Good morning and thank you for joining us for Hovnanian Enterprises Fiscal 2020 First 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 be making some opening remarks about the first quarter results and then opening the line for questions. The company will also be webcasting a slide presentation along with our opening comments from management. The slides are available on the Investor's 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, Kathreen. Thank you all for participating in the call this morning to review the results for our first quarter, which ended January 31, 2020. 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 it's 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 in 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 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; Brad O'Connor, Vice President, Chief Accounting Officer and Controller; and David Bachstetter, Vice President, Finance, and Treasurer. I'll now turn the call over to Ara. Ara, please go ahead.

Thanks, Jeff. I am going to review the results of our first quarter and as usual, Larry Sorsby will follow me with more detail. On Slide 4, we compare a year-over-year results for the first quarter. As you can see in the upper left hand portion of the slide, total revenues grew 30% to $494 million during this year's first quarter. The growth was driven by a 28% increase in deliveries, and a 4% increase in average sales price. We're pleased to see a more substantial increase in our revenues this quarter; this is in line with the increases we've seen in our contracts over the past two quarters. Moving to the top right, you can see that our gross margin was 17.3% for the first quarter of 2020, compared to 17.8% during the first quarter of 2019. This was lower than we anticipated, and is partially due to greater discounting to move through some of the spec inventory during the slower winter season. In recent weeks, as we have seen the market growing stronger, there has been far less discounting on specs. In the lower left hand portion of the slide, you can see that our total SG&A ratio was 12.2% for the first quarter of 2020, compared to 15.9% in last year's first quarter. Our total SG&A dollars were flat year-over-year at $60 million for the first quarter. Our increased levels of revenue and flat SG&A dollars resulted in a lower SG&A ratio for the first quarter. This certainly demonstrates the benefits of leveraging our SG&A expenses with higher revenues. As we continue to grow our consolidated revenues, we expect to be able to better leverage our costs and overtime, get our annual SG&A ratio back to a more normalized range of 10%. In the lower right hand…

Thanks, Ara. I'll start with a discussion about the year-over-year increase in our interest expense. As you can see, on Slide 12, there was an $8 million year-over-year increase in cost of sales interest rates in the first quarter, much of this increase was driven by higher delivery volumes. Cost of sales interest as a percent of homebuilding revenues was 3.8% in this year's first quarter, which is down slightly from the run rate of 4% for both, the third and fourth quarters of fiscal 2019. So while cost of sales interest expense on a percentage basis was up compared to the first quarter last year, it was less than this year's first quarter than what we saw for the last half of the prior year. Additionally, interest incurred increased $5 million year-over-year, half of this increase was due to higher non-recourse debt levels, and the other half was related to the debt exchanges that we completed in October and December of 2019. Other interest expense, which we show on the bottom of the slide, increase $3 million as this portion of the $5 million increase in interest incurred was expensed. Turning to Slide 13; I am going to update you on our unconsolidated joint venture activity. During fiscal 2018 and 2019, the number of domestic joint venture communities declined. In fiscal 2019, we opened six joint venture communities and in the first quarter of fiscal 2020, we contributed four communities into the new age-restricted joint venture Ara mentioned earlier. Total domestic joint venture communities increased from 15 to 24 year-over-year. As a result, we are once again beginning to see increases in our domestic joint venture contracts, which were up 29% in the most recent quarter. Primarily due to non-reoccurring income from our joint venture in Saudi Arabia in…

Thanks, Larry. The spring selling season is definitely off to a great start and that's evident by our 42% increase in contracts in the first quarter, and 44% increase in contracts in the month of February. The 4.8 contracts per community in February is the highest monthly sales pace we've achieved since May of 2005. These increases, along with less use of incentives should bode well for the operating results over the next several quarters. We expect our EBITDA performance will continue to improve. Signs -- given the signs of the strength we continue to see from the overall US economy, and more specifically, the housing market, we'll continue to take steps that lead us on our path to growing our revenues and getting back to higher levels of sustainable profitability. That concludes our formal comments, and we're happy to open it up for questions.

Thank you. The company will now answer questions. [Operator Instructions] And our first question comes from Alan Ratner with Zelman. Your line is open.

Hey guys, good morning. Nice wave of [ph] results, and thanks for the color on -- specifically, the coronavirus; I think that's certainly at top of everybody's minds there. So good to hear. Yes, I guess the question -- obviously, we don't know what impact these fears may ultimately have on either the economy or order activity, but I'm curious that -- very strong order numbers you mentioned pulling back on some incentives as the quarter went on. As you sit here today does the uncertainty surrounding coronavirus, does that change how you're thinking about the pricing side of the business at all? Are you thinking about maybe being a little bit less aggressive on pushing price or pulling back on those incentives, just given that we don't really know what's likely to come around the corner?

We're not right now, Alan. Obviously, we're going to monitor sales every week in every community, and certainly different communities and geographies wanted [ph] different actions. But right now, sales feel particularly and perhaps surprisingly steady and solid, so we'll continue on as we've been doing right now.

Right, that's good, it's good to hear. Second question, if we can dig in on the gross margin a little bit more, you know, coming in a little bit lighter than you guys had expected. And I know you mentioned, obviously, incentives might have been a little bit higher when some of those homes were sold, but I would presume that you had that visibility when you gave the guidance a couple of months ago. So, I'm curious exactly, why that number came in a bit lighter? Was it home that you sold inter-quarter? Maybe some mix impact that came in, you know, lower because they were specs? And, I guess more broadly, as we think about the remainder of the year, should we expect a similar kind of ramp in the back half versus the first half that we've seen the last couple of years in your gross margin?

Alan, I'll take the first part first. And then, perhaps Larry or Brad will tackle the second part. But we gave guidance last quarter and the difference was, we still had some specs to sell. And the greater incentives really affected the specs that we sold and delivered that quarter, and it was just enough to make it a little lower than the guidance but not that significantly.

So, Alan, we're certainly encouraged that we're able to clawback some of the incentives that Ara just mentioned and haven't been doing as heavily incenting spec sales. As I mentioned in my portion of the script, that's going to lead to margins being better in the second quarter this year than last year. And we just haven't made any projections for the second half of the year with respect to gross margins but yeah, as long as we can continue to clawback incentives and raise prices because demand is strong, I certainly think that gives you a hint as to what gross margins might do in the future.

Appreciate that, Larry.

Alan, I might comment. Just reflecting on this, as -- you know, you asked the questions about the coronavirus; you know, it just brings to mind the horrific events of the World Trade Center terrorist attack, a long time ago. And one would have thought then that you'd see a significant pullback on sales, housing sales; but while it was a very brief hiccup, the housing market continued on a pretty strong basis and that's what we're feeling so far right now with the coronavirus. Something you'd expect to have a widespread impact, but instead, it's really -- so far repeating the effect similar to the horrific events related to the World Trade Center while ago.

Got it and I appreciate that perspective. One last, just kind of housekeeping, just so I understand this margin impact. Larry, do you have the current spread on margin between specs and to be built, just to kind of maybe quantify what dragged those extra sales in the quarter ahead on the margin?

This is Brad O'Connor. It was about 350 basis points spread between specs and to be builds for the first quarter.

Okay, got it. Thanks, Brad. Thanks. Good luck, guys.

Thank you. [Operator Instructions] Our next question comes from Alex Baron with Housing Research Center. Your line is open.

Yes, thanks, guys. Good job on the orders. I wanted to ask about the corporate SG&A portion. It was up a little bit versus all the quarters last year, there is something that's one-time in nature, is that taking to be more of a run rate for this year?

This year we had a little bit higher expenses related to some cyber-security work that we've been doing with some outside resources compared to the prior years, and also last year, stock compensation can vary depending on performance metrics being hit, etcetera. So what I would say is, I know it's a little higher this first quarter versus last year; it will probably trend higher than last year and the best you probably can do is model it similar to what you see for the first quarter.

Got it. Okay, that's helpful. And then, the other question was; I guess you went a little bit past for me on the joint ventures. Can you elaborate a little bit more on why the income dropped this quarter and what we can expect going forward there versus last year?

It's primarily related to -- we have a joint venture in Saudi Arabia, and in last year's first quarter, we had a one-time non-reoccurring profit event; what was it again…

It's about $6 million.

$6 million of the $8 million was related to that. And as we're gearing, joint ventures back up again, and we're certainly seeing that on the community counts and on the orders. Ultimately, that'll result in higher revenues and once again, improving profitability.

But at the moment, the joint ventures are starting off and have some extra startup costs associated.

Okay. And so, for the near-term, I guess we shouldn't look at last year as kind of a model for what to expect here?

Yes. We're just not given specific guidance but sitting in your shoes, I would say that's worth looking at as you try to model it.

Got it. Okay, thanks guys.

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Ara for any closing remarks.

Great. Thank you very much. We're pleased to report strong performance on many metrics. We look forward to giving you more positive updates in the quarters to come. And in the meantime, everyone stay safe and wash your hands a lot. Thank you.

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