Hovnanian Enterprises Inc. (NYSE:HOV) Q4 2018 Earnings Conference Call Transcript

Dec 06, 2018 • 11:00 am ET


Hovnanian Enterprises Inc. (NYSE:HOV) Q4 2018 Earnings Conference Call Transcript


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Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2018 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 up 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 log on to the website at this time.

Before we begin, I would like to turn the call over to Jeff O'Keefe, VP, IR. Jeff, please go ahead.

Jeff O'Keefe

Thank you, Chelsea, and thank you all for participating in this morning's call to review the results for our fourth quarter, which ended October 31, 2018. (Forward Looking Cautionary Statements)

Joining me today are Ara Hovnanian, Chairman, President and CEO; Larry Sorsby, EVP and CFO; Brad O'Connor, VP, CAO and Controller; and David Bachstetter, VP of Finance, and Treasurer.

I'll now turn the call over to Ara. Ara, go ahead.

Ara Hovnanian

Thanks, Jeff. I'm going to briefly review our operating results for the fourth quarter and also talk about our current sales environment. And as usual, Larry will follow me with a little more detail.

We're pleased with our fourth quarter performance and met or exceeded the guidance we gave on our last conference call. On Slide 4, we show the guidance and our actual results for the fourth quarter of 2018. Starting at the top, our total revenues of $615 million, we're in the middle of our guidance range. Our gross margin for the fourth quarter was 19.2% and exceeded the guidance range. Our SG&A ratio was 8.3% and it was also better than the guidance range we gave. And finally, adjusted pretax income was $51 million, which exceeded the high end of the range we gave by $11 million. While we didn't give any guidance regarding net income, we are pleased to report $46 million of net income.

Since there's been a lot of attention given to the recent sales trend in the home building industry, let me take a few minutes to talk about what we're seeing out there. There's no doubt that new home sales have been choppy throughout the summer and recently the choppiness has become more pronounced.

Slide 5, shows contracts per community for the quarter by month on the left hand side and for the entire quarter on the right. You can see that the fourth quarter got off to a slow start in the month of August. However, we ended the quarter with year-over-year increases for the months of September and October. In spite of those increases, the fourth quarter contracts per community declined from 8.6 to 8.3 for the fourth quarter based on