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 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 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 distance, 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 feed 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…

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…

[Operator Instructions]. Our first question comes from Alan Ratner with Zelman & Associates.

First off, great to hear. You guys are doing well. And second, congrats on the strong year end results. I was hoping to -- maybe first, just drilling a little bit on the whole price versus volume equation here. And just, I guess, I have Slide 11 up in front of me with the absorption trends by month, which is very helpful. Clearly, the rates you were running at in the summer were unsustainable. And I think it makes a lot of sense to try to push that margin higher as you've done. I'm curious now, just looking at that trend line, if you feel like you've kind of found that equilibrium point where 4, 4.5 sales per month. You're kind of comfortable running at and maybe you pull back a little bit on the pricing side or do you still think there is a reason to bring that lower given kind of backlogs and constraints with the industry of getting those homes built? And I have a follow-on on that after.

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 close 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 100% sure I understood the last part of the question, but I'll answer what I think I understood. As we mentioned, I mean, the torrid pace we had earlier was just not sustainable. So we're not -- and that's what built this huge backlog. We're not projecting to keep that pace. We want to keep pushing pricing and margins instead. So that's why we're being a little more conservative about our revenue targets.

And then just on cycle time -- thank you for that. The cycle times, how do your cycle times look today versus, say, before COVID, how much have they been extended if they have? And what are the biggest bottlenecks there that you're seeing?

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.

[Operator Instructions]. Our next question comes from Alex Barrón with Housing Research. Alex Barrón : 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 achieve 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, typically, our fourth quarter is a very large quarter. So it would be hard to take our largest quarter and multiply by 4. There is a little seasonality in our first quarter, while it's going to be up dramatically compared to last year. It's typically a little lower volume. So it's -- you can't just take the big fourth quarter and multiply by 4. Alex Barrón : 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 mentioned in our remarks, the corporate G&A was greatly impacted by stock compensation expenses for the fourth quarter that relate to our improved performance for fiscal '20 compared to what we had anticipated previously and certainly compared to the prior year. And so -- and the other thing we mentioned is that some of the stock compensation is based on, it adjusts when the stock price adjusts. So if our stock price goes up, the amount of the expense increases as well, and it's on a catch-up basis. So there is some that will continue and as a run rate because if we are -- if our performance continues to show strength, you'll see stronger stock compensation and higher stock prices, presumably, which would then drive the expense. But some of it is more one-time because it relates to one specific comp plan that completed this fiscal year and is measured and will be done. So it's probably somewhere right in between [indiscernible]. Alex Barrón : If I could ask one more on the -- on your mothball land, I think a lot of that used to be in California, I'm guessing they might have been in Sacramento. And just wanted to confirm if that's correct. And how much of that is still left on your books? I believe [indiscernible] is pretty 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 over 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.