Good morning, and thank you for joining us today for Hovnanian Enterprises' Fiscal 2024 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 page of the company's website at www.khov.com. Those listeners who would like to follow along should now log onto the website. I would like to turn the call over to Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead.

Thank you, Carmen, and thank you all for participating in this morning's call to review the results for our second quarter. All statements on 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 31st, 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 today on the call 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 second quarter results and I'll also comment on the current housing environment. Brad will follow me with more details, and of course, we'll follow-up with Q&A. Let me begin by saying what I just said at John Burns Housing Conference in California last week. I feel like we're in a Goldilocks environment. The market is not too hot and it's not too cold. A hot market would challenge construction costs. It would create challenges with labor shortages and material shortages and would certainly make it even more difficult to purchase land. The challenges of a cold market are obvious, but the current environment feels balanced and more sustainable with higher rates keeping the resale supply limited and demand in check, yet sufficient to have a good supply-demand balance. We are assuming a higher for scenario -- a higher for longer scenario for our strategies. If mortgage rates go up meaningfully, our budgets may be aggressive. If mortgage rates come down meaningfully, our budgets might be too conservative. I've got to add a comment that it feels like a lot of attention this morning when two existing home sales and listings. Existing home sales are low because there's no inventory of existing home sales. And there was a lot of attention with listings going up, but they're up from record lows and people are losing sight of that and getting caught up in the headlines, existing home listings are 1.2 million listings. That's up from the record lows, but normal is 2 million listings. The market is very jittery and overreacting in my view towards skewed headlines right now. Let me start on Slide 5. We show our second quarter guidance compared to our actual results. Starting on the top of the slide, revenues…

Thank you, Ara. Now beginning with Slide 17, you can see that we ended the quarter with a total of 132 open for sale communities. 109 of those communities were wholly owned. During the second quarter, we opened 11 new wholly owned communities sold out of 17 wholly owned communities and contributed three to a new unconsolidated joint venture. We also opened four new unconsolidated joint venture communities and closed one during the second quarter. Total communities of 132 were up slightly compared to the second quarter last year when we had 128. However, it was down sequentially from 135 communities at the end of the first quarter. This sequential shortfall in communities is a result of two prevailing trends. First, with continued growth in contracts, we sold through communities faster than we anticipated. The other factor continues to be delayed due to utility hookups throughout the country. We currently expect our total community count to increase by about 5% to 10% by the end of the third quarter of '24 and then grow at least another 5% by the end of fiscal '24. We expect community count to continue to grow in fiscal '25. Predicting community count can be challenging given a variety of factors. The reason we are expecting community count growth is shown on Slide 18. We ended the second quarter with 36,841 controlled lots, which equates to a 7.3 year supply of controlled lots. Our lot count increased 10% sequentially and 29% year-over-year. We optioned 6,300 lots in 63 communities during the second quarter. That is the most we have optioned in one quarter since we started tracking the data in the first quarter of 2016. Our lot count increased, sorry, our land teams are actively engaging with land sellers and negotiating for new land parcels…

Thank you, Brad. I have to add that our stock price today is a scratch head scratcher. Our profits went up 50% and we're one of the leaders in EBIT ROI and we're trading at about 1.4 times our year-end book value, which ends in five months. But we'll continue to put our head down and do what we do best and perform with exceptional returns and build beautiful homes for our customers. We are encouraged by the recent demand for homes, which is evident in our contracts and our traffic, both foot traffic at our communities and visits to our websites. These two trends should definitely keep our contracts per community above normal levels. First, a substantial percentage of homes that we sell are in the active adult or active lifestyle category. In fiscal 2023, it was 21% of our deliveries and I could see that inching up over the future. This is a category where that many of our homebuilding peers do not focus on and we have made it one of our specialties. We've been building active adult lifestyle homes for decades. This buyer demographic is not as concerned about mortgage rates as many of these are cash buyers. In the first half of 2024, 51% of our active adult buyers purchased all cash and many of the others took a small mortgage and didn't really need a mortgage to qualify to purchase. By the way, they have no problem selling their existing home and giving up a mortgage because in most cases, they've already paid off their mortgage. Second, our backlog conversion ratio has increased significantly over the past two years, due to our focus on QMIs. Our second quarter backlog conversion rate was 37% in 2022. It increased to 30% in 2023, and then increased…

Thank you. So we will now answer questions. [Operator Instructions] One moment for our first question, please. All right. And it comes from the line of Natalie Kulasekere with Zelman. Please go ahead.

Hey, nice job during the quarter and thanks for taking my questions. Could you maybe talk a little bit about how May is doing so far in terms of absorptions month-to-date compared to April?

Sure. I'll take that. Well, first of all, obviously, we only have two full weeks in April so far excuse me, in May so far. One of those was Mother's Day. So it's a little early, frankly, to give much color on May. But I'd say in general, it's been choppy as it often is choppy with changes in the environment. We just had mortgage rate reductions over the last three weeks. We've had a lot of focus on the Fed and inflation rates and what their outlook is. So with two weeks, it's really hard to tell. I can say this that our website traffic is outstanding right through last week. If you compare, it's not the highest week since the COVID surge, but it's a very high week. And I think we beat every week other than one week during the COVID surge with our website visit. So, hopefully, that will translate like it has done to good sales in the future.

Got it. Thank you so much. And one more question. So is there an overarching theme on the 40% of communities that you did not raise price in? For example, are they in the similar price point or similar markets? Like is there any trend that you're seeing there that you can share with us?

No, I'd say it's been fairly uniform in terms of price increases. It might have -- it might be a little more challenge in our lowest price homes, the Aspire Homes, as we call them, where they're struggling more for qualification and we tend to have more mortgage rate buy downs, which affects net pricing. But other than that, I'd say it's been very uniform both geographically and price point.

Got it. Thank you so much.

Thank you. [Operator Instructions] One moment for our next question is from Alex Barron with Housing Research Center. Please proceed.

Yes. Thank you. And great job on the quarter guys. I wanted to focus on the margin guidance and just the upper range and lower range. I mean, you're kind of halfway into the quarter. So what would drive the lower range, I guess, at this point?

Brad?

I'm sorry, I missed the question. Alex, could you repeat it?

The question was, what drives since you're one month into the quarter, why do we have such a wide range? And I'd say given the volatility in mortgage rates, we reserve costs in our back pocket for closing and qualification challenges. And that makes it very difficult to know for sure until toward the end, especially as we're selling more and more QMI. So we give ourselves a little wider spread than we did in our pre-QMI days. And we strive to give guidance that we can meet or beat consistently.

Yes. And I would just add, Alex, we saw that in the second quarter actuals, we were at the high end of our range because of just the amount of ultimately how much mortgage rate buy down and other concessions end up getting used on the homes as they close.

Got it. And as far as the share buyback, it seems you guys hadn't done that in a while. So can you just give us your thoughts on going forward how you're thinking about share buybacks in general?

I mean, I would say that we felt like after our earnings call, I think our stock price was around $169-ish I think last at the end of first quarter, the stock price started to go down. And we felt like we feel very strongly about our growth and where our earnings are headed and where our stock price should be headed. And when the stock was down in the $140 range, we felt like it was a good opportunistic time to take some shares out of the market. We could do that again in the future. We'll continue to monitor that for opportunities. I think we have roughly $10 million to $15 million remaining on an approval that we could do. So we're just looking when it's opportunistic and stock prices drop to something we think makes sense, we might consider doing it.

Okay. Well, best of luck for the rest of the year. Thanks, guys.

Thanks, Alan.

Thank you. And as I see no further questions in the queue, I will turn it back to Ara Hovnanian for his final comments.

Thank you very much. As I've mentioned, we're very excited about our performance. We're very excited about our prospects. We are still scratching our head about the valuations, but we think that only spells opportunity. And we look forward to giving you more good news in quarters to come. Thank you very much.

Thank you. And this concludes our conference call for today. Thank you all for participating and have a nice day. You may now disconnect.