HOVNP Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Total Revenues: $668 million, near the midpoint of guidance.

Adjusted Gross Margin: 14.3%, exceeding expectations and improving from 13.4% in Q1.

SG&A Expenses: 12.6%, at the lower end of guidance.

Adjusted EBITDA: $41 million, above projected range.

Adjusted Pretax Income: $9 million, at the top end of guidance.

Liquidity: $442 million, well above target, after $232 million spent on land and $10 million on stock repurchases.

Joint Ventures: Reported a $1 million loss, slightly below expectations due to startup costs.

2Strategic Updates and Business Highlights

The company is focusing on affordability through targeted mortgage rate buy downs to maintain sales pace while transitioning to newer communities with better margins.

Incentives represented 11.9% of average sales price, marking a 70 basis point decline from Q1, the first decrease in nearly two years.

Construction costs decreased by 2% year-over-year, and cycle times improved by 6 days.

The company is managing inventory effectively, with a focus on quick move-in homes (QMIs) which accounted for 68% of total sales.

The number of QMIs has decreased significantly from 1,160 a year ago to 731, indicating improved inventory management.

3Forward Guidance and Outlook

For Q3 2026, HOVNP expects:

Total Revenues: Between $650 million and $750 million.

Adjusted Gross Margin: 14% to 15%.

SG&A as a Percentage of Revenue: 12.5% to 13.5%.

Adjusted EBITDA: $30 million to $40 million.

Adjusted Pretax Income: Breakeven to $10 million.

Management anticipates a rebound in adjusted pretax income in Q4, driven by deliveries from newer, higher-margin communities.

4Bad News, Challenges, or Points of Concern

Year-over-year revenue declined by 3% due to a 12% drop in home deliveries amid a competitive market.

The company faces challenges from a choppy housing market and low consumer confidence, exacerbated by geopolitical tensions (e.g., the Iran war).

Although incentives have decreased, they remain higher than pre-2023 levels, putting pressure on margins.

There is uncertainty regarding the timing of community openings and the overall sales environment, making it difficult to provide visibility beyond the next quarter.

5Notable Q&A Insights

Management clarified that the anticipated Q4 improvement is expected to be sequential rather than year-over-year.

The company is renegotiating terms with land sellers to share the burden of current market conditions, with some success in deferring costs.

There is a strategic pivot towards base price adjustments versus incentives, but the effectiveness of mortgage rate buy downs remains significant.

Finished QMIs have decreased substantially, which has allowed the company to be less aggressive with incentives.

The Saudi operation is still active, with deliveries expected in the second half of the year, despite current geopolitical challenges. Overall, HOVNP is navigating a challenging housing market with a focus on strategic inventory management and transitioning to higher-margin communities, while maintaining a strong liquidity position.