Ara Hovnanian on inventory strategy
From Hovnanian Enterprises Q4 2025 Earnings Call · · Investing 101
“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.”
On , Ara Hovnanian, President, Chief Executive Officer & Chairman of the Board at HOVNANIAN ENTRPRS INC -CL A, spoke about inventory strategy during Hovnanian Enterprises Q4 2025 Earnings Call on Investing 101.
About Ara Hovnanian
Ara Hovnanian, President, CEO, and Chairman of Hovnanian Enterprises, stated during the company's fiscal 2025 fourth-quarter earnings call on December 5, 2025, that the company met or beat all of its guidance metrics, though he expressed disappointment in the absolute results. He said the company expects its performance to "bottom out" in the upcoming quarter and then begin improving. Hovnanian noted that the company walked away from nearly 15,000 lots during fiscal 2025, including about 6,000 in the fourth quarter, while securing 9,600 lots under contract in the last three quarters. He attributed margin challenges to older land vintages underwritten with lower incentives, and said that as the company works through those lots and brings on newer land deals identified in 2024 and 2025, margins are expected to improve. On the call, Hovnanian said that 62% of the company's land was initially controlled in 2024 or 2025, while 87% of fourth-quarter deliveries came from lots with vintages from 2023 or earlier. He noted that incentives accounted for 12.2% of the average sales price in the fourth quarter, with the majority attributed to mortgage rate buydowns. In earlier remarks from the fiscal 2025 third-quarter call, Hovnanian described the entry-level market as "the tougher market" and said the company had seen success in active adult and first-time and second-time move-up segments. He also stated that the company's net debt-to-capital ratio was 47.9% at the end of the third quarter, a significant improvement from 146.2% at the beginning of fiscal 2020.