Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2017 First Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and will 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 first 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, Vice President, Investor Relations. Jeff, please go ahead. Jeff O’Keefe: Thank you, Karen and thank you all for participating in this morning's conference call to review the results for our first quarter, which ended January 31, 2017. 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 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 and/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 described in detail in this section's entitled risk factors and management discussion and analysis particularly the portions of the MD&A entitled Safe Harbor statement in our Annual Report on Form 10-K for the fiscal year ended October 31, 2016 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 from the company 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, go ahead.

Thanks Jeff. I am going to review our operating results for the first quarter and discuss the current sales environment. Larry is going to follow up with a little more detail and discuss other items including our liquidity position. Our first quarter results were in line with our previous guidance and I'll discuss that more fully in a moment. However, I thought a review our capital markets' environment would be helpful. Since late in fiscal 2015, the high yield market for our credit rating has been difficult. We faced challenging high yield environments from time to time in our 35-year history of participating in high yield markets. Similar to what we've seen in the past, we expect the high yield markets to eventually reopen for us. The overall high yield markets are clearly strengthening, but as a result of the difficult high yield markets for us, we had to temporarily reduced our land spend as we paid off $320 million of maturing public debt between October 15 and May of 16. Additionally, in the beginning of 2016, we announced that we are existing four underperforming markets. These two factors led to a reduction in our land position and a 22% decline in our total community count. This clearly impacted a number of our operating results compared to last year, but again we are in line with our previous guidance. Starting in the upper left hand corner of Slide 3, we show there for the first quarter of 2017, total revenues decreased slightly to $552 million from last year, a portion of this decline is a shift in deliveries from wholly-owned communities to joint venture communities. We don't report joint venture revenues in our consolidated results. If you include those revenues, our total revenues would have been up 4% on a…

Thanks Ara. On Slide 9, we provide an update on Houston. Despite the fact that we have had over two years of significantly lower oil prices our Houston operations continue to post solid results. During the first quarter of 2017, we saw the absolute number of net contracts in Houston increased by 2% year-over-year and net contracts per community increased 12% year-over-year from 5% to 5.6%. As I have said in prior calls, there were three things that set our Houston operations apart from many of the builders we compete against in that market. Number one, we focus on a lower average price points. Our average home price on homes delivered for the first quarter of 2017 in Houston was approximate $290,000 which is even lower than it has been in recent quarters. Number two, we do not build in any of the highly competitive master planned communities. And number three, we have less exposure to communities in the energy corridor in Houston than our peers. We commend our local Houston management team that worked diligently to successfully – extremely difficult local market conditions. Despite continued success for our Houston operations, we will keep a close eye on the market and we are prepared to take appropriate action should circumstances change. As a side note, our Texas operations both Houston and Dallas remain amongst our strongest markets. Turning to Slide 10, you will see our owned and optioned land position broken out by a publicly reported market segments. Our investments and land option deposits was $53 million as of January 31, 2017. Additionally, we have another $11 million invested in three development expenses. In November, after improving our liquidity position, we started more aggressively seeking land parcels again. As a result, we are now beginning to review a greater number…

Thanks Larry. After a deleveraging in fiscal 2016, we are now focused on identifying new land parcels, so that we can grow our deliveries in 2018 and beyond. As Larry pointed out, we made progress this quarter and we increased our owned lot position. We are very focused on high inventory turnover to leverage our operating capability. We began this year with about $350 million in excess cash and liquidity that we have since put to work, both buying back some of our debt and through purchasing and optioning land for future community. The faster we can get these new communities opened, the faster we can get back to help your levels of profitability and it's something we are very focused on. We are confident that the steps we have taken are positioning us properly for the continued market recovery. That concludes our formal remarks and we'd like to turn it over for questions.

Thank you. [Operator Instruction] And our first question for today comes in the line of Nishu Sood for Deutsche Bank.

This is actually Tim on for Nishu. Thank you for taking my question. My first question is actually regarding the gross margin, you know solid progress year-over-year. You mentioned some headwinds and as well some tailwinds including the labor land incentives, and as well as kind of working your way through some of the higher priced inventory or land that you purchased back in the mini-bubble. I was just wondering could you walk us through each of these moving parts and as well what you expect for them next year?

Yeah. I can't say that we could be very specific because it's so situational. But overall, as I think we pointed out that our guidance is that our full year gross margins will be similar. That's in terms full year for 2017 will be similar to last year's full year.

And clearly as time goes by, there is less and less overhang from the lot that we purchased and what you referred to as the mini-bubble. So that headwind should diminish in future years. You know it's hard to answer the labor question. I think we as well as the entire industry have seen labor cost increases that have caused margin declines for an entire industry, as we project forward, we assume no changes in costs, no changes in home prices, no changes in absorption pace. Historically, we and the industry have been able to offset any cost increases by raising home prices. This particular cycle we have very unusual to see labor cost increases kind of outstrip our ability to raise prices. Hard to say what may or may not happen in the future.

And just a follow-up on that, it seems, just looking at the backlog on a wholly-owned versus daily basis. It seems that California is contributing a substantially higher amount, while higher amount of deliveries in 4Q than 4Q 2015 and now a higher amounts of backlog dollars as well. Is your California gross margin a bit higher than they are in the rest of the country as is the case with some other builders? Just trying to kind of figure out the mix shift there as the total buckets shrinks?

As a general statement and highly regulated markets where you have expensive land, we have a higher gross margin that we do in market to where we're able to auction, finish lots such as Houston. We get a higher inventory turn and Houston kind of offsets slightly lower margins and in California we have to have higher margins to offset the lower inventory turns. So, I think as a generic comment, the California gross margins are higher on average than many parts of our company.

Thank you. And our next question comes from line of Ryan McKeveny from Zelman Industries.

One more on the gross margin specific to the 2Q guidance. I believe you said it will be similar to 2Q of last year, which on an adjusted excluding capitalized interest basis we see as 16.1%. So, when I think about that, I guess first is that the right number that you are comparing to and then secondly, regarding the 1Q 2017 results which were 17.2% implies to more around 100 bps of decline sequentially. So, just curious of the factors you've talked pressuring margins. Is there anything specific to call out on why that 2Q would be down that amount relative to what you just reported for 1Q?

First of all the answer is yes, 16.1% or 16.2% that you cited, the right number comparing it to and the reason I think is just kind of mix, where the deliveries are coming from across the country and community by community. So, that's a simple answer.

Got it. Okay. Then one, a bit random one here, but we saw press release yesterday about a JV you guys have in Saudi Arabia and we're just wondering if you could maybe elaborate a bit on the economics of that for the Company and whether this is a type of growth opportunity potentially going forward? Thank you.

Sure. Well first of all, at the moment, it's a small joint venture that we actually established a few years ago. It's small amount of investment for us, although we do have the option to increase our contribution. The venture is with a large land owner there and frankly was random that the opportunity came about. The announcement yesterday was that our venture signed a joint venture agreement with the Saudi Government's Ministry of Housing to provide housing that they are subsidizing for their citizens. At this point, I don't think it's anything material, but it does have the opportunity to become a little more meaningful. And if it does become more meaningful, we'll certainly report on that in a little more detail in the future.

The joint venture that was announced yesterday is actually a joint venture between our Saudi joint venture with this large land owner and the Ministry of Housing. So, it's kind of a joint venture on a joint venture that has tremendous potential, but only time will tell whether it's realized.

Thank you. And our next question comes from the line of Megan McGrath from MKM Partners.

Good morning. I wanted to follow-up on some demand environment comments. You talked about both a nice increase in absorptions in recent months, but also an increase in incentives that were impacting your gross margin. So, I realized a lot of this is localized. So, maybe you could talk us through sort of big picture, you know your sense on the demand environment and where you are seeing increased incentives and does that coincide with where you are seeing increased absorptions as well?

Sure. Just overall the macro perspective, we definitely are feeling a little strengthening in the marketplace and I think our sales per community, our contracts per community are certainly an indication of that. If I look around the country, I'd say we're feeling some strengthening, certainly in Northern California in the Sacramento area that has been strong. We're continuing to see a strong Texas market, the Arizona market in Bromley in Phoenix that has been strengthening as well. On the other side, we're seeing a little more challenge in the Chicago market, which has historically done very well for us and our southeast coastal markets have had more of a headwind in terms of incentives that would include the Hilton, primarily the Hilton Head in Savannah markets in south.

Okay. Great. That's helpful. And then, to switch gears a little and talk about your increase land spend. Similarly can you give us any detail there on – was there any particular regions or product type where you saw yourself spending more money this quarter?

No I say, nothing stick out of my mind. I mean we shrunk the number of divisions by four as we've said during the call and our intent and plan is to be larger in the 15 plus markets that we are in and that's part of our strategy. So, our plan is to increase income spread that in many of our markets. It just depends on where we find the best opportunities at any given moment. I forgot to mention in the DC market by the way, we've seen a little of strengthening in the Virginia – northern Virginia segment recently and perhaps that comes from people's faith that the defense industry may see more dollar spent and that certainly helps employment in that area.

Great. Thank you.

Thank you. And our next question comes from the line of Sam McGovern from Credit Suisse.

Hey guys thanks for taking my question. Just on the bond buybacks. Can you walk us through how you guys think about the IRR on the bond repurchased versus using the cash to reinvest in the business for the next few years and also whether you guys have repurchased any bonds after quarter end?

We typically bought bonds back when we thought we got a higher yield by buying bonds back than we could achieve by investing in a new deal where was the yield was equal to or higher than what or underwriting hurdle rates were for equal land deal. You know in that particular quarter, first quarter we obviously ended the fourth quarter with a lot of cash that we immediately put to use. So, it was even easier to make that decision. The hurdle rates again remained higher than we were able to achieve on our typical land deals. But we just couldn't put the money to work. So, the actual spread was even a greater spread because it was earning virtually nothing sitting in the bank. But we know that debt is coming due in a couple of years anyway, so it was something that we reflected on and thought was the best decision at this point in time, and I don't believe there is an subsequent that will be announced in the 10-Q with respect to subsequent bond purchases.

Got it and what capacity do you guys have to repurchase bonds? And what covenants are being used to repurchase the junior debt?

I don't believe we're currently restricted by covenants buying back bad debt, so there are no financial covenants that that causes us to be restricted.

Okay, great. Thanks. I'll pass it on.

Thank you. [Operator Instruction] Our next question comes from the line of James Finnerty from Citi.

Hi. Good morning.

Good morning.

Just going back to, I think the prior commentary on 2018 deliveries being similar to 2016. I apologize if I missed that. Did you reiterate that today in terms of consolidated plus joint venture deliveries?

I don't believe we use those exact words. I believe what we said was 2018 tend to grow again, including unconsolidated joint ventures.

So grow again relative to 2017?

Yes.

Okay. And then in terms of 2017 land spend you spent $190 in the first quarter. Can you give us any idea for the full year 2017 versus 2016? 2016 you spent I believe $567 million. How should we think about that?

I think you should expect us to spend more on – in the aggregate in 2017 that we did in 2016.

Okay, great. And then last, just on the bond repurchases, were those bonds retired?

Yeah.

Yeah.

Okay, great. Thank you.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to Ara Hovnanian for any closing comments.

Great. Thank you very much. We'll continue to make progress. As Larry shared earlier from the pure operations standpoint which we measure by EBITDA inventory, we continue to perform very well compared to our peers, but all of us are suffering from a challenging EBIT inventory environment. That will improve as it does every cycle. We've certainly seen that over in the last 60 years of our history. And when we combine that, we're getting our revenue growth back again as our new communities open. We're confident that we will see continued improving results over the long term. Thanks very much and we'll look forward to giving you more updates each quarter that are positive. 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.