Good morning, and thank you for joining us today for Hovnanian Enterprises Fiscal 2020 Fourth 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 and all participants are currently in a listen-only mode. Management will make some opening remarks about the fourth 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, Josh, and thank you all for participating in this morning's call to review the results for our fourth quarter and year, which ended October 31, 2020. All statements in this conference call that are not historical facts should be considered 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 other 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, 2019, 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, 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 and Chief Accounting Officer and Treasurer. I'll now turn the call over to Ara. Ara, go ahead.

Thanks, Jeff. 2020 has been a challenging year from many perspectives. And I hope all of you and your families remain safe and healthy. In late March and early April, I couldn't have imagined a scenario where demand for new homes would be as strong as it's been over the past 7 months or that we'd be building and selling more homes than last year with roughly 50% of our associates across the country working from home. Yes, that's exactly where we find ourselves today. I'm going to review our full year and fourth quarter results and then address the current market environment. Then as usual, Larry Sorsby will follow me with more detail before the Q&A. As the number of COVID cases rise across the country, we continue to keep the safety and well-being of our associates, customers and trade partners a top priority. Our sales offices now have installed ultraviolet air filters, and we accept customers by appointment only. Our construction associates are taking every possible precaution to remain safe and to keep our trade partners safe. Most of our associates that normally work in offices continue to work from home instead and those that are physically in the office have plenty of space to keep socially distanced, following the CDC guidelines. I've said this before, but it bears repeating, I can't say enough about the tremendous effort all of our associates around the country are putting in day after day to keep things running smoothly. It's truly been a remarkable feat under the current conditions. Given the COVID-19 related challenges, we're particularly pleased with our fourth quarter results. On Slide 4, we compare our fourth quarter results to the guidance we gave on our third quarter conference call. Our total revenues, adjusted gross margin, adjusted EBITDA and adjusted pre-tax income were all slightly better than the high end of the guidance that we gave. Our fourth quarter would have been even stronger if not for the early impact of COVID-19, causing us to delay starts for several months in the middle of the first wave of the pandemic. At that time, no one knew what COVID's effect would be on the economy and housing. The starts that we delayed in March, April and May are homes that we would have delivered in our fourth quarter. The good news is that we still had a strong fourth quarter, plus the demand for our homes became so strong after the early COVID period that our backlog of to-be-built homes has grown significantly. We expect to report strong year-over-year gains in deliveries and profits compared to last year in both the first and the second quarter of fiscal 2021 based on our existing backlog. Based on the strong sales I just mentioned on Slide 5, we show the solid backlog of 3,402 homes under contract at the end of the fourth quarter. The dollar value of this backlog was $1.42 billion, the number of homes in backlog was up 55%, and the dollar value was up 61%. This is the highest number of homes we've had in backlog in well over a decade. It's the strength of this backlog, which sets us up nicely for strong results in the first half of '21. Turning to Slide 6. We show our full year results for fiscal '20 compared to fiscal '19. Starting at the top of the table, you can see that our revenues were up 16% to $2.3 billion compared to $2 billion last year. Our adjusted gross margin also increased to 18.4% this year compared to 18.1% in the prior year. Our total SG&A ratio improved by 130 basis points from 11.6% last year to 10.3% this year. And our adjusted EBITDA increased 35% year-over-year to $234 million. Moving on to Slide 7. We show year-over-year comparisons for the fourth quarter. We begin with total revenues in the upper left-hand portion of the slide. As per our guidance provided last quarter, our total revenues for the fourth quarter were $683 million this year compared with $713 million in last year's fourth quarter. As I mentioned earlier, if not for delays and starts during the first wave of the pandemic, we would have closed many more homes during the fourth quarter, which obviously would have resulted in higher revenues. Moving to the upper right-hand portion of the slide, you can see that our adjusted gross margin increased 130 basis points year-over-year. Gross margin was 20.2% this year compared to 18.9% in last year's fourth quarter. It was also up 270 basis points on a sequential basis from 17.5% in the third quarter of fiscal '20. The 20.2% that we reported in the fourth quarter of fiscal '20 was the highest quarterly gross margin since 2014. As we said on our last call, we pivoted to increasing home prices back in June, consciously trading off a lower sales pace for improved margins. We continue to believe that these home price increases should offset any potential material and labor cost increases. A slower sales pace keeps us from selling out our communities too quickly. It also gives us time to open new communities and gives our land acquisition teams time to replenish our land pipeline, so we can stabilize and eventually grow our community count. In the lower left-hand quadrant of the slide, you can see that our total SG&A dollars were $66 million in this year's fourth quarter compared to $54 million a year ago. The $12 million increase year-over-year is primarily related to $8 million more in stock compensation expenses. Some of our stock compensation expenses are affected by changes in our stock price. And obviously, our stock price has gone up recently. As our stock price increased, and we exceeded our fiscal '20 performance targets, we incurred more stock compensation expense than we contemplated in both our guidance and in the prior year. Secondly, while our construction quality continues to improve and we once again reduced our construction defect reserves, a non-cash item, we did not have as large a reduction as last year's fourth quarter. Each year, during the fourth quarter, we complete an annual actuarial study to update our construction defect reserves. For 2019, this resulted in a $7 million reduction to SG&A. In fiscal '20, while we were able to reduce our reserves, once again, the reduction was $3 million. This variation in our construction defect reserves makes it difficult to compare year-over-year SG&A expenses. If you adjust for both the increased stock compensation and the construction defect reserves, our SG&A expense would have been virtually identical in both years. In the lower right-hand quadrant of the slide, we show that EBITDA increased 66% from $51 million in last year's fourth quarter to $84 million this year. In the upper left-hand portion of Slide 8 and you can see that our pre-tax income for the fourth quarter increased $43 million from a $1 million loss last year to a $42 million profit in this year's fourth quarter. If you ignore land charges and gain or loss on extinguishment of debt, the adjusted pre-tax income was about $45 million for both the fourth quarter of this year and last year. In the lower left-hand quadrant of the slide, we show that for the full year, pre-tax income improved $95 million year-over-year or from a $40 million loss last year to a $55 million profit this year. And in the lower right-hand portion of the slide, we show that our adjusted pre-tax income was $51 million this year compared with $10 million last year. That's a fivefold year-over-year increase and it's the highest adjusted pre-tax income we've had since 2006. On the left-hand portion of Slide 9, we show that our quarterly contracts increased 43% to 1,918 homes from 1,345 homes in last year's fourth quarter. The picture is even better on a per community basis, which we show on the right-hand portion of the slide. Here, you can see that we had 16.5 contracts per community for the fourth quarter this year, and that's compared to 9.5 for last year's fourth quarter. That's a 74% increase year-over-year. Our fiscal '20 third quarter contracts per community were even higher at 19. Interestingly, the 2020 third quarter and fourth quarter were the highest number of contracts per community we have ever recorded for any quarter. To give complete transparency, Slide 10 shows the number of consolidated contracts on a monthly basis for each month from January through November compared to the same month a year ago. As you can see, we began the calendar year with solid improvements in January and February. Then as COVID-19 became a reality for the United States, our sales fell off for two consecutive months in March and April. Contracts then increased at least 50% year-over-year for each month from June through September. Now I'm certain you may be concerned that the percentage increases were less in October and November. I want to emphasize that we consciously focused on raising prices to slow down our sales pace. We were not able to sell homes fast enough to start homes as fast as we were selling them. And if we continued, we would have been exposed to potential increases in construction costs without the ability to increase home prices on homes that were already sold. The record third quarter sales pace was just not sensible. We're focused on return on investment. And we believe a more sustainable sales pace synced up with our construction starts and combined with higher margins makes more sense for us. You can see the positive impact of this tactic in our higher gross margins during the fourth quarter, a trend that we expect to continue into the first quarter of 2021. If you look at consolidated contracts per community on a monthly basis, as we view on Slide 11, the percentage increase in contracts per community were even greater. They were up at least 80% year-over-year every month from June through September. As we continue to raise home prices starting in August, our sales pace per community began to slow down. However, in spite of the conscious slowing of our sales pace, October contracts per community were up 38% and November was even stronger, up 48%. And finally, December has started off very strongly as well. If you turn to Slide 12, you can see another view of contracts per community with longer-term trends. On Slide 7, we show we averaged 44 annual contracts per community from '97 to 2002. As we mentioned before, that was a period of neither boom nor a bust for housing. In the middle of the slide, you can see the steady growth in contracts per community for each of the past several years. Finally, on the right-hand side of the slide, we show contracts per community for 2020 increased 39% to 54.2% compared to 38.9% a year ago. This is the first full year in well over a decade that we were above our historical normalized sales pace. However, we're still below the peak that we achieved in the last cycle somewhere near 60 homes per community. In spite of raising prices with the intention of slowing down our sales pace, if you seasonally adjust an annualized November contracts per community, it was 60 contracts per community per year and represents a torrid sales pace. I'm happy to report our land acquisition teams are making great progress on new land opportunities in our markets, and we're very optimistic and excited about the opportunities we see ahead of us. The demand for new homes continues to be strong, and where and when appropriate, we plan to continue raising home prices even if it slows down our sales pace further. We believe that trading margin for sales pace makes sense today. By the way, it's worth noting that the last boom was fueled by speculative purchasers. This boom is fueled by users. Millennials finally jumping into homeownership in every category of move up and move down housing is in full gear. Before I turn it over to Larry, I want to express my gratitude to Lou Smith, who retired as our COO on November 30th. Lou has been with our company for the past 14 years, and I'll certainly miss his vast industry knowledge, his insights and the great contributions he made to our company. I wish him and his wife all the best as they embark on this next stage of their lives. I'll now turn it over to Larry Sorsby, our CFO.

Thanks, Ara. I'll start on Slide 13. This was another strong quarter for our financial services division. Driven by historically low rates and strong home demand, our financial services fourth quarter pre-tax earnings increased 34% year-over-year to $12 million. If you turn to Slide 14, you can see that our consolidated community count declined by 25 communities from 141 on October 31, 2019 to 116 at the end of October this year. The primary reason community count has declined is that we're selling through communities much faster than we expected. There are two additional reasons for the decline. First, we had 15 community grand openings that were expected to have occurred by October 31 this year, but were delayed given the general COVID environment. Second, we contributed 4 wholly-owned communities into unconsolidated joint ventures during the first quarter of fiscal 2020. As you can see on Slide 15, sequentially, community count was relatively flat from the third quarter to the fourth quarter. During 2021, the community count is likely to vacillate from quarter to quarter. Throughout the remainder of fiscal 2021, we plan to replenish the communities we sell out and close this year with new communities that open. We believe that our community count at the end of the year will be similar to current levels. Keep in mind, our revenue growth today is not as directly tied to community count growth as it was in the past. Previously, we thought the primary way we would achieve revenue growth would be through community count growth. More recently, we have been achieving remarkable increases in our sales pace per community and that higher sales pace rather than increased community count is fueling our anticipated revenue growth. If the current sales pace was to slow down, so is the speed at which we are closing out our communities. And as a result, our land acquisition efforts would result in community count growth rather than just replenishment. Slide 16 shows, we controlled 26,049 lots or a 4.6 year lot supply at the end of the fourth quarter. As of the end of the year, we controlled 100% of our expected 2021 delivery forecast, which assumed growth over 2020. Additionally, we already control almost 90% of the lots required to meet our 2022 delivery forecast because some analysts are saying that builders will soon be running out of lots, let me repeat what I just said, we control all of the lots we need for our anticipated growth in 2021 deliveries and almost 90% of the lots we need for 2022 deliveries. We have sufficient time to find the remaining 10% of lots needed for 2022 deliveries. Further, I can tell you that the number of land and lot opportunities being brought to our corporate land committee has picked up recently. We remain disciplined in our underwriting approach using current home sales price, current home sales pace and current construction costs to achieve our 20%-plus unlevered IRR hurdle rate. If we find land opportunities that pencil under these self-adjusting criteria, we will move forward to control them. On Slide 17, we show despite the adverse impact of COVID-19, we added 2022 newly controlled lots during the fourth quarter. During the same quarter, we had 1,721 deliveries and lot sales, resulting in a net increase of 301 controlled lots. After temporarily slowing new land acquisitions earlier this year due to the onset of COVID, our land acquisition teams are back in the market sourcing new deals. Turning to Slide 18. During the fourth quarter of fiscal 2020, our land and land development spend was $229 million, a 41% increase over the same quarter a year ago. Despite that significant increase in land spend, we ended the fourth quarter with $399 million of liquidity. We have excess capital to invest, and we're busy tying up new land parcels. Turning to Slide 19. Compared to our peers, you can see that we had the third highest percent of land controlled via options. We continue to use land options whenever possible in order to achieve high inventory turns, enhance our returns on capital and reduce risk. We are pleased to control 63% of our land through options. Looking at our consolidated communities in the aggregate, including mothballed communities and the $182 million of inventory not owned, we have an inventory book value of $1.2 billion, net of $183 million of impairments. Turning now to Slide 20. Compared to our peers, you can see that we had the second highest inventory turnover rate for the trailing 12-month period. Our inventory turns are 46% higher than the next highest peer below us. High inventory turns are a key component of our overall strategy. We believe one of the key pure operating metrics for the homebuilding industry is EBIT to inventory. On Slide 21, we show the trailing 12-month EBIT to inventory for us and our peers. This ROI metric measures pure operating performance before interest expense. We remain above median when compared to our peers on this metric. We and the entire industry are still not at normalized historical ROI levels. But given the recent increase in new home demand, we believe ROI returns will soon improve for all of us. We continue to work hard to get further to the right on this chart. On Slide 22, another area of discussion is related to our deferred tax asset. Our deferred tax asset is very significant, and because it is fully reserved by a valuation allowance, it is not currently reflected on our balance sheet. We've taken numerous steps to protect this asset. As of October 31, 2020, our deferred tax asset in the aggregate was $578 million. We will not have to pay federal income taxes on approximately $1.8 billion of future pre-tax earnings. We show that we ended the fourth quarter with a shareholders' deficit of $436 million. If you add back our valuation allowance, as we've done on this slide, our shareholders' equity would be a positive $142 million. Turning now to Slide 23. On this slide, we show our debt maturity ladder at the end of the fourth quarter. As of today, the most likely scenario is that in July 2021, we expect to pay off in full, one year prior to maturity, our $111 million of second lien notes due in 2022. Furthermore, considering that it sits at the very top of our secured capital structure, we believe we will be able to refinance and extend our revolver on or prior to its maturity in fiscal 2023. As always, we will continue to analyze and evaluate our capital structure and explore transactions to further strengthen our balance sheet and our financial performance. Turning to Slide 24. I would now like to discuss our results and trends in the context of the multiyear key metric targets that we originally provided 2.5 years ago. The targets, including the assumptions upon which they're based, and our accompanying remarks are integrally related and are intended to be presented and understood together. Given the forward-looking nature of these targets, you should keep in mind that the targets assume no changes in current market condition, and actual results may differ significantly depending upon actual market conditions and other factors, including those described on Slide 2 and in the Risk Factors section of our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. In June 2018, 2.5 years ago, we provided illustrative multiyear key metric targets shown in the third column of this slide. The first column shows the trailing 12-month results when we initially provided these key metric targets. The second column shows our results in fiscal 2020. Our 2020 results clearly demonstrate the strong progress we have made towards achieving these target metrics over the past couple of years. So long as market conditions remain unchanged, as we begin fiscal 2021, we believe our fiscal 2020 results demonstrate we're trending toward and have an opportunity to achieve these multiyear targets in fiscal 2021. Turning to Slide 25. You will clearly see the significant year-over-year improvements and strong progress we expect to make towards achieving our multiyear targets during the first quarter of fiscal 2021. For the first quarter, assuming no adverse changes in current market conditions, we expect to report total revenues between $570 million and $600 million, up from $494 million in the same period last year. We also expect gross margins to be in the range of 19% to 20% compared to 17.3% in last year's first quarter, and SG&A as a percentage of total revenues to be between 11.5% and 12.5%. Excluding land-related charges and gains or losses on extinguishment of debt, we expect adjusted EBITDA to be between $45 million and $60 million, up between 50% and 100% compared to the same quarter last year. Finally, we expect our adjusted pre-tax profit for the first quarter of fiscal 2021 to grow to between $5 million and $15 million compared to a $14 million loss in the same period last year.

Our first question comes from Alan Ratner with Zelman & Associates.

First off, it's great to hear that you are doing well. Congratulations on the strong year-end results. I'd like to dive a bit into the price versus volume situation. I have Slide 11 in front of me, which outlines the absorption trends by month and is very helpful. It's clear that the rates you were maintaining in the summer were not sustainable, and I believe it makes sense to aim for higher margins as you have done. I'm curious if you feel like you’ve found an equilibrium point around 4 to 4.5 sales per month where you are comfortable, and if you might consider easing up on pricing, or do you think there’s still a need to lower prices due to backlogs and industry constraints in building those homes? I have a follow-up question after that.

Sure. Well, as I mentioned, if you just annualize November, it's at a pace of 60 homes per year per community. That's historically a super high pace. I'd say right now, we still error on the side of raising prices even further. We just need a little time for our new communities to open up. There were some delays related to COVID because of us and because of different governmental entities that were obviously also affected and contractors, et cetera. And we need time to get our land acquisition team to complete a lot of the acquisitions we're about to make. And that way, we won't dip in our community count. We want to at least stabilize our community count. So we're kind of looking at both of those things together. But I'd say, at the moment, we probably error on the side of raising prices further, even if that slows the pace down.

Got it. That's helpful. And this is somewhat related to that, but I'm just kind of looking at the revenue guidance you provided for '21, which is up about 15% year-over-year at the midpoint. So very strong growth, but your backlog is up about 60% heading into the year. So can you help us kind of just think through the various push and pulls there? I mean, clearly, there's probably some elongation of cycle times, I would imagine that's factored into that. So to the extent you could talk through that, that would be helpful? But then where is that expectation, at least for order activity as the year progresses? It would seem like you're implying a fairly meaningful drop-off in year-over-year growth or declines for that matter. But I just want to make sure I'm thinking through that correctly.

I'm not entirely certain I grasped the last part of your question, but I will respond to what I believe I understood. As we previously stated, the rapid growth we experienced earlier was simply not sustainable, contributing to a significant backlog. We do not anticipate maintaining that pace moving forward. Instead, our focus will be on enhancing pricing and margins. This is why we are adopting a more cautious approach to our revenue targets.

Can you provide an update on your current cycle times compared to pre-COVID levels? Have they been extended, and what are the main bottlenecks you are experiencing?

There has been a little bit of extension, and it varies quite a bit by market. And the bottlenecks change. It's like what is that game with the bobbing heads, whack-a-mole, yes, sometimes, appliances are a problem, and then luxury vinyl planks are a problem, different things become a problem at different moments, and that can extend cycle time. But overall, it's just starting to stabilize. And I think we'll make some progress.

Our next question comes from Alex Barrón with Housing Research.

I guess I was kind of working through your guidance and it seems to me, everything is working pretty well, and I think you guys are taking the right steps in terms of trying to raise price and maybe not get ahead of yourself. But is there any reason that we couldn't extrapolate the profitability you guys had this quarter to the full year in a sense? Because if you do the math, you guys did 643 million of home sales, it seems like that times 4 is roughly the midpoint of your guidance for next year. So is there anything that you think could get in the way of basically not just assuming you might have achieved a similar level of pre-tax margin for the full year?

Well, I think our guidance is pretty clear. And we gave you a fairly tight range of what we expected to do. And the range is well above what we achieved for the full year, last year. I mean, clearly, the trend that you saw in the fourth quarter, we do expect to continue into fiscal 2021, and that's reflected in the guidance that we gave you.

I will just add that our fourth quarter is typically our largest quarter, making it difficult to simply multiply it by four. While we expect significant growth in our first quarter compared to last year, it usually has lower volume. Therefore, you cannot just take the large fourth quarter and multiply it by four.

Right, right. Okay. And then in terms of the corporate G&A, you guys had been, I guess, $15 million to $20 million the past 3 quarters. This one jumped up to $26 million. Was that something of a one-time in nature or is that more of a run rate going forward?

As we discussed, the corporate general and administrative expenses were significantly affected by stock compensation costs in the fourth quarter, which were linked to our stronger performance for fiscal '20 compared to our earlier expectations and the previous year. Additionally, some of the stock compensation adjusts based on stock price fluctuations. Therefore, if our stock price increases, the associated expense will also rise, occurring on a catch-up basis. This suggests that if our performance remains strong, we will likely see increased stock compensation and higher stock prices, which would drive the expense. However, some of these costs are more one-time expenses tied to a specific compensation plan that has concluded this fiscal year. This is likely to create a mix of ongoing and one-time expenses.

If I could ask one more question about your unused land, I believe a lot of it was in California, possibly in Sacramento. Can you confirm if that is correct? Additionally, how much of that land is still reflected on your books? I think the market is quite strong at the moment.

Yes, it's very strong. And you are correct. It's the largest part, about 1,600 homes are in Northern California, in a great location, outside of Sacramento, and the only reason it's still mothballed is we're slightly modifying our entitlements that we think will yield even better approvals, better profits and performance. We expect to be bringing that community online sometime in the next 12 months to begin development. It is a solid property.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back to Ara Hovnanian for any further remarks.

Great. Well, thank you very much. We're obviously pleased with the results and are particularly with our most recent sales and the strength that we see. It's an unusual time. It's a difficult time to provide guidance and outlook and clarity on what's going on. We've given you the most reasonable assumptions that we know right now and I can only say we just feel very good about both the sales environment and our ability to replenish and hopefully soon grow our land pipeline. So we're bullish and we look forward to giving you continued progress after our first quarter. Thank you.

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