HOVNANIAN ENTERPRISES INC

Previous wording

During fiscal 2024 and continuing through thefirst nine months of fiscal 2025, 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.

Current wording

During fiscal 2025 and continuing through thefirst quarter 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.

Previous 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 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 the remainder of fiscal 2025 and beyond.

Current wording

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 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.

Previous wording

During the nine months ended July 31, 2025, our cash position allowed us to spend $660.0 million on land purchases and land development for long-term growth, redeem $26.6 million of senior notes, repurchase $30.1 million of our common stock, and still have total liquidity of $277.9 million, including $146.6 million of homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of July 31, 2025.

Current wording

During thethree months ended January 31, 2026, our cash position allowed us to spend $180.7 million on domestic land purchases and land development for long-term growth and repurchase $9.0 million of our common stockand still have total liquidity of $471.4 million, including $339.9 million of homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of January 31, 2026.

Previous wording

Information on our operating results for thethree and nine months ended July 31, 2025 are as follows:

Current wording

Information on our operating results for thethree months ended January 31, 2026 are as follows:

Previous wording

● Sale of homes revenues increased to $769.1 million for thethree months ended July 31, 2025 from $687.4 million for thethree months ended July 31, 2024, andincreased to$2.1 billionfor the nine months ended July 31, 2025 from $1.9 billion for thenine months ended July 31, 2024. There was a 14.0% and 10.2%increase in the number of home deliveries for thethree and nine months ended July 31, 2025, compared to the same periods of the prior year, partially offset by a decrease in average price of 1.9% and 3.8% for thethree and nine months ended July 31, 2025, compared to the same periods of the prior year. The increase in deliveries was primarily the result of an increase in our backlog conversion ratio, while the decrease in average price was the result ofthe geographic and community mix of our deliveries.

Current wording

● Sale of homes revenues decreased to $575.8 million for thethree months ended January 31, 2026 from $646.9 million for thethree months ended January 31, 2025. There was a 12.4% decrease in the number of home deliveries for thethree months ended January 31, 2026, compared to the same period of the prior year, partially offset by an increase in average price of 1.6% for thethree months ended January 31, 2026, compared to the same period of the prior year.

Previous wording

● Gross margin dollars decreased 31.3% and 24.8% for thethree and nine months ended July 31, 2025, as compared to the same periods of the prior year, while gross margin percentage decreased to 11.7% and 13.5% forthe three and nine months ended July 31, 2025, respectively, from 19.1%and 18.9%for the three and nine months ended July 31, 2024, respectively. Gross margin percentage, before cost of sales interest expense and land charges, decreased to 17.3%for thethree months ended July 31, 2025 from 22.1% for thethree months ended July 31, 2024, and decreased to 17.6% for the nine months ended July 31, 2025 from 22.2% for the nine months ended July 31, 2024. The decrease in gross margin percentagewas 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.

Current wording

● Gross margin dollars decreased 40.6% for thethree months ended January 31, 2026, as compared to the same period of the prior year. Gross margin percentage decreased to 10.1% forthe three months ended January 31, 2026 from 15.2% for the three months ended January 31, 2025. Gross margin percentage, before cost of sales interest expense and land charges, decreased to 13.4%for thethree months ended January 31, 2026 from 18.3% for thethree months ended January 31, 2025. The decrease in gross margin percentagewas 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.

Previous wording

● Income before income taxes decreased to $23.8 million for the three months ended July 31, 2025 from $97.3 million for the three months ended July 31, 2024, and decreased to $90.2 million for the nine months ended July 31, 2025 from $199.2 million for the nine months ended July 31, 2024. Net income decreased to $16.6 million for the three months ended July 31, 2025 from $72.9 million for the three months ended July 31, 2024, and decreased to $64.5 million for the nine months ended July 31, 2025 from $147.7 million for the nine months ended July 31, 2024. Included in income before income taxes for the nine months ended July 31, 2025 was a gain of $22.7 million related to the contribution of assets to a new joint venture. For the nine months ended July 31, 2024, income before taxes included a gain of $45.7 million related to the consolidation of a joint venture. Earnings per share, basic and diluted, decreased to $2.14 and $1.99, respectively, for the three months ended July 31, 2025 compared to $10.61 and $9.75, respectively, for the three months ended July 31, 2024. Earnings per share, basic and diluted, decreased to $8.55 and $7.94, respectively, for the nine months ended July 31, 2025 compared to $20.85 and $19.15, respectively, for the nine months ended July 31, 2024.

Current wording

● Income before income taxes decreased to $28.7 million for the three months ended January 31, 2026 from $39.9 million for the three months ended January 31, 2025. Net income decreased to $20.9 million for the three months ended January 31, 2026 from $28.2 million for the three months ended January 31, 2025. Included in income before income taxes for the three months ended January 31, 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. Earnings per share, basic and diluted, decreased to $2.80 and $2.62, respectively, for the three months ended January 31, 2026 compared to $3.88 and $3.58, respectively, for the three months ended January 31, 2025.

Previous wording

● Net contracts increased 1.6% for the three months ended July 31, 2025 and decreased 0.4% for the nine months ended July 31, 2025, compared to the same periods of the prior year. The increase for the three months ended is primarily due to our current strategy of using increased incentives to drive sale pace. During the third quarter of fiscal 2025, incentives were 11.6% of the average sales price, which is up 3.9% from the same period of the prior year and up 1.1% from the second quarter of fiscal 2025. The slight decrease in net contracts for the nine months ended July 31, 2025 is due tocontinued macroeconomic uncertainty that permeated throughout the period leading to low consumer confidence.

Current wording

● Net domestic contracts increased 3.1% for thethree months ended January 31, 2026 compared to the same period of the prior year. The increase for the three months ended is primarily due to our current strategy of using increased incentives to drive sales pace.

Previous wording

● Contract backlog decreased from 2,041 homes at July 31, 2024 to 1,491 homes at July 31, 2025, and the dollar value of contract backlog decreased to $838.8 million, a 27.6% decrease in dollar value compared to the prior year, as our backlog conversion ratio has increased from the prior year period due to our having more QMI homes available to sell and deliver.

Current wording

● Domestic contract backlog decreased from 1,598 homes at January 31, 2025 to 1,335 homes at January 31, 2026, and the dollar value of domestic contract backlog decreased to $782.7 million, a 16.0% 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.

Previous wording

For thethree and nine months ended July 31, 2025, sale of homes revenues increased 11.9%and 6.1%, respectively, compared to the same periods in the prior year. Thesale of homes revenue increased due to a 14.0% and 10.2% increase in homes delivered, respectively, partially offset by a 1.9% and 3.8% decrease in the average price per home for the three and nine months ended July 31, 2025, respectively, compared with the prior year periods. The average price per home decreased to $537,421 in thethree months ended July 31, 2025 from $547,748 in thethree months ended July 31, 2024. The average price per home decreased to $520,473 in the nine months ended July 31, 2025 from $540,958 in the nine months ended July 31, 2024. The increase in deliveries was primarily the result of an increase in our backlog conversion ratio. The decrease in average price was the result of the geographic and community mix of our deliveries. For further detail on changes in segment revenues see “Homebuilding: Operations by Segment” below. For further detail on land sales and other revenues, see “Homebuilding: Land Sales and Other Revenues” below.

Current wording

For thethree months ended January 31, 2026, sale of homes revenues decreased 11.0%, respectively, compared to the same period in the prior year. Thesale of homes revenue decreased due to a 12.4% decrease in homes delivered, partially offset by a 1.6% increase in the average price per home for the three months ended January 31, 2026 compared with the prior year period. The average price per home increased to $523,894 in thethree months ended January 31, 2026 from $515,880 in thethree months ended January 31, 2025. The increase in average price was the result of the geographic and community mix of our deliveries. For further detail on changes in segment revenues see “Homebuilding: Operations by Segment” below. For further detail on land sales and other revenues, see “Homebuilding: Land Sales and Other Revenues” below.

Previous wording

Land sales and other revenues decreased $13.4 for the three months ended July 31, 2025 and increased $1.6 million for the nine months ended July 31, 2025, compared to the same periods in the prior year. Revenue associated with land sales can vary significantly due to the mix of land parcels sold. There weretwo and five land sales during thethree and nine months ended July 31, 2025, respectively, and one and two land sales in the three and nine months ended July 31, 2024, respectively. Land sales revenues decreased $13.0 millionand increased $4.8 million during thethree and nine months ended July 31, 2025, respectively, compared to the same periods in the prior year. Other revenues, which includes interest income, decreased due to lower rates on our cash and cash equivalent accounts during the first three quarters of fiscal 2025, partially offsetting the increase in land sales revenues for the nine months ended July 31, 2025.

Current wording

Land sales and other revenues increased $27.4 million for the three months ended January 31, 2026 compared to the same period in the prior year. Revenue associated with land sales can vary significantly due to the mix of land parcels sold. There was oneland sale during both thethree months ended January 31, 2026 and 2025. Land sales revenues increased $27.9 million during thethree months ended January 31, 2026 compared to the same period in the prior year.

Previous wording

Cost of sales includes expenses for homebuilding and land and lot sales, including inventory impairments 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.

Current wording

Cost of sales includes expenses for consolidated housing and land and lot sales, including inventory impairments 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.

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 11.7%and 13.5% for thethree and nine months ended July 31, 2025, compared to 19.1%and 18.9% for the prior year periods. Total homebuilding gross margin percentage, before cost of sales interest expense and land charges decreased to 17.3% and 17.6% for the three and nine months ended July 31, 2025, compared to 22.1% and 22.2% for the three and nine months ended July 31, 2024. The decrease in gross margin percentage for thethree and nine months ended July 31, 2025 was primarily due to increased 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 10.1% for thethree months ended January 31, 2026, compared to 15.2%for the prior year period. Total homebuilding gross margin percentage, before cost of sales interest expense and land charges decreased to 13.4% for the three months ended January 31, 2026, compared to 18.3% for the three months ended January 31, 2025. The decrease in gross margin percentage for thethree months ended January 31, 2026 was primarily due to increased 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 reflects certain inventories we have either written off or written down to their estimated fair value totaling $16.0 million and $3.1 million in expense for thethree months ended July 31, 2025 and 2024, respectively, and $20.1 million and $3.6 million during the nine months ended July 31, 2025 and 2024, respectively. Inventory impairments amounted to $7.6 million and $8.8 million during thethree and nine months ended July 31, 2025, respectively, and$2.7 million during both thethree and nine months ended July 31, 2024. The impairments recorded for fiscal 2025 were for two communities in the Northeast segment and three communities in the West segment. The impairment recorded for fiscal 2024 was for one community in the West segment. We wrote-off residential land option, approval and engineering costs across each of our segments during the first three quarters of both fiscal 2025 and 2024.

Current wording

Inventory impairments and land option write-offs reflects certain inventories we have either written off or written down to their estimated fair value totaling $2.4 million and $1.0 million in expense for thethree months ended January 31, 2026 and 2025, respectively. There were no inventory impairments during both the three months ended January 31, 2026 and 2025. We wrote-off residential land option, approval and engineering costs across each of our segments during the first quarters ofboth fiscal 2026 and 2025.

Previous wording

Homebuilding selling, general and administrative (“SGA”) expenses increased $4.8 million to $55.8 million for thethree months ended July 31, 2025 andincreased $14.7 million to $161.1 million for the nine months ended July 31, 2025 compared to the same periods in the prior year. The increase for thethree and nine months ended July 31, 2025 compared to the same periods in the prior year was 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 of annual merit increases.

Current wording

Homebuilding selling, general and administrative (“SGA”) expenses decreased $4.0 million to $50.3 million for thethree months ended January 31, 2026 compared to the same period in the prior year. The decrease for thethree months ended January 31, 2026 compared to the same period in the prior year was primarily due to a decrease in compensation expense as a result of estimating lower fiscal 2026 bonuses, partially offset by the cost of annual merit increases.

Previous wording

Net contracts per active selling community for thethree and nine months ended July 31, 2025 were 9.8 and 30.8, respectively, compared to 9.5 and 30.4 for the same periods in the prior year, respectively. Our reported level of sales contracts (net of cancellations) was impacted by increasing incentives and concessions to drive customer demand for QMI homes.

Current wording

Net domestic contracts per active selling community for thethree months ended January 31, 2026 were 9.5 compared to 9.6 for the same period in the prior year. Our reported level of domestic sales contracts (net of cancellations) continues to be driven by customer demand for our available QMI homes. This approach of offering a strong selection of QMI homes allows customers to take advantage of available incentives and purchase homes quickly and affordably.

Previous wording

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:

Current wording

The following table provides historical quarterly cancellation rates, which represents the number of cancelled domestic contracts in the quarter divided by the number of gross domestic sales contracts executed in the quarter, excluding unconsolidated joint ventures:

Previous wording

The following table provides quarterly contract cancellations as a percentage of the beginning backlog, excluding unconsolidated joint ventures:

Current wording

The following table provides quarterly domestic contract cancellations as a percentage of the beginning domestic backlog, excluding unconsolidated joint ventures:

Previous 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 third 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 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 first quarter of fiscal 2026 was 16%, which approximates our historical normal rate. Generally, 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 still remain uncertain and it is difficult to predict what cancellation rates will be in the future.

Previous wording

Our consolidated sales contracts and homes in contract backlog, excluding unconsolidated joint ventures, by segment is set forth below:

Current wording

Our consolidated sales contracts and homes in contract backlog, excluding unconsolidated joint ventures, is set forth below:

Previous wording

(1)Reflects the reclassification ofeight 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 we entered into during the three months ended January 31, 2025.

Current wording

(1)Excludes eight consolidated homes and $5.0 million of contract backlog related to the assets and liabilities contributed from the West segment to a joint venture we entered into during the three months ended January 31, 2025.

Previous wording

Contract backlog dollars decreased 27.6% as of July 31, 2025 compared to July 31, 2024, and the number of homes in backlog decreased 26.9%for the same period. The decrease in contract backlog dollars and number of homes as of July 31, 2025 compared to July 31, 2024, was primarily driven by an increase in sales of QMI homes and improved contract backlog conversion.

Current wording

Domestic contract backlog dollars decreased 16.0% as of January 31, 2026 compared to January 31, 2025, and the number of homes in domestic backlog decreased 16.5%for the same period. The decrease in domestic contract backlog dollars and number of homes as of January 31, 2026 compared to January 31, 2025, was primarily driven by an increase in sales of QMI homes and improved domestic contract backlog conversion.******

Previous wording

Financial information relating to our homebuilding operations by segment was as follows:

Current wording

Financial information relating to our homebuilding operations by reportable segment was as follows:

Previous wording

Homebuilding revenue decreased 34.1% for the nine months ended July 31, 2025 compared to the same period in the prior year. The decrease was due to a 29.8% decrease in homes delivered and a 6.2% 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 for thenine months ended July 31, 2025 compared to some communities delivering higher priced, larger single family homes and townhomes in mid to higher-end submarkets of the segment for the nine months ended July 31, 2024, which were no longer delivering in the current year.

Current wording

Northeast - Homebuilding revenue decreased 3.2% for thethree months ended January 31, 2026 compared to the same period in the prior year. The decrease for thethree months ended January 31, 2026 was attributed to a 6.3% decrease in homes delivered and a 9.1% 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 lower-end submarkets of the segment for the three months ended January 31, 2026 compared to some communities delivering higher priced, larger single family homes and townhomes in higher-end submarkets of the segment for the three months ended January 31, 2025, which were no longer delivering in the first quarter of the current year.

Previous wording

Southeast – Homebuilding revenue decreased 9.7% for thethree months ended July 31, 2025 compared to the same period in the prior year. The decrease for thethree months ended July 31, 2025 was attributed to a 15.6% decrease in homes delivered, partially offset by a 6.9% 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 townhomes in higher-end submarkets of the segment for the three months ended July 31, 2025 compared to some communities delivering lower priced, smaller single family homes, townhomes and build-for-rent homes in lower-end submarkets of the segment for the three months ended July 31, 2024, which were no longer delivering in the current year.

Current wording

Southeast – Homebuilding revenue increased 44.0% for thethree months ended January 31, 2026 compared to the same period in the prior year. The increase for thethree months ended January 31, 2026 was attributed to a 27.4% increase in homes delivered and a 13.3% increase in average sales price. The increase in average sales price was the result of new communities delivering higher priced, larger single family homes in higher-end submarkets of the segment for thethree months ended January 31, 2026 compared to some communities delivering lower priced, smaller single family homes and build-for-rent homes in lower-end submarkets of the segment for thethree months ended January 31, 2025, which were no longer delivering in the current year.

Previous wording

Income before income taxes decreased $27.3 million to a loss of $6.3 million for thethree months ended July 31, 2025 compared to the same period in the prior year. This was primarily due to a $2.3 million increase in SGA, an $8.6 million increase in inventory impairments and land option write-offs and a significant decrease in gross margin percentage. For a discussion of gross margin see “Homebuilding: Cost of Sales” above.

Current wording

Income before income taxes decreased $9.6 million to a loss of $3.5 million for thethree months ended January 31, 2026 compared to the same period in the prior year. This was primarily due to a $3.3 million decrease in income from unconsolidated joint ventures, a $1.3 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 revenue increased 14.0% for thethree months ended July 31, 2025 compared to the same period in the prior year. The increase was due to a 22.1% increase in homes delivered, partially offset by a 2.7% decrease in average sales price and a $13.5 million decrease in land sales and other revenue. 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 for thethree months ended July 31, 2025 compared to some communities delivering higher priced, larger single family homes in higher-end submarkets of the segment for thethree months ended July 31, 2024, which were no longer delivering in the current year.

Current wording

West – Homebuilding revenue decreased 18.1% for thethree months ended January 31, 2026 compared to the same period in the prior year. The decrease was due to a 23.5% decrease in homes delivered, partially offset by a 9.0% increase in average sales price. The increase in average sales price was the result of new communities delivering higher priced, larger single family homes in higher-end submarkets of the segment for thethree months ended January 31, 2026 compared to some communities delivering lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment for thethree months ended January 31, 2025, which were no longer delivering in the current year.

Previous wording

Income before income taxes decreased $8.8 million to $11.6 million for thethree months ended July 31, 2025 compared to the same period in the prior year. This was primarily due to the decrease in homebuilding revenue discussed above and a significant decrease in gross margin percentage. For a discussion of gross margin see“Homebuilding: Cost of Sales” above.

Current wording

Income before income taxes decreased $13.9 million to a loss of $11.4 million for thethree months ended January 31, 2026 compared to the same period in the prior year. This was primarily due to the decrease in homebuilding revenue discussed above, a $3.5 million decrease in income from unconsolidated joint ventures and a significant decrease in gross margin percentage. For a discussion of gross margin see “Homebuilding: Cost of Sales” above.

Previous wording

Financial services consists primarily of originating mortgages from 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. For thenine months ended July 31, 2025 and 2024, Federal Housing Administration and Veterans Administration (“FHA/VA”) loans represented 41.0% and 34.1%, respectively, of our total loans. For thenine months ended July 31, 2025 compared to the same period in the prior year, our conforming conventional loan originations as a percentage of our total loans decreased from 65.3% to 58.0%. The origination of loans which exceed conforming conventions increased from 0.6% to 1.0% for thenine months ended July 31, 2025 compared to the same period in the prior year.

Current wording

Financial services consists primarily of originating mortgages from 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. For thethree months ended January 31, 2026 and 2025, Federal Housing Administration and Veterans Administration (“FHA/VA”) loans represented 39.4% and 41.1%, respectively, of our total loans. For the three months ended January 31, 2026 compared to the same period in the prior year, our conforming conventional loan originations as a percentage of our total loans increased from 58.4% to 59.2%. The origination of loans which exceed conforming conventions increased from 0.5% to 1.4% for thethree months ended January 31, 2026 compared to the same period in the prior year.

Previous wording

During thethree and nine months ended July 31, 2025 and 2024, financial services provided $13.9 million and $25.8 million of income before income taxes compared to $6.5 million and $15.5 million for the same periods in the prior year. The increase in financial services income before income taxes for thethree and nine months ended July 31, 2025 compared to the same periods in the prior year was primarily due to an increase in the amount of loans closed during the period 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,80.9% and 81.4% of our non-cash homebuyers obtained mortgages originated by these subsidiaries during the three months ended July 31, 2025 and 2024, respectively, and 79.9% and 79.7% ofour non-cash homebuyers obtained mortgages originated by these subsidiaries during the nine months ended July 31, 2025 and 2024, respectively.

Current wording

During thethree months ended January 31, 2026 and 2025, financial services provided $5.8 million and $3.5 million of income before income taxes, respectively. The increase in financial services income before income taxes for thethree months ended January 31, 2026 compared to the same periods in the prior year was primarily due to 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,79.6% and 80.4% of our non-cash homebuyers obtained mortgages originated by these subsidiaries during the three months ended January 31, 2026 and 2025, respectively.

Previous wording

Corporate general and administrative expenses include operations at our headquarters in New Jersey. These 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 to $35.0 million for thethree months ended July 31, 2025 compared to $38.5 million for thethree months ended July 31, 2024 and decreased to $97.2 million for the nine months ended July 31, 2025 compared to $108.1 million for the nine months ended July 31, 2024. The decrease was primarily due to lower stock compensation expense compared to the same periods in the prior year. During the nine months of fiscal 2024, we had additional expense related to finalizing the value of phantom stock awards granted under our 2019 long-term incentive plan as a result of an increase to our stock price. In addition, for the nine months of fiscal 2025, we recorded a benefit related to our 2024 and 2023 long-term incentive plan phantom stock awards, as a result of a decrease in our stock price during the period.

Current wording

Corporate general and administrative expenses include operations at our headquarters in New Jersey. These 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 remained relatively flat at $33.7 million for thethree months ended January 31, 2026 compared to $32.7 million for thethree months ended January 31, 2025.

Previous wording

Income from unconsolidated joint ventures consists of our share of the earnings or losses of our unconsolidated joint ventures. Income from unconsolidated joint ventures increased $4.8 millionto $15.5 million for thethree months ended July 31, 2025 and decreased $3.1 million to $33.8 million for the nine months ended July 31, 2025 compared to the same periods in the prior year. The increase for the three months ended July 31, 2025 compared to the same period of the prior year was primarily due to the recognition of additional income from two unconsolidated joint ventures; because the joint venture partner achieved certain return hurdles, the Company was able to recognize a higher share of the unconsolidated joint ventures' income than it had in the prior year. The decrease for thenine months ended July 31, 2025 compared to the same period of the prior year was primarily due to the recognition of losses from two unconsolidated joint ventures in which one just started delivering homes in the second quarter of fiscal 2025 and the other is not currently delivering any homes. In addition, we recognized income in the first nine months of the prior year from a joint venture that was subsequently consolidated in fiscal 2024.

Current wording

Income from unconsolidated joint ventures consists of our share of the earnings or losses of our unconsolidated joint ventures. Income from unconsolidated joint ventures decreased $5.8 millionto $3.4 million for thethree months ended January 31, 2026 compared to the same period in the prior year. The decrease was primarily due to less open for sale unconsolidated joint venture communities leading to fewer deliveries.

Previous wording

For thethree and nine months ended July 31, 2025, we recorded income tax expense of $7.2 million and $25.7 million, respectively, and $24.4 million and $51.6 million for the same periods in the prior year, respectively. In both the current and prior year periods, the expense was primarily driven by federal and state tax expense on income before income taxes and permanent differences, partially offset by the generation of energy home credits. The federal tax expense is not paid in cash as it is offset by the use of our existing NOL carryforwards.

Current wording

For thethree months ended January 31, 2026 and 2025, we recorded income tax expense of $7.8 million and $11.7 million, respectively. In both the current and prior year periods, the expense was primarily driven by federal and state tax expense on income before income taxes and permanent differences, partially offset by the generation of energy home credits. The federal tax expense is not paid in cash as it is offset by the use of our existing NOL carryforwards.

Previous wording

Our total liquidity at July 31, 2025 was $277.9 million, including $146.6 million in homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility. We believe that our cash on hand together with available borrowings on our senior secured revolving credit facility will be sufficient for at least the next 12 months to finance our working capital requirements.

Current wording

Our total liquidity at January 31, 2026 was $471.4 million, including $339.9 million in homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility. We believe that our cash on hand together with available borrowings on our senior secured revolving credit facility will be sufficient for at least the next 12 months to finance our working capital requirements.

Previous wording

We spent $660.0 million on land and land development during the first three quarters of fiscal 2025. After land and land development spending and all other operating activities, including revenue received from deliveries, cash from operations was $19.2 million. During the first three quarters of fiscal 2025, cash used in investing activities was $60.6 million, primarily due to new joint ventures entered into during fiscal 2025, along with spending on capitalized software, partially offset by distributions of capital from existing unconsolidated joint ventures. Cash used in financing activities was $30.5 million during the first three quarters of fiscal 2025, primarily due to the redemption of our 13.5% Senior Notes, along with net payments for our mortgage warehouse lines of credit, net payments fornonrecourse mortgage financings, treasury stock purchases and payments of preferred dividends, partially offset bynet proceeds for 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 $180.7 million on land and land development during the first quarter of fiscal 2026. After land and land development spending and all other operating activities, including revenue received from deliveries, cash from operations was $140.9 million. During the first quarter of fiscal 2026, cash used in investing activities was $29.1 million, primarily due to a new joint venture entered into during the first quarter of fiscal 2026, along with spending on capitalized software, partially offset by net cash acquired through acquisitions. Cash used in financing activities was $52.6 million during the first quarter of fiscal 2026, primarily due to net payments for our mortgage warehouse lines of credit, net payments fornonrecourse mortgage financings, net payments forland banking financings, treasury stock purchases and payments of preferred dividends, partially offset bynet proceeds formodel 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 thenine months ended July 31, 2025 and 2024 were for operating expenses, land purchases, land deposits, land development, construction spending, investments in unconsolidated joint ventures, land banking transactions, state income taxes, debt reductions, interest payments, preferred dividends, treasury stock purchases and litigation matters. During these periods, we provided for our cash requirements from available cash on hand, housing and land sales, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.

Current wording

Our cash uses during thethree months ended January 31, 2026 and 2025 were for operating expenses, land purchases, land deposits, land development, construction spending, model sale leasebacks, land banking transactions, state income taxes, interest payments, preferred dividends, equity repurchases, investments in unconsolidated joint ventures and acquisitions. During these periods, we provided for our cash requirements from available cash on hand, home and land sales, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.

Previous wording

(1)At July 31, 2025, provides for up to $125.0 million in aggregate amount of senior securedfirst 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

(1)At January 31, 2026, provides for up to $125.0 million in aggregate amount of senior securedfirst 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 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 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 July 31, 2025 (collectively, the “Notes Guarantors”).

Current wording

Except for K. Hovnanian, the issuer of the notes and borrower under the credit agreements 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 January 31, 2026 (collectively, the “Notes Guarantors”).

Previous wording

The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together, the “Debt Instruments”) outstanding at July 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 exchange 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 July 31, 2025, we believe we were in compliance with the covenants of the Debt Instruments.

Current wording

The credit agreements governing the Secured Credit Facility and the indentures governing the senior notes (together, the “Debt Instruments”) outstanding at January 31, 2026 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 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 January 31, 2026, 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 in the near term 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 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