HOVNANIAN ENTERPRISES INC (HOV)
SIC breadcrumb: Construction > Building Construction General Contractors And Operative Builders > SIC 1531 Operative Builders
SEC company page: https://www.sec.gov/edgar/browse/?CIK=357294. Latest filing source: 0001753926-25-001938.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 2,978,581,000 | USD | 2025 | 2025-12-22 |
| Net income | 63,865,000 | USD | 2025 | 2025-12-22 |
| Assets | 2,633,913,000 | USD | 2025 | 2025-12-22 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-12-22. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000357294.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2012 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 2,752,247,000 | 2,451,665,000 | 1,991,233,000 | 2,016,916,000 | 2,343,901,000 | 2,782,857,000 | 2,922,231,000 | 2,756,016,000 | 3,004,918,000 | 2,978,581,000 | |
| Net income | -332,193,000 | 4,520,000 | -42,117,000 | 50,928,000 | 607,817,000 | 225,490,000 | 205,891,000 | 242,008,000 | 63,865,000 | ||
| Diluted EPS | -0.02 | -56.23 | 0.72 | -7.06 | 7.03 | 85.86 | 29.00 | 26.88 | 31.79 | 7.43 | |
| Operating cash flow | 386,996,000 | 301,578,000 | -66,822,000 | -249,127,000 | 292,828,000 | 210,213,000 | 89,466,000 | 435,275,000 | 23,640,000 | 188,279,000 | |
| Capital expenditures | 8,007,000 | 6,478,000 | 5,193,000 | 4,005,000 | 3,380,000 | 5,942,000 | 12,592,000 | 18,821,000 | 17,859,000 | 22,097,000 | |
| Dividends paid | 0.00 | 0.00 | 0.00 | 10,700,000 | 10,700,000 | 10,700,000 | 10,700,000 | ||||
| Share buybacks | 103,000 | 0.00 | 0.00 | 12,222,000 | 4,800,000 | 26,528,000 | 30,244,000 | ||||
| Assets | 2,354,956,000 | 1,900,898,000 | 1,662,042,000 | 1,881,424,000 | 1,827,342,000 | 2,320,508,000 | 2,562,030,000 | 2,492,940,000 | 2,605,574,000 | 2,633,913,000 | |
| Liabilities | 2,483,466,000 | 2,361,269,000 | 2,115,546,000 | 2,371,200,000 | 2,263,436,000 | 2,145,124,000 | 2,178,979,000 | 1,911,151,000 | 1,805,225,000 | 1,802,978,000 | |
| Stockholders' equity | -128,510,000 | -460,371,000 | -453,504,000 | -490,463,000 | -436,929,000 | 174,897,000 | 383,036,000 | 581,736,000 | 800,349,000 | 830,935,000 | |
| Free cash flow | 378,989,000 | 295,100,000 | -72,015,000 | -253,132,000 | 289,448,000 | 204,271,000 | 76,874,000 | 416,454,000 | 5,781,000 | 166,182,000 |
Ratios
| Metric | 2012 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net margin | -13.55% | 0.23% | -2.09% | 2.17% | 21.84% | 7.72% | 7.47% | 8.05% | 2.14% | ||
| Return on equity | 347.53% | 58.87% | 35.39% | 30.24% | 7.69% | ||||||
| Return on assets | -17.48% | 0.27% | -2.24% | 2.79% | 26.19% | 8.80% | 8.26% | 9.29% | 2.42% | ||
| Liabilities / equity | 12.27 | 5.69 | 3.29 | 2.26 | 2.17 |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-06-02. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000357294.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2016-Q3 | 2016-07-31 | -474,000 | reported discrete quarter | ||
| 2016-Q4 | 2016-10-31 | 22,289,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2017-Q1 | 2017-01-31 | -143,000 | reported discrete quarter | ||
| 2017-Q2 | 2017-04-30 | -6,682,000 | reported discrete quarter | ||
| 2017-Q3 | 2017-07-31 | -337,209,000 | reported discrete quarter | ||
| 2017-Q4 | 2017-10-31 | 11,841,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2018-Q1 | 2018-01-31 | -30,809,000 | reported discrete quarter | ||
| 2018-Q2 | 2018-04-30 | -9,823,000 | reported discrete quarter | ||
| 2018-Q3 | 2018-07-31 | -1,026,000 | reported discrete quarter | ||
| 2018-Q4 | 2018-10-31 | 46,178,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2019-Q1 | 2019-01-31 | -17,452,000 | reported discrete quarter | ||
| 2022-Q3 | 2022-07-31 | 10.82 | reported discrete quarter | ||
| 2023-Q1 | 2023-01-31 | 2.26 | reported discrete quarter | ||
| 2023-Q2 | 2023-04-30 | 4.47 | reported discrete quarter | ||
| 2023-Q3 | 2023-07-31 | 649,957,000 | 7.38 | reported discrete quarter | |
| 2023-Q4 | 2023-10-31 | 887,032,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2024-Q1 | 2024-01-31 | 594,196,000 | 2.91 | reported discrete quarter | |
| 2024-Q2 | 2024-04-30 | 708,380,000 | 6.66 | reported discrete quarter | |
| 2024-Q3 | 2024-07-31 | 722,704,000 | 9.75 | reported discrete quarter | |
| 2024-Q4 | 2024-10-31 | 979,638,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2025-Q1 | 2025-01-31 | 673,623,000 | 3.58 | reported discrete quarter | |
| 2025-Q2 | 2025-04-30 | 686,471,000 | 2.43 | reported discrete quarter | |
| 2025-Q3 | 2025-07-31 | 800,583,000 | 1.99 | reported discrete quarter | |
| 2025-Q4 | 2025-10-31 | 817,904,000 | derived Q4 = FY annual - nine-month YTD | ||
| 2026-Q1 | 2026-01-31 | 631,952,000 | 2.62 | reported discrete quarter | |
| 2026-Q2 | 2026-04-30 | 667,645,000 | -284,000 | -0.46 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001753926-26-000964.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Hovnanian Enterprises, Inc. (“HEI”) conducts all of its homebuilding and financial services operations through its subsidiaries (references herein to the “Company,” “we,” “us” or “our” refer to HEI and its consolidated subsidiaries and should be understood to reflect the consolidated business of HEI’s subsidiaries).
Key Performance Indicators
The following key performance indicators are commonly used in the homebuilding industry and by management as a means to better understand our operating performance and trends affecting our business and compare our performance with the performance of other homebuilders. We believe these key performance indicators also provide useful information to investors in analyzing our performance:
●
Net contracts is a volume indicator which represents the number of new contracts executed during the period for the purchase of homes, less cancellations of contracts in the same period. The dollar value of net contracts represents the dollars associated with net contracts executed in the period. These values are an indicator of potential future revenues;
●
Contract backlog is a volume indicator which represents the number of homes that are under contract but not yet delivered as of the stated date. The dollar value of contract backlog represents the dollar amount of the homes in contract backlog. These values are an indicator of potential future revenues;
●
Active selling communities is a volume indicator which represents the number of communities which are open for sale with ten or more home sites available as of the end of a period. We identify communities based on product type; therefore, at times there are multiple communities at one land site. These values are an indicator of potential revenues;
●
Net contracts per active selling community is used to indicate the pace at which homes are being sold (put into contract) in active selling communities and is calculated by dividing the number of net contracts in a period by the number of active selling communities in the same period. Sales pace is an indicator of market strength and demand; and
●
Contract cancellation rates is a volume indicator which represents the number of sales contracts cancelled in the period divided by the number of gross sales contracts executed during the period. Contract cancellation rates as a percentage of backlog is calculated by dividing the number of cancelled contracts in the period by the contract backlog at the beginning of the period. Cancellation rates as compared to prior periods can be an indicator of market strength or weakness.
On January 1, 2026, we acquired a controlling interest in a previously unconsolidated joint venture in the Kingdom of Saudi Arabia ("KSA"), that operates and markets itself under the trade name HOV Global. Beginning in the first quarter of fiscal 2026, the results from KSA are included in our consolidated financial statements. Consistent with our historical presentation, we will continue to exclude the results of our KSA operations from these key performance indicators generally (unless otherwise indicated) because such operations are not expected to have a material impact on our financial results for fiscal 2026. Where we have excluded the KSA operations, we refer to such metrics as being for our “domestic” operations.
Overview
Market Conditions and Operating Results
The demand for new and existing homes is dependent on a variety of demographic and economic factors, including job and wage growth, household formation, consumer confidence, mortgage financing, interest rates, inflation and overall housing affordability.
During fiscal 2025 and continuing through the first half of fiscal 2026, mortgage rates have fluctuated but still remain at a persistently high level. As a result, affordability generally remains challenging for homebuyers. We have stayed aggressive in our pricing, incentives and concessions in order to align with the current market.
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We continue to use our increased inventory of quick move-in homes ("QMI homes") to help meet buyers’ needs for more affordable housing in the existing uncertain interest rate environment. The time between contract signing and closing is shorter with a QMI home as compared to a to be built home, which provides customers with more certainty on their mortgage pricing. The availability of QMI homes also allows us to offer mortgage interest rate buydown assistance, which is a tool we offer through our wholly-owned mortgage banking subsidiary ("K. Hovnanian Mortgage"), to help ease the impact of higher monthly payments from rising interest rates. We pay the cost of interest rate buydowns for customers that qualify through K. Hovnanian Mortgage and decide to use the program. The level of interest rate based incentives utilized differs across our markets and is one of several available options we use to drive sales and close homes.
Our emphasis on driving sales pace versus price resulted in domestic net contracts increasing by 1.0% in the second quarter of fiscal 2026 compared to the prior year second quarter and 2.0% for the six months ended April 30, 2026 compared to the same period of the prior year. Within the six-month period, net contracts fluctuated from month to month, reflecting ongoing shifts in market conditions and consumer sentiment, including increased hesitancy from buyers, which we believe was partially attributed to the Iran war. Even with the volatility in the broader economy and affordability constraints, we were able to raise prices or decrease incentives in approximately 44% of our domestic communities during the second quarter of fiscal 2026.
While the long-term fundamentals of the new home market remain favorable, there remains a great degree of uncertainty due to inflation, tariffs, the continued possibility of an economic recession, employment risk, geopolitical events and the potential for further mortgage rate increases. While we continue to experience some supply chain issues, we remain focused on continuing to shorten our construction cycle times and building on our national initiatives to drive down costs with our material providers and trade partners. The changing conditions in the housing market, and in the general economy, makes it difficult to predict how strongly our business will be impacted by these external factors over fiscal 2026 and beyond.
During the six months ended April 30, 2026, our cash position allowed us to spend $413.0 million on domestic land purchases and land development for long-term growth and repurchase $18.5 million of our common stock and still have total liquidity of $442.0 million, including $310.9 million of homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of April 30, 2026.
Information on our operating results for the three and six months ended April 30, 2026 are as follows:
● Sale of homes revenues decreased to $604.2 million for the three months ended April 30, 2026 from $650.3 million for the three months ended April 30, 2025, and was $1.2 billion for the six months ended April 30, 2026 and $1.3 billion for the six months ended April 30, 2025. There was an 11.8% and 12.1% decrease in the number of home deliveries for the three and six months ended April 30, 2026, respectively, compared to the same periods of the prior year, partially offset by an increase in average price of 5.3% and 3.4% for the three and six months ended April 30, 2026, respectively, compared to the same periods of the prior year.
● Gross margin dollars decreased 31.0% and 36.0% for the three and six months ended April 30, 2026, respectively, as compared to the same periods of the prior year. Gross margin percentage decreased to 10.2% for both the three and six months ended April 30, 2026 from 13.8% and 14.5% for the three and six months ended April 30, 2025, respectively. Gross margin percentage, before cost of sales interest expense and land charges, decreased to 14.3% for the three months ended April 30, 2026 from 17.3% for the three months ended April 30, 2025 and decreased to 13.9% for the six months ended April 30, 2026 from 17.8% for the six months ended April 30, 2025. The decrease in gross margin percentage was primarily due to increased use of incentives and concessions, including additional mortgage interest rate buydowns, to make our homes more affordable. In the current homebuilding environment, we remain focused on driving financial performance by increasing our sales pace versus achieving a higher gross margin.
● Selling, general and administrative costs (including corporate general and administrative expenses) ("Total SGA") was $84.0 million, or 12.6% of total revenues, in the three months ended April 30, 2026 compared with $80.6 million, or 11.7% of total revenues, in the three months ended April 30, 2025, and $168.0 million, or 12.9% of total revenues, in the six months ended April 30, 2026 compared with $167.5 million, or 12.3% of total revenues, in the six months ended April 30, 2025. The increase in Total SGA percentage is primarily due to the decrease in sale of homes revenue for the same periods of the prior year.
● Income before income taxes decreased to $0.3 million for the three months ended April 30, 2026 from $26.5 million for the three months ended April 30, 2025 and decreased to $29.0 million for the six months ended April 30, 2026 from $66.4 million for the six months ended April 30, 2025. Net income decreased to a loss of $0.6 million for the three months ended April 30, 2026 from $19.7 million for the three months ended April 30, 2025 and decreased to $20.3 million for the six months ended April 30, 2026 from $47.9 million for the six months ended April 30, 2025. Included in income before income taxes for the three months ended April 30, 2026 and 2025 were land sales of $33.5 million and $12.6 million, respectively. Included in income before income taxes for the six months ended April 30, 2026 and 2025 was a $26.8 million gain on consolidation of joint ventures and a $22.7 million gain on the contribution of assets to a new joint venture, respectively, along with land sales of $68.2 million and $19.4 million, respectively. Earnings per share, both basic and diluted, decreased to a loss of $(0.46) for the three months ended April 30, 2026 compared to $2.64 and $2.43, respectively, for the three months ended April 30, 2025. Earnings per share, basic and diluted, decreased to $2.36 and $2.20, respectively, for the six months ended April 30, 2026 compared to $6.53 and $6.02, respectively, for the six months ended April 30, 2025.
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● Net domestic contracts increased 1.0% and 2.0% for the three and six months ended April 30, 2026, respectively, compared to the same periods of the prior year. The increase for the three and six months ended is primarily due to our current strategy of using increased incentives to drive sales pace, although the incentives needed decreased this quarter from the first quarter of fiscal 2026.
● Net domestic contracts per active selling community increased slightly to 11.3 and 21.2 for the three and six months ended April 30, 2026, respectively, compared to 11.2 and 20.8 in the same periods of the prior year.
● Domestic contract backlog decreased from 1,711 homes at April 30, 2025 to 1,613 homes at April 30, 2026, and the dollar value of domestic contract backlog decreased to $938.4 million, a 5.0% decrease in dollar value compared to the prior year, as our domestic backlog conversion ratio has increased from the prior year period due to increased sales of QMI homes that were both sold and delivered within the quarter.
Results of Operations
Total Revenues
Compared to the same period in the prior year, revenues (decreased) increased as follows:
Three Months End
[Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Hovnanian Enterprises, Inc. (“HEI”) conducts all of its homebuilding and financial services operations through its subsidiaries (references herein to the “Company”, “we”, “us” or “our” refer to HEI and its consolidated subsidiaries and should be understood to reflect the consolidated business of HEI’s subsidiaries). The following tables and related discussion set forth key operating and financial data for our homebuilding and financial services operations as of and for the fiscal years ended October 31, 2025 and 2024. For similar operating and financial data and discussion of our fiscal 2024 results compared to our fiscal 2023 results, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended October 31, 2024, which was filed with the SEC on December 18, 2024. Key Performance Indicators The following key performance indicators are commonly used in the homebuilding industry and by management as a means to better understand our operating performance and trends affecting our business and compare our performance with the performance of other homebuilders. We believe these key performance indicators also provide useful information to investors in analyzing our performance: ● Net contracts is a volume indicator which represents the number of new contracts executed during the period for the purchase of homes, less cancellations of contracts in the same period. The dollar value of net contracts represents the dollars associated with net contracts executed in the period. These values are an indicator of potential future revenues; ● Contract backlog is a volume indicator which represents the number of homes that are under contract but not yet delivered as of the stated date. The dollar value of contract backlog represents the dollar amount of the homes in contract backlog. These values are an indicator of potential future revenues; ● Active selling communities is a volume indicator which represents the number of communities which are open for sale with ten or more home sites available as of the end of a period. We identify communities based on product type; therefore, at times there are multiple communities at one land site. These values are an indicator of potential revenues; ● Net contracts per active selling community is used to indicate the pace at which homes are being sold (put into contract) in active selling communities and is calculated by dividing the number of net contracts in a period by the number of active selling communities in the same period. Sales pace is an indicator of market strength and demand; and ● Contract cancellation rates is a volume indicator which represents the number of sales contracts cancelled in the period divided by the number of gross sales contracts executed during the period. Contract cancellation rates as a percentage of backlog is calculated by dividing the number of cancelled contracts in the period by the contract backlog at the beginning of the period. Cancellation rates as compared to prior periods can be an indicator of market strength or weakness. 29 Table of Contents Overview Market Conditions and Operating Results The demand for new and existing homes is dependent on a variety of demographic and economic factors, including job and wage growth, household formation, consumer confidence, mortgage financing, interest rates, inflation and overall housing affordability. From January 2022 to October 2023, 30-year mortgage rates more than doubled. The sharp increase in interest rates, persistently high levels of inflation and doubt about the stability of the economy negatively impacted housing demand beginning in the second half of fiscal 2022 and into fiscal 2023. During the first quarter of fiscal 2024, mortgage rates declined, which had a positive effect on our sales pace. Rates fluctuated for the remainder of fiscal 2024 and throughout fiscal 2025 but still remain persistently high. As a result, affordability generally remains challenging for homebuyers. We have stayed aggressive in our pricing, incentives and concessions in order to align with the current market. We continue to use our increased inventory of quick move-in homes (“QMI homes”) to help meet buyers’ needs for more affordable housing in the existing uncertain interest rate environment. The time between contract signing and closing is shorter with a QMI home as compared to a to be built home, which provides customers with more certainty on their mortgage pricing. The availability of QMI homes also allows us to offer mortgage interest rate buydown assistance, which is a tool we offer through our wholly-owned mortgage banking subsidiary (“K. Hovnanian Mortgage”), to help ease the impact of higher monthly payments from rising interest rates. We pay the cost of interest rate buydowns for customers that qualify through K. Hovnanian Mortgage and decide to use the program. The level of interest rate based incentives utilized differs across our markets and is one of several available options we use to drive sales and close homes. Although the long-term fundamentals of the new home market remain favorable, during fiscal 2025, volatility in the broader economy and affordability constraints caused many consumers to delay purchasing a new home. As a result of this more difficult sales environment, we experienced a decrease in net contracts compared to fiscal 2024. Even as mortgage rates increased and we focused on increasing sales pace versus price, we were still able to raise net prices in approximately 36% of our communities during the fourth quarter of fiscal 2025. There remains a great degree of uncertainty due to inflation, tariffs, the continued possibility of an economic recession, employment risk and the potential for further mortgage rate increases. While we continue to experience certain supply chain issues, we remain focused on continuing to shorten our construction cycle times and building on our national initiatives to drive down costs with our material providers and trade partners. The changing conditions in the housing market, and in the general economy, make it difficult to predict how strongly our business will be impacted by these external factors over fiscal 2026 and beyond. Our cash position allowed us to spend $859.4 million on land purchases and land development for long-term growth during fiscal 2025 and still have total liquidity of $404.1 million, including $272.8 million of homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of October 31, 2025. In addition, our September 2025 issuance of $900.0 million in aggregate amount of senior unsecured notes to refinance all of our senior secured notes and secured term loan facility contributed to our ongoing efforts to manage and simplify the Company’s capital structure and strengthen its financial position. Additional information on our results for the year ended October 31, 2025 were as follows: ● For the year ended October 31, 2025, sale of homes revenues decreased 0.8% as compared to the prior year, due to a 3.5% decrease in average sales prices, partially offset by a 2.8% increase in homes delivered. The increase in deliveries in fiscal 2025 was primarily the result of a 7.7% increase in community count as well as an increase in QMI contracts. ● Homebuilding gross margin percentage decreased from 18.7% for the year ended October 31, 2024 to 12.7% for the year ended October 31, 2025, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, decreased from 22.0% for the year ended October 31, 2024 to 17.2% for the year ended October 31, 2025. The decreases were primarily due to the increased use of incentives and concessions, including additional mortgage interest rate buydowns, to make our homes more affordable. In the current homebuilding environment, we remain focused on driving financial performance by increasing our sales pace versus achieving a higher gross margin. 30 Table of Contents ● Selling, general and administrative expenses (including corporate general and administrative) increased $7.6 million for the year ended October 31, 2025 as compared to the prior year, however, as a percentage of total revenue, such costs were relatively flat at 11.7% for the year ended October 31, 2025 compared to 11.4% for the year ended October 31, 2024. The increase was primarily due to an increase in advertising expenses and compensation expense, mainly related to increased headcount and annual merit increases, as well as fees incurred on unused builder forward commitments. The increase in headcount was in preparation for expected growth in community count and deliveries in fiscal 2025 and fiscal 2026. ● Other interest increased to $35.4 million for the year ended October 31, 2025 from $30.8 million for the year ended October 31, 2024, primarily due to an increase in communities in planning, along with an increase in land banking and model lease financing interest, as our inventory not owned increased during fiscal 2025. ● Income before income taxes decreased to $86.1 million for the year ended October 31, 2025 from $317.1 million for the year ended October 31, 2024. Similarly, net income declined to $63.9 million for fiscal 2025, compared to $242.0 million in the previous fiscal year. Several key factors contributed to these reductions. Although both fiscal years included gains resulting from the consolidation of previously unconsolidated joint ventures, the gain in fiscal 2024 was $45.7 million whereas the gain for fiscal 2025 was $18.9 million. Additionally, the results for the year ended October 31, 2025 reflected a loss on extinguishment of debt totaling $33.1 million. In contrast, the year ended October 31, 2024 included a gain on extinguishment of debt totaling $1.4 million. Net income was also negatively impacted by inventory impairments and land option write-offs of $39.6 million and $11.6 million for the years ended October 31, 2025 and 2024, respectively. ● Earnings per share, basic and diluted, decreased to $7.95 and $7.43, respectively, for the year ended October 31, 2025, compared to earnings per share, basic and diluted of $34.40 and $31.79, respectively, for the year ended October 31, 2024. ● Net contracts decreased 3.1% to 5,023 for the year ended October 31, 2025, compared to 5,186 in the prior year. Included in the year ended October 31, 2025 and 2024, respectively, were 44 and 276 build-for-rent contracts. ● Net contracts per active selling community decreased to 35.9 for the year ended October 31, 2025 compared to 39.9 in the prior year. The decrease was due to the decrease in net contracts from October 31, 2024 to October 31, 2025. ● Active selling communities increased to 140 at October 31, 2025 compared to 130 at October 31, 2024, while our total lots controlled decreased to 35,883 at October 31, 2025 compared to 41,891 at October 31, 2024. This reduction in the number of total lots controlled was primarily the result of our decision to walk away from certain lower margin lots. These lots had been originally underwritten prior to the escalation of sales incentives that are necessary in the current market environment in order to make home purchases more affordable. We expect our community count will continue to grow in fiscal 2026. ● Contract backlog decreased from 1,649 homes at October 31, 2024 to 1,242 homes at October 31, 2025, and the dollar value of contract backlog decreased to $726.5 million, a 22.4% decrease in dollar value compared to the prior year. Our backlog conversion ratio has increased from the prior year due to our focus on having more QMI homes available to sell and deliver. 31 Table of Contents Results of Operations Total Revenues Compared to the prior year, revenues (decreased) increased as follows: Year Ended October 31, Variance 2025 Compared (Dollars in thousands) 2025 to 2024 2024 Homebuilding: Sale of homes $ 2,852,908 $ (22,580 ) $ 2,875,488 Land sales 21,606 (21,151 ) 42,757 Other revenues 9,092 (3,517 ) 12,609 Financial services 94,975 20,911 74,064 Total change $ 2,978,581 $ (26,337 ) $ 3,004,918 Total revenues percent change (0.9) % Homebuilding: Sale of Homes Sale of homes revenues decreased $22.6 million, or 0.8%, for the year ended October 31, 2025, compared to the prior year. The slight decrease in revenues in fiscal 2025 was primarily due to the average sales price per home decreasing 3.5% in fiscal 2025 from fiscal 2024, partially offset by a 2.8% increase in homes delivered. The increase in deliveries in fiscal 2025 was primarily the result of community count increasing, along with an increase in our backlog conversion ratio. The decrease in average sales price in fiscal 2025 was primarily due to the geographic and community mix of our deliveries. For further detail on changes in segment revenues see “Homebuilding Operations by Segment” below. Land sales are ancillary to our homebuilding operations and are expected to continue in the future but may fluctuate significantly up or down. For further detail on land sales and other revenues, see the section titled “Homebuilding: Land Sales and Other Revenues” below. Information on the sale of homes is set forth in the table below: Year Ended October 31, October 31, (Dollars in thousands, except average sales price) 2025 2024 Consolidated total: Housing revenues $ 2,852,908 $ 2,875,488 Homes delivered 5,496 5,348 Average sales price $ 519,088 $ 537,675 Unconsolidated joint ventures:(1) Housing revenues $ 621,785 $ 539,028 Homes delivered 935 853 Average sales price $ 665,011 $ 631,920 (1) Represents housing revenues and home deliveries for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures. See Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of our joint ventures. 32 Table of Contents Homebuilding: Land Sales and Other Revenues Land sales and other revenues decreased $24.7 million for the year ended October 31, 2025, compared to the prior year. Revenue associated with land sales can vary significantly due to the mix of land parcels sold. There were five land sales during the year ended October 31, 2025, compared to six in the prior year. Other revenues include interest income, which decreased as a result of lower rates on cash and cash equivalent account balances beginning in the first quarter of fiscal 2025 compared to the prior year. Homebuilding: Cost of Sales Cost of sales includes expenses for consolidated housing and land and lot sales, including inventory impairment and land option write-offs (defined as “land charges” in the tables below). A breakout of such expenses for homebuilding and land and lot sales and the gross margins for each is set forth below. Homebuilding gross margin before cost of sales interest expense and land charges, is a non-GAAP financial measure. This measure should not be considered as an alternative to homebuilding gross margin determined in accordance with U.S. GAAP as an indicator of operating performance. Management believes this non-GAAP measure enables investors to better understand our operating performance. This measure is also useful internally, helping management evaluate our operating results on a consolidated basis and relative to other companies in our industry. In particular, the magnitude and volatility of land charges for the Company, and for other homebuilders, have been significant and, as such, have made comparable financial analysis of our industry more difficult. Homebuilding metrics excluding land charges, as well as interest amortized to cost of sales, and other similar presentations prepared by analysts and other companies are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’ respective levels of impairments and debt. Year Ended October 31, October 31, (Dollars in thousands) 2025 2024 Sale of homes $ 2,852,908 $ 2,875,488 Cost of sales, excluding interest expense and land charges 2,360,888 2,241,749 Homebuilding gross margin, before cost of sales interest expense and land charges 492,020 633,739 Cost of sales interest expense, excluding land sales interest expense 90,357 87,717 Homebuilding gross margin, after cost of sales interest expense, before land charges 401,663 546,022 Land charges 39,571 8,903 Homebuilding gross margin $ 362,092 $ 537,119 Homebuilding gross margin percentage 12.7 % 18.7 % Homebuilding gross margin percentage, before cost of sales interest expense and land charges 17.2 % 22.0 % Homebuilding gross margin percentage, after cost of sales interest expense, before land charges 14.1 % 19.0 % 33 Table of Contents Cost of sales as a percentage of consolidated home sales revenues are presented below: Year Ended October 31, October 31, 2025 2024 Sale of homes 100.0 % 100.0 % Cost of sales, excluding interest expense and land charges: Housing, land and development costs 71.3 % 68.6 % Commissions 3.3 % 3.2 % Financing concessions 3.9 % 2.5 % Overheads 4.3 % 3.7 % Total cost of sales, before interest expense and land charges 82.8 % 78.0 % Cost of sales interest 3.1 % 3.0 % Land charges 1.4 % 0.3 % Homebuilding gross margin percentage 12.7 % 18.7 % Homebuilding gross margin percentage, before cost of sales interest expense and land charges 17.2 % 22.0 % Homebuilding gross margin percentage, after cost of sales interest expense and before land charges 14.1 % 19.0 % We sell a variety of home types in various communities, each yielding a different gross margin. As a result, depending on the mix of communities delivering homes, consolidated gross margin may fluctuate up or down. Total homebuilding gross margin percentage decreased to 12.7% for the year ended October 31, 2025 compared to 18.7% for the prior year. Total homebuilding gross margin percentage, before cost of sales interest expense and land charges decreased to 17.2% for the year ended October 31, 2025 compared to 22.0% for the prior year. The decreases in gross margins were primarily due to increases in our use of incentives and concessions, including additional mortgage interest rate buydowns, to make our homes more affordable. Land and lot sale expenses and gross margins are set forth below: Year Ended October 31, October 31, (In thousands) 2025 2024 Land and lot sales $ 21,606 $ 42,757 Cost of sales, excluding interest 10,475 21,635 Land and lot sales gross margin, excluding interest 11,131 21,122 Land and lot sales interest expense 618 2,090 Land and lot sales gross margin, including interest $ 10,513 $ 19,032 Land sales are ancillary to our homebuilding operations and are expected to continue in the future but may fluctuate significantly. Homebuilding: Inventory Impairments and Land Option Write-offs Inventory impairments and land option write-offs reflect certain inventories we have either written off or written down to their estimated fair value totaling $39.6 million and $11.6 million in expense for the years ended October 31, 2025 and 2024, respectively. During the years ended October 31, 2025 and 2024, we wrote off residential land option, approval and engineering costs totaling $18.2 million and $1.6 million, respectively. Land option, approval and engineering costs are written off when a community’s pro forma profitability is not projected to produce an adequate return on investment commensurate with the risk. If we determine an adequate return is not probable, we cancel the option, or when a community is redesigned, we write off the engineering costs related to the initial design. Such write-offs occurred across each of our segments in fiscal 2025 and 2024. Inventory impairments were $21.4 million in the aggregate for the year ended October 31, 2025 for six communities in our Northeast segment, one community in our Southeast segment and five communities in our West segment. For the year ended October 31, 2024, inventory impairments were $10.0 million in the aggregate for two communities in our Northeast segment and two communities in our West segment. It is difficult to predict future impairments, but if conditions in the overall housing industry or a specific geographic market worsen in the future, there are future changes in our business strategy that significantly affect the key assumptions used in our projections of future cash flows, and/or there are material changes in any other items we consider in assessing recoverability, we may need to recognize additional inventory impairments and any such charges could be material. 34 Table of Contents In fiscal 2025, we walked away from 32.9% of all the lots we controlled under option contracts. The remaining 67.1% of our option lots are in communities that we believe remain economically feasible. The following table represents lot option walk-aways by segment for the year ended October 31, 2025: Walk- Away Dollar Number of % of Lots as a Amount Walk- Walk- Total % of Total of Walk Away Away Option Option (Dollars in millions) Away Lots Lots Lots(1) Lots Northeast $ 4.3 6,518 43.7 % 23,320 28.0 % Southeast 4.6 3,513 23.6 % 8,484 41.4 % West 9.3 4,871 32.7 % 13,485 36.1 % Total $ 18.2 14,902 100.0 % 45,289 32.9 % (1) Includes lots optioned at October 31, 2025 and lots optioned that the Company walked away from in the year ended October 31, 2025. Homebuilding: Selling, General and Administrative Homebuilding selling, general and administrative (“SGA”) expenses increased $9.9 million to $212.4 million for the year ended October 31, 2025, compared to the prior fiscal year. The increase is primarily due to an increase in selling overhead from higher advertising costs and an increase in total compensation expense as a result of an increase in headcount from opening more communities along with the cost associated with annual merit increases, as well as fees incurred on unused builder forward commitments we began offering in the second half of fiscal 2022 to lower mortgage rates for our customers. Homebuilding: Key Performance Indicators Net Contracts Per Active Selling Community Net contracts per active selling community in fiscal 2025 were 35.9 compared to 39.9 in fiscal 2024, a 10.0% decrease in sales pace per community. Our reported level of sales contracts (net of cancellations) was impacted by uneven demand caused by overall market uncertainty along with affordability constraints and high interest rates. Contract Cancellation Rates The following table provides historical quarterly cancellation rates, which represents the number of cancelled contracts in the quarter divided by the number of gross sales contracts executed in the quarter, excluding unconsolidated joint ventures: Quarter 2025 2024 2023 2022 2021 First 16 % 14 % 30 % 14 % 17 % Second 15 % 14 % 18 % 17 % 16 % Third 19 % 17 % 16 % 27 % 16 % Fourth 17 % 18 % 25 % 41 % 15 % 35 Table of Contents The following table provides quarterly contract cancellations as a percentage of the beginning backlog, excluding unconsolidated joint ventures: Quarter 2025 2024 2023 2022 2021 First 14 % 10 % 16 % 8 % 11 % Second 15 % 13 % 16 % 9 % 9 % Third 17 % 12 % 12 % 8 % 6 % Fourth 17 % 15 % 13 % 13 % 6 % Most cancellations occur within the legal rescission period, which varies by state but is generally less than two weeks after the signing of the contract. Cancellations also occur as a result of a buyer’s failure to qualify for a mortgage, which generally occurs during the first few weeks after signing. Due to our solid backlog position, our cancellation rate as a percentage of beginning backlog for the fourth quarter of fiscal 2025 was 17%, which approximates our historical normal rate. When sales pace is increasing, the cancellation rate as a percentage of beginning backlog tends to lag the changes seen in our cancellation rate as a percentage of gross sales. Market conditions, although continuing to improve, still remain uncertain and it is difficult to predict what cancellation rates will be in the future. Contract Backlog Our consolidated contract backlog, excluding unconsolidated joint ventures, by segment is set forth below: October 31, October 31, (Dollars in thousands) 2025 2024 Northeast: (1)(2)(3) Total contract backlog $ 383,131 $ 531,481 Number of homes 631 782 Southeast: (1)(3) Total contract backlog $ 127,668 $ 121,974 Number of homes 220 239 West: (4) Total contract backlog $ 215,750 $ 283,377 Number of homes 391 628 Totals: (1)(2)(3)(4) Total consolidated contract backlog $ 726,549 $ 936,832 Number of homes 1,242 1,649 (1) Reflects the reclassification of 86 homes and $70.1 million of contract backlog and 13 homes and $10.6 million of contract backlog as of April 30, 2024 from the consolidated Northeast and Southeast segments, respectively, to unconsolidated joint ventures. This is related to the assets and liabilities contributed to a joint venture the Company entered into during the three months ended April 30, 2024. (2) Reflects the reclassification of 88 homes and $74.2 million of contract backlog as of July 31, 2024 from an unconsolidated joint venture to the consolidated Northeast segment. This is related to the assets and liabilities acquired from a joint venture the Company closed out during the three months ended July 31, 2024. (3) Reflects the reclassification of 22 homes and $14.4 million of contract backlog and 46 homes and $30.7 million of contract backlog as of October 31, 2025 from unconsolidated joint ventures to the consolidated Northeast and Southeast segments, respectively. This is related to the consolidation of the remaining assets and liabilities from an unconsolidated joint venture the Company closed out and two active selling communities from another unconsolidated joint venture that were consolidated during the three months ended October 31, 2025. (4) Reflects the reclassification of eight consolidated homes and $5.0 million of contract backlog as of January 31, 2025 from the West segment to an unconsolidated joint venture. This is related to the assets and liabilities contributed to the joint venture the Company entered into during the three months ended January 31, 2025. Contract backlog dollars decreased 22.4% as of October 31, 2025 compared to October 31, 2024, and the number of homes in backlog decreased 24.7% for the same period. The decrease in backlog dollars and number of homes for the year ended October 31, 2025 compared to the prior fiscal year was primarily driven by an increase in sales of QMI homes and improved contract backlog conversion. 36 Table of Contents Homebuilding Operations by Segment Financial information relating to our homebuilding operations by segment was as follows: Year Ended October 31, Variance 2025 (Dollars in thousands, except average sales price) Compared 2025 to 2024 2024 Northeast Homebuilding revenue $ 1,151,641 $ 115,593 $ 1,036,048 Income before income taxes $ 165,530 $ (25,523 ) $ 191,053 Homes delivered 1,968 322 1,646 Average sales price $ 582,696 $ (29,452 ) $ 612,148 Southeast Homebuilding revenue $ 349,980 $ (98,922 ) $ 448,902 Income before income taxes $ 15,459 $ (62,216 ) $ 77,675 Homes delivered 704 (174 ) 878 Average sales price $ 496,375 $ (13,652 ) $ 510,027 West Homebuilding revenue $ 1,377,073 $ (60,821 ) $ 1,437,894 Income before income taxes $ 15,115 $ (111,598 ) $ 126,713 Homes delivered 2,824 - 2,824 Average sales price $ 480,423 $ (22,441 ) $ 502,864 Homebuilding Results by Segment Northeast – Homebuilding revenues increased 11.2% in fiscal 2025 compared to fiscal 2024, primarily due to a 19.6% increase in homes delivered, partially offset by a 4.8% decrease in average sales price. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes, townhomes and affordable-housing homes in fiscal 2025 compared to some communities delivering higher priced, larger single family homes and townhomes in higher-end submarkets of the segment in fiscal 2024, which were no longer delivered in fiscal 2025. Income before income taxes decreased $25.5 million to $165.5 million in fiscal 2025 compared to fiscal 2024, primarily due to a $23.6 million decrease in land sales and other revenue, an $11.5 million increase in inventory impairments and land option write-offs and a decrease in gross margin percentage. For a discussion of gross margin, see “Homebuilding: Cost of Sales” above. Southeast – Homebuilding revenues decreased 22.0% in fiscal 2025 compared to fiscal 2024, primarily due to a 19.8% decrease in homes delivered and a 2.7% decrease in average sales price. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes in lower-end submarkets of the segment in fiscal 2025 compared to some communities in fiscal 2024 that had higher priced, larger single family homes and townhomes in higher-end submarkets, which were no longer delivered in fiscal 2025. Income before income taxes decreased $62.2 million to $15.5 million in fiscal 2025 compared to fiscal 2024, primarily due to the decrease in homebuilding revenue discussed above, a $4.8 million increase in inventory impairments and land option write-offs and a decrease in gross margin percentage. For a discussion of gross margin, see “Homebuilding: Cost of Sales” above. West – Homebuilding revenues decreased 4.2% in fiscal 2025 compared to fiscal 2024 due a 4.5% decrease in average sales price, while the numbers of homes delivered remained flat. The decrease in average sales price was mainly the result of new communities delivering lower priced, smaller single family homes in lower-end and higher-end submarkets of the segment in fiscal 2025 compared to some communities in fiscal 2024 that had higher priced, larger single family homes in higher-end submarkets, which were no longer delivered in fiscal 2025. Income before income taxes decreased $111.6 million to $15.1 million in fiscal 2025 compared to fiscal 2024, primarily due to the decrease in homebuilding revenue discussed above, an $11.7 million increase in inventory impairments and land option write-offs, a $12.4 million increase in SGA expenses and a decrease in gross margin percentage. For a discussion of gross margin, see “Homebuilding: Cost of Sales” above. 37 Table of Contents Financial Services Financial services consists primarily of originating mortgages for our home buyers, selling such mortgages in the secondary market, and title insurance activities. We use mandatory investor commitments and forward sales of mortgage-backed securities (“MBS”) to hedge our mortgage-related interest rate exposure on agency and government loans. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk associated with MBS forward commitments and loan sales transactions is managed by limiting our counterparties to investment banks, federally regulated bank affiliates and other investors meeting our credit standards. Our risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments. For the years ended October 31, 2025 and 2024, our conforming conventional loan originations as a percentage of our total loans were 58.7% and 64.0%, respectively. FHA/VA loans represented 40.3% and 35.4%, respectively, of our total loans. The remaining 1.0% and 0.6% of our loan originations represent loans which exceed conforming conventions. Realized gains and losses relating to the sale of mortgage loans are recognized when control passes to the buyer of the mortgage. During the years ended October 31, 2025 and 2024, financial services provided $39.0 million and $24.1 million of income before income taxes, respectively. In fiscal 2025, financial services income before income taxes increased from the prior year primarily due to an increase in the volume of loans closed and an increase in the basis point spread between the loans originated and the implied rate from our sale of the loans. In the markets served by our wholly owned mortgage banking subsidiaries, 80.0% and 79.4% of our noncash home buyers obtained mortgages originated by these subsidiaries during the years ended October 31, 2025 and 2024, respectively. Corporate General and Administrative Corporate general and administrative expenses include payroll, stock compensation, facility costs and rent and other costs associated with our executive offices, legal expenses, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, national and digital marketing, construction services and administration of insurance, quality and safety. Corporate general and administrative expenses decreased $2.3 million for the year ended October 31, 2025 compared to the year ended October 31, 2024, primarily due to lower stock compensation expense, along with a decrease in bonus expense due to lower profitability. In addition, we recorded a benefit in fiscal 2025 related to our 2024 and 2023 long-term incentive plan phantom stock awards, as a result of a decrease in our stock price during fiscal 2025. Other Interest Other interest increased $4.7 million to $35.4 million for the year ended October 31, 2025 compared to the year ended October 31, 2024. The increase in Other interest was primarily due to an increase in communities in planning, along with additional inventory financing resulting from an increase in average land banking and model lease financing interest, as our inventory not owned increased during fiscal 2025. (Loss) Gain on Extinguishment of Debt, Net On April 30, 2025, K. Hovnanian Enterprises, Inc. (“K. Hovnanian”) redeemed the remaining $26.6 million aggregate principal amount of its 13.5% Senior Notes due 2026 for a redemption price of $27.5 million, which included accrued and unpaid interest. This redemption resulted in a gain on extinguishment of debt of $0.4 million for the fiscal year ended October 31, 2025, including the write-off of unamortized premiums, debt issuance costs and fees. The gain from the redemption is included in the Consolidated Statement of Operations as "(Loss) gain on extinguishment of debt, net". On September 25, 2025, K. Hovnanian completed a private placement of $450.0 million aggregate principal amount of 8.0% Senior Notes due 2031 (the “2031 Notes”) and $450.0 million aggregate principal amount of 8.375% Senior Notes due 2033 (the “2033 Notes” and, together with the 2031 Notes, the “Notes”). The Notes are guaranteed by the Company and substantially all of its subsidiaries, other than K. Hovnanian, its home mortgage subsidiaries, certain of its title insurance subsidiaries, joint ventures and subsidiaries holding interests in joint ventures. K. Hovnanian used the net proceeds from the Notes issuance, together with cash on hand, to (i) fund the redemption on September 25, 2025 of the entire outstanding principal amount of its 11.75% Senior Secured 1.25 Lien Notes due 2029 at a redemption price equal to 100.0% of the principal amount thereof plus the applicable “make-whole” premium, plus accrued and unpaid interest to, but excluding, the redemption date, (ii) fund the redemption of the entire outstanding principal amount of its 8.0% Senior Secured 1.125 Lien Notes due 2028 at a redemption price equal to 104.0% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the redemption date of September 30, 2025 and (iii) repay in full all outstanding loans under its Senior Secured 1.75 Lien Term Loan Facility due 2028 at par plus accrued and unpaid interest to, but excluding, the prepayment date. 38 Table of Contents In addition, on September 25, 2025, the amendments to the Fourth Amendment to the Credit Agreement, dated as of September 10, 2025, to the Credit Agreement dated as of October 31, 2019 (as amended by the First Amendment to the Credit Agreement, dated as of November 27, 2019, the Second Amendment to the Credit Agreement, dated as of August 19, 2022 and the Third Amendment to the Credit Agreement, dated as of September 25, 2023), by and among K. Hovnanian, the Company, the other guarantors party thereto, Wilmington Trust, National Association, as administrative agent, and the lenders party thereto, which provides for up to $125.0 million in aggregate amount of senior secured first lien revolving loans became effective. These transactions resulted in a loss on extinguishment of debt of $33.5 million for the fiscal year ended October 31, 2025, including the write off of unamortized premiums, debt issuance costs and fees. On November 15, 2023, we redeemed in full all of the $113.5 million aggregate principal amount of our 10.0% Senior Secured 1.75 Lien Notes due 2025 for a redemption price of $119.2 million, which included accrued and unpaid interest. This redemption resulted in a gain on extinguishment of debt of $1.4 million, including the write-off of unamortized premiums, debt issuance costs and fees. Income from Unconsolidated Joint Ventures Income from unconsolidated joint ventures consists of our share of the income or loss from our joint ventures. Income from unconsolidated joint ventures decreased to $46.4 million for the year ended October 31, 2025 from $52.3 million for the year ended October 31, 2024. The decrease of $5.8 million in fiscal 2025 was primarily due to the recognition of losses from two unconsolidated joint ventures in which one started delivering homes during the second quarter of fiscal 2025 and the other is not yet delivering homes. In addition, we recognized income during the first nine months of the prior year from a joint venture that was subsequently consolidated prior to the end of fiscal 2024. Income Taxes Income tax expense decreased to $22.2 million for the year ended October 31, 2025 from $75.1 million for the year ended October 31, 2024. These amounts were primarily attributable to federal and state taxes on income before taxes and non-deductible executive compensation, along with less state net operating losses (“NOL”) available to utilize, partially offset by energy efficient home tax credits. In fiscal 2025, income tax expense was further reduced by the benefit of our debt extinguishment. Income tax expense for fiscal year 2024 includes the favorable impact of releasing state valuation allowances. Currently, federal tax expense is not paid in cash as it is offset by the use of our existing NOL carryforwards. Deferred federal and state income tax assets (“DTAs”) primarily represent the deferred tax benefits arising from NOL carryforwards and temporary differences between book and tax income which will be recognized in subsequent years as an offset against future taxable income. If the combination of future years’ income (or loss) and the reversal of the timing differences results in a loss, such losses can be carried forward to future years. In accordance with ASC 740, we evaluate our DTAs quarterly to determine if valuation allowances are required. We assess whether valuation allowances should be established based on the consideration of all available evidence using a “more-likely-than-not” standard. As of October 31, 2025, we considered the weight of all available positive and negative evidence to determine the valuation allowance for DTAs of $53.0 million. See Note 11 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further information. Deferred tax assets, net, of $229.6 million at October 31, 2025 decreased $11.4 million from October 31, 2024, due primarily to the utilization of our DTAs to offset tax expense on taxable income during fiscal 2025. 39 Table of Contents Contractual Obligations The following summarizes our aggregate contractual commitments at October 31, 2025: Payments Due by Period Less than More than (In thousands) Total 1 year 1-3 years 3-5 years 5 years Long term debt (1)(2)(3) $ 1,436,118 $ 74,936 $ 149,872 $ 149,872 $ 1,061,438 Operating leases 31,237 10,958 14,181 5,539 559 Total $ 1,467,355 $ 85,894 $ 164,053 $ 155,411 $ 1,061,997 (1) Represents our senior notes and $511.1 million of related interest payments for the life of such debt (assuming in each case that such debt is not redeemed or otherwise repaid prior to the stated maturity thereof). (2) Does not include $29.5 million of nonrecourse mortgages secured by inventory. These mortgages have various maturities spread over the next two to three years and are paid off as homes are delivered. (3) Does not include the mortgage warehouse lines of credit made under our Master Repurchase Agreements. See “Capital Resources and Liquidity” for further discussion. Also, does not include our $125.0 million Secured Credit Facility under which there were no borrowings outstanding as of October 31, 2025. We had outstanding letters of credit and performance bonds of $6.2 million and $276.8 million, respectively, at October 31, 2025, related primarily to our obligations to local governments to construct roads and other improvements in various developments. We do not believe that any such letters of credit or performance bonds are likely to be drawn upon. Capital Resources and Liquidity Overview Our total liquidity at October 31, 2025 was $404.1 million, including $272.8 million in homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility. This was above our target liquidity range of $170.0 to $245.0 million. We believe that our cash on hand together with available borrowings on our senior secured revolving credit facility will be sufficient through fiscal 2026 to finance our working capital requirements. We have historically funded our homebuilding and financial services operations with cash flows from operating activities, borrowings under our credit facilities, the issuance of new debt and equity securities, and other financing activities. We may not be able to obtain desired financing even if market conditions, including then-current market available interest rates (in recent years, we have not been able to access the traditional capital and bank lending markets at competitive interest rates due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business. Operating, Investing and Financing Cash Flow Activities We spent $859.4 million on land and land development during fiscal 2025. After land and land development spending and all other operating activities, including revenue received from deliveries, we had $188.3 million in cash provided by operations. During fiscal 2025, cash used in investing activities was $66.0 million, primarily due to a new joint venture entered into during the period, along with spending on capitalized software, partially offset by distributions of capital from existing unconsolidated joint ventures. Cash used in financing activities was $70.4 million during fiscal 2025, which was primarily due to a $26.6 million redemption of our senior secured notes, net payments related to the September 2025 debt transaction and related deferred financing costs, net payments for nonrecourse mortgage financings, treasury stock purchases, payments of preferred dividends and net payments under our mortgage warehouse lines of credit, partially offset by net proceeds from land banking financings and model sale leaseback financings. We intend to continue to use nonrecourse mortgages, model sale leasebacks, joint ventures, and, subject to covenant restrictions in our debt instruments, land banking programs as our business needs dictate. 40 Table of Contents Our cash uses during the years ended October 31, 2025 and 2024 were for operating expenses, land purchases, land deposits, land development, construction spending, debt payments, model sale leasebacks, land banking transactions, state income taxes, interest payments, preferred dividend payments, financing transaction costs, debt and equity repurchases, litigation matters and investments in unconsolidated joint ventures. During these periods, we provided for our cash requirements from available cash on hand, home and land sales, financing transactions, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues. Our net income historically does not approximate cash flow from operating activities. The difference between net income and cash flow from operating activities is primarily caused by changes in inventory levels together with changes in receivables, prepaid expenses and other assets, mortgage loans held for sale, accrued interest, deferred income taxes, accounts payable and other liabilities, and noncash charges relating to depreciation, stock compensation and impairments. When we are expanding our operations, inventory levels, prepaid expenses and other assets increase causing cash flow from operating activities to decrease. Certain liabilities also increase as operations expand and partially offset the negative effect on cash flow from operations caused by the increase in inventory, prepaid expenses and other assets. Similarly, as our mortgage operations expand, net income from these operations increases, but for cash flow purposes, net income is partially offset by the net change in mortgage assets and liabilities. The opposite is true as our investment in new land purchases and development of new communities decrease, causing us to generate positive cash flow from operations. See “Inventories” below for a detailed discussion of our inventory position. Debt Transactions Senior secured notes, senior notes and credit facilities balances as of October 31, 2025 and October 31, 2024, were as follows: October 31, October 31, (In thousands) 2025 2024 Senior Secured Notes: 8.0% Senior Secured 1.125 Lien Notes due September 30, 2028 (1) $ - $ 225,000 11.75% Senior Secured 1.25 Lien Notes due September 30, 2029(1) - 430,000 Total Senior Secured Notes $ - $ 655,000 Senior Notes: 13.5% Senior Notes due February 1, 2026 (2) $ - $ 26,588 8.0% Senior Notes due April 1, 2031 (1) 450,000 - 8.375% Senior Notes due October 1, 2033 (1) 450,000 - 5.0% Senior Notes due February 1, 2040 24,968 24,968 Total Senior Notes $ 924,968 $ 51,556 Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028 (1) $ - $ 175,000 Senior Secured Revolving Credit Facility (3) $ - $ - Subtotal senior notes and credit facilities $ 924,968 $ 881,556 Net premiums (discounts) $ (11,051 ) $ 17,340 Unamortized debt issuance costs $ (13,199 ) $ (2,678 ) Total senior notes and credit facilities, net of discounts, premiums and unamortized debt issuance costs $ 900,718 $ 896,218 (1) On September 25, 2025, K. Hovnanian completed a private placement of $450.0 million aggregate principal amount of 8.0% Senior Notes due April 1, 2031 and $450.0 million aggregate principal amount of 8.375% Senior Notes due October 1, 2033. K. Hovnanian used the net proceeds from the notes issuance, together with cash on hand, to fund (i) the redemption of all of its $430.0 million aggregate principal amount of 11.75% Senior Secured 1.25 Lien Notes due September 30, 2029 and all of its $225.0 million aggregate principal amount of 8.0% Senior Secured 1.125 Lien Notes due September 30, 2028, and (ii) the payoff in full of its $175.0 million Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028. (2) On April 30, 2025 K. Hovnanian redeemed the remaining $26.6 million aggregate principal amount of its 13.5% Senior Notes due 2026 for a redemption price of $27.5 million, which included accrued and unpaid interest. (3) At October 31, 2025, provides for up to $125.0 million in aggregate amount of senior secured first lien revolving loans. The revolving loans under the revolving credit facility have a maturity of June 30, 2028 and borrowings bear interest, at K. Hovnanian’s option, at either (i) a term SOFR (subject to a floor of 3.00%) plus an applicable margin of 4.50% or (ii) an alternate base rate (subject to a floor of 3.00%) plus an applicable margin of 3.50%. In addition, K. Hovnanian will pay an unused commitment fee on the undrawn revolving commitments at a rate of 1.00% per annum. 41 Table of Contents Except for K. Hovnanian, the issuer of the notes and borrower under the credit agreement governing our secured revolving credit facility (the "Secured Credit Facility"), our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, we and each of our subsidiaries are guarantors of the Secured Credit Facility and senior notes outstanding at October 31, 2025 (collectively, the “Notes Guarantors”). The credit agreement governing the Secured Credit Facility and the indentures governing the senior notes (together, the “Debt Instruments”) outstanding at October 31, 2025 do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K. Hovnanian, to incur (including through exchanges or certain other types of transactions) indebtedness, pay dividends, including on our preferred stock, and make distributions on common and preferred stock, repay/repurchase certain indebtedness prior to its respective stated maturity, repurchase common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates. The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans under the Secured Credit Facility (the “Secured Revolving Loans”) made under the Credit Agreement, dated as of October 31, 2019, as amended, by and among K. Hovnanian, the Company, the other guarantors party thereto, Wilmington Trust, National Association, as administrative agent, and the lenders party thereto (the “Secured Credit Agreement”) or notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the Secured Revolving Loans or notes or other material indebtedness, cross default to other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency and, with respect to the Secured Revolving Loans, material inaccuracy of representations and warranties, a change of control, the failure of the documents granting security for the obligations under the Secured Credit Agreement to be in full force and effect, and the failure of the liens on any material portion of the collateral securing the obligations under the Secured Credit Agreement to be valid and perfected. As of October 31, 2025, we believe we were in compliance with the covenants of the Debt Instruments. Under the terms of our Debt Instruments, we have the right to make certain redemptions and prepayments and, depending on market conditions, our strategic priorities and covenant restrictions, may do so from time to time. We will also continue to analyze and evaluate our capital structure and explore transactions to strengthen our balance sheet, including those that reduce leverage, interest rates and/or extend maturities, and will seek to do so with the right opportunity. We may also continue to make debt or equity purchases and/or exchanges from time to time through tender offers, exchange offers, redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions. Due to covenant restrictions in our Debt Instruments, we may be limited in the amount of debt we can incur, even if market conditions, including then-current market available interest rates (prior to the fourth quarter of fiscal 2025, we had not been able to access the traditional capital and bank lending markets at competitive interest rates for some time due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business. See Note 9 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of K. Hovnanian’s Debt Instruments, including information with respect to the collateral securing our Secured Credit Agreement. 42 Table of Contents Mortgages and Notes Payable We have nonrecourse mortgage loans for certain communities totaling $29.5 million and $90.7 million, net of debt issuance costs, at October 31, 2025 and October 31, 2024, respectively, which are secured by the related real property, including any improvements, with an aggregate book value of $113.9 million and $249.7 million, respectively. The weighted-average interest rate on these obligations was 7.4% and 8.7% at October 31, 2025 and October 31, 2024, respectively, and the mortgage loan payments on each community primarily correspond to home deliveries. K. Hovnanian Mortgage originates mortgage loans primarily from the sale of our homes. Such mortgage loans and related servicing rights are generally sold in the secondary mortgage market within a short period of time. K. Hovnanian Mortgage finances the origination of mortgage loans through various master repurchase agreements, which are recorded in “Financial services” liabilities on the Consolidated Balance Sheets. The loans are secured by the mortgages held for sale and are repaid when we sell the underlying mortgage loans to permanent investors. As of October 31, 2025 and 2024, we had an aggregate of $94.3 million and $131.4 million, respectively, outstanding under several of K. Hovnanian Mortgage’s short-term borrowing facilities. See Note 8 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of these agreements and facilities. Equity On September 1, 2022, our Board of Directors (the “Board”) authorized a repurchase program for up to $50.0 million of our Class A common stock. On December 18, 2024, the Board authorized an incremental increase to our repurchase program and on April 11, 2025, the Board authorized another incremental increase to our repurchase program, such that, inclusive of any amounts remaining under the existing repurchase authorization, as of April 11, 2025, we were authorized to repurchase up to $30.6 million of our Class A common stock. Under the program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing and actual dollar amount repurchased will depend on a variety of factors, including legal requirements, price, future tax implications and economic and market conditions. The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date. During the year ended October 31, 2025, we repurchased 257,908 shares of Class A common stock, with a market value of $30.1 million, or $116.70 per share. During the year ended October 31, 2024, we repurchased 188,800 shares of Class A common stock, with a market value of $26.5 million, or $140.31 per share. Share repurchases are added to “Treasury stock” on our Consolidated Balance Sheets. As of October 31, 2025, $26.4 million of our Class A common stock is available for repurchase under our share repurchase program. On July 12, 2005, we issued 5,600 shares of 7.625% Series A preferred stock, with a liquidation preference of $25,000 per share. Dividends on the Series A preferred stock are not cumulative and are payable at an annual rate of 7.625%. The Series A preferred stock is not convertible into the Company’s common stock and is redeemable, in whole or in part, at our option at the liquidation preference of the shares. The Series A preferred stock is traded as depositary shares, with each depositary share representing 1/1000th of a share of Series A preferred stock. The depositary shares are listed on the NASDAQ Global Market under the symbol “HOVNP.” During both fiscal 2025 and 2024 we paid dividends of $10.7 million on the Series A preferred stock. Unconsolidated Joint Ventures We have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located. At both October 31, 2025 and 2024, we had investments in six unconsolidated homebuilding joint ventures. Our unconsolidated joint ventures had total combined assets of $720.4 million and $845.1 million at October 31, 2025 and 2024, respectively. Our investments in unconsolidated joint ventures totaled $163.5 million and $142.9 million at October 31, 2025 and 2024, respectively. The increase in our investments of $20.6 million was primarily due to new joint ventures formed during the year, along with income recognized from existing joint ventures, partially offset by an increase in our share of losses recognized from existing joint ventures. Partner distributions and the consolidation of previously unconsolidated joint ventures also partially offset the increase in the investment balance. 43 Table of Contents As of October 31, 2025 and 2024, our unconsolidated joint ventures had outstanding debt totaling $121.9 million and $88.7 million, respectively, under separate construction loan agreements with different third-party lenders and affiliates of certain investment partners to finance land development activities. The outstanding debt is secured by the underlying property and related project assets and is nonrecourse to us. Although we and our unconsolidated joint venture partners provide certain guarantees and indemnities to the lender, we do not provide a guaranty or have any other obligation to repay the outstanding debt or to support the value of the collateral underlying the outstanding debt. Our guarantees are limited to performance and completion of development activities, environmental indemnification and standard warranty and representation against fraud, misrepresentation and similar actions, including voluntary bankruptcy. We do not believe that our existing exposure under our guaranty and indemnity obligations related to the outstanding debt of our unconsolidated joint ventures is material. We determined that none of our joint ventures was a variable interest entity. All our unconsolidated joint ventures were accounted for under the equity method because we did not have a controlling financial interest. See Notes 19 and 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further discussion of joint ventures and variable interest entities. Inventories Total inventory, excluding consolidated inventory not owned, decreased $129.2 million during the year ended October 31, 2025 from October 31, 2024. Total inventory, excluding consolidated inventory not owned, decreased in the Northeast by $83.3 million, increased in the Southeast by $108.8 million and decreased in the West by $154.7 million. The net decrease was primarily attributable to home deliveries, impairments and write-offs, and land sales. However, this reduction was partially offset by new land purchases and land development during fiscal 2025, along with an increase in inventory from the consolidation of previously unconsolidated joint ventures. Substantially all homes under construction or completed and included in inventory at October 31, 2025 are expected to close during the next six to nine months. Consolidated inventory not owned, which consists of options related to land banking and model financing, increased $121.9 million during fiscal 2025. The increase was primarily due to an increase in land banking transactions, along with an increase in the sale and leaseback of certain model homes during the period. We have land banking arrangements, whereby we sell land parcels to land bankers and they provide us an option to purchase back finished lots on a predetermined schedule. Because of our options to repurchase these parcels, these transactions are considered a financing rather than a sale. Our Consolidated Balance Sheet, at October 31, 2025, included inventory of $258.6 million recorded to “Consolidated inventory not owned,” with a corresponding amount of $169.1 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned” for the amount of net cash received from the transactions. In addition, we sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third-party at the end of the respective lease. As a result of our continued involvement and the ability to repurchase model homes with below market options, these sale and leaseback transactions are considered a financing rather than a sale. Therefore, our Consolidated Balance Sheet, at October 31, 2025, included inventory of $74.3 million recorded to “Consolidated inventory not owned,” with a corresponding amount of $75.6 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned” for the amount of net cash received from sale and leaseback transactions. In the ordinary course of business, we enter into land and lot option purchase contracts in order to procure land or lots for the construction of homes. Lot option contracts enable us to control significant lot positions with a minimal capital investment and substantially reduce the risks associated with land ownership and development. At October 31, 2025, we had total cash deposits of $333.2 million to purchase land and lots with a total purchase price of $2.8 billion. Our financial exposure is generally limited to forfeiture of the nonrefundable deposits, letters of credit and other nonrefundable amounts incurred. We have no material third-party guarantees. 44 Table of Contents The following tables summarize home sites included in our total residential real estate. The decrease in total home sites available at October 31, 2025 compared to October 31, 2024 is attributable to delivering homes and terminating certain option agreements, partially offset by acquiring new land parcels during the period. Remaining Total Contracted Home Home Not Sites Sites Delivered Available October 31, 2025: Northeast 18,982 631 18,351 Southeast 6,081 220 5,861 West 10,822 391 10,431 Consolidated total 35,885 1,242 34,643 Unconsolidated joint ventures (1) 5,925 998 4,927 Owned 5,496 848 4,648 Optioned 30,387 392 29,995 Construction to permanent financing lots 2 2 - Consolidated total 35,885 1,242 34,643 October 31, 2024: Northeast 19,580 782 18,798 Southeast 7,161 239 6,922 West 15,154 628 14,526 Consolidated total 41,895 1,649 40,246 Unconsolidated joint ventures (1) 4,349 679 3,670 Owned 6,632 1,215 5,417 Optioned 35,259 430 34,829 Construction to permanent financing lots 4 4 - Consolidated total 41,895 1,649 40,246 (1) Represents active communities and home sites for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures. See Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of our unconsolidated joint ventures. The following table summarizes our started or completed unsold homes and models, excluding unconsolidated joint ventures, in active selling communities. The decrease in unsold homes was primarily due to a concerted effort to align our starts pace with the sales pace in fiscal 2025. October 31, 2025 October 31, 2024 Unsold Unsold Homes Models Total Homes Models Total Northeast 257 23 280 259 35 294 Southeast 125 18 143 135 19 154 West 525 23 548 627 31 658 Total 907 64 971 1,021 85 1,106 Started or completed unsold homes and models per active selling communities(1) 6.5 0.4 6.9 7.9 0.6 8.5 (1) Active selling communities (which are communities that are open for sale with ten or more home sites available) were 140 and 130 at October 31, 2025 and 2024, respectively. This ratio does not include substantially completed communities, which are communities with less than ten home sites available. 45 Table of Contents Financial Services Assets and Liabilities Financial services assets consist primarily of residential mortgage receivables held for sale of which $109.8 million and $147.2 million at October 31, 2025 and 2024, respectively, were being temporarily warehoused and are awaiting sale in the secondary mortgage market. The decrease in mortgage loans held for sale from October 31, 2024 was primarily related to a decrease in the volume of loans originated during the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024. Financial services liabilities decreased $52.3 million from $183.1 million at October 31, 2024, to $130.9 million at October 31, 2025. The decrease was primarily due to the decrease in amounts outstanding under our mortgage warehouse lines of credit and directly correlated to the decrease in the volume of mortgage loans held for sale. Inflation The annual rate of inflation in the United States was 3.0% in September 2025, as measured by the most recent publicly available Consumer Price Index, which is slightly higher than October 2024, but much improved from its peak of 9.1% in June 2022. Inflation has a long-term effect, because of higher costs of land, materials and labor results in increasing the sale prices of our homes. Historically, these price increases have been commensurate with the general rate of inflation in our housing markets and have not had a significant adverse effect on the sale of our homes. A significant risk faced by the housing industry generally is that rising house construction costs, including land, labor and interest costs, could substantially outpace increases in the income of potential purchasers and therefore limit our ability to raise home sale prices, which may result in lower gross margins. Inflation has a lesser short-term effect, because we generally negotiate fixed-price contracts with many, but not all, of our subcontractors and material suppliers for the construction of our homes. These prices usually are applicable for a specified number of residential buildings or for a time period of between three to 12 months. Construction costs for residential buildings represented approximately 51% of our homebuilding cost of sales for fiscal year 2025. Critical Accounting Policies Management believes that the following critical accounting policies require its most significant judgments and estimates used in the preparation of the Consolidated Financial Statements: Inventories - Inventories consist of land, land development, home construction costs, capitalized interest, construction overhead and property taxes. Construction costs are accumulated during the period of construction and charged to cost of sales under the specific identification method. Land, land development and common facility costs are allocated based on buildable acres to product types within each community, then charged to cost of sales equally based upon the number of homes to be constructed in each product type. We record inventories on our Consolidated Balance Sheets at cost unless the inventory is determined to be impaired, in which case the inventory is written down to its fair value. Our inventories consist of the following three components: (1) sold and unsold homes and lots under development, which includes all construction, land, capitalized interest and land development costs related to started homes and land under development in our active communities; (2) land and land options held for future development or sale, which includes all costs related to land in our communities in planning or mothballed communities; and (3) consolidated inventory not owned, which consists of model homes financed with an investor and inventory related to land banking arrangements accounted for as financings. We sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third-party at the end of the respective lease. As a result of our continued involvement and the ability to repurchase model homes with below market options, for accounting purposes in accordance with ASC 606 “Revenue From Contracts with Customers,” these sale and leaseback transactions are considered a financing rather than a sale. 46 Table of Contents We have land banking arrangements, whereby we sell our land parcels to the land banker and they provide us an option to purchase back finished lots on a predetermined schedule. Because of our options to repurchase these parcels, for accounting purposes in accordance with ASC 606, these transactions are considered a financing rather than a sale. The recoverability of inventories and other long-lived assets is assessed in accordance with ASC 360, “Property, Plant and Equipment.” ASC 360 requires long-lived assets, including inventories, held for development to be evaluated for impairment based on the undiscounted future cash flows of the assets at the lowest level for which there are identifiable cash flows. We evaluate impairment at the individual community level, which is the lowest level of discrete cash flows that are available. We evaluate inventories of communities under development and held for future development for impairment when indicators of potential impairment are present. Indicators of impairment include, but are not limited to, decreases in local housing market values, decreases in gross margins or sales absorption rates, decreases in net sales prices (base sales price, net of sales incentives), or actual or projected operating or cash flow losses. The assessment of communities for indicators of impairment is performed quarterly. As part of this process, we prepare detailed budgets for all of our communities at least semi-annually and identify those communities with a projected operating loss. For those communities with projected losses, we estimate the remaining undiscounted future cash flows and compare those to the carrying value of the community, to determine if the carrying value of the asset is recoverable. The projected operating profits, losses or cash flows of each community can be significantly impacted by our estimates of the following: ● future base selling prices; ● future home sales incentives; ● future home construction and land development costs; and ● future sales absorption pace and cancellation rates. These estimates are dependent upon specific market conditions for each community. While we consider available information to determine what we believe to be our best estimates as of the end of a quarterly reporting period, these estimates are subject to change in future reporting periods as facts and circumstances change. Local market-specific conditions that may impact our estimates for a community include: ● the intensity of competition within a market, including available home sales prices and home sales incentives offered by our competitors; ● the current sales absorption pace for both our communities and competitor communities; ● community-specific attributes, such as location, availability of lots in the market, desirability and uniqueness of our community, and the size and style of homes currently being offered; ● potential for alternative product offerings to respond to local market conditions; ● changes by management in the sales strategy of the community; ● current local market economic and demographic conditions and related trends of forecasts; and ● existing home inventory supplies, including foreclosures and short sales. 47 Table of Contents These and other local market-specific conditions that may be present are considered by management in preparing projection assumptions for each community. The sales objectives can differ between our communities, even within a given market. For example, facts and circumstances in a given community may lead us to price our homes with the objective of yielding a higher sales absorption pace, while facts and circumstances in another community may lead us to price our homes to minimize deterioration in our gross margins, although it may result in a slower sales absorption pace. In addition, the key assumptions included in our estimate of future undiscounted cash flows may be interrelated. For example, a decrease in estimated base sales price or an increase in homes sales incentives may result in a corresponding increase in sales absorption pace. Additionally, a decrease in the average sales price of homes to be sold and closed in future reporting periods for one community that has not been generating what management believes to be an adequate sales absorption pace may impact the estimated cash flow assumptions of a nearby community. Changes in our key assumptions, including estimated construction and development costs, sales absorption pace and selling strategies, could materially impact future cash flow and fair-value estimates. Due to the number of scenarios that would result from various changes in these factors, we do not believe it is possible to develop a sensitivity analysis with a level of precision that would be meaningful to an investor. If the undiscounted cash flows are more than the carrying value of the community, then the carrying amount is recoverable, and no impairment is recorded. However, if the undiscounted cash flows are less than the carrying amount, then the community is deemed impaired and is written down to its fair value. We determine the estimated fair value of each community by calculating the present value of its estimated future cash flows at a discount rate commensurate with the risk of the respective community, or in limited circumstances, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale), and recent bona fide offers received from third parties. The estimated future cash flow assumptions are virtually the same for both our recoverability and fair value assessments. Should the estimates or expectations used in determining estimated cash flows or fair value, including discount rates, decrease or differ from current estimates in the future, we may be required to recognize additional impairments related to current and future communities. The impairment of a community is allocated to each lot on a relative fair value basis. From time to time, we write off deposits, engineering and capitalized interest costs when we determine that it is no longer probable that we will exercise options to buy land in specific locations or when we redesign communities and/or abandon certain engineering costs. In deciding not to exercise a land option, we take into consideration changes in market conditions, the timing of required land takedowns, the willingness of land sellers to modify terms of the land option contract (including timing of land takedowns), and the availability and best use of our capital, among other factors. The write-off is recorded in the period it is deemed not probable that the optioned property will be acquired. Inventories held for sale are land parcels ready for sale in their current condition, where we have decided not to build homes but are instead actively marketing the land. Land held for sale is recorded at the lower of its carrying amount or the fair value less costs to sell. In determining fair value for land held for sale, management considers, among other things, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale) and recent bona fide offers received from third parties. Unconsolidated Homebuilding and Land Development Joint Ventures - Investments in unconsolidated entities in which the Company has significant influence over the operating and financial decisions of the entity, but holds less than a controlling financial interest, are accounted for by the equity method. In all periods presented, our investments in unconsolidated homebuilding and land development joint ventures are accounted for under the equity method because we are not the primary beneficiary or de-facto agent, and we have a significant, but less than controlling, interest in the entities. Under the equity method, we recognize our proportionate share of income or loss earned by the joint venture upon the delivery of lots or homes to third parties. Our ownership interests in joint ventures vary but our voting equity interests held are generally 20% to 50%. Specific criteria is used when determining if we are the primary beneficiary of, or have a controlling interest in, an unconsolidated entity. Factors considered in determining whether we have significant influence, or we have control include risk and reward sharing, experience and financial condition of the other partner, voting rights, involvement in day-to-day capital and operating decisions and continuing involvement. The evaluation of whether an entity is a variable interest entity or a voting interest entity and then whether we are the primary beneficiary or have control or significant influence can require significant judgment. We believe that the equity method of accounting is appropriate for our investments in unconsolidated entities where we are not the primary beneficiary and we do not have a controlling interest but rather share control with our partners. In most cases, the joint venture agreements require that both partners agree on establishing the significant operating and capital decisions of the partnership, including budgets, in the ordinary course of business. In accordance with ASC 323, “Investments - Equity Method and Joint Ventures,” we assess our investments in unconsolidated joint ventures for recoverability quarterly, and if it is determined that a loss in value of the investment below its carrying amount is other than temporary, we write down the investment to its fair value. We evaluate our equity investments for impairment based on the joint venture’s projected cash flows. This process requires significant management judgment and estimates. 48 Table of Contents Warranty Costs and Construction Defect Reserves - We accrue warranty costs that are covered under our existing general liability and construction defect policy as part of our general liability insurance deductible. This accrual is expensed as selling, general, and administrative costs. Our insurance coverage generally includes deductibles either in the aggregate or on a per-claim basis, with the exception of workers’ compensation insurance, which does not have a deductible. Reserves for estimated losses for construction defects, warranty and bodily injury claims have been established using the assistance of a third-party actuary. The third-party actuary uses our historical warranty and construction defect data to assist management in estimating our unpaid claims, claim adjustment expenses and incurred but not reported claims reserves for the risks that we are assuming under the general liability and construction defect programs. The estimates consider provisions for inflation, claims handling and legal fees. These estimates are subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to our markets and the types of products we build, claim settlement patterns, insurance industry practices and legal interpretations, among others. As a high degree of judgment is required in determining these estimated liability amounts, actual future costs could differ significantly from our currently estimated amounts. In addition, we establish a warranty accrual for lower cost-related issues to cover home repairs, community amenities and land development infrastructure that are not covered under our general liability and construction defect policy. We accrue an estimate for these warranty costs as part of cost of sales at the time each home is closed and title and possession have been transferred to the homebuyer. Deferred Income Taxes - Deferred income taxes are provided for temporary differences between amounts recorded for financial reporting and income tax purposes. If the combination of future years’ income (or loss) combined with the reversal of the timing differences results in a loss, such losses can be carried forward to future years to recover the DTAs. We evaluate all available positive and negative evidence, including the existence of losses in recent years and forecasts of future taxable income, in assessing the need for a valuation allowance. The underlying assumptions we use in forecasting future taxable income require significant judgment. The ultimate realization of DTAs is dependent on the generation of future taxable income during the periods in which temporary differences or carry-forwards are deductible or creditable. A valuation allowance is provided to offset DTAs if, based upon the available evidence, it is more likely than not that some or all of the DTAs will not be realized. In evaluating the exposures associated with our various tax filing positions, we recognize tax liabilities in accordance with ASC 740, “Income Taxes” for more likely than not exposures. We re-evaluate the exposures associated with our tax positions on a quarterly basis. This evaluation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity by taxing authorities and effectively settled issues. Determining whether an uncertain tax position is effectively settled requires judgment. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision. A number of years may elapse before a particular matter for which we have established a liability is audited and fully resolved or clarified. We adjust our liability for unrecognized tax benefits and the income tax provision in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a liability that is materially different from our current estimate. Any such changes will be reflected as increases or decreases to income tax expense in the period in which they are determined. 49 Table of Contents Recent Accounting Pronouncements See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Safe Harbor Statement All statements in this Annual Report on Form 10-K 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 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 in, 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: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) 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 result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to: ● Changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; ● Shortages in, and price fluctuations of, raw materials and labor, including due to geopolitical events, changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with, and retaliatory measures taken by other countries, and changes in immigration laws or the enforcement thereof and trends in labor migration; ● Fluctuations in interest rates and the availability of mortgage financing, including as a result of instability in the banking sector; ● Increases in inflation; ● Adverse weather and other environmental conditions and natural or man-made disasters; ● The seasonality of the Company’s business; ● The availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; ● Reliance on, and the performance of subcontractors; ● Regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; ● Increases in cancellations of agreements of sale; ● Changes in tax laws affecting the after-tax costs of owning a home; ● Legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; ● Levels of competition; ● Utility shortages and outages or rate fluctuations; ● Information technology failures and data security breaches; ● Negative publicity; ● Global economic and political instability; ● High leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; ● Availability and terms of financing to the Company; ● The Company’s sources of liquidity; ● Changes in credit ratings; ● Government regulation, including regulations concerning the development of land, the home building, sales and customer financing processes, tax laws and environmental, health and safety matters; ● Potential liability as a result of the past or present use of hazardous materials; ● Operations through unconsolidated joint ventures with third parties; ● Significant influence of the Company’s controlling stockholders; ● Availability of net operating loss carryforwards; and ● Loss of key management personnel or failure to attract qualified personnel. Certain risks, uncertainties and other factors are described in detail in Part I, Item 1 “Business” and Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K as updated by our subsequent filings with the SEC. 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 after the date of this Annual Report on Form 10-K. 50 Table of Contents