Hovnanian Enterprises Inc Q2 FY2023 Earnings Call

Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2023 Second 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. Management will make some opening remarks about the second 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 Investor 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 now like to turn the call over to Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead.

Thank you, Lydia and thank you all for participating in this morning's call to review the results for our second quarter which ended April 30, 2023. 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 in 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, 2022 and subsequent filings with the Securities and Exchange Commission. Except as otherwise 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, President and CEO; Larry Sorsby, Executive Vice President and CFO; and Brad O'Connor, Senior Vice President, Chief Accounting Officer and Treasurer. I'll now turn the call over to Ara.

Thanks, Jeff. I'm going to discuss our second quarter results and provide some insights into the current housing market. Larry Sorsby, our CFO, will follow up with additional details, and we'll open the floor for questions afterward. On Slide 5, we typically compare our quarterly results with our guidance. Given the increase in mortgage rates, instability in the banking sector, inflation concerns, federal debt ceiling issues, the ongoing conflict in Ukraine, and general economic uncertainty, we are pleased to report that we surpassed the high end of our guidance for nearly all metrics in the second quarter. Total revenues reached $704 million, SG&A was at 10.7%, and adjusted EBITDA stood at $87 million, all of which exceeded our guidance range. Our adjusted pretax income was $46 million, surpassing our forecast by over 30%. We saw strong demand for quick move-in homes, which led to higher deliveries, revenues, and profits in the second quarter, although this also resulted in a slightly lower adjusted gross margin than we had previously expected, mainly because most of our quick move-in homes were located in the West, which currently experiences lower margins. Recently, the gap between margins for quick move-in homes and those for to-be-built homes has narrowed, and we are making efforts to close it further. Due to the slowdown in housing sales last year as mortgage rates surged, we increased our use of incentives and began more quick move-in homes last summer. These strategies boosted demand and allowed us to achieve better home deliveries and profits than anticipated during the quarter. On Slide 6, we compare this year's second quarter results to the same period last year. This year's comparisons are challenging since last year’s margins and profits were particularly strong. In total revenues, we remained flat year-over-year at $704 million. Our adjusted gross margin was 20.9% this year, contrasting with last year's significant peak of 26.6%. Gross margins for the second quarter of 2023 were negatively affected by a 650-basis point rise in incentives and concessions compared to the same period last year. We delivered more homes last quarter, which had been sold during a more challenging market period. Even with the increased use of concessions, our gross margin remained above 20%, which we view as more typical. The contracts we are currently signing for new homes have margins that exceed those of our recent deliveries and are also above 20%. On the lower left side of the slide, SG&A was 10.7% this year compared to 9.7% last year. After excluding certain benefits from the Phantom stock last year, our SG&A remained essentially flat. In the lower right section of the slide, adjusted EBITDA was $87 million, down from $124 million last year. On Slide 7, our adjusted pretax income for the quarter was $46 million compared to $88 million last year. Our net income for the second quarter of 2023 was $34 million, down from $62 million in last year's second quarter. Moving to Slide 8, contracts per community in the second quarter were down 13% from last year's stronger-than-normal pace. However, at 13 contracts per community, we are significantly above the levels achieved in prior second quarters before COVID. Historically, from 1997 to 2002, we averaged 13.5 contracts per community during the second quarter, suggesting that the current quarter aligns with more typical levels. Since last summer, we've seen substantial increases in our sales pace following a decline in home demand after the rise in rates. Our contracts per community for the second quarter of 2023 increased sequentially by 100%, from 6.5 in the first quarter to 13 in the second quarter. On Slide 9, we reveal that the trend of monthly contracts per community has sharply increased since the beginning of the fiscal year, and this is true whether we include or exclude build-for-rent contracts. The data indicates our sales pace is significantly improving, exceeding what is typical for the spring selling season. Although there are still a few days left, preliminary results for May show a 30% increase in total contracts compared to all of May last year, and contracts per community rose 18% from 3.3 in May last year to 3.9 in preliminary results for May 2023. While lower than April's numbers, this remains at a very high annualized pace, surpassing pre-COVID sales levels. It's worth mentioning that May had only 4 Sundays compared to 5 in April, affecting sequential results. Looking at Slide 10, we break down contracts per community by geographic segments. Consistent with previous quarters, contracts per community in the West segment were lower than those in the Northeast or Southeast segments. However, the sales pace in the West has improved, significantly narrowing the gap between the West and Northeast during the second quarter of 2023. Moving to Slide 11, you can observe the month-by-month trend of our seasonally adjusted annualized contract pace per community. The decline began in May of last year, reaching a low in September with 21.2 contracts per community. Since then, the trend has been positive, approaching our normalized annual pace of 44 contracts per community. The slowdown was a reaction to rising mortgage rates, but we see that customers have adjusted to the higher rates and are re-engaging with the housing market. Turning to Slide 12, we present annual contracts per community. On the left, you see our normalized pace of 44 contracts achieved from 1997 to 2002. In the middle, there’s our annual contracts per community for the last 9 fiscal years. On the right, we show recent seasonally adjusted monthly contracts per community for the past several months. Except for the pace in March, all recent figures exceed those of the previous 9 years, apart from the two years following COVID. In Slide 13, we note that our cancellation rate in the second quarter returned to a normalized rate of 18%. Weekly traffic in our communities and website visits are holding at healthy levels, suggesting strong future demand for new homes. Now, I want to switch gears and discuss our recent pivot towards increasing the number of quick move-in homes, or QMIs. This shift is logical because QMIs provide customers with more certainty regarding their mortgage payments at closing, as we consider a home to be a QMI once construction begins. On Slide 14, we illustrate that following a significant shortage of QMIs during the COVID surge in demand, we've increased from 3.2 QMIs per community at the end of Q3 2022 to a peak of 5.6 QMIs per community at the end of fiscal 2022, and now we stand at 4.8 QMIs per community at the end of Q2 2023. Growing our QMIs has been challenging due to our rising sales pace. Currently, our QMIs per community are still slightly above our historical average and consumer demand for QMIs is very strong. Since the start of the year, QMI sales have risen to about 60% of our total sales, up from 40% historically, reflecting a significant 50% increase. We target approximately 7 QMIs per community, ideally with some homes beginning construction and others partway through at each community. However, recent strong sales make it difficult to reach this target. Some investors worry that builders will overproduce QMIs, but we don't observe that happening on the ground. If we reach 7 QMIs per community, we plan to align our start schedule with the local community's current sales pace, ensuring we don't create an excessive number of unsold homes. In the meantime, we will keep focusing on selling these homes before completion. Due to strong current sales and limited MLS listings, it is hard to start enough QMIs to meet demand. On Slide 15, we show that the number of existing homes for sale nationwide remains low at 910,000, which is less than half of the historical average of over 2 million homes. This scarcity should aid our sales as buyers have fewer existing homes to choose from and are turning to new construction. We highlighted that consumers want assurance in knowing and locking in mortgage rates, which is another driving factor in building more QMIs. Additionally, having QMIs available is important since homebuyers can close much sooner compared to to-be-built homes. On Slide 16, due to increased demand for our homes, we've been able to raise net home prices in 30% of our communities during the first quarter and in 69% during the second. If demand continues strong, we anticipate being able to keep increasing home prices in the future. These price increases take into account incentives and concessions. One reason margins remain robust, despite a higher usage of incentives, is that lumber costs have returned to more historically normal levels. We have also actively worked to lower construction costs in other areas. As mentioned in our last call, we initiated a purchasing blitz, collaborating with our trade partners and material suppliers to negotiate significant annual savings. These cost reductions from the purchasing blitz should positively influence our margins later in 2023 as we deliver homes that are currently under construction at these lower costs. In addition, during the second quarter, we implemented measures to further cut our SG&A expenses. First, we reduced our workforce by about 10% since the end of fiscal 2022. Second, senior executives took a pay cut. And third, we asked our employees to cut back on outside service providers. The combined savings from these actions yielded significant annual reductions in overhead. Given the relative strength of the housing market and our cost-cutting initiatives, we are even more optimistic about our future growth prospects. Moreover, we believe favorable demographics and the consistently low supply of existing homes will sustain demand over the long term. I'll now hand it over to Larry Sorsby, our Chief Financial Officer.

Thanks, Ara. I'm going to start with Slide 17. You can see that we ended the quarter with 128 communities open for sale. Wholly owned communities grew 12% year-over-year to 114. Utility company delays continued to slow down our ability to open new communities. If not for these delays, our number of communities open for sale would have been even higher. During the rapid increase in mortgage rates last summer, we suspended most new land acquisitions. As a result, on Slide 18, we show that our lot count peaked in the second quarter of fiscal '22 at 33,501 lots controlled. During each of the subsequent quarters, our lot count modestly decreased and we ended the second quarter of fiscal '23 with 28,657 lots. Given our recent increase in sales pace, our land teams have jumped back into the market quickly and are once again actively negotiating new land parcels that meet our underwriting standards. We have already experienced success in our new land acquisition efforts and our corporate land committee calendars continue to fill up. By using current home prices, current construction costs and current sales pace to underwrite to a 20-plus percent internal rate of return, our underwriting standards automatically self-adjust to changes in market conditions. We think our outlook for future deliveries is very bright, given the increase in new communities and the solid pace in contracts per community compared to last year. Given the return to a more normalized sales pace and our planned increase in community count, we anticipate returning to top line growth in fiscal '24. On Slide 19, we show our percentage of lots controlled by option increased from 45% in the second quarter of fiscal '15 to 71% in the second quarter of fiscal '23. This has been a focus of our land strategy and we continue to make progress. A low percentage of owned lots strongly mitigates land risk. Turning now to Slide 20. Compared to our peers, you see that we have one of the highest percentages of land controlled via options. We continue to use land options whenever possible to achieve higher inventory turns, enhance our returns on capital and to reduce risk. Turning now to Slide 21. We show year's supply of owned lots for us and our peers. With 1.6-year supply of owned lots, we have the second-lowest year supply. Having a shorter supply of owned lots combined with a strong supply of option lots is a good way to mitigate land risk. On Slide 22, including both owned and option lots, you can see that we have a 5.5-year supply of controlled land. Turning now to Slide 23. Compared to our peers, we continue to have the third highest inventory turnover rate. High inventory turns are a key component of our overall strategy. We believe we have opportunities to continue to increase our use of land options and to further improve both inventory turns and our returns on inventory in future periods. Turning to Slide 24. After $157 million of land spend in our second quarter, we ended the quarter with $464 million of liquidity, more than $200 million above the high end of our targeted liquidity range. Turning now to Slide 25. On this slide, we show our debt maturity ladder at the end of the second quarter. During last year's fourth quarter, we amended our revolving credit facility to extend the maturity date to June 30, 2024. After that, we don't have any debt maturing until the first quarter of fiscal 2026. Due to changing market conditions last summer, we temporarily shifted our focus to preserving liquidity and paused our debt reduction plans. In our press release this morning, we announced that in May, we redeemed $100 million of our 7.75% senior secured notes due 2026. We have retired $494 million of debt since the beginning of fiscal 2020. This latest debt reduction shows that we remain committed to strengthening our balance sheet. Given our $337 million deferred tax assets, we will not have to pay federal income taxes on approximately $1.3 billion of future pretax earnings. This benefit will significantly enhance our cash flow in years to come and will accelerate our progress of improving our balance sheet. Our financial guidance for the third quarter and full year of fiscal '23 assumes no adverse changes in current market conditions, including no further deterioration in our supply chain or material increases in mortgage rates, inflation or cancellation rates. Our guidance assumes continued extended construction cycle times averaging 6 to 7 months compared to our pre-COVID cycle times for construction of approximately 4 months. Further, it excludes any impact to SG&A expenses from our Phantom stock expenses related solely to the stock price movement from our $73.77 stock price at the end of the second quarter of fiscal '23. While we've met or exceeded most of our guided metrics over many quarters, there is a greater degree of uncertainty in the current environment given inflation, the potential of an economic recession, risk related to increasing the U.S. debt ceiling, employment risk, recent bank failures, utility company delays and mortgage rate increases. With those caveats in mind, on Slide 26, we show our guidance for the third quarter of fiscal '23. We expect total revenues for the third quarter to be between $630 million and $730 million. We expect adjusted gross margins to be in the range of 21.5% to 22.5%. SG&A as a percent of total revenue is expected to be between 11% and 12%. Our guidance for adjusted EBITDA is between $85 million and $95 million. Our adjusted pre-tax income for the third quarter of fiscal '23 is expected to be between $50 million and $60 million. On Slide 27, we show guidance for fiscal '23. We expect total revenues for fiscal '23 to be between $2.5 billion and $2.65 billion. We also expect adjusted gross margins to be in the range of 21% to 22.5%. SG&A as a percent of total revenues is expected to be between 11% and 12.5%. Our guidance for adjusted EBITDA is between $320 million and $340 million. Our adjusted annual pre-tax income for fiscal '23 is expected to be between $180 million and $200 million. We expect our diluted EPS to be in the range of $17 to $20. Book value per common share is expected to be between $57 and $60 at the end of the fourth quarter. Turning now to Slide 28. It shows the compounded annual growth rate of our book value per share from the end of '21 to the midpoint of our guidance for the fourth quarter of fiscal '23. Our expected growth rate is 205%. Slide 29 shows our book value growth rate compared to our peers, helped by the fact that we started at a low number, our growth rate is much higher than our peers. We think it's important to consider how rapidly our book value is increasing when evaluating an appropriate price-to-book ratio compared to our peers. Given our rapidly growing book value, we think it would be appropriate to consider a variety of metrics, including EBIT, return on investment, and our price earnings multiple when establishing a fair value for our stock. We believe when all of our financial metrics are considered, our stock is a compelling value. Turning to Slide 30. Not only has our book value per share been growing at an extremely strong rate but on this slide we show that compared to our peers we have the second highest return on equity at 50%. Turning to Slide 31. On this slide, we show compared to our peers that we have one of the highest consolidated EBIT returns on investment at 32.9%. We believe this is the most accurate measure of pure homebuilding performance as it ignores leverage. On Slide 32, we show our price to book multiple compared to our peers. While we trade above median, we still trade below peers that have lower growth rates and lower returns than us. Given our rapidly growing book value, it's not reasonable to place an arbitrarily low multiple of book as a cap to our share price as some analysts have suggested. On Slide 33, we show the trailing 12-month price-to-earnings ratio for us in our peer group. Even though homebuilder stocks have traded higher since the beginning of calendar '23, the group still trades at a significant discount to the overall stock market. Based on our price earnings multiple of 3.61x at yesterday's closing stock price of $93.83, we're trading at a 41% discount to the homebuilding industry average PE ratio. We recognize that our stock may trade at a discount to the group because of our higher leverage. However, given our 50% return on equity, our industry-leading growth in book value, our top quartile EBIT return on investment, combined with our improving balance sheet, we believe our stock continues to be the most undervalued of the entire universe of public homebuilders. We remain focused on further strengthening our balance sheet, including further reductions in our debt levels. We look forward to reporting our progress in future periods. That concludes our formal comments and we're now happy to open it up for Q&A.

And our first question coming from the line Jesse Lederman with Zelman & Associates.

Congrats on the strong results. You gave some really great info, particularly on the absorption pace. And looking at Slide 11, it's clear that the second quarter was particularly strong. And on a seasonally adjusted basis, right around your historical level. I do notice that May did pick a touch lower from April on a seasonally adjusted basis. I'm just curious to hear your thoughts on why you think that may have occurred? Was it rates rising through the month? What did you see there that may have resulted in a slight drop in that metric?

I'll try to tackle that. Several things. First, May is seasonally normally a little slower month. Maybe more importantly, May only had 4 Sundays, April had 5 Sundays, that makes a big difference. Finally, if you turn to Slide 12, we separate the normal contracts per community in our for-sale communities from our BFR sales. And what you see is if you put the BFR sales aside, April was actually almost identical to May, I mean, 0.1 difference in sales per community. So it's actually surprisingly resilient and steady right now. There was a lot of variation in BFRs. In April, we had about 5 BFRs community and per community. And in May, we only had 1.1. So that also makes a difference.

And I'll add one additional point to that. May is not over. So we still have a couple more days of sales to report. So I wouldn't be surprised when we actually have full month of May that it isn't equal to April on a seasonally adjusted annualized basis, excluding BFRs, if not even a touch higher potentially which is unusual. So I would say May is quite strong comparatively.

That's very helpful. Just one quick follow-up on the BFR side, are you seeing anything? I know your BFR sales absorptions were a little lower in May. And I'm sure some of that may be timing related. Are you seeing, in terms of ebb and flow of demand from that particular buyer, how does that look? Are they becoming more aggressive or pulling back relative to the prior few months?

Interestingly, it's kind of followed the pattern of normal for-sale communities. It slowed towards the last half of '22. Mortgage rates for our normal customers went up but they also went up on the build-for-rent buyers as well. So a lot of them went to the sidelines for a bit. But as the market, in fact, picked up at the beginning of the calendar year, it seemed like the appetite for build for rent investors also picked up. So we're seeing that as a good little supplement to our normal business. It is choppier, though, because it depends on what transactions happened in a particular month. So it will be volatile and you can kind of see that on Slide 12. But overall, we're optimistic about the long-term demand for build for rent and we anticipate strategically making it a more important part of our overall portfolio.

That's helpful. And if I could just squeeze in one more. You mentioned the spread between your quick move-in homes and your to-be-built homes. The gross margin has narrowed. Could you just maybe quantify where the gross margin on each of those products stands today? And where you kind of see it going?

It varies dramatically community by community. If you look at some places in the mid-Atlantic or Delaware or Southeast Coastal where in some of those markets and some of those communities were the QMIs and the to-be-built, have identical margins. There is a 0 variance in other locations, we have a premium for QMIs and in others, more historically, similar to what we're experiencing primarily in the West, we see a little discount for QMIs versus to-be-built. So it's just a very different picture by community and by geography. Overall, though the blended delta has been narrowing recently.

When you say narrowing, you mean

A spread between a to-be-built margin which is typically higher than compared to a quick move-in margin.

Got it. So you're seeing spec or quick move-in margins accelerate more rapidly of late than the to-be-built margin?

Well, yes. And more specifically, again, the margin difference between to-be-built and QMIs is narrowing. So even if we're both going up, yes, that spread is less.

And I would say part of it is related to just training our sales associates. The value that a quick move-in home is to a consumer today. Most consumers value having a quick move-in home so that they can lock in their mortgage payment at a reasonable rate as compared to to-be-built so that we're shifting the kind of psychological historical, hey, we've got to discount a quick move in to move it to, hey, those are more in demand than to-be-built, so we shouldn't be discounting them at all. So it's a shift in culture for us. We've not historically been a big builder of quick move-in homes. And I think some of that training is starting to kick in. And as Ara mentioned, we're seeing that spread narrow and hopefully, it will continue to narrow.

And our next question coming from the line of Jordan Hymowitz with Philadelphia Financial Management of San Francisco, LLC.

I have 2 questions. One, you spoke about continued debt pay down and you have a tremendous amount of cash now on the balance sheet. And last year, you paid down $200 million, if I remember correctly. Would that be a possibility this year as well?

I don't think we're putting out any guidance on when we're going to reduce debt again. I mean, we're going to balance it between making investments in land to fuel further growth. At the same time, we want to strengthen our balance sheet. Suffice it to say, over future periods, whether it's this year or not, I'm just not prepared to comment on, we will be reducing debt.

And which debt did you reduce of the $100 million which interest rate?

The 7.75% was required by debt covenants to pay that one down first. That certainly wouldn't have been our preference. If we had the flexibility to pay down the higher coupon, we would have done so, but covenants restrict us to paying off that one first.

And what would be the next one you could pay down?

The same. Well, we still have to pay off the balance of the 7.75%.

Yes, I mean, that $150 million is left on that. So we'd have to pay down $150 million. After the $150 million, Brad, what's the next coupon if you know?

It's the next lien in, so I think it's a 10.5%, Larry.

My final question is whether you plan to continue not paying any cash taxes for the next year or so. Is it correct to say that one of the reasons your book value is growing faster, as well as your cash flow, is because there are no cash taxes?

Do you want to take it, Brad?

Sure. I mean, the answer to your question is, we won't be paying any federal taxes. We do pay some state taxes. But it doesn't change our book value, the deferred tax asset that is being used at the time that it's basically an asset offsets the payable associated with taxes. So it's already in our book value.

And our next question coming from the line of Alex Barron with Housing Research Center.

I guess continuing on what Jordan was asking. So if you guys have to pay the debt down in the order of these liens and you've got 2025 debt coming due, wouldn't it be beneficial to you to just continue to pay down debt continuously, assuming that if interest rates don't come down and don't give you an opportunity to refi otherwise?

I think we've communicated clearly that we're returning to our debt reduction strategy. We plan to allocate some capital for future debt reductions. Additionally, we are consistently monitoring the high-yield market to identify a suitable time to possibly refinance parts of our capital structure.

I mean, overall, again, with the pattern, we reduced debt 2 years ago, a couple of hundred million dollars. We reduced debt last year, a couple of hundred million dollars. We just reduced $100 million this quarter. So our plans are certainly to stay on that trend. At the moment, though, there's a lot of uncertainty in the economy, as we've discussed many times in our call. So we're staying on the more conservative side with more cash than we really need on our balance sheet right now. But I'd anticipate as things smoothing out in the economy, that we're going to be continuing our trajectory of debt reduction.

Yes, I understand the cautious approach, but it appears that the interest savings are boosting your earnings and the book value you are investing in. I hope this trend continues.

Yes. We agree.

Okay. On the issue of DTA and taxes, the $12 million that you posted this quarter, is that just for accounting purposes? Or is there actual payment that you're making just for state purposes or something like that?

It's important to note that now that we have the DTA on our books, we are in a position where, if you recall, several years ago it was fully reserved. This means that as we earn income, there isn't any tax expense recognized because the reserve is gone and the asset is recorded. On the income statement, you reflect the expense related to the income, but there won't be any payment made since the receivable offsets it. That's the reason it appears as an expense, but it's essentially a non-cash expense.

Okay. So going forward, we can assume you'll be showing that but the true earnings power is the pretax income?

Right. From a cash flow perspective, correct. That's right.

Thank you. And I'm showing no further questions. Actually, I'm showing Jordan just queued up.

Yes. Just one quick follow-up. So even if you don't pay down the debt, eventually, you guys are going to try and do a global debt refinancing. And can you talk a little bit about what your total net debt to EBITDA has trended down to at this point? And how lenders tend to look at that?

I don't have that stat at my fingertips. Brad, you or Jeff?

No, not in front of us. No.

I think it's important to note, Jordan, that with our improving sales pace and our optimistic outlook for profits in the upcoming third and fourth quarters, along with a slight positive trend in the high-yield market, the bond market may soon be open to us and other homebuilders for new issuances. We will closely monitor the situation, and once we feel confident that the market is favorable, we will take the necessary steps to refinance part of our capital structure. We don't plan to conduct a global refinance for the entire amount because we want to strengthen our balance sheet, reduce debt further, and avoid facing large prepayment penalties. Therefore, we will refinance only a portion of our debt with the intention of paying down our obligations moving forward.

But again, overall, we have about 3 years remaining before the bulk of our debt is due. So we're focused. We don't have our gun to our head. And in the meantime, we're storing up more cash than normal, but we certainly anticipate we'll have good opportunities sometime over the next 3 years to refinance.

The last question is, if you don't pay down any more debt this year, how much additional cash will you generate?

I don't think we made a projection on that either, Jordan. So I think you see the trend historically for us is the fourth quarter is a big quarter for us in terms of deliveries that generally generates strong cash flow and I think our liquidity will be well above the high end of our targeted range at year-end. And I think that's about as much guidance as we can give you. Jordan, we did fund at the end of the first quarter, we don't have it updated for the second quarter. But at the end of the first quarter on a trailing 12 months basis, the net debt to adjusted EBITDA was at 2.2x, down significantly from where we were in 2019 of 8.9x.

Got it. Yes, if you could update that slide, maybe that would be helpful.

Sure.

Very good. Any last questions, operator?

I'm showing no further questions at this time.

Very good. Well, thank you all very much. We're pleased with the current environment and we look forward to sharing some more continued good news in future quarters. Thank you.

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