Hovnanian Enterprises Inc. (NYSE:HOV) Q4 2019 Earnings Conference Call - Final Transcript

Dec 05, 2019 • 11:00 am ET

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Hovnanian Enterprises Inc. (NYSE:HOV) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from Megan McGrath with Buckingham Research. Your line is now open.

Analyst
Megan McGrath

Hi, good morning. I wanted to follow up on your conversation around your lots and land ownership and options. We've heard from some other builders as we've worked through the last couple of months that have also had really high rates of order growth, some caution around their ability to maintain community count growth as they start to sell through these high orders. So I'd love to hear your comments on that looking into 2020 and the amount of finished lots that you have to kind of continue this pipeline?

Executive
Ara K. Hovnanian

We feel pretty comfortable, Megan. I mean, it's always a competitive environment, but I can't say that we've seen any significant decrease in opportunities from what we saw a year ago or two years ago. We continue to be disciplined, but we're finding opportunities across the country.

Executive
J. Larry Sorsby

Yeah. The other thing I would add is, obviously, just from a pure mathematical perspective, as you sell at a faster pace per community, it does make achieving growth in community count more difficult because you sell through them more quickly. But obviously, what we're really after is growth and contracts growth and revenues, which we're achieving by selling faster per community and get the benefit of some overhead reduction as well. So we'll take the faster pace even if it does modify our ability to grow community count as fast as we otherwise would.

Analyst
Megan McGrath

Okay, great. That's what I was after. Thank you. And then just to follow-up a little bit on pricing, your order ASP was down about 1.5. It looks like although your individual regions were down more than that, so that's partially due to mix. So could you talk about that mix shift downward to a lower price point and what you're seeing there versus any pure pricing pressure?

Executive
Ara K. Hovnanian

Yeah. We have been trying to grow our Aspire line. Our Aspire line is our most affordable entry-level homes. So I'd say we're deemphasizing a little bit the move up homes, although it's not a huge segment, first-time homebuyers have always been a big part of our market. But we're pushing further on increasing the mix of our lowest price.

Analyst
Megan McGrath

Great. Thank you very much.

Operator
Operator

Our next question comes from Alan Ratner with Zelman & Associates. Your line is now open.

Analyst
Alan Ratner

Hey guys, good morning. Congrats on the strong quarter and the debt refinancing.

Executive
Ara K. Hovnanian

Thank you.

Analyst
Alan Ratner

A couple of housekeeping questions first. First on the SG&A, very impressive leverage. I think a year ago, you guys had kind of a one-time benefit in that number, maybe some reversal of some defect reserves. Was there any similar benefit this quarter that you can quantify?

Executive
J. Larry Sorsby

Yeah. Alan, hi. Thanks for the pat on the back on the good results. With respect to SG&A, last year we had an actuarial analysis that we do for the year-end every year and it resulted in a $10 million reversal