HOVNANIAN ENTERPRISES INC

Previous wording

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 affordability generally remains challenging for homebuyers. We have been aggressive in our pricing, incentives and concessions in order to align with the current market.

Current wording

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.

Previous wording

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 recent 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 isone of several available options we use to drive sales and close homes.

Current wording

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 isone of several available options we use to drive sales and close homes.

Previous wording

There still remains a great degree of uncertainty due to inflation, the continued possibility of an economic recession, employment risk and the potential for further mortgage rate increases. While we continue to experience some lingering 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 2025 and beyond.

Current wording

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.

Previous wording

Our cash position allowed us to spend $995.4 million on land purchases and land development for long-term growth during fiscal 2024, and still have total liquidity of $338.2 million, including $210.0 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, 2024.

Current wording

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.

Previous wording

● For the year ended October 31, 2024, sale of homes revenues increased 9.3% as compared to the prior year, primarily due to a 9.6% increase in homes delivered, partially offset by a 0.3% decrease in average sales price. The increase in deliveries in fiscal 2024 was primarily the result of a 15.0% increase in community count as well as an increase in QMI contracts.

Current wording

● 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.

Previous wording

● Homebuilding gross margin percentage decreased from 19.6% for the year ended October 31, 2023 to 18.7% for the year ended October 31, 2024, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, decreased from 22.7% for the year ended October 31, 2023 to 22.0% for the year ended October 31, 2024. 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.

Current wording

● 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.

Previous wording

● Selling, general and administrative expenses (including corporate general and administrative)increased $37.5 million for the year ended October 31, 2024 as compared to the prior year, however, as a percentage of total revenue, such costs were relatively flat at 11.4% for the year ended October 31, 2024 compared to 11.1% for the year ended October 31, 2023. The increase was primarily due to an increase in advertising expenses and compensation expense, mainly related to increased headcount and annual merit increases, along with grants of phantom stock awards under our 2019, 2023 and 2024 long-term incentive plans, for which expense is impacted by the change in our stock price each period. The increase in headcount is in preparation for growth in community count and deliveries in fiscal 2025.

Current wording

● 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.

Previous wording

● Earnings per share, basic and diluted, increased to $34.40 and $31.79, respectively, for the year ended October 31, 2024, compared to earnings per share, basic and diluted of $28.76 and $26.88, respectively, for the year ended October 31, 2023.

Current wording

● 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.

Previous wording

● Active selling communities increased to 130 at October 31, 2024 compared to 113 at October 31, 2023, and our total lots controlled increased to 41,891 at October 31, 2024 compared to 31,726 at October 31, 2023. We expect our community count will continue to grow in fiscal 2025.

Current wording

● 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 resultof 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.

Previous wording

● Contract backlog decreased from 1,824 homes at October 31, 2023 to 1,649 homes at October 31, 2024, and the dollar value of contract backlog decreased to $936.8 billion, a 11.7% 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.

Current wording

● 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.

Previous wording

Sale of homes revenues increased $245.0 million, or 9.3%, for the year ended October 31, 2024, compared to the prior year. The increased revenues in fiscal 2024 were primarily due to a 9.6% increase in homes delivered, partially offset by the average sales price per home decreasing slightly to $537,675 in fiscal 2024 from $539,249 in fiscal 2023. The increase in deliveries in fiscal 2024 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 2024 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.

Current wording

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 theaverage sales price per home decreasing 3.5%in fiscal 2025 from fiscal 2024, partially offset bya 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.

Previous wording

(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. During the fourth quarter of fiscal 2023, we delivered 2,176 homes in our unconsolidated joint venture in the Kingdom of Saudi Arabia. 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.

Current wording

(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.

Previous wording

Land sales and other revenues decreased $10.1 million for the year ended October 31, 2024, compared to the prior year. Other revenues include interest income, which decreased as a result of lower rates on cash and cash equivalent accounts beginning in the first quarter of fiscal 2024 compared to the prior year. Revenue associated with land sales can vary significantly due to the mix of land parcels sold. There weresix land sales during the year ended October 31, 2024, compared tofour in the prior year.

Current wording

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.

Previous wording

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 18.7% for the year ended October 31, 2024 compared to 19.6% for the prior year. Total homebuilding gross margin percentage, before cost of sales interest expense and land charges decreased to 22.0% for the year ended October 31, 2024 compared to 22.7% 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.

Current wording

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.

Previous wording

Inventory impairments and land option write-offs reflect certain inventories we have either written off or written down to their estimated fair value totaling $11.6 million and $1.5 million in expense for the years ended October 31, 2024 and 2023, respectively. During the years ended October 31, 2024 and 2023, we wrote off residential land option, approval and engineering costs totaling $1.6 million and $1.5 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 2024 and 2023. Inventory impairments were $10.0 million in the aggregate for the year ended October 31, 2024 for two communities in our Northeast segment and two communities in our West segment. We did not record any inventory impairments for the year ended October 31, 2023. It is difficult to predict future impairments, but if conditions in the overall housing industry or a specific geographic market worsen in the future beyond our current expectations, 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.

Current wording

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 forsix communities in our Northeast segment, one community in our Southeast segment andfive communities in our West segment. For the year ended October 31, 2024, inventory impairments were $10.0 million in the aggregate fortwo communities in our Northeast segment andtwo 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.

Previous wording

In fiscal 2024, we walked away from 9.7% of all the lots we controlled under option contracts. The remaining 90.3% of our option lots are in communities that we believe remain economically feasible.

Current wording

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.

Previous wording

Net contracts per average active selling community in fiscal 2024 were 43.6 compared to 40.8 in fiscal 2023, a 6.9% increase in sales pace per community. Our reported level of sales contracts (net of cancellations) was impacted by an increase in our active selling communities and an increase in customer demand partially due to the increased availability of QMI homes.

Current wording

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.

Previous wording

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 2024 was 15%, 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.

Current wording

Most cancellations occur within the legal rescission period, which varies by state but is generally less thantwo 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.

Previous wording

Contract backlog dollars decreased 11.7% as of October 31, 2024 compared to October 31, 2023, and the number of homes in backlog decreased 9.6% for the same period. The decrease in backlog dollars and number of homes for the year ended October 31, 2024 compared to the prior fiscal year was primarily driven by an increase in sales of QMI homes and improved contract backlog conversion.

Current wording

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.

Previous wording

Northeast –Homebuilding revenues increased 6.9% in fiscal 2024 compared to fiscal 2023, primarily due to a 1.7% increase in homes delivered and a 6.1% increase in average sales price. The increase in average sales price was the result of new communities delivering higher priced, larger single family homes and condominiums in higher-end submarkets of the segment in fiscal 2024 compared to some communities delivering lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment in fiscal 2023, which were no longer delivering in the current year.

Current wording

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.

Previous wording

Southeast –Homebuilding revenues increased 6.8% in fiscal 2024 compared to fiscal 2023, primarily due to a 13.1% increase in homes delivered, partially offset by a 5.7% decrease in average sales price. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes, townhomesand build-for-rent homes in lower-end submarkets of the segment in fiscal 2024 compared to some communities in fiscal 2023 that had higher priced, larger single family homes and townhomes in mid to higher-end submarkets, which were no longer delivering in the current year.

Current wording

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.

Previous wording

Income before income taxes increased $12.0 million to $190.5 million in fiscal 2024 compared to fiscal 2023, primarily due to the increase in homebuilding revenue discussed above and a $1.1 million decrease in SGA, while gross margin percentage remained relatively flat.

Current wording

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.

Previous wording

West –Homebuilding revenues increased 10.9% in fiscal 2024 compared to fiscal 2023, primarily due to a 13.7% increase in homes delivered, partially offset by a 2.2% decrease in average sales price. The decrease in average sales price was mainly the result of new communities delivering lower priced, smaller single family homes in lower-end submarkets of the segment in fiscal 2024 compared to some communities in fiscal 2023 that had higher priced, larger single family homes and condominiums in mid to higher-end submarkets, which were no longer delivering in the current year.

Current wording

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.

Previous wording

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, 2024 and 2023, our conforming conventional loan originations as a percentage of our total loans were 64.0% and 69.8%, respectively. FHA/VA loans represented 35.4% and 29.5%, respectively, of our total loans. The remaining 0.6% and 0.7% 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.

Current wording

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.

Previous wording

During the years ended October 31, 2024 and 2023, financial services provided $24.1 million and $19.4 million of income before income taxes, respectively. In fiscal 2024, financial services income before income taxes increased $4.7 million from the prior year primarily due to an increase in the volume of loans closed and an increase in the average size of the loans settled. In the markets served by our wholly owned mortgage banking subsidiaries,79.4% and 70.1% of our noncash home buyers obtained mortgages originated by these subsidiaries during the years ended October 31, 2024 and 2023, respectively.

Current wording

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.

Previous wording

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 increased $36.5 million for the year ended October 31, 2024 compared to the year ended October 31, 2023, primarily due to an increase in compensation expense, mainly related to increased headcount and annual merit increases and increased expense related to grants of phantom stock awards under our 2019, 2023 and 2024 long-term incentive plans, for which expense is impacted by the change in our stock price each period. In addition, since the 2024 long-term incentive plan was new in the current year this resulted in incremental stock compensation expense when compared to the prior year.

Current wording

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.

Previous wording

Gain (Loss) on Extinguishment of Debt, Net

Current wording

(Loss) Gain on Extinguishment of Debt, Net

Previous wording

Income tax expense of $75.1 million and $50.1 million for the years ended October 31, 2024 and 2023, respectively, was primarily driven by federal and state tax expense on income before income taxes andnon-deductible executive compensation expense, partially offset by the generation of energy efficient home tax credits. Income tax expense for fiscal years 2024 and 2023 also reflected the favorable impact of releasing state valuation allowances. The federal tax expense is not paid in cash as it is offset by the use of our existing net operating loss (“NOL”) carryforwards.

Current wording

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.

Previous wording

As of October 31, 2024, we considered the weight of all available positive and negative evidence to determine the valuation allowance for DTAs of $55.7 million. See Note 11 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further information.

Current wording

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.

Previous wording

Deferred tax assets, net, of $241.0 million at October 31, 2024 decreased $61.8 million from October 31, 2023, due primarily to the utilization of our DTAs to offset tax expense on taxable income during fiscal 2024.

Current wording

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.

Previous wording

We had outstanding letters of credit and performance bonds of $2.6 million and $225.7 million, respectively, at October 31, 2024, 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.

Current wording

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.

Previous wording

Our total liquidity at October 31, 2024 was $338.2 million, including $210.0 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 2025 to finance our working capital requirements.

Current wording

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.

Previous wording

We spent $995.4 million on land and land development during fiscal 2024. After land and land development spending and all other operating activities, including revenue received from deliveries, we had $23.6 million in cash provided by operations. During fiscal 2024, cash used in investing activities was $46.5 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 $187.9 million during fiscal 2024, which was primarily due to a $113.5 million redemption of our senior secured notes, net payments of $31.5 million related to the May 2024 debt exchange, net payments for nonrecourse mortgage financings, treasury stock purchases and payments of preferred dividends, partially offset by net proceeds from our mortgage warehouse lines of credit, 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.

Current wording

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.

Previous wording

Our cash uses during the years ended October 31, 2024 and 2023 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, housing and land sales, financing transactions, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.

Current wording

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.

Previous wording

(3)At October 31, 2024,provides for up to $125.0 million in aggregate amount of senior secured first lien revolving loans. The revolving loans thereunder have a maturity of June 30, 2026 and borrowings bear interest, at K. Hovnanian’s option, at either (i) a term secured overnight financing rate (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 4.00%) 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.

Current wording

(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.

Previous wording

Except for K. Hovnanian, the issuer of the notes and borrower under the credit agreements governing our term loans and revolving credit facilities (collectively, the“Credit Facilities”), 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 Credit Facilities, the senior secured notes and senior notes outstanding at October 31, 2024 (collectively, the “Notes Guarantors”).

Current wording

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”).

Previous wording

The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together with the Credit Facilities, the “Debt Instruments”) outstanding at October 31, 2024 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 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 (the“Secured Term Loans”) made under the Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028, and loans (the“Secured Revolving Loans”) made under the Senior Secured Revolving Credit Agreement due June 30, 2026, 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 Term Loans, 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, with respect to the Secured Term Loans and Secured Revolving Loans, material inaccuracy of representations and warranties and with respect to the Secured Term Loans and Secured Revolving Loans, a change of control, and, with respect to the Secured Term Loans, Secured Revolving Loans and senior secured notes, the failure of the documents granting security for the obligations under the secured Debt Instruments 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 Debt Instruments to be valid and perfected. As of October 31, 2024, we believe we were in compliance with the covenants of the Debt Instruments.

Current wording

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.

Previous wording

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 also continue to actively analyze and evaluate our capital structure and explore transactions to simplify our capital structure and 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.

Current wording

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.

Previous wording

Any liquidity-enhancing or other capital raising or refinancing transaction will depend on identifying counterparties, negotiation of documentation and applicable closing conditions and any required approvals. Due to covenant restrictions in our Debt Instruments, we are currently limited in the amount of debt we can incur, 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.

Current wording

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.

Previous wording

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 Credit Facilities, senior secured notes and senior notes, including information with respect to the collateral securing our Debt Instruments.

Current wording

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.