Hovnanian Enterprises, Inc.

For the third quarter, total revenue was $706 million, gross margin was 14.6%, SG&A was 12.3%, income from unconsolidated joint ventures was $3 million, adjusted EBITDA was $32 million, and adjusted pretax income was a loss of $2 million. On a same-quarter basis, quarterly contracts declined by 57 homes to 1.36 thousand, and sales pace was 9.4 contracts per community. Management said the quarter was slightly below the guidance range on adjusted pretax income mainly because JV income was below expectations due to delivery delays at a newer joint venture. For the fourth quarter, guidance calls for revenue of $800 million to $900 million, adjusted gross margin of 15% to 16.5%, SG&A of 10.5% to 11.5% of revenue, JV income of $10 million to $20 million, adjusted EBITDA of $50 million to $65 million, and adjusted pretax income of $15 million to $30 million.

Ara Hovnanian emphasized that the housing market remains difficult because of high mortgage rates, inflation, and geopolitical uncertainty, but said the company is staying focused on sales pace, inventory discipline, and transitioning away from older land bought before today’s incentive environment. He stressed that newer communities are increasingly being underwritten with current incentives in mind, which should support margin recovery over time. His tone was cautious but constructive, with repeated emphasis on positioning the company for stronger returns over the longer term rather than maximizing near-term pricing.

Brad O'Connor highlighted liquidity as being well above target, with no significant near-term debt maturities and a balance sheet that has improved through debt reduction and higher book equity. He noted that community count ended at 147, down slightly year over year, but expects it to rise sequentially in Q4 as newer communities open. On the land side, he said 87% of controlled lots are now option lots and 82% of lots were controlled in fiscal 2023 or later, reflecting a more current underwriting framework and a more flexible, capital-light portfolio. He also said the company’s Q4 guide assumes stable market conditions, ongoing use of mortgage buy-downs, and no changes from phantom stock expense tied to the quarter-end closing price of $123.90.

Analysts pressed on construction costs, incentives, ICE raids, Saudi Arabia exposure, community-count growth, ASP trends, and whether gross margin gains are sustainable. Management said construction cost per square foot ticked up only slightly, with some lumber increases, and that it continues pushing back on material and labor costs. On incentives, they said levels fell sequentially even as mortgage rates rose, though future direction is hard to predict; on community count, they still expect growth in Q4 and into 2027 but acknowledged prior delays from walking away from underwritten land deals. On Saudi Arabia, they said the business is currently small and non-event-like in the income statement, with deliveries expected to begin in Q4 and later into 2027.