Earnings call transcript: Hovnanian’s Q4 2025 results miss EPS forecast, stock dips

Hovnanian Enterprises reported its fourth-quarter fiscal 2025 earnings, revealing a significant miss on earnings per share (EPS) against market expectations. The company posted an EPS of -$0.51, sharply below the forecasted $0.63, marking a substantial negative surprise of 180.95%. Despite this, the revenue slightly exceeded expectations at $818 million compared to the forecast of $814.5 million. Following the announcement, Hovnanian’s stock fell by 18.64% to $133.98, reflecting investor disappointment.

Key Takeaways

• Hovnanian’s Q4 EPS of -$0.51 missed the forecast by a wide margin.
• Revenue slightly surpassed expectations at $818 million.
• Stock price dropped by 18.64% following the earnings release.
• The company ended the quarter with $404 million in liquidity.
• Hovnanian continues to focus on quick-moving inventory and new mortgage options.

Company Performance

Hovnanian Enterprises faced a challenging fourth quarter, with revenues declining by 17% year-over-year to $818 million. The company emphasized its strategy of maintaining a higher inventory of quick-moving homes, which constituted 73% of its sales. Despite the revenue beat, the significant EPS miss highlighted ongoing challenges, particularly in a tough housing market characterized by high mortgage rates and economic uncertainty.

Financial Highlights

• Revenue: $818 million (17% decline YoY)
• Adjusted Gross Margin: 16.3%
• Adjusted EBITDA: $89 million
• Adjusted Pre-tax Income: $49 million
• Liquidity: $404 million at quarter-end

Earnings vs. Forecast

Hovnanian’s EPS of -$0.51 was a stark contrast to the expected $0.63, resulting in a negative surprise of 180.95%. This miss is significant compared to previous quarters and likely contributed to the negative market reaction. However, the revenue of $818 million slightly exceeded the forecast of $814.5 million, providing a small positive note in the financial results.

Market Reaction

Hovnanian’s stock experienced a steep decline of 18.64% in pre-market trading, closing at $133.98. This drop reflects investor concerns over the company’s profitability and future earnings potential. The stock’s movement contrasts with broader market trends and highlights the impact of the earnings miss.

Outlook & Guidance

Looking ahead, Hovnanian provided revenue guidance for Q1 Fiscal 2026 in the range of $550 million to $650 million, with an expected gross margin of 13-14%. The company anticipates margin improvements from newer land acquisitions and a focus on A and B locations and the active adult segment.

Executive Commentary

CEO Ara Hovnanian emphasized the company’s strategy to prioritize quick-moving inventory, stating, "By focusing on pace over price, maintaining a higher inventory of quick-moving homes, we’re able to sign and deliver more contracts each quarter." He also highlighted the company’s operating model, which is reportedly yielding industry-leading results.

Risks and Challenges

• Economic Uncertainty: Continued economic challenges could impact buyer behavior.
• High Mortgage Rates: Persistently high rates may deter potential homebuyers.
• Inventory Management: Balancing inventory to meet demand without oversupply.
• Lot Supply: The reduction in controlled lots could affect future growth.
• Competitive Market: Intense competition in the housing sector may pressure margins.

Q&A

During the earnings call, analysts inquired about Hovnanian’s cost management strategies and the potential impact of 7-year ARM mortgages on affordability. The company reiterated its focus on margin improvements through strategic land acquisitions and maintaining operational efficiency.

Full transcript - Hovnanian Enterprises (HOV) Q4 2025:

Michelle, Conference Operator: Good morning, and thank you for joining us for today’s Hovnanian Enterprises Fiscal 2025 Fourth 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 fourth quarter results and then open the line for questions. The company will also be webcasting the slide presentation along with the opening remarks 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 now like to turn the call over to Jeff O’Keefe, Vice President, Investor Relations. Jeff, please go ahead.

Jeff O’Keefe, Vice President, Investor Relations, Hovnanian Enterprises: Thank you, Michelle, and thank you all for participating in this morning’s call to review the results for our fourth 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 section entitled Risk Factors and Management’s Discussion and Analysis, particularly the portion of MD&A entitled Safe Harbor Statement and our Annual Report on Form 10-K for the fiscal year ended October 31st, 2024, and subsequent filings with the Securities and Exchange Commission.

Except as 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 and CEO, Brad O’Connor, CFO, David Mitrison, Vice President, Corporate Controller, and Paul Eberle, Vice President, Finance and Treasurer. I’ll now turn the call over to Ara.

Ara Hovnanian, Chairman and CEO, Hovnanian Enterprises: Thanks, Jeff. I’ll begin by reviewing our fourth quarter results, and I’ll discuss our strategic positioning in the current housing market. After my remarks, Brad will follow with additional details and will open up the floor for your questions. Let me begin with slide five. Here we present our fourth quarter guidance alongside our actual results. Despite persistent political and economic uncertainty at home and abroad, our team delivered results meeting or beating our guidance across each of these key metrics. Beginning at the top of the slide, our revenues reached $818 million, surpassing the midpoint of our guidance. Adjusted gross margin came in at 16.3% for the quarter, near the high end of our guidance. SG&A was 11.2%, near the lower end of our guidance. Income from unconsolidated joint ventures totaled $13 million, slightly above our expectations.

Adjusted EBITDA for the quarter was $89 million, also exceeding our guidance range, and adjusted pre-tax income was $49 million, close to the midpoint of our guidance. On slide six, we show the fourth quarter results compared to last year. The year-over-year comparisons are challenging, to say the least, in almost all metrics, given that 2024 was an excellent year for us and the environment became much, much more challenging in 2025. In the upper left-hand portion of the slide, our total revenues declined by 17% year-over-year, primarily driven by a 13% reduction in deliveries and the absence of a significant land sale that occurred in the fourth quarter of last year. Moving to the Adjusted gross margin, we saw a year-over-year decline primarily driven by higher incentives offered to support affordability.

Our focus on pace over price and our short-term strategy to move through lower margin lots are laying the foundation for stronger performance when the market stabilizes and as we open communities with our newer land acquisitions that factored in higher incentives while still achieving normal return metrics. In the fourth quarter of this year, incentives accounted for 12.2% of the average sales price. The majority of this cost was attributed to mortgage rate buy-downs, an essential tool for unlocking affordability at the moment and driving demand. This represents an increase of 60 basis points from the third quarter of 2025, up 370 basis points compared to a year ago, and higher by 920 basis points versus fiscal 2022 before the mortgage rate spike began affecting margins on our deliveries.

Were it not for the considerable cost of making homes affordable through mortgage rate buy-downs, our gross margins would actually be quite robust. Moving to the bottom left, you’ll notice that our total interest expense ratio increased compared to last year. This is mainly due to other interest related to a few large communities in planning where interest is expensed immediately rather than capitalized. These communities were on our balance sheet before land banking, hence the increased interest. Moving to the bottom right-hand section of the slide, importantly, while our profitability stayed within guidance, it was certainly a big reduction from last year’s strong performance. These results are consistent with our strategy of moving through older vintage lots, selling our QMIs, prioritizing sales pace over price, and clearing our balance sheet to make way for new land contracts, which are projected to carry significantly higher margins and returns.

Turning to the sales environment on slide seven, we continue to use mortgage rate incentives to support our sales. Although the number of contracts in the fourth quarter fell by 8% compared to last year, it basically reflects the overall market conditions. Last year’s fourth quarter was a particularly strong quarter for sales, making a difficult comparison for this year. Our use of incentives has helped soften some of the challenges and maintain steady activity. Turning to slide eight, this slide displays traffic per community for each month in the fourth quarter, as well as the month of November. Compared to last year, traffic increased significantly in three of the four months. These results clearly highlight a positive trend. Buyer interest has grown compared to last year. However, many potential buyers are still hesitant to move forward and enter contracts given a lot of economic and world uncertainty.

You can see that contracts during the year on slide 9 show that it was quite choppy every month. Looking at slide 10, you’ll notice that quarterly contracts per community declined this year compared to the fourth quarter of last year. Similar to our year-over-year monthly results, our quarterly year-over-year results were also volatile. These comparisons demonstrate how challenging the current environment is. The contracts per community in the fourth quarter of 2025 were 16% below the level seen during the 1997 to 2002 period, one of the few that we consider a normal sales environment. On slide 11, we provide a closer look at monthly contracts per community, comparing each month in the fourth quarter to the same month last year. This year, sales pace for each month in the fourth quarter was lower than the same months last year and below our normal levels.

If you refer to slide 12, we present contracts per community as if our quarter ended on September 30th, allowing for a direct comparison with all of our peers that report contracts per community on a calendar quarter basis, which is most of them. With 9.6 contracts per community, our sales pace ranks as the fourth highest among all the publicly traded homebuilders. As illustrated on slide 13, contracts per community declined year-over-year for a vast majority of the homebuilders reporting this metric. Although any decrease is less than ideal, our performance surpassed all but two of our peers. These comparisons are based on an adjusted quarter ending in September for us, which allows us to have a direct evaluation and comparison compared to our peers. The takeaway from these last two slides is clear.

Our focus on sales pace over price is delivering above-average sales results and strengthening our margin position. I recognize, however, that it’s sad to point out that we are one of the least bad in a difficult market, but that will eventually change. For the past two years, about 70% of our buyers have used mortgage rate buy-downs. As shown on slide 14, the total value of incentives and buy-downs has grown considerably over the last four years. Incentives began to rise sharply in early 2023, jumping from 3.9% in the fourth quarter of 2022 to 7.4% in the first quarter of 2023. While these higher incentives have put short-term pressure on our margins, they’ve helped us keep our sales steady and move through lots with lower margin potential.

To further support homebuyers, we are maintaining a robust inventory of quick-moving homes, or QMIs, as we call them, enabling customers to benefit from incentive programs and secure homes quickly and cost-effectively. On slide 15, we show that at the end of the fourth quarter, we had 6.5 QMIs per community. This marks the third quarter in a row where the number of QMIs per community has gone down, reflecting our ability to align starts with sales pace and optimize inventory levels. QMIs are homes that we have started framing but have not yet sold. As shown on slide 16, the number of QMIs fell from 1,163 at the end of January of 2025 to 907 at the end of October of 2025. This represents a 22% decrease over that period.

It demonstrates our flexibility in aligning supply with current demand and optimizing our approach to meet buyers’ needs while maintaining operational efficiency. In the fourth quarter, QMI sales comprised 73% of our total sales, down from the record of 79% in prior quarters, but still well above our historical norms of about 40%. By focusing on QMIs, we sign and deliver more contracts within the same quarter. This approach means we have fewer homes in backlog at the end of each quarter, but a higher rate of converting backlog to deliveries. In the fourth quarter of 2025, 36% of our homes delivered were both contracted and delivered in the same quarter. While this makes it a bit harder to predict next quarter’s results, it led to a backlog conversion ratio of 102%, much higher than the historical average of 66% for fourth quarters since 1998.

That was also the first time we’ve ever been above 100% in any quarter. We continue to closely manage our QMIs for each community, making sure the rate at which we start these homes matches the rate at which we sell them. If you look at slide 17, you’ll see that despite higher mortgage rates and a slower sales pace nationwide, we managed to increase net prices in 36% of our communities during the fourth quarter. More than half of these price increases happened in Delaware, Maryland, New Jersey, South Carolina, Virginia, and West Virginia, some of our strongest markets. However, we’ve also been successful and have communities in some of our most challenging markets, typically in A and B locations, that have great returns. Our approach remains to prioritize sales pace, but when the market strength is evident, we capitalize on opportunities to raise prices and reduce incentives.

I’ll now turn it over to Brad O’Connor, our Chief Financial Officer. Thank you, Ara. Before I get to the next slide, I want to comment on the other income line on our income statement. During the fourth quarter of fiscal 2025, we assumed control of two previously unconsolidated joint ventures after our partners received their final cash distributions, achieving their preferred return requirements. As a result, we consolidated the remaining assets and liabilities of these successful joint ventures at fair value, recording a gain of $18.9 million in other income. This type of consolidation has become more common, and we anticipate another similar event in the first quarter of fiscal 2026. Importantly, these communities continue to meet our standard return metrics even after the step-up to fair value and after current incentives.

Turning to slide 18, we finished the quarter with 156 communities open for sale, reflecting steady growth as we focus on expanding our top line. We expect newer communities to outperform older vintages, supporting our growth strategy. Unfortunately, the difficult market is currently a headwind to our growth, but the larger higher community count is allowing us to generally maintain our volume. Slide 19 details our land position. We ended the fourth quarter with 35,883 controlled lots, equivalent to a 6.5-year supply. Including joint ventures, we now control 38,742 lots. Our lot count decreased 14% year-over-year, reflecting disciplined land acquisition and a willingness to walk away from or postpone less attractive opportunities. Even with fewer lots, we remain well-positioned to increase our home deliveries in the coming years.

On the far right side of the slide, you can see that our lot count decreased sequentially for the third quarter in a row. These recent declines are reflective of the operating environment. We walked away from almost 15,000 lots during fiscal 2025, including almost 6,000 lots in the fourth quarter. Having said that, our land teams remain active, securing 9,600 lots under contract in the last three quarters, 3,100 in the fourth quarter, all meeting or exceeding our margin and IRR hurdles, even after factoring in current high incentives. Slide 20 shows the age of our lot position, both owned and optioned, broken down by the year each lot was controlled. The number above each bar represents the percentage of total lots that were controlled in that year. The number below each bar indicates the percentage of incentives used on homes delivered during that year.

This slide illustrates that by the fourth quarter of this year, 62% of our land was initially controlled in either 2024 or 2025, by which time we were assuming more significant incentives in our underwriting of land acquisitions. However, 87% of our deliveries in the fourth quarter were from lots with vintages from 2023 or earlier. Those vintages are more challenging from a margin perspective because we were assuming much lower incentives when they were underwritten. We are working through those lots, as you can see on this slide, but it is a gradual transition. The process of shifting our land position towards lots that were purchased with greater incentives is slow and ongoing. We are working through the older, less profitable lots and replacing them with newer land acquisitions that offer better returns.

In today’s challenging market, we’re also working with some land sellers who we have option agreements with to buy mutually beneficial solutions where we both share a little bit of the pain in a difficult market. Strategically, we decided to sell through lower margin lots to make room for new land acquisitions that meet our IRR targets. The good news is we are still finding new land opportunities that meet our underwriting criteria, even with current high incentives and the current sales pace. Given our recent land acquisitions that begin delivering in 2026, we expect our gross margin percentage to bottom in the first quarter of fiscal 2026 and to gradually improve in the following quarters. On slide 21, we show our land and land development spend for each quarter of fiscal 2025 and the quarterly average for all of 2024.

Land and development spend has decreased in response to market conditions, reflecting disciplined capital allocation and rigorous evaluation of every acquisition, factoring in current prices, incentive levels, construction costs, and sales pace to ensure IRRs above 20%. We continue to identify compelling opportunities in our markets and remain laser-focused on revenue and profit growth for the long term. Our commitment to disciplined underwriting and strategic investment will drive continued success. Turning to slide 22, we ended Q4 with $404 million in liquidity, well above our targeted range, even after spending $199 million on land and land development. We completed a significant refinancing during the fourth quarter, which is highlighted on slide 23. The top of the slide shows our maturity ladder as of July 31st, 2025. This refinancing shown on the bottom portion of the slide marks a major milestone for us.

For the first time since 2008, all of our debt, except for our revolving credit facility, is now unsecured. This change strengthens our balance sheet going forward, providing us with greater financial flexibility, reducing risk, and positioning us for future growth. The successful refinancing underscores our disciplined approach to managing debt and emphasizes our commitment to maintaining a strong and stable financial foundation. On slide 24, we highlight how we’ve successfully increased our equity and reduced our debt over the past few years. Over that time, equity has grown by $1.3 billion, and the debt has been reduced by $754 million. Net debt to capital is now 44.2%, a substantial improvement from 146.2% at the start of fiscal 2020. While we still have work to do, we remain on track toward our 30% net debt target.

With $230 million in deferred tax assets, we will not pay federal income taxes on approximately $700 million of future pre-tax earnings, enhancing cash flow and supporting growth. Given the current volatility and challenges with predicting margins, we are only providing financial guidance for the next quarter. Our outlook assumes that market conditions remain stable, with no major increases in mortgage rates, tariffs, inflation, cancellation rates, or construction cycle times. As we rely more on QMI sales, forecasting profits is tougher. While we’ve performed at the top of our guidance for many quarters, our goal is to provide realistic guidance that we can meet or beat if conditions are favorable.

Our forecast includes ongoing use of mortgage rate buy-downs and similar incentives, and it does not include any changes to SG&A expenses from phantom stock costs tied to stock price changes from the $120.23 closing price at the end of Q4 fiscal 2025. Slide 25 shows our guidance for the first quarter of fiscal 26. Our expectation for total revenues for the first quarter is between $550 million and $650 million. Adjusted gross margin is expected to be in the range of 13%-14%. This is lower than our typical gross margin, particularly because of increased costs of mortgage rate buy-downs and our focus on pace versus price. Assuming no further deterioration in the market, we expect our gross margin to bottom in the first quarter of ’26, with margins gradually increasing each quarter in the remainder of ’26.

We expect the range of SG&A as a percentage of total revenues to be between 13.5% and 14.5%, which is still higher than usual. One of the reasons the SG&A ratio is running a little high is that we are expecting community account growth, and we have to make new hires in advance of those communities. In addition, we are making significant investments to improve processes and technology in many areas to significantly increase our efficiency in future years. We expect income from joint ventures to be between break-even and $10 million, and our guidance for Adjusted EBITDA is between $35 million and $45 million. Our expectation for adjusted pre-tax income for the first quarter is between $10 million and $20 million.

This includes the expectation of other income from the consolidation of the joint venture in the first quarter when the partners expected to reach their full return of all capital as prescribed in the JV agreement. As a reminder, this has become a normal part of the life cycle of our joint ventures as we have had other income from JV-related transactions four times in the past 10 quarters. Our first quarter guidance also includes proceeds from a land sale we expect to close in the first quarter. On slide 26, we show 85% of our lots controlled via option, up from 46% in fiscal 2015, reflecting our strategic focus on land-light. Looking at slide 27, we remain strong compared to our peers in controlling land through options. In fact, we have the fourth highest percentage of option lots, placing us well above the industry median of 58%.

On slide 28, we have the second highest inventory turnover rate among our peers. This is an important part of our strategy because it means we sell and replace our inventory more quickly than most competitors, demonstrating a more efficient use of our capital. This reflects many other factors in addition to land-light. We see more opportunities to use land options, as well as reduce lot purchase to construction start and construction start to completion cycle times, which would further help us improve our inventory turnover. On slide 29, we show that compared to our mid-size peers, we have the second highest adjusted EBIT returns on investment at 17.7%. On slide 30, we have the five larger builders, and we still rank fifth highest overall. Our adjusted EBIT return on investment is a true measure of pure home building operating performance.

Over the last several years, we’ve consistently had one of the highest ROIs among our peers. On slide 31, we show our price-to-book value compared to our peers. We are trading slightly above book value and just below the median for all the peers shown on the slide. These last two slides emphasize the point that given our high return on investment, combined with our rapidly improving balance sheet, we believe our stock continues to be undervalued. I’ll now turn it back to Ara for some brief closing comments.

Jeff O’Keefe, Vice President, Investor Relations, Hovnanian Enterprises: Thanks, Brad. Five years ago, we were above median compared to our mid-size peers in EBIT ROI, which we believe is the true key operating metric for home builders from our perspective. Four years ago, we were also above median in ROI. For the past three years, we have been number one or the number two performer in ROI. Our operating model is yielding industry-leading results. It’s true that we have a high debt-to-cap ratio and higher interest rates than many of our peers, which means that we have been more sensitive to margin compression. However, as we’ve shown you, we have been steadily increasing our equity and decreasing the amount of debt. With our recent refinancing, we’ve decreased the cost of our debt.

Our fourth quarter pre-tax was significantly impacted by the heavy fees to pay off our debt early during the refinancing, but the interest savings would quickly bring back the benefits, and the longer maturities give us the flexibility to deal with market uncertainties. We have plenty of work ahead of us, but the key is that we have the right operating model that is producing top results on an ROI basis. As Brad mentioned, we’re making heavy investments in business process redesign, technology, and in searching for new opportunities and cost reductions that will make us even more competitive in the future. Our land position, as shown on slide 32, is heavily weighted to the Northeast, which is over 53% of our lots controlled, and that’s important because the Northeast is one of our most profitable segments.

It is lowest in the Southeast, a more challenging market at the moment, where we only control 17% of our total lots. Finally, the West has 30% of our lots. While our short-term sales have been below last year, as I mentioned earlier, traffic per community is up fairly significantly over last year in recent months. Buyers are definitely out there looking, but with all the world and economic uncertainty, they are hesitating at the moment, but that will eventually pass. Our new land acquisitions, particularly the land and lot contracts in the last year, have been underwritten with significant incentives that should yield dramatically better gross margins and returns. In addition, on Monday morning, I can look back and say we were too heavily invested in the more affordable tertiary markets with entry-level homes.

This has been the more challenging segment of the housing market, and we have been staying clear of these locations in our new land acquisitions. Conversely, our active adult segment has been performing quite well, and we are focusing more on the segment, which is currently only about 19% of our deliveries. Regarding our move-up product, clearly the A and B locations are performing the best all over the country, and that’s where we’re concentrating our efforts on new land acquisitions. By focusing on pace over price, maintaining a higher inventory of quick-moving homes, we’re able to sign and deliver more contracts each quarter, convert backlog at a higher rate, and keep our communities active and burn through our older land that has lower embedded margins. This clears our balance sheet for newer land acquisitions, underwritten to provide solid returns even with the current high incentives.

As Brad mentioned, our internal guidance suggests that margins should bottom out in the first quarter and begin to steadily increase in subsequent quarters if the market conditions remain similar to current conditions. That concludes our formal comments, and we’re happy to turn it over for Q&A now.

Ara Hovnanian, Chairman and CEO, Hovnanian Enterprises: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We ask that you please limit yourself to one question and one follow-up before re-entering the queue. One moment for our first question. Our first question comes from the line of Natalie Kuleska with Zelman. Your line is open. Please go ahead.

Natalie Kuleska, Analyst, Zelman: Hey, good morning, and thanks for taking my question. Are you doing anything to offset some of the pressure from gross margins? Have you seen any cost improvements, maybe direct cost improvements? Have you been able to negotiate anything lower with your vendors? Yeah, just any color on that would be great.

I mean, we have consistently gone back in existing communities and certainly for new communities to re-bid with suppliers, trade partners, etc. We’ve had some success controlling costs and reducing costs in some places. We’re down pretty significantly in costs on a per sq ft basis from two years ago. Over this year, we’re basically holding steady. So any increases being caused by tariffs or other things have been offset by savings elsewhere. So we’ve been able to manage costs flat, and we’ll continue to pursue ways to reduce costs either with trades or change in material suppliers, etc.

Jeff O’Keefe, Vice President, Investor Relations, Hovnanian Enterprises: I’ll mention one additional thing. We’ve seen several of our peers have success with buying down a seven-year ARM versus a 30-year fixed. That has two benefits. One, you can qualify buyers at a lower rate and at the same time actually save cost, which helps margins. So we’re going to begin advertising and promoting that program more aggressively starting this weekend. And if it’s as successful as we’re seeing, that incremental portion of our buyers that use a seven-year ARM will help our margins.

Natalie Kuleska, Analyst, Zelman: Okay, that’s helpful. Thank you. And when you expect gross margin to take higher next year, is that driven by a mixed impact, or is it because you think you will be done selling through underperforming assets at that point?

It’s a mix because you’re working through the older stuff. So yeah, as we continue to work through the older, more challenging property and bring on deals we identified in 2024 and 2025, that mixed shift to newer land will help our margins improve.

Okay, thank you.

Ara Hovnanian, Chairman and CEO, Hovnanian Enterprises: Thank you. And as a reminder to ask a question, please press star 1-1 on your telephone. I am showing no further questions at this time, and I would like to hand the conference back to Ara Hovnanian for closing remarks.

Jeff O’Keefe, Vice President, Investor Relations, Hovnanian Enterprises: Thank you very much. Well, needless to say, we’re pleased that we met or beat all of our guidance metrics, disappointed in the absolute results, but we look forward to our performance bottoming out in this upcoming quarter and then beginning our improvement from there. Thanks so much, and we look forward to reporting better and better results in future quarters.

Ara Hovnanian, Chairman and CEO, Hovnanian Enterprises: This concludes today’s conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

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