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Ara Hovnanian

Thanks, Jeff. I'm going to review our fourth quarter and year-end results and I'll also comment on the current housing environment. Brad will follow me with more details and of course, we'll open it up for Q&A afterwards.
Let me begin on slide 5. Here we show full-year guidance compared to our actual results. Starting on the top of the slide, revenues were $3 billion which was slightly better than the midpoint of our guidance.
Our adjusted gross margin was 22% for the year, which was exactly at the midpoint of the guidance we gave. Our SG&A ratio was 11.4%, which was very near the midpoint of the guidance that we gave.
Our income from unconsolidated joint ventures was $52 million, which was slightly below the guidance we gave due to delayed deliveries in three communities related to utility connections.
Adjusted EBITDA was $456 million for the year, which is above the high end of the range that we gave. And finally, our adjusted pretax income was $327 million, which was also above the high end of the guidance range that we gave. We're obviously pleased that our profitability for the full year was above the high end of the guidance range.
On slide 6, we show how our full-year results compared to last year. Starting in the upper left hand portion of the slide, you can see that our total revenues increased 9% to just over $3 billion. Moving across the top to gross margin, our gross margin was 22% in fiscal year '24, which was slightly below the prior year's gross margin.
Moving to the bottom left, you can see that adjusted EBITDA increased 7% for the year to $456 million. And in the bottom right hand portion of the slide, we're excited about the adjusted pretax income improvement over the prior year, up 16% to $327 million.
If you go to slide 7, here we show our results compared to last year's fourth quarter. Keep in mind that last year's fourth quarter was one of the strongest fourth quarters that we've had in a very long time, particularly for gross margin and pretax income. It makes the year-over-year comparisons for the quarter much more difficult.
Starting in the upper left hand quadrant of the slide, you can see our total revenues increased 10% to just under $1 billion. In the upper right hand portion of the slide, you can see that our gross margin was a healthy 21.7%, but down compared to a particularly strong margin in the previous year. On a sequential basis, we decreased slightly from 22.1% in the third quarter of '24.
Gross margins declined year-over-year as per our guidance, despite a 1% decrease in construction costs over the same period. The lower gross margin is primarily due to the continued use of mortgage rate buydowns, which have been stubbornly high due to the elevated levels of mortgage rates as well as some other incentives.
It's also related to a greater conscious focus on pace versus price, which we will discuss more fully in a moment. Going forward, we expect to continue to use mortgage rate buydowns to help with buyer affordability.
During this year's fourth quarter, incentives were 8.5% of the average sales price. This is up 120 basis points from a year ago and up 500 basis points higher than fiscal '22, which was prior to the mortgage rate spike impacting deliveries. Because of the continued use of incentives and increased land-light position, we expect gross margins to decrease further in the first quarter as we provided in our guidance.
We continue to emphasize pace over price and we expect to report strong EBIT ROI again going forward. As a side note, we utilize a comparable level of incentives in new land acquisitions and they must meet our IRR minimum hurdle rate of 20% even after the cost of these incentives.
Moving to the bottom left-hand portion of the slide, as a result of the lower gross margin percentage, you can see that our adjusted EBITDA decreased a bit to $159 million in this year's fourth quarter. Finally, in the bottom right hand portion of the slide, correspondingly adjusted pretax profits also decreased a bit to $126 million.
While the fourth quarter met our expectations and guidance, it would have been better if not for the hurricanes right toward the end of our fiscal year. We ended up missing deliveries, primarily due to a lack of meters installed in homes and a scarcity of subcontractor crews due to the shift toward rebuilding.
Our current communities were spared major damage, but there was a tornado that touched down recently in one of our completed communities in Florida's East Coast causing some damage to about a dozen homes. I know that new orders and current levels of demand are very much in focus by investors and analysts, so I'm now going to discuss contracts from several different perspectives.
If you turn to slide 8, while the year was choppy from quarter-to-quarter, we ended the year with fourth quarter contracts increasing 48% year-over-year. I'm going to repeat that statistic because it's pretty significant.
Our fourth quarter contracts increased 48% year-over-year. The contract pace continued in the month of November following the fourth quarter with our contracts up 55% year-over-year as demand for our homes remained robust. Regardless of one's politics, there does seem to have been a little post-election enthusiasm regarding the outlook, the economic outlook at least for our homebuyers.
If you turn to slide 9, you can see contracts per community for the fourth quarter increased to 10.4, a 25% year-over-year increase and more than double the sales pace of Q4 '22. This was a solid fourth quarter sales pace, setting this up for a great fiscal '25.
We're pleased with these results, especially given all the uncertainty with the presidential election, the impact of hurricanes, the volatility in mortgage rates, and the general economic and geopolitical uncertainty.
If you turn to slide 10, we show mortgage rate trends. The gray line on this slide shows what happened to mortgage rates last year between July of '22 and November of '23. The blue line shows what happened with mortgage rates this past year between July of '23 and November of '24.
For most of the time shown, they coincidentally followed a very similar pattern of monthly increases and decreases just at slightly higher rates this year. However, beginning in July of this year, mortgage rates fell below the levels of the prior year for the same months and continued to decline until September -- the end of September.
Mortgage rates have increased since the beginning of October, but they still remain lower now than they were last year. In addition, web traffic continues to be very strong. For the last month of the quarter, as well as the month of November, weekly visits to our website were only surpassed by the COVID surge of '22 and '21. This trend makes me particularly optimistic about future demand.
On slide 11, we give even more granularity and show the trend of monthly contracts per community compared to the same month a year ago. Other than the month of September when our sales pace was flat compared to the previous year, our contracts per community were up significantly compared to the same month the previous year.
As you can also see on the slide, EFRs were not very particular -- were not very impactful in any of the months shown. We continue to believe that many of the fundamentals that led to our outperformance remain intact, such as the low supply of existing homes for sale and the good jobs report. Furthermore, the overall health of the economy and positive demographic trends remain solid.
Turning to slide 12, we show contracts per community as if we had a September 30th quarter-end. That way we can compare our results to our peers that report contracts per community on a calendar quarter-end.
At 10.7 contracts per community, our September quarterly sales pace is the third highest among public homebuilders that reported at this time. This occurred despite September being one of the slower months in the quarter as I showed you on the previous slide.
On slide 13, you can see that our year-over-year growth in contracts per community for the same period was the second highest among our peers. Again, this was as if our quarter ended in September so we could compare to many other companies.
The following two months were dramatically stronger in sales for us. What we're trying to illustrate on these last two slides is that we are still selling an above number of homes compared to our peers. Above average number of homes, excuse me.
On the top of slide 14, you can see that for a sizable percentage of our deliveries, our homebuyers continue to utilize mortgage rate buydowns. The percentage of customers that use buydowns in this year's fourth quarter was 72%.
The buydown usage in our deliveries indicates that buyers have been consistently relying on these mortgage rate buydowns to combat affordability at the current mortgage rate levels. Given the persistently high mortgage rate environment, we assume buydowns will remain at similar levels going forward.
We are budgeting the cost of these same buydowns to remain constant. As I said earlier, this includes the analysis of any new land acquisitions. We continue to find land opportunities for growth even with these high levels of incentives.
In order to meet homebuyers' desires to use mortgage rate buydowns, we're intentionally operating with an elevated level of quick move-in homes or QMIs as we call them, so that we can offer affordable mortgage rate buydowns in the near-term.
On slide 15, we show that we had 7.9 QMIs per community at the end of the fourth quarter, which is consistent with where it was at the end of the third quarter. We define QMIs, by the way, as a home once we start the building.
In the fourth quarter of '24, QMI sales were 72% of our total sales, an increase from 67% in the third quarter of '24. Historically, that percentage was about 40%. Obviously, demand for these QMIs remains high, so we're very comfortable with the current level of QMIs per community.
Due to the increase in community count in the quarter, it's not surprising that our finished QMIs increased to 233 finished homes. On a per community basis, that puts us at 1.8 finished QMIs per community. That's up slightly from 1.5 finished QMIs per community at the end of the third quarter, but it's lower than the 1.9 QMIs at our first quarter. Our goal with QMIs is obviously to sell them before completion.
During the fourth quarter, we emphasized pace versus price. We're pleased that with the significant increase in sales pace and the effect on ROI, this did result in a lower gross margin for the fourth quarter and an even lower margin in our guidance for the first quarter of '25.
But again, the tradeoff of pace versus price resulting in lower margins is producing great returns on inventory for us. The decrease in gross margin is primarily due to increased use of incentives, particularly in the West.
The focus on quick move-in homes results in more contracts that are signed and delivered in the same quarter, which leads to higher backlog conversion. Our fourth quarter is an extreme example of this increase as 31% of our homes delivered in the fourth quarter were contracted in the same quarter.
This resulted in a backlog conversion ratio of 86%. This is the highest backlog conversion ratio we've had for the past 14 years. We'll continue to manage our QMIs at a community level. We track our start schedule at a community level and we make sure that there is a match with our current sales pace per community so that we don't get too far ahead of ourselves.
If you move to slide 16, you can see that even with the economic and political uncertainty, as well as the higher mortgage rates, we are still able to raise net prices in 34% of our communities during the fourth quarter. While we are focusing on pace versus price, we are still able to raise prices in about a third of our communities.
Turning to slide 17, I'll add that in addition to the use of our incentives and the increased level of QMIs, we also attribute part of our performance metrics to the introduction of our new national portfolio of home designs that we refer to as Looks.
The new designs feature curated interiors with simple and honest pricing that reduced the complexity of the selection process for the homebuyers and the building process for us. There are significant other advantages to our Looks program, but we'll discuss that at some point in the future. The current high levels of demand should support the growth that we're focused on achieving over the next several years.
I'll now turn it over to Brad O'Connor, our Chief Financial Officer.

Brad O'Connor

Thank you, Ara. On slide 18, you can see that we ended the quarter with a total of 147 open for sale communities, a 14% increase from last year. 130 of those communities were wholly owned.
During the fourth quarter, we opened 21 new wholly owned communities and sold out of 17 wholly owned communities. We had 17 unconsolidated joint venture communities at the end of the fourth quarter, we opened one new unconsolidated joint venture community and closed four unconsolidated joint venture communities during the quarter.
Even with the growth in community count this quarter, we still experienced delays in opening new communities, primarily due to utility hookups throughout the country. We expect community count to continue to grow further in fiscal '25.
The leading indicator for further community count growth is shown on slide 19. We ended the quarter with 41,891 controlled lots, which equates to a 7.8 year supply of controlled lots. Our lot count increased 6% sequentially and 32% year-over-year.
If you include lots from our unconsolidated joint ventures, we now control 44,720 lots. We added 5,500 lots and 56 future communities during the fourth quarter. Our land teams are actively engaging with land sellers negotiating for new land parcels that meet our underwriting standards.
In fiscal '24, we began talking about our pivot to growth. This followed a stretch of several years where we used a significant amount of the cash regenerated to pay down debt. On slide 20, we show our land and land development spend for each quarter going back five years. You can see how that pivot to growth has impacted our land and land development spend.
During the fourth quarter of '24, our land and land development spend increased 45% year-over-year to $318 million. You can clearly see that the land and land development spend in every quarter of fiscal '24 was the highest over the five years shown on this slide.
Our fourth quarter represented the highest quarterly spend since 2010 when we started reporting that metric. Our corporate land committee continues to be busy, which is an indication that our lot count should continue to increase over time, but not always in a straight line.
We are using current home prices, including the current level of mortgage rate buydowns and other incentives, current construction costs, and current sales base to underwrite to a 20% plus percent internal rate of return.
Our underwriting standards automatically self-adjust to any changes in market conditions. We are finding many opportunities in our markets and are very focused on growing our top and bottom lines for the long-term. And this growth in lots control precedes growth in community count, which precedes growth in deliveries. We are very pleased with the trends.
On slide 21, we show the percentage of our lots controlled via option increased from 46% in the fourth quarter of fiscal '15 to 84% in the fourth quarter of fiscal '24. This is the highest percentage of option loss we've ever had continuing our strategic focus on land-light.
Turning now to slide 22, you see that we continue to have one of the higher percentages of land controlled via option compared to our peers. Needless to say, with the second highest percentage of option lots, we are significantly above the median.
On slide 23, compared to our peers, we have the second 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 further improve our turns on inventory in future periods. Our focus on pace versus price is evident here.
Turning to slide 24, even after spending a record $318 million on land and land development, we ended the fourth quarter with $338 million of liquidity, which is above the high end of our targeted liquidity range.
Turning now to slide 25, this slide shows our maturity ladder as of October 31, 2024. Over the past several years, we have taken a number of steps to improve our maturity ladder and we remain committed to further strengthening our balance sheet going forward. In February of 2025, one year prior to maturity, we plan to pay off all of the remaining $27 million of the 13.5% notes, which is our highest coupon debt.
Turning to slide 26, we show the progress we've made to date to grow our equity and reduce our debt. Starting on the upper left hand part of the slide, we show the $1.3 billion growth in equity over the past few years. During the same period, on the upper right hand portion, you can see the $700 million reduction in debt.
On the bottom of the slide, you can see that our net debt to net cap at the end of fiscal '24 was 49.3%, which is a significant improvement from our 146.2% at the beginning of fiscal '20. We still have more work to do to achieve our goal of a mid-30% level, but we are comfortable that we are on a path to achieve our target soon.
We've made considerable progress, which is evidenced by the credit rating upgrades we received from both S&P Global and Moody's during fiscal '24. Our balance sheet has improved significantly over the last five years and we expect to continue to make noteworthy progress moving forward.
Given our remaining $241 million of deferred tax assets, we will not have to pay federal income taxes on approximately $800 million of future pretax earnings. This benefit will continue to significantly enhance our cash flows in years to come and will accelerate our growth plans.
Regarding guidance, our internal plan, given our significant new community openings and current sales base is for substantial growth in deliveries and revenues in fiscal '25, which is off to a spectacular start.
However, given the volatility and the difficulty in projecting margins with moving interest rates and volatility in general, we will focus our guidance on the current quarter, the first quarter of fiscal '25.
Our financial guidance for the first quarter of '25 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 five months, compared to our pre-COVID cycle time for construction of approximately four months. It also assumes that we continue to be more reliant on QMI sales, which makes forecasting gross margins more difficult. Our guidance assumes continued use of mortgage rate buydowns and other incentives similar to recent months.
Further, it excludes any impact to SG&A expense from our phantom stock expense related solely to the stock price movement from the $176.04 stock price at the end of the fourth quarter of fiscal '24. I also want to emphasize that our first quarter has historically been our lowest-performing quarter in terms of gross margin, SG&A, and pretax in 2025 will not be different.
slide 27 shows our guidance for the first quarter of fiscal '25. Our expectations for total revenues for the first quarter to be between $650 million and $750 million. Adjusted gross margin is expected to be in the range of 17.5% to 18.5%. This is lower than a typical gross margin, particularly because of the cost of mortgage rate buydowns and our focus on pace versus price.
Keep in mind that all else being equal, first quarter gross margins are lower than the rest of the year to be as a result of lower volume, given there are some period costs and cost of sales. We expect the range of -- for SG&A as a percentage of total revenue to be between 13.5% and 14.5%, which is still higher than usual.
One of the reasons our SG&A is running a little high is that we are gearing up for significant community count growth and we have to make new hires in advance of those communities. The upcoming growth is evident from our land position and land spend. In addition, as we have said before, our first quarter is typically our lowest volume quarter, and therefore SG&A as percent of revenues is often the highest in the first quarter.
We expect income from joint ventures to be between $15 million and $30 million. Our guidance for adjusted EBITDA is between $55 million and $65 million and our expectations for adjusted pretax income for the first quarter is between $25 million and $35 million.
Turning to slide 28, we show that our return on equity was 34.6%, the second highest over the trailing 12 months compared to our peers. And on slide 29, we show that compared to our peers, we have one of the highest consolidated EBIT returns on investment at 30.7%.
While our ROE was helped by our leverage, our EBIT return on investment is a true measure of pure homebuilding operating performance without regard to leverage and was the highest among our midsized peers. We believe we are striking a good balance between pace and price, which is delivering industry-leading ROIs and ROEs.
Over the last several years we have consistently had one of the highest ROIs among our peers. Eventually, investors will recognize our consistent superior returns on capital and significantly improved balance sheet.
Given our rapidly growing book value, we think it would be appropriate to consider a variety of metrics including EBIT return on investment, enterprise value to EBITDA, and our price to earnings multiple when establishing a fair value for our stock. We believe when all of the fundamental financial metrics are considered, our stock is one of the most compelling values in the industry.
On slide 30, we show our price to book multiple compared to our peers and we are just above the median. On slide 31, we show the trailing 12-month price to earnings ratio for us and our peer group based on our price-earnings multiple of 5.98 times at yesterday's stock price of $189.96.
We are trading at a 45% discount to the homebuilding industry average PE ratio if you consider all public builders and a 36% discount when considering our midsize peers. We recognize that our stock may trade at a discount to the group because of our higher leverage, but our leverage has been shrinking and our equity has been growing rapidly.
On slide 32, we show that despite our extremely high ROE, there are a number of peers that have a higher price-to-book ratio than us. This slide more visually demonstrates how much we are undervalued relative to the other builders when looking at the relationship between ROE and price to book. A very similar result exists when looking at ROE to price to earnings.
On slide 33, you can see an even more glaring disconnect with our high EBIT ROI and our PE. We have the third highest EBIT ROI and yet our stock trades at the lowest multiple to earnings of the group.
These last four slides further emphasize our point that given our high return on equity and return on investment, combined with our rapidly improving balance sheet, we believe our stock continues to be the most undervalued in the entire universe of public homebuilders.
I will now turn it back over to Ara for some brief closing remarks.

Ara Hovnanian

Thanks, Brad. I just wanted to wrap up the call by saying that we're very excited about the growth we hope to achieve in fiscal '25. Our recent sales have been fantastic. In the fourth quarter again, contracts increased 48% and then we follow that up with a 55% growth in contracts in November.
These are very strong year-over-year improvements and these are improvements over last year, which was a great year for us. Some of you might be concerned about our gross margin guidance for the first quarter. Although these contracts are at a lower gross margin, I want to repeat that we made a conscious effort on trading pace for margin, given our focus on inventory turns, EBIT ROIs, and QMIs.
The improved sales pace and the expected corresponding growth in revenues should result in continued industry-leading inventory turns, EBIT ROI, and ROE over the coming year. In closing, the housing market continues to show positive fundamentals notwithstanding the affordability challenges.
Given the growth in our lot count, our community count, and our land and land development spend, we think we are really well positioned to drive delivery growth in excess of 10% on an annual basis over the next few years and we expect to continue to deliver top tier industry returns for our shareholders.
That concludes our formal comments and we're happy to turn it over for Q&A now.

Question and Answer Session

Operator

(Operator Instructions) Alan Ratner, Zelman & Associates.

Alan Ratner

Hey, guys, good morning. Thanks for all the commentary so far. Very helpful. Ara, I'd love to drill in a little more on the strategy shift might be too strong of a word, but just the kind of the pace versus price kind of decision right now and clearly a bit of a change this quarter. I think we had always expected margins to gradually pull back from the recent levels we've seen, but admittedly it's happening a lot quicker than even we would have expected. And I know this is intentional on your part, but 18% gross margin plus or minus is kind of back to where you were pre-pandemic and it kind of brings your EBIT margin levels down to something in that kind of mid, maybe high-single-digit range. And I'm just curious if you think about the outlook for '25, it doesn't sound like you're anticipating much change in incentives. You do have some unknowns out there with tariffs and labor costs and things like that. Is there a level of gross margin if you were to see some cost creep where you would perhaps shift back to maybe more of a price over pace dynamic? Maybe pull back a little bit on the QMIs or the start base in order to try to preserve that margin or do you feel like there's enough in the bag here that you can kind of maintain this level 18% plus or minus and drive that 10% growth regardless of what happens on cost?

Ara Hovnanian

Well, Alan, first I'll note that you certainly were accurate about projecting margin for the industry would drift down from the particularly high levels that they were just post-pandemic. But I do want to remind you of two things. Number one, as Brad said, our first quarter gross margins have historically been the lowest. That is the case again this year. And while that may seem counterintuitive, as Brad mentioned, there are some fixed costs, particularly construction overhead, that are time-related. So it's not just cost subtracted from price. We do expect improvement over the quarters from that level. But given the volatility, we're just going to project a quarter at a time. The second point, I just lost my train of thought. Brad, do you want to jump in on a -- second point on margin?

Brad O'Connor

Sure. I think one of the things I'll add, Alan, is as we drive forward growth that we've been talking about, our EBIT margin should improve because our SG&A will improve with more volume. So you start to squeeze some of the other components of EBIT margin through the volume. So if gross margin comes down a little, you can make room for it with better SG&A percentage with growth. The other thing is as we think about whether we would pull back on dates and I think that's what you're thinking about here. We'd have to consider as we move to more land-light and by rolling lot takes, et cetera, we can consider whether we would continue in those communities or not at the point where it doesn't make economic sense to move forward. So the last thing we want to do is sit on an existing asset we own. So we have to consider all those components when deciding whether we would drive for pace versus continue to or try to improve margin and slow pace down.

Ara Hovnanian

But I'll focus on the point I was going to enunciate that Brad just touched on. We are shifting to a greater land-light. It's always been part of our strategy. It's becoming even more of our strategy. As you saw from some of the graphs, land-light gross margins are inherently lower than wholly-owned gross margins, which is what we were pre-pandemic that you're comparing to. If everything was perfect, our gross margin should go down because you pay more for a land-light lot than you do for a wholly owned lot that you carry for two years or three years.
But what we've done a lot of analysis and we think our ROI and earnings are much better off with lower margins and higher turnover and a higher sales pace. I want to focus Alan on a 55% increase in sales last month following a 48% increase in sales for the quarter. That, along with what Brad mentioned, the benefits of SG&A, we feel very comfortable are going to offset the margin decrease and it's a tradeoff that's very well worth it. We don't currently expect our gross margins to fall. We actually expect them to be up from the first quarter for all the reasons that we mentioned.

Alan Ratner

Great. And I appreciate all that added color and understood on all those points and I think it makes a lot of sense. Brad, I was going to -- my second part was going to be kind of on the topic you ended with, which is kind of the asset-light land-light strategy and how it gives you that flexibility to either attempt to renegotiate or maybe walk away from deals that no longer makes sense. I'm just curious if you've started that process in any markets or any communities at this point. Are there any deals where they're no longer making economic sense at the prior underwriting or is that still kind of a ways off into the future?

Brad O'Connor

Yeah, we haven't had to do that yet, Alan. Certainly, something we look at with every community as it's performing. But fortunately, we haven't had to walk away or frankly renegotiate anything at the moment. As you can see in our numbers, we did have a couple of impairments for stuff that we did own where we were underperforming and we had to make an impairment. But our walkaways have been very normal, which is typically walkaways that happen during the due diligence period as opposed to something that happens once we've gotten going. So fortunately, so far, no, we have not had to do that.

Ara Hovnanian

Hey, Alan, I'll mention one other fact that's interesting and has not been focused on very often and that is that as we go more toward a land-light strategy, and as you saw, we're one of the leaders in that area, our balance sheet has a lower percentage of land and land development of a -- as a percentage of our overall balance sheet compared to work in process.
And I mention that because it really is a risk reducer because if the market slows down, it's much easier to turn a finished home into liquidity than it does a raw or developed lot into liquidity. So we feel like one of the side benefits of the QMI strategy is more safety as well, because you could get liquidity extremely fast, even faster than we were able to in prior cycles.

Alan Ratner

Makes a lot of sense. And one last quick housekeeping question. The joint venture guide for $15 million to $30 million is that kind of just straight profitability from JVs or are there any consolidations contemplated within that guide like you had last quarter.

Brad O'Connor

That's just straight normal JV income. There's no consolidations considered in that number.

Alan Ratner

Great. All right. Thanks a lot, guys. Appreciate it. Good luck and Happy Holidays.

Brad O'Connor

Thank you.

Ara Hovnanian

Okay, thank you. Same to you, Alan.

Operator

Alex Barron, Housing Research Center.

Alex Barron

Yes. Thanks, guys, and great job in the quarter. Glad to see the growth is coming. I wanted to ask about, is there any thought or possibility that you guys could be taking out the debt earlier than its maturity and able to swap it for a lower interest rate debt.

Brad O'Connor

Yeah, I mean, Alex, it's something that we're looking at. As you probably know, a lot of that debt currently has pretty high prepayment penalties. So it's a balance of considering what the lower rate might be versus the cost of doing that. As I mentioned, we're going to pay off the $27 million that's coming due in 2026. We'll do that in a year early.
So just in a few months here we're going to pay that off. But otherwise, we are monitoring as the call premiums reduce versus what we expect we might be able to issue new debt at and consider when we should do that. So it's something we're definitely paying attention to. But those make calls or call premiums are at the moment pretty significant.

Ara Hovnanian

Yeah. However, I think it's fair to emphasize that as the call premiums become more reasonable, there will be significant savings in interest. If all things hold semi-steady with the current levels when we do refinance, there will be significant savings in our interest costs and it's not way out in the future. It's -- the opportunities are going to be coming pretty soon as our call premiums reduce rapidly.

Alex Barron

Yeah, I mean, that's the hope. As far as share buybacks, I couldn't figure out if you guys bought any this quarter. I know you did in the last couple of quarters.

Brad O'Connor

We did not have any in the fourth quarter.

Alex Barron

Okay. And as far as your shift towards increasing sales pace, is there like a average target you guys are trying to aim at?

Ara Hovnanian

No, we don't. We just look at pricing and pace on a community-by-community basis. So we don't have a specific target.

Brad O'Connor

It's something we certainly consider is in many cases because we've moved to more land-light, we've got scheduled land take requirements, lot take requirements per month or per quarter. So we want to at least make sure we're hitting a sales space that hits those requirements. If we go faster, we can buy the lot faster, but -- and so we would consider doing that, but we certainly want to make sure we're at least hitting the pace we need to hit the minimum lot takedowns.

Alex Barron

Got it. And if I could ask one more, I saw some homes advertised with a 3.5% mortgage rate and I was wondering if that was just a temporary thing that led to the lower guidance. In other words, if you're no longer offering that, is there a chance that margins could bounce back in the back half of the year?

Brad O'Connor

There's certainly a chance that margins could get better in the back half of the year. It all depends on what happens with mortgage rates, what happens with the market, and what it takes to sell the homes and maintain the pace we want to maintain. The example you gave on our website, we do have -- we do those advertisements and those incentives by communities.
So we can have one or two communities that might have very low rate, while other communities wouldn't have been as low. So it's certainly something we look at every community, how that community is performing, what the peers, competitors to that community or offering to make sure we're competitive. But your point about whether margins could get better later in the year? We absolutely think that could happen if the market were to get stronger or mortgage rates come down and the cost of the buydowns we're giving decreases. So that's certainly a possibility.

Ara Hovnanian

I'll add that similar to retail stores, even if a community offers a 3.5% 30-year fixed, it doesn't mean every home in the community is. It's usually for a select number of homes that have been finished and are ready to deliver. It's not an across the board offering.

Alex Barron

Got it. Yeah, I assume that. Okay, guys, well, best of luck for 2025. Thanks.

Ara Hovnanian

Okay. Thanks, Alex.

Operator

Austin Hopper, AWH Capital.

Austin Hopper

Hey, guys, thanks for taking my question. And you answered several of them already. You talked about SG&A as a percentage of revenues. I guess, it was 11.4% in the year. Can you give us a sense like what that can trend towards in future periods kind of as you scale your business and how that would potentially offset some amount of gross margins?

Brad O'Connor

I think as we grow, we've talked about the fact that we've had to invest ahead in some of the growth, but as we intimated in the remarks, we said we think we're positioned for 10% plus growth over the next few years. And if we can achieve that, I think SG&A goes from 11.4% to something south of 10% ultimately, which still would put us at the high end of the range of our homebuilding peers. So we're continuing to look at ways to drive that further. But just pure growth should get us into single-digits over the next couple of years if we can grow the way we anticipate.

Austin Hopper

Great. Thank you.

Operator

Thank you. I am showing no further questions at this time. I would now like to turn it back to Ara Hovnanian for closing remarks.

Ara Hovnanian

Thank you very much. We are pleased with the results for our last quarter and we look forward to giving you continued great results during fiscal '25. Thank you.

Operator

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