Good morning, and thank you for joining us today for Hovnanian Enterprises’ Fiscal 2024 First Quarter Earnings Conference Call. An archive for 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 fourth 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 page of the company’s website at www.khov.com. Those listeners who would like to follow along should now log into the website. I would like to turn the call over to Jeff O’Keefe, Vice President, Investor Relations. Jeff, please go ahead. Jeff O’Keefe: Thank you, Twanda, and thank you all for participating in this morning’s call to review the results for our first quarter, which ended January 31, 2024. 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 and are 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 and Management’s Discussion and Analysis, particularly with a portion of MD&A entitled Safe Harbor Statement in our annual report on Form 10-k for the fiscal year ended October 31, 2023, 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 on the call today are Ara Hovnanian, Chairman, President and CEO; Brad O’Connor, CFO and Treasurer and David Mikerson, Vice President, Corporate Controller. I’ll now turn the call over to Ara.

Thanks, Jeff. I’m going to review our first quarter results, and I’ll also comment on the current housing environment. Brad O’Connor, our Chief Financial Officer, will follow me with more details, and of course, we’ll follow-up with Q&A afterwards. Starting on Slide 5, we show how our results compared to last year’s first quarter. Starting in the upper left-hand quadrant of the slide, you can see that, our total revenues increased 15% to $594 million. In the upper right-hand corner of the slide, our gross margin held steady year-over-year at 21.8%. In the bottom left-hand portion of the slide, you can see that, our EBITDA increased 30% to $65 million in this year’s first quarter. If you adjust the impact from the incremental phantom stock expense, EBITDA would have increased 45% to $72 million. Finally, in the bottom right-hand portion of the slide, pretax profit increased 80% to $33 million and if you ignore the impact of the incremental phantom stock expense, pretax profit would have increased 122% to $40 million. By all of these measures, we’re off to a strong start for fiscal ‘24. On Slide 6, we show our first quarter guidance in the first column. Our actual results in the second column and because our guidance specifically excluded positive or negative impacts from the incremental phantom stock expense, we added a third column that shows our results adjusted for the $7.5 million of incremental phantom stock expense for the quarter. The impacts have fluctuated positive or negative on a quarter-over-quarter basis for the past several years, but with all the ups and downs in a quarter, it hasn’t had much of a significant impact on an annual basis, but it can have a little more impact, as you see on an individual quarter. It’s obviously a little…

Thanks, Brad. We’re encouraged by our sales pace in January and the first few weeks of February. There are two main factors that cause us to be optimistic about the spring selling season. First, there’s a downward trend in mortgage rates. Second, the tightness of existing homes for sale. Third, there are very favorable signs from the employment market. Fourth, there are strong demographic trends, including the millennials, and finally, the overall growth in the broader economy. These same factors should continue to drive demand for new homes over the longer term. After reducing debt for several years and refinancing much of our remaining debt last fall. We’re in a position where we are now more focused on growing our revenues and achieving higher levels of profitability. Rest assured that while we’re more focused on growth than the past, we’re still extremely committed to reducing our leverage and are targeting about mid-30% net debt-to-cap ratio. That concludes our formal comments, and we’ll open it up now for Q&A.

[Operator Instructions]. Our first question comes from the line of Alan Ratner with Zelman and Associates. Your line is open.

Thanks for taking my questions. My first one is just related to the QMI share of the business. Could you maybe just remind us what percent of the business now whether on orders or deliveries is QMIs or in your first quarter versus maybe a year ago or pre-COVID and what the margin differential is on those QMIs versus the business average? Thanks. Brad O’Connor: The QMI business for the first quarter of ‘24 was 63% of the deliveries, I’m sorry, of sales. It’s typically in the past if you went back to pre-COVID would have been typically 40% -ish up or down but around 40%. We aren’t really commenting on the margin differential. Overall, the QMI as we mentioned do get impacted with rate buy downs that happen up until closing, which is why we mentioned we slightly missed our margin percentage. But we’re not providing the breakdown of our margin to be built versus QMI.

Understood. Do you see that 63% of sales, how high could you see that going? Is that kind of a comfortable range? Or would you foresee that rising a little bit more? Brad O’Connor: It’s probably a comfortable range right now. On the West Coast, it’s higher than that average. On the East Coast, it’s lower than that average. We tend to sell more to be built. But I think at the moment, the 60% to 70% range is probably a fair guesstimate.

That’s helpful. And then just on the pivoting to cycle times, what exactly are the bottlenecks preventing you from getting those 40 days back to get you back to the four months from the 160 where you are now?

I think it’s early on during the COVID craziness, it was more of a challenge of material and labor. Today, the material shortages have really dwindled and it’s really more about labor. I mean, the housing market has been strong, apartment construction was strong. There was a lot of demand on labor. Luckily, while new home construction for sale has been strong, apartment construction seems to be waning a bit. I think there’ll be a little less pressure on the labor side. Hopefully, that will allow us to get back to more normal cycle times.

That’s helpful. If I could squeak in one more, somewhat similar, just on the land development side. I know you’re trying to ramp community count and could you talk a little bit about the horizontal development timelines and maybe some constraints there? Cost inflation has that kind of leveled off, or is that still accelerating? Whereas on the material side, on the vertical construction, it’s leveled off. Anything on the horizontal development would be helpful.

Yes. But first of all, land development has continued to be a little behind schedule for the whole industry. The same sort of thing regarding the general demand. But on top of that, the one particular problem has been transformers for the entire industry. And that has been delaying community openings for outside developers and for ourselves for internal developers. Costs have not really been a material problem. It’s just been timing delays, and it’s very often related to transformers. I will add, I guess on the west-coast in California, they’ve had a particularly large amount of rain too. So that’s been a bit of an effect.

Okay. And do you think your reliance on third party developers, given you’re optioning a relatively high share of your lofts, has had an impact on maybe your visibility into the community count ramp here, and any impact on from those developers from the regional banking crisis about a year ago? Or has that kind of settled itself out?

Well, I’d love to blame it on our outside developers, but I mean, we can be late as well. There’s just been a challenge on for everyone on, land development, again, the transformer issue that I mentioned. So that’s part of what makes it difficult to project community count. The other thing is we have been selling out a little faster, depending on how fast a particular community sells out that would be deleted from community counts. So that’s what makes it hard to measure. Suffice it to say though, that we’re quite optimistic that we’ll continue increasing the set -- the community opening pace, hopefully even more than we’ve seen over the last couple of quarters. But for all the reasons I just mentioned, it’s always hard to project accurately.

Our next question comes from the line of Alex Barron with Housing Research Center. Your line is open.

Good job on the quarter and the year. I was wondering, I saw that you guys paid down some debt. Can you help us which trache of debt you guys paid down? Brad O’Connor: The final payment that occurred in November was really part of the transaction that we had announced in the fourth quarter. And so, we’ll get to the specific tranche. It was the 10% senior secured, 1.75 notes that were due November of 2025. That October was $114 million of book value.

Great, great. And so, going forward, is there a plan to continue reducing debt? Or are you switching gears and not doing that going forward?

What we try to make clear is, while our primary focus in the past was bringing down debt, we brought it down enough that we feel we can focus on both significant growth and still reducing debt. Our fanatical focus on inventory turn, which is driven by our option loss and really focusing on the timing between taking down a lot and construction certainly helps that going forward. The other thing that obviously helps us quite a bit is our NOL, because we’re not having to pay taxes even though we booked the taxes. We feel confident that we can grow significantly and still continue to reduce debt to reach our target of around the mid-30% range.

Just to add to that, when we did the refinancing in the fourth quarter, we intentionally left if you look at the maturity ladder slide that we provided, we intentionally left tranches of relatively small amounts of debt that’s coming due in ‘26, ‘27 and ‘28 that’s there for us to continue to pay down.

Okay. Yes, that was going to be my next question. If you did continue to pay down, is there a specific order that you’d have to go down?

We would likely look at it in order of where we don’t have to make significant prepayment penalties, but you have to balance that with whatever the rates are in the individual notes. We don’t have an order that we need to take out the near-term maturity. We can do it in whatever order we want, but it has to do with what it would cost us to take out each piece and when.

Okay. The good news is your leverage is coming down pretty quickly. I think by the end of the year, you should be pretty similar to most other builders. That’s very, very good progress.

My guess is we’re making there for sure.

Yes, most definitely. Now in terms of your margin outlook, as it pertains to incentives, I think you guys noted, you’ve seen improvements in sales so far in January and February. Are you guys more likely to pursue higher sales pace and maintain the incentives the same? Or are you guys more likely to accept the lower sales pace but try to reduce the incentives?

I would say pace is very important to us, but we look at every community, community-by-community and while trying to maintain the pace in that community, we will tweak pricing or reduce concessions, small amounts to continue to improve our margin without shutting off the sales pace. So, it’s a balancing act, but pace is definitely important to us.

Okay. And if I could ask one last one, as far as the phantom stock expense going forward, that’s basically, impacted by the movement in your stock price relative to each previous quarter?

That’s exactly right. So, when we -- each quarter end we adjust the phantom stock expense based on the stock price on the last day of the quarter. And so, the guidance, as we’ve said, the guidance are given for the second quarter assumes that the stock price stays the same as it was on January 31st at the 168, I think it was. So, if it moves up or down from there, we either can get a benefit or additional expense associated with that stock price movement. That’s right.

And is that somewhat indefinite or when would those pluses and minuses sort of change go away?

The most recent grant that has phantom stock expense was in December of ‘23. So that particular grant will have the exposure to this stock price over the next few years. We did have, one of the early ones was 2019, that one is now completed. So, the exposure to that one ended actually in this first quarter, the final payout was made. So, it just depends on the grant. And when that grant gets paid out. Brad O’Connor : I’ll add that given the stock price has been much healthier recently, it’s very likely impossible that we’ll reduce our use of phantom stock in the future, and our older ones are expiring.

Yes. I was going to say, is there any benefit to using this method versus giving people -- to some other compensation? Brad O’Connor : The benefit is that we foresaw our earnings increasing and didn’t think it would be a good idea to dilute our current shareholders. We thought they benefit more from the lack of dilution than the small expense on a given quarter. Again, if you go back quarter-by-quarter, I believe the data’s in the appendix. You can see on an annual basis, it really hasn’t amounted to much. It is been up and down. One quarter is up 5 million, one quarter is down 5 million. But on any individual quarter, yes, it makes a difference on the quarter.

[Operator Instructions]. I’m showing no further questions in the queue. I would now like to turn the call back over to Ara for closing remarks.

Great, thank you very much. As we said, we’ve been pleased with the results and the market overall just feels like it’s continuing to strengthen. So, we’re looking forward to a very good ‘24 and look forward to reporting more good news next quarter. Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.