Good morning, and thank you for joining us today for Hovnanian Enterprises Fiscal 2025 Third 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 [Operator Instructions]. Management will be making opening remarks about the third 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 Investors 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, Michelle, and thank you all for participating in this morning's call to review the results for our third quarter. 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/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 and 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, 2024, and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable security laws, we undertake no obligation to publicly update or revise any forward-looking statements or whether -- or revise any forward-looking statements, whether as a result of new information, future events or changes in circumstances or any other reason. Joining me today on the call are Ara Hovnanian, Chairman and -- President and CEO; Brad O’'Connor, Chief Financial Officer; David Mitrisin, Vice President, Corporate Controller; and Paul Eberly, Vice President, Finance and Treasurer. Ara, you can go ahead.

Thanks, Jeff. I'm going to review our third quarter results, and I'll also comment on the current housing environment. Brad will follow me with more details as usual. And of course, we'll open it up to Q&A afterwards. Let me begin on Slide 5. Here, we show our third quarter guidance compared to our actual results. Given all of the political and economic uncertainty that was present throughout the quarter, we're pleased that we met or exceeded the guidance we provided for all of the metrics. Starting at the top of the slide, revenues were $801 million, which was right at the midpoint of our guidance. Our adjusted gross margin was 17.3% for the quarter, which was just below the midpoint of the guidance range. Our SG&A ratio was 11.3%, which was better than the midpoint of our guidance. Our income from unconsolidated joint ventures was $16 million, which was within the guidance range, although on the lower end. Adjusted EBITDA was $77 million for the quarter, which was above the high end of the guidance range. And finally, our adjusted pretax income was $40 million, which was at the very top of our guidance range. While this is adjusted pretax income, which excludes land charges, we did have higher walkaway costs and impairment charges during this year's third quarter. The majority of the impairments were in the West segment and were related to communities where we also walked away from land that we didn't -- that didn't meet our return thresholds. Again, given the challenging operating environment, we're satisfied that we are able to meet or exceed the guidance we provided. On Slide 6, we show our third quarter results compared to last year's third quarter. Keep in mind that last year's third quarter was particularly strong, partly because…

Thanks, Brad. I want to emphasize that in this more challenging environment, we continue to work with some of our land sellers currently under option in order to find a compromise where we both share a bit of the pain in a slow market. We've made a strategic decision to burn through certain less profitable land parcels at lower gross margins that clear the way for our newer land acquisitions, which meet our historical return metrics even after the big incentives. Fortunately, we're still finding new land opportunities that meet our return hurdles, again, even after the high level of incentives and at the slower sales pace. To wrap up, we met or exceeded our expectations for the third quarter. Regardless of market conditions, we closely monitor our communities and adjust our local strategies on a weekly basis. Given the tough operating environment, we are focusing on this even more today. Our goal is to be able to deliver strong ROE and ROI results even in difficult markets. That concludes our formal comments, and we'll be happy to turn it over for Q&A now.

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

First, I'd love to just drill in a little bit on the improvement you guys saw in order activity in July. I'm curious if you feel like that was more macro and market-driven based on maybe some of the tariff noise subsiding and rates coming down? Or were there any company-specific actions you guys took to drive that improvement, i.e., higher incentives or community openings or anything like that?

I'd say, in general, Alan, as you saw with our incentives, we did increase incentives a bit this quarter versus last quarter. But overall, I'd say the market is more macroeconomic and political uncertainty news driven. I mean it's just amazing. If there's a good headline, sales are good that week. If there's a bad world headline, the sale, it can go back and forth and back and forth. But other than a slightly more buydown rate, we really didn't do anything very different. It was more macro.

Got it. And then just in terms of August activity month-to-date, would you say that, that July improvement has continued thus far? Or is it just remaining choppy here so far?

I would say -- go ahead. Brad G. O’Connor: I would say it's just remaining choppy. I think we see weak changes just like we kind of showed in the monthly data we were showing there, just bounces back and forth.

Got it. Okay. Appreciate that. Second question on the gross margin guide down sequentially. Obviously, it makes sense given the strategy you guys are working through some of the -- maybe the underperforming assets. But I'm just curious if you can kind of give some framework on how -- you have a very helpful slide in there with the vintage of your lots and you can kind of see, I guess, the land that was underwritten during a better time. When you think about the headwind that might continue from working through these assets, is this like a couple of quarter type phenomenon? Is this something that's likely going to persist through '26? Just can you help frame the size of the bucket of assets that you're kind of focusing on burning through at this point?

It's hard to comment on that, and I can't say we specifically project it. The prices and the margins are not just lot vintage driven, but are also geography driven. I mentioned earlier the markets that are mostly East Coast that are doing far, far better than some of our West Coast markets, plus Texas has been a little slower and Florida has been a little slower. So some of it depends on really burning through the tougher communities in the tougher geographies. Having said that, too, we are having some success working with our -- the sellers of lots to us to share some of the pain, which helps margins and allows us to feel more comfortable burning through some of the lower margins rather than walking from lots. We prefer not to walk from lots where we really can avoid it. So the long-winded answer, Alan, is I'm not sure we really haven't focused on how long it's going to be. I will say that we've reduced the number of lots that we bought in '23 and '24 by almost 2,000 homes, and we've increased our recent purchases, our recent lots that we bought this year in '25 by about 1,000 homes. So the recent purchases have excellent margins even with the rate buydowns, as we said several times. So when that gets into better balance, I can't quite say. But I'm feeling pretty good about our new land acquisitions and eager to clear the road in our balance sheet to pursue more and more of the new land acquisitions.

That's great. I appreciate that. And Brad, can I just squeak in one last housekeeping question. The consolidation on the JV next quarter, did you give a dollar amount, what's going to flow through the other income line? Brad G. O’Connor: We didn't give a dollar amount, but on those 3 previous transactions I mentioned, we averaged about $30 million, and this will probably be in that same neighborhood.

And that's embedded within the pretax income correct? Brad G. O’Connor: Correct.

[Operator Instructions] Our next question comes from Jay McCanless with Wedbush.

I guess, first, can we talk about the balance sheet and what type of debt restructuring opportunities might be out there at this point? Brad G. O’Connor: Sure. I mean we -- as we've said in the past, I'm always looking at ways to continue to improve our balance sheet. And one of those that we talked about previously with the market is the idea of refinancing our secured debt into unsecured, and it's something we're certainly continuing to take a look at, and we'll take advantage of if the opportunity arises, sometimes I pay a lot of attention to on a regular basis.

Yes. Overall, I'd say the market for high yield, even in the homebuilding industry is getting a little better and a little stronger. So we think there will be opportunities in the very near future.

Okay. Great. And then the second question kind of following on what Alan was asking. Are there opportunities maybe to do bulk sales in terms of moving through some of these lots going ahead and taking an even larger gross margin hit to get that off your books so that these newer communities and the better gross margins can shine through a little easier?

We look at that regularly, and we're constantly looking at the potential loss in a sale or a walk away versus building out. And we haven't done a lot of land sales in bulk. We have done a couple of walkaways. But generally speaking, as I mentioned earlier, we're finding some better opportunities with sharing the pain with our land-light partners. So I think that's probably more of the strategy. I will also say -- we mentioned -- Brad mentioned 3 times in the last 9 quarters, we've had a gain from consolidation. We've also had probably 3 or 4 quarters with gains from land sales. So we tend to do more of the latter, the gain from land sales than the loss from land sales. And it makes sense if you consider that 85% of our lots are optioned. We don't have a lot of bulk land on our balance sheet today to sell in bulk at a loss. But we do have, from time to time, entitled land that's more than that -- where the entitlements come through a little earlier than we planned and more than we need for a given market, and we've been having good success selling those at a profit. Brad G. O’Connor: Just to add to your comment, one of the land sales we had earlier this year was basically what you described. It was an underperforming community that we did flip to somebody else. So it's something we do look at, as Ara described.

Got it. Okay. Great. And then the 21% of communities where you could raise price this quarter, I know we're mostly focused in the Northeast, Mid-Atlantic. I think that's the second quarter in a row where we all see good performance there. But diving down a little further, is that entry-level active adult? Any color you can give us on what buyer groups are resilient enough where you can raise price at this point?

I'd say, generically, the entry level is the tougher market. We've had some good success in active adult as a couple of our peers have had. And we've had some good success on first-time and second-time move-up. It's been a more challenging environment in the tertiary super low entry price points.

There are no further questions. I'd like to turn the call back over to Ara for any further comments.

Thank you very much. Again, we're pleased to have met our expectations and guidance, even though we're not as good as we performed last year, but we are excited about the opportunities in the land market and replenishing our land supply, and we'll look forward to delivering some good results. I think we've shown that we have a great franchise that can really deliver some industry-leading ROEs and ROIs. And I think as we continue to replace our land position with newer and newer land parcels, I think our performance is going to get just that much better. Thanks very much.

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