Good morning and thank you for joining us today for the Hovnanian Enterprises Fiscal 2017 Second 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. [Operator Instructions] Management will make some opening remarks about the second quarter results and then open the line up 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 in 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, Nicole and thank you all for participating this morning in our call to review the results for our second quarter, which ended April 30, 2017. All statements in this conference call that are not historical facts should be considered as forward-looking statements within the meanings 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 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 factors are described in detail on the sections entitled Risk Factors and Management’s Discussion and Analysis, particularly the portion 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 the operating results for the second quarter and discuss our current sales environment. Larry is going to follow me with a little more detail and discuss a few other items, including our liquidity position. We have experienced a strong spring selling season and have seen our sales per community continue to improve. However, many of our 2017 year-over-year comparisons remained challenging for a couple of reasons. First, we generated 28% revenue growth in 2016, which makes for some pretty tough comparisons. Second, although we initially anticipated growing in 2017 and beyond, during late 2015 and throughout 2016, as oil plunged, the high-yield’s capital markets threw a kink in our plans. And as a result of the capital markets closing on us, instead of positioning the company for further growth last year, we temporarily reduced our land spend, we converted 13 wholly-owned communities into joint ventures and we exited 4 underperforming markets and finally, paid off $320 million of debt. The cumulative effect of these actions has led to decreases and community counts, contracts, deliveries and revenues this year. By the end of last year, we had strengthened our liquidity position, had the debt behind us and we are once again working hard to replenish our land position so that we could generate growth in the future. Given these limitations, our second quarter results were in line with our previous guidance. Starting in the upper left hand corner of Slide 3, we show that for the second quarter of 2017, total revenues decreased 11% to $586 million from last year. A portion of this decline is a shift in deliveries from wholly-owned communities to joint ventures. We don’t report joint venture revenues in our consolidated reports. However, as an indication of size and trend…

Thanks Ara. On Slide 10, we provide an update on Houston. Despite the fact that we have had over 2 years of significantly lower oil prices, our Houston operations continue to post solid results. During the second quarter of 2017, we saw the absolute number of net contracts in Houston increased by 4% year-over-year and net contracts per community increased 13% year-over-year from 7.7 contracts per community to 8.7. As I have said on prior calls, there are 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 point. Our average home prices on homes delivered for the second quarter of 2017 in Houston was approximately $288,000, which is slightly lower than it has been in recent quarters and lower than most of our competitors. 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 who have worked diligently to successfully deliver solid results in a 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 actions should circumstances change. Turning to Slide 11, you will see our owned and option land position broken out by our publicly reported market segments. During fiscal 2016, our land spend was almost exclusively spent on parcels that we previously tied up under option agreements. Due to paying off $320 million of debt maturities, we did not have sufficient liquidity in 2016 to also invest in purchasing our option newly identified land parcels. We are now in the…

Thanks Larry. I just want to take a step backwards and once again put our recent performance into perspective. At the peak of the last cycle, we built a little over 20,000 homes annually. We had a market cap of about $4.5 billion. We were not only one of the top performers in the homebuilding industry, but we are ranked number two in the Fortune 500 for all industries for return to shareholder value in – for 2 years in a row. In hindsight, in conjunction with our strong performance, we are obviously overly aggressive in ‘04 and ‘05 from a company acquisition and a land acquisition point of view. When the Great Recession of housing came along, our debt to capital ratio of 50% proved to be too much for the severity of the downturn and made for a more challenging downturn as well as a more challenging recovery. As we mentioned debt that we recently – we did mentioned debt that we recently paid off, but if you turn to Slide 22, you can get a longer term perspective and you can see that we have made good progress over the longer term. From the end of fiscal ‘08 to the end of our second quarter, we have reduced our debt by almost $1 billion. Debt reduction has been a focus of ours for a while. Instead of diluting our shareholders, our plan was to grow our top line and return to higher levels of profitability. On Slide 23, we show annual revenues for ‘15 and ‘16. We grew our total revenues by 28% in fiscal ‘16 or about $600 million of growth in 1 year, which is obviously a fairly significant growth rate for us. When we set out on this growth path, we anticipated some continued…

[Operator Instructions] Our first question comes from the line of Arjun Chandar of JPMorgan. Your line is now open.

Good morning. Thank you. With regards to your liquidity position, can you comment a little bit around the sequential improvement in liquidity as it relates to the sequential decline in owned inventory, you mentioned around $100 million of land spend, how should we think about the evolution of working capital going forward in the back half of fiscal ‘17?

We are – our land teams have been busy, scouting out deals. The pipeline has grown and we don’t typically project a specific dollar amount of land spend. But I believe that you will see an increase in land spend compared to the second quarter and the third quarter and fourth quarter.

We definitely plan on operating at least within our capital liquidity targets. We have often been operating in excess of them. And as Larry mentioned earlier, we would really love to do even more with options. We are the second highest in inventory turnover. We are working to even increase that and that will allow us to do more without spending as much in land. But we are budgeting and planning for more land spend as we go. As we mentioned earlier, it is a big time lag between spending the money for land, tying up options and when we can increase communities open for sale. It’s frustrating, but we are plugging away with it and anxious to get our community count growth back again.

Thank you. And then my follow-up question is just on quantifying the liquidity lever, so how should we think about quantifying the liquidity levers that you mentioned, additional land banking, JVs, increased use of non-recourse projects, specific loans as it relates to managing near-term liabilities?

I think as we have excess liquidity, we will pull less on the levers. And if the capital markets remained open. And we are able to push out some of our debt and obviously relive some pressure. And we would use the levers less. And if the capital markets aren’t open and we have to pay off more debt in a short-term basis similar to what we did from October of ‘15 to 2016, we were able to raise significant liquidity to pay off over $320 million of debt. So we could certainly do the same playbook again. We don’t expect that, that will happen, but that playbook remains open.

As we mentioned, we have ended the last few quarters in excess of our liquidity target. Frankly, we would rather put all the money to work, but we are working hard to be disciplined in our new land acquisitions. We want more land growth. We have got the capital for it. We are hungry for it, but we don’t need deals that don’t work. So right now, we have got excess liquidity. We are looking to put back to work. If we find more opportunities and we are comfortable with as we keep the priority of managing our liquidity. And as Larry mentioned, we have the opportunity to pull a lot of the liquidity levers, we have not been doing that because we just had excess liquidity, but we have that flexibility if we see the opportunities.

Great. Thank you.

Thank you. Our next question comes from the line of James Finnerty of Citi. Your line is now open.

Hi, good morning.

Good morning.

Good morning.

So just touching based on the land spend again, so for full year ‘17 relative to ‘16, are you thinking of growth and can you give us some idea of magnitude?

Yes. We have not made a public protection. I still stand by what I just reiterated to the last question is that I think you will see an increase in land spend. I mean we are happy to tie up land by options. It’s more important to us is how many new lots that we actually control, then how much we actually have to spend to control them. Having said that, I still expect that our spend is going to increase in the third quarter and fourth quarter.

And that’s sequential or is that year-over-year?

Certainly, sequentially.

Okay, great. And then in terms of the absorptions and the increased absorptions, which seem really impressive, what do you sort of I guess driving that, is that related to sort of macro conditions really healthy markets or is there a change in strategy that you are using to drive the absorptions higher?

No, there is not a change in strategy. As you know, our company has been around for about 60 years. We have gone through a lot of cycles. And there is a point in all the cycles as you recover, market starts to increase in velocity. We have been increasing. We are still nowhere near normal. But we have definitely been increasing and we think there is upside to go. What’s going to be important is that not only velocity increases, but as you get pass this inflection point of supply and demand, we want and I am sure we are going to see a pricing power and margin power. We are not budgeting it internally, but having been through so many of these cycles, this one obviously the dozy of all cycles. But what falls down often will go up in our cyclical industry. So right now, I would say it’s nothing more than the cyclical recovery and we are nearing that inflection point I think in the supply versus demand of housing.

Great. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Sam McGovern of Credit Suisse. Your line is now open.

Hi guys. Thanks for taking my questions. Can you talk to what kind of IRRs you guys are targeting on the land purchases and related to that, with regard to the buybacks, you guys said earlier this year, how would you guys took about IRRs on buybacks of debt versus reinvestment business?

Sure, it’s always a delicate balance. But our internal target on un-levered IRR without factoring in corporate overhead is in excess of 20%. Typically, if we are able to get finished lot takedowns, it’s well in excess of 20%. All-cash purchases where we do the land development, those typically have a higher margin, but are on the lower spectrum of IRR. Regarding – Larry, maybe can fill in on this more. But regarding that opportunity versus buying back bonds, over the last couple of quarters, we are aggressive in buyback our bonds because yields were pretty high. Those yields have been coming down pretty significantly. And as we mentioned, the first lien and secured debt has been trading down to par at 7%, so we are certainly more focused right now on investing in land.

Okay, great. And then just following up on some of your prepared remarks and with regard to the land that you guys purchased in 2013 and 2014, but when do you expect that the cycle out of inventory and also what percent of inventory does that currently represent?

It’s in – go ahead, Larry.

I don’t think we have publicly given data on what percentage the inventory, but it’s a lesser and lesser percentage. It’s not the major mover anymore. As Ara kind of commented in our remarks, I mean what’s happened is it’s been – that issue has been overtaken by the increases that we both saw on labor more recently immaterial, so any land that we bought, whether it be ‘13, ‘14, ‘15 or ‘16, have seen increases in labor and material since we have underwrote those deals and that’s a margin pressure we and the industry continue to see.

Okay, great. Thanks so much. I will pass along.

Thank you. Our next question comes from the line of Megan McGrath of MKM Partners. Your line is now open.

Hey, thanks. This is Kevin DaCruz on for Megan. So, sorry if I missed this, but I was just wondering what next quarter gross margins would be and the puts and takes for that guidance?

Yes. I believe what I said it is going to be similar to last year’s third quarter.

Okay. And then you had absorptions up around 20% year-over-year, could you give us some sense geographically where you are seeing strength, where you are seeing weaknesses?

Yes. You might have missed that point, but our strongest markets continue to be Houston. It’s very strong in Northern California for us in Sacramento. And it’s strong – very strong in Phoenix as well. Some of the tougher – by the way, it’s also strong, it’s not a huge market, but Delaware has been very nice market for us. In terms of velocity, Chicago remains strong and margin has been – excuse me, yes, velocity, Chicago strong, margin, it’s been tougher. Maryland has been a little more challenging. Interestingly though, Virginia on the other side of D.C., that market seems to be strengthening.

You want to look save it in our deck, because it has the change in absorption pace by publicly reported segments. So, it gives you pretty good color.

Thanks.

Thank you. Our next question comes from the line of James Finnerty of Citi. Your line is now open.

Yes, thanks for taking follow-up. You mentioned in your prepared comments specifically it can be pushed out to 2020 maturity, how does that relate to the unsecured maturities coming due ‘19 and one step fashion that you are thinking about? Thank you.

Yes, I think if we push out the – if we are able to successfully push out the tower, I think that’s really what’s been the overhang on the trading of the unsecureds. So, I would suspect that if we pushed out the first lien tower that the unsecured would trade better and ultimately lead to our ability to refinance those at a more attractive rate than we could do so today.

And just 2 years ago, our unsecureds were around the 7% yield. Obviously, that changed dramatically as oil plunged and the high yield markets really fell apart. We are hoping it gets a lot stronger. I think our results are supporting lower yields and the moves we are contemplating in the capital markets should help as well.

And just as a follow-up to that, the H/2 capital debt, how does – how would that play into refinancing of the 2020 maturity? Would that be sort of included in that step in the theory?

The H/2 capital, I’m not sure that they are linked at all. So I mean we are looking at all different kinds of alternatives and proposals. But right now, the only thing that we have kind of publicly commented on is we think that it might make sense to push the tower of 7.25% notes and that’s about all I can say on that.

Great. Thank you. Appreciate it.

Thank you. And at this time, I am showing no further questions. I would hand the call back over to Ara for any closing remarks.

Great. Well, we are making progress. The market is getting stronger. We will definitely look forward to giving you some more updates about our success as the quarters roll on. Thank you very much.

Ladies and gentlemen, thank you for participating on today’s conference. That does conclude today’s program. You may all disconnect. Everyone, have a great day.