Hovnanian Enterprises Inc. (NYSE:HOV) Q4 2019 Earnings Conference Call - Final Transcript
Dec 05, 2019 • 11:00 am ET
Ara K. Hovnanian
$40 million. Excluding the costs related to our early extinguishment of debt, which was $42 million related to our recent refinancing and excluding $3 million of land related charges, our adjusted pre-tax income for the fourth quarter was $45 million. This exceeded consensus estimates, and for the full year our adjusted pre-tax profit was $10 million.
Finally, we said that we expected our community count to increase in the fourth quarter and that we would exceed the 160, we ended the year with a 162 total communities which increased sequentially and was up 14% compared to a 142 communities in the fourth quarter of last year.
On Slide 5, we compare year-over-year results for the fourth quarter. As you can see in the upper left hand quadrant, total revenues grew 16% from $615 million last year to $714 million during this year's fourth quarter. The growth was driven by a 17% increase in deliveries and was offset slightly by a little lower average sales price. The increase in total revenues is the result of investments that we've been making in our land position over the last two years.
Moving to the top right, you can see that our gross margin was 18.9% for the fourth quarter of '19 compared to 19.2% during the fourth quarter of 2018. While it was down compared to last year just a bit, it was up sequentially from 18.4% in the third quarter and exceeded our guidance as I said before. In the lower left hand portion of the slide, you can see that our total SG&A ratio was 7.6% for the fourth quarter of 2019 compared to 8.3% in last year's fourth quarter. Our increased level of revenues and the resultant lower SG&A ratio for the fourth quarter demonstrates the benefits of leveraging our SG&A expenses with higher revenues.
Our total SG&A dollars were up from $51 million last year to $54 million in this year's fourth quarter. Our 15% increase in consolidated communities certainly impacted our SG&A costs. However, for five quarters in a row, our SG&A per community decreased year-over-year. For the fourth quarter it decreased from $413,000 per community last year to $382,000 per community this year. As we started getting a greater number of -- excuse me, as we started getting a greater number of deliveries from our growing community count, we expect to be able to leverage our costs and over time get our annual SG&A ratio back to more normalized levels in the 10% range.
In the bottom right hand quadrant of the slide, in typical fashion, we had a particularly strong fourth quarter with adjusted pre-tax income of $45 million which exceeded consensus estimates.
Now let me talk about our sales environment. Our fourth quarter continued a very positive trend that began in February of this year and continued throughout the year. On Slide 6, we show that consolidated contracts for the quarter increased 34% year-over-year to 1,345 contracts this year compared to 1,004 contracts a year