, our pretax income, which includes slightly higher interest expense was $4 million, compared with a $15 million loss last year. If you ignore the $1.2 million in land charges and loss on extinguishment of debt, the pretax adjusted income was $5 million for this year’s second quarter, compared with a $13 million loss in the same quarter a year ago. Now shifting to the current sales environment, it’s an understatement to say sales were extremely weak from mid-March through mid-April. Slide 6 shows the number of consolidated contracts on a monthly basis for all seven of the current fiscal year – all seven months of the current fiscal year compared to the same seven months a year ago. As you can see, we were successfully executing our growth plans right through the month of March, and we achieved significant year-over-year increases in contracts each month. This was followed by March, which was a start of the adverse impact COVID-19 had on our sales. We had a 16% year-over-year decline in contracts in March. In April, contracts were down 31%. However, we started to see a significant improvement in our sales pace during the last two weeks of the month. This was followed by a very strong rebound in May with the number of contracts increasing 28% year-over-year for the month. The 687 contracts in May 2020 was the highest level of sales for any month since April 2008. If you look at contracts per community on a monthly basis as we do on slide 7, you can see the similar negative impact COVID-19 had on our sales pace in March and April. However, contracts per community increased 43% in May to 5.3, which is the highest contracts per community for a single month since March of 2005. On Slide 8, the phenomenal sales in the first half of the quarter were offset by slow sales in the second half of the quarter. In the end, poor sales during the peak of the pandemic were enough to result in a 4% year-over-year decline in contracts for the entire quarter. This broke a streak of four quarters in a row with double-digit year-over-year increases. The picture is a little better on a per community basis, which we show on Slide 9. Here you can see that we had 11.3 contracts per community for the second quarter this year, compared to 10.5 for the last year’s second quarter. That’s an 8% increase year-over-year. If you turn to Slide 10, you can see another view of contracts per community with longer-term trends. On the left-hand side, we show our average annual contracts per community from 1997 to 2002. This was neither a boom nor a bust period for housing. As we said before, we averaged 44 contracts per community during this period. In the middle of the slide, you can see the steady growth in contracts per community for each of the past several years. On the right-hand side of the slide, we show that contracts per community for the trailing 12 months ended April were 40.8, compared to 35.6 a year ago. While our contracts pace has certainly improved substantially over the last year were not at historical norms let alone on the market peaks, yes. Fortunately, we invested time and resources in fiscal 2019 establishing a state-of-the-art national call center. The call center is responsible for responding to leads from our website and our digital marketing efforts. The contributions our call center made prior to COVID-19 were steadily increasing. However, given how quickly the virus changed everything, the call centers become a critical component of our recent sales success. While our communities remained open for sales, the majority of in-person customer visits to our model homes were set up by appointment only. The call center supported our ability to swiftly respond to incoming customer leads and their strong preference for virtual, rather than in-person model home tours during the pandemic shutdown. In the months of April and March, 41 home buyers signed a contract without seeing the home at all. The virtual tours and video chats were enough for customers to make a decision to buy one of our homes. During the months of April and May, appointments scheduled by our call center were up 90% year-over-year. Almost half of our total contracts in the month of April started from a call center lead. There is no doubt that the investments we made in our call center are paying off in a large way. I’ll now turn it over to Larry Sorsby.

Thank you, Ara. We don’t typically provide weekly data as it can be quite volatile, but as I walk you through the next four slides, you will see the impact COVID-19 had on various traffic and sales metrics on us on a weekly basis. On Slide 11, we show that the weekly traffic troughed at the end of March and the first couple weeks in April at roughly 600 units of traffic. Since that time, we’ve seen improvements to almost 1500 traffic units per week – last week. Even though it was good to see traffic rebound of the lows, we still have not returned to February’s average level of 1710 traffic units which we show on the far right-hand portion of the slide. However, the traffic we did see was very high quality. Further, our website traffic remains strong through the entire shutdown period. We also saw an increase in cancellation rates. Turning to Slide 12, there you can see a similar trend in weekly cancellation rates as a percentage of gross contracts. They peaked in the second full week of April at 46%, but have come back down to more normal levels in the high teens in recent weeks. Interestingly, there were four weeks when the weekly cancellation rates were much higher than normal for March 29 through April 19. But even in those weeks, the absolute number of cancellations didn’t change much compared to the period prior to COVID-19 shutdown. However, during those same four weeks, our gross contracts per week declined significantly and that is what caused our cancellation rates to increase. Slide 13 shows weekly cancellations as a percentage of beginning contract backlog. Here, you can see that while there are some minor weekly ups and downs, our backlog cancellation rate remained steady throughout the entire period. We really did not see a large cancellation from our backlog. On Slide 14, we show weekly net contracts, which have been on the rise for the past seven consecutive weeks. We have not increased incentives in most of our communities and we’ve not seen the level of the centers rise in most of our peers’ communities either. We are not discounting home prices in order to drive the improvements in our sales pace. We are just seeing increased market demand. Turning to Slide 15, this was a good quarter for our Financial Services division. Their year-over-year second quarter pretax earnings increased 30% to $5 million. These improvements were driven by both volume increases and improved operating margins. Recently, there have been a lot of focus on whether customers can still qualify for a mortgage due to tighter loan underwriting standards and the unprecedented high number of recent job losses. Whenever there are material changes to mortgage underwriting criteria, our mortgage company scrubs our contract backlogs to see if customers still qualify. Fortunately, the overwhelming majority of our customers still qualified for a mortgage, amazingly, only ten of our customers who planned to close in our second quarter had lost their job and no longer qualified. We entered the pre-COVID-19 environment with an extremely strong sales push. On the top half of Slide 16, we show that we have a solid backlog of 2221 homes under contract at the end of the first quarter. The number of homes in backlog was up 24% and the dollar amount was up 20%. Notwithstanding the strong deliveries in our second quarter, and the fore COVID-19 period of sales, on the bottom-half of the slide, you can see that the number of homes in our consolidated contract backlog at the end of the second quarter of fiscal 2020 was still 6% higher than it was a year earlier and it was a slight growth in contract backlog dollars at April 30th of 2020, compared to the end of last year’s second quarter. Today, most of the customers in our backlog seem very motivated to close. On Slide 17, you can see that we closed 446 homes in March 2020. In spite of COVID-19, we closed more homes in March this year than we closed in both March of 2019 and in February 2020, then we increased that level and closed 503 homes in April. Despite the virus, our customers clearly still wanted to move into their new homes. If you turn to Slide 18, you can see that our consolidated community count declined by 15 communities from 147 on April 30, 2019 to 132 at the end of April this year. This decline is due primarily to three factors. Number one, selling through communities faster than we expected prior to the impact of COVID-19; number two, in total, there were seven community grand openings that were expected for the second quarter that were delayed. Some of these delays were due to COVID-19 and others were related to normal development plans. Number three, we contributed four wholly-owned communities into unconsolidated joint ventures during the first quarter of fiscal 2020. Given the impact of COVID-19, and uncertain economic environment going forward, similar to our peers, we took measures to preserve cash by delaying certain land purchases, land development activity and beginning work on some unsold homes. Turning to Slide 19. In response to COVID-19, we reduced our available spec homes from almost 800 at the end of January to just over 600 at the end of April. However, we really not altered our spec strategy much. We had 4.7 specs homes per community at the end of the second quarter this year which is consistent with our average of 4.6 spec homes per community since 1997. During the second quarter of fiscal 2020, 49% of our contracts were for spec homes, compared to 46% in last year’s second quarter. Clearly, thus far during the pandemic, demand for quick move in homes has remained strong. Given this demand, we intend to gradually increase our level of spec homes back to be closer to the 790 we had at the end of our first quarter. On Slide 20, we control 26,734 lots or a 4.9 years supply at the end of the second quarter. In spite of the adverse impacts of COVID-19, we still added 1289 newly controlled lots during the second quarter. After temporarily slowing new land acquisitions due to COVID-19, given the recent improvement in demand for our homes, our land acquisition teams are back in the market sourcing new deals today. We will remain disciplined to our underwriting standards using current home sales price, current home sales pace and current construction cost. If we find land deals that pencil under these self-adjusting criteria, we will purchase them. Turning to Slide 21, compared to our peers, you can see that we had the third highest percent of land control via options, we continue to use land options whenever possible in order to achieve high inventory turns, enhance our returns on capital and reduce risk. We are pleased to control 60% of our land through options. Looking at our consolidated communities in the aggregate, including mothballed communities and the $198 million of inventory not owned, we have an inventory book value of $1.3 billion net of $194 million of impairments. Turning now to Slide 22, compared to our peers, you see that we have the second highest inventory turnover rate for the trailing 12 month period. Although we lag NVRs, industry-leading number – turnover number, our turns remain 42% higher than the next highest peer below us. High inventory turns are a key component of our overall strategy. Another area of discussion is related to our deferred tax asset. Our deferred tax asset is very significant and because it is fully reserved or by valuation allowance it is not currently reflected on our balance sheet. We’ve taken numerous steps to protect this asset. As of April 30th 2020, our deferred tax asset in the aggregate was $597 million. We will not have to pay Federal cash income taxes on approximately $1.9 billion of future pretax earnings. On Slide 23, we show that we ended the second quarter with a shareholders’ deficit of $495 million. If you add back our valuation allowance, as we’ve done on this slide, then our shareholders’ equity will be a positive $110 million. As you can see on Slide 24, we ended the second quarter with $247 million of liquidity. This is slightly higher than the liquidity – and then our liquidity target range of $170 million to $245 million and if higher, then the $225 million we had in the previous quarter. In order to maximize financial flexibility and increasing our cash position, we elected to draw in full our $125 million credit facility on March 25th. During the second quarter, those funds remained in our bank accounts which ensured the cash was available as we needed it. In late May, we regained confidence in the financial markets and repaid our revolver in full. Turning to Slide 25. On the top of this slide, we show our maturity ladder at the end of the first quarter and on the bottom of this slide, we show what it looked like at the end of our second quarter. In March, we extended our debt maturities by exchanging $59 million of our 10% second lien notes due July 2022 include $59 million of our 11.25% 1.5 lien notes due February of 2026. We remain pleased with the debt exchanges we completed over the past seven months. These steps simplified our balance sheet and extended the maturities on more than $1 billion of our debt. We will continue to analyze and evaluate our capital structure and explore transactions to further strengthen our balance sheet. Given the large unemployment numbers and uncertainty in the economy, we are withdrawing any goals or guidance we offered in our earlier public comments and we will not be giving any guidance for the next quarter or for the full year. Now, I will turn it back over to Ara for some brief closing remarks.

Thanks, Larry. Given the recent record unemployment levels and indicators of a possible recession, we decided to take the difficult measures to right-size our organization to prepare for a further – for further potential economic slowdown. This strategy has several components. First in April, our corporate leaders took a voluntary salary reduction. These pay cuts will remain until we got a better picture on how the economic recovery is unfolding. In May, we streamlined our organizational structure by transitioning from three homebuilding operating groups to two. Additionally, we are consolidating several business units resulting in the reduction of three divisional offices. Lastly, given the challenging conditions of the Chicago market for several years, we decided to gradually phase out of that market as we sell-through our existing Chicago communities. Considering these operational changes, Lou Smith, our Chief Operating Officer has decided to retire effective November 30, 2020. His responsibilities will be spread among the senior leaders of our company. Further, we took measures to reduce our overhead through a combination of furloughs and layoffs and other cost reduction measures. We expect these steps to reduce our annualized overhead expenses by approximately $20 million. As a result of these steps, we expect to take a charge of approximately $3 million for severance and other related expenses in our third quarter of fiscal 2020. As the market rebounds from the pandemic, we believe that this new organizational alignment will allow us to be even more cost-efficient and nimble in pursuing our long-term growth plans. It should also result in the more rapid repair of our balance sheet. I want to emphasize that once the adverse impacts of this pandemic are behind us, we are confident that even with our more streamlined organizational structure, we can continue to successfully grow. Before I wrap up, I just want to take a moment to thank all of our associates, whether they be in the field, in construction service, or sales or the office staff that supports them, they’ve all conducted themselves with the level of professionalism that’s absolutely beyond what we could have asked for, especially they their lives have been turned upside down at their own homes during these challenging times. That concludes our prepared comments and we’ll now open it up for questions.

[Operator Instructions] And our first question comes from Alan Ratner with Zelman & Associates.

Hey guys. Good morning. First off, glad to hear you are doing well and that your associates have recovered so far, and congratulations on the strong bounce back in results so far in May. I guess, my first question is, just thinking about that rebound that you and others have seen, it’s quite remarkable considering where we were six weeks ago. I am curious if you can kind of drill on a little bit on in terms of your different price points, different product types segments. Is that recovery that bounced back geared more towards the entry-level spec product that I think a lot of builders talked about recovering a bit sooner or have you seen that expanding throughout different segments thinking about active adults, thinking about more of your 2B built product? I am just curious if that portion of the business has shown the same type of improvement.

Sure. Alan, that’s a good question. First, in the beginning, our active adult 55 plus communities were slower to recover compared to our other business. As you might imagine it was a group that was more at risk. So, they were a little more hesitant to get out to the sales offices. I’ve got to say that they are – that group is really starting to pick up just recently. So, I think that will provide a little afterburner growth for us coming up as they also follow the same home buying inclination that the rest of the market has. Putting that aside, I’d say it’s been fairly consistent at price points; and regarding specs, I think approximately half of our sales over the last two months have been specs, homes that started without a sale and about half were to be built. So, that part is not dramatically different than what we’ve been seeing historically.

Perfect. That’s very helpful. Second question, recognizing this might be a little bit difficult to answer at this point given all the uncertainties, but when you made the decision, the difficult decision to undergo the restructuring there and right-size the overhead, obviously it was a much different sales environment than we are sitting at today and I think it’s obviously uncertain whether that will continue. But you mentioned being able to continue to kind of perform at the newer, more lean overhead structure. But assuming that the economy continues to bounce back and demand returns to the levels that we saw pre-COVID on a fairly sustainable basis going forward, how should we think about the growth opportunity of your business just thinking about all the various levers you are pulling, is 2021 going to be tougher to grow because of that even if the market continues to accelerate. Just thinking about your land book, your overhead, et cetera?

Alan, I would say, I do not feel our growth prospects are hampered whatsoever by the reorganization. I mean, we are now going to be a flatter, leaner organization. I think that makes us a little more nimble, and the divisions that were consolidated were divisions that were on the smaller side. So, consolidating just makes it more efficient to operate with less overhead. And the other thing I’ll mention is a large number of our reductions were furloughed. So, if we really felt that it was necessitated by rising demand, assuming they haven’t our associate – former associates didn’t take a job elsewhere, we’d have the ability to hire them back. But while it was a very painful experience, it always is to reduce staffing, I think we are going to be a leaner, more efficient company, and we’ll absolutely be able to grow in no way in my mind hampered by the reductions.

Great. I appreciate that. Thanks a lot. Good luck. Yes. Sorry, Larry.

[Multiple speakers] a little bit, because I agree with everything Ara said, 2021, the growth opportunities in no way do we believe will be adversely impacted by our restructuring decisions. But I do believe for us and the entire industry, the COVID-19 is going to have an adverse effect on the industry’s ability to grow as much as they would have otherwise grown, because during the COVID-19 environment, land developers weren’t doing land development, builders weren’t doing land development. Homebuilders delayed making land acquisitions. All of those delays will impact the availability of finished lots that we can complete homes on. So, I think there will be an impact from COVID-19. It’s just not going to be related to the restructuring that we or other builders have done.

That’s a very interesting point. Thank you. I appreciate that, Larry.

Thank you. [Operator Instructions] Our next question comes from Alex Barron with Housing Research. Your line is now open.

Yes. Thank you. Good morning guys. Hope you are all well. Thanks for taking my questions. I wanted to ask, I guess a number of things if you will allow me. The first thing is, we’ve obviously seen a pretty remarkable rebound in sales activity, and I am curious what kind of feedback your sales people are getting. Is it people who moved to the sidelines to see what happens and they are now just coming back or has there been some radical change in the mindset of the buyer, meaning like renters who had no thought of buying before, but now suddenly see an urgency in buying. What do you guys think is happening?

Yes, we are really speculating just as others have speculated in order to answer that question. But I think it’s all of the above. I think there were people that were on the cusp of buying right before the shutdown that we are pulled back, and now it’s come into the market. So I think that’s a portion of it. I think there is also people that have been couped up in small apartments, whether they be in urban areas or whether they been in suburban areas during the shutdown, let’s say, I really don't want to ever experience that again. So, I am looking to buying a home. I think it is also related to the lower availability of product - of used homes in the market, lower MLS listings that are available for sale out there. And therefore, people that are ready to buy can’t find what they want on the used side and it’s helping the new homebuilders who can provide products that they are interested in. And I also believe that it had a lot to do with respect to as different states started to be more optimistic about ending the shutdown and letting people gradually phase back into the new normal environment, that’s caused optimism and people willing to buy. And then lastly, I think, the uber low interest rates and affordability are encouraging people to buy. So, I think it’s a combination of all of those things that are causing better-than-expected demand.

I’ll add just a couple of other anecdotes. When you have people sheltering at home for a few months, when you have bundled households, either roommates or people living with their parents, there is an extra motivation to unbundle and have your own home. And then, as Larry mentioned, people have been couped up and if you are going to be in your nest for a long time, you really get a chance to look around and think about whether this is where you want to be or if you want to improve your nest, so to speak. So, I just think it got people to reflect and it really focused on their home and their desire of home ownership and the type of home they want.

Got it. So, in the last couple weeks, you guys have shown in your presentation you’ve seen like sales in the mid-170s. Is there any reason why that wouldn’t be sustainable you think? And just to confirm, have you guys increased your incentives or vice versa, if you haven’t increased them are you guys raising prices?

We have not increased our incentives in general at all and we are now exploring being a little more aggressive on price increases. And we gave you the data week-by-week through May. I’ll tell you that June is off to a phenomenal start, as well. So, we are definitely seeing the market actually gain momentum right here. And as Larry mentioned, the key thing we’ll just have to look at all homebuilders is, do we have enough improved lots on the ground to meet demand right now. As he mentioned, developers slowed downs, towns were slow in processing land development permits - so, during this pandemic. So, that will be more of the challenge. But I think that will be short-term and that we’ll be able to get through that.

I mentioned, I think we still have the overall economy be in kind of a dark cloud over us, right now. The stock market is doing brilliantly, which is a forward-looking vehicle typically. So, it’s anticipating the economy is going to bounce back. But we got to start seeing that unemployment number reduce. If that unemployment number doesn’t start reducing in the future at some point, I do believe that will have an adverse effect on the industry’s ability to sustain the current level of sales that we’ve been seeing recently and it’s just a cautious high that we have constantly in the marketplace. We've not seen it yet. But 41 million plus jobs being – people being unemployed, that has a huge trickle down negative effect in the economy if they don’t start getting that work again.

Yes, I agree on that. One last one if I could, on your DTA. So, what exactly is a criteria for you guys to be able to reverse it? I mean, you had positive pretax income for the last two years. You just positive income again this quarter. It would seem if the trends continue, you shouldn’t be at positive pretax income for the rest of the year. So, is there a real chance you could be reversing the DTA sometime in the not so distant future?

We have to be at – at a minimum, we have to be at a three year cumulative profit. That’s the first threshold. But it has to be a substantial profit. It can’t be small amount of profit that it can swing back and forth to a loss. So I would say it’s something that we are certainly monitoring unlikely something would happen in fiscal 2020, but if we are able to grow at fiscal 2021, maybe by the end of fiscal 2021, we’d be in a position to do that. This remains to be seen how we perform.

Got it. All right. Well, best of luck guys. Thanks and stay safe.

Thank you.

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Ara Hovnanian for closing remarks.

Thank you very much. And needless to say as I stated at the outset, these are extraordinary times and it’s not completely clear what the impact is going to be long-term. At the moment, it feels very good in terms of home sales. People definitely want a nest. So, we are going to do our jobs to providing the home for people to shelter in and we’ll look forward to giving you an update in the next quarter. Thanks so much.

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