HOV 10-K & 10-Q changes, risk factors and insider trading

Turmoil in the financial markets can affect our liquidity. In addition, our cash balances are primarily invested in short-term government-backed instruments. The remaining cash balances are held at numerous financial institutions and may, at times, exceed insurable amounts. We seek to mitigate this risk by depositing our cash in major financial institutions and diversifying our investments.investments; however, there can be no assurance that we will be able to fully mitigate this risk. In addition, our homebuilding operations often require us to obtain letters of credit. We have certain stand-alone letter of credit facilities and agreements pursuant to which letters of credit are issued. However, we may need additional letters of credit above the amounts provided under these facilities and letters of credit may not be issued under our senior secured revolving credit facility. If we are unable to obtain such additional letters of credit as needed to operate our business, we would be adversely affected.

In addition, geopolitical events, acts of war or terrorism, threats to national security, civil unrest, any outbreak or escalation of hostilities throughout the world, changes in tariffs or trade policies and international trade sanctions, and health pandemics may have a substantial impact on the economy, consumer confidence, the housing market, our associates and our customers, and therefore our business and financial results.

The difficulties described above could cause us to take longer and incur more costs to build our homes. In addition, our insurance may not fully cover business interruptions or losses caused by weather conditions and man-made or natural disastersdisasters. and weWe may not be able to recapture increased costs by raising prices in many cases because we fix our prices up to 12 months in advance of delivery bywhen signingwe sign home sales contracts. Some buyers may also cancel or not honor their home sales contracts altogether.

The homebuilding industry is vulnerable to raw material and labor shortages and has from time-to-time experienced such shortages. In particular, shortages and fluctuations in the price of lumber or in other important raw materials could result in delays in the start or completion of, or increase the cost of, developing one or more of our residential communities. Pricing for labor and raw materials can be affected by various national, regional, local, economic and political factors. For example, the federal government has previously imposed new or increased tariffs or duties on an array of imported materials and goods that are used in connection with the construction and delivery of our homes, including lumber, raising our costs for these items (or products made with them). Such government-imposed tariffs and trade regulations on imported building supplies, and retaliatory measures by other countries, may in the future have significant impacts on the cost to construct our homes and on our customers’ budgets, including by causing disruptions or shortages in our supply chain. We Despite moderation in the rate of inflation during 2025, we have also experienced price fluctuations and increased labor costs, particularly over thein prior tworecent fiscal years, before stabilizing in the current fiscal year, as a result of a sharp rise in inflation across the United States. The cost and availability of labor may be adversely affected by changes in immigration laws or the enforcement thereof and trends in labor migration. In addition, increased demand could increase material and labor costs. Although much improved during the current fiscal year,years 2024 and 2025, we continued continue to experience some construction delays due to shortages in the supply of certain materials, as well as labor and subcontractor shortages in our markets. These delays impact the timing of our expected home closings and may also result in cost increases that we may not be able to pass to our current or future customers. Sustained increases in construction costs may, over time, erode our margins, and impact our total contract or delivery volumes.

The large majority of our customers finance their acquisitions through lenders providing mortgage financing. Mortgage rates, up until recently,late 2022, had been historically low, which made the homes we sell more affordable. Despite the Federal Reserve lowering interest rates in September2024 and November 2024,2025, mortgage rates have significantly increased since the beginning of fiscal year 2022 as a result of the Federal Reserve raising interest rates in an effort to curtail inflation during fiscal years 20232022 and 2022.2023. When interest rates increase, the cost to own a home increases, which reduces the number of potential homebuyers who can obtain mortgage financing and can result in a decline in the demand for our homes. We cannot predict whether interest rates will rise further, or the paces of any increases, but additional increases would likely have a considerable impact on housing demand.

Increases in interest rates (or the perception that interest rates will rise, including as a result of governmentthe actual or anticipated actions of the government), have, and could in the future, increase the costs to obtain mortgages, decrease the availability of mortgage financing have,financing, and lower demand for new homes because of the increased monthly mortgage costs and cash required to close on mortgages to potential home buyers. Even if potential customers do not need financing, changes in interest rates and mortgage availability could make it harder for them to sell their existing homes to potential buyers who need financing. This could prevent or limit our ability to attract new customers as well as our ability to fully realize our backlog because our sales contracts generally include a financing contingency. Financing contingencies permit the customer to cancel his/her obligation in the event mortgage financing at prevailing interest rates, including financing arranged or provided by us, is unobtainable within the period specified in the contract. This contingency period is typically four to eight weeks following the date of execution of the sales contract. We believe that the availability of mortgage financing, including through federal government agencies or government-sponsored enterprises (such as Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and FHA/VA financing), is an important factor in marketing many of our homes. Any limitations or restrictions on the availability of mortgage financing (including due to any failure of lawmakers to agree on a budget or appropriation legislation to fund relevant programs or operations or as a result of instability in the banking sector) could reduce our sales. Further, if we are unable to originate mortgages for any reason going forward, our customers may experience significant mortgage loan funding issues, which could have a material impact on our homebuilding business and our Consolidatedfinancial Financialcondition Statements.and results of operations.

The homebuilding industry experienced a significant and sustained downturn that began in 2007, during which the lowest volumes of housing starts were significantly below troughs in previous downturns. This downturn resulted in an industry-wide softening of demand for new homes due to a lack of consumer confidence, decreased availability of mortgage financing, and large supplies of resale and new home inventories, among other factors. In addition, an oversupply of alternatives to new homes, such as rental properties, resale homes and foreclosures, depressed prices and reduced margins for the sale of new homes. Industry conditions had a material adverse effect on our business and results of operations in fiscal years 2007 through 2011. Further, we had substantially increased our inventory through fiscal year 2006, which required significant cash outlays and which increased our price and margin exposure as we worked through this inventory. If the homebuilding industry experiences another significant or sustained downturn, it would materially adversely affect our business and results of operations in future years. During the second half of fiscal year 2022 and into fiscal year 2023, we experienced a decrease in housing demand due to a sharp increase in mortgage rates, a substantial increase in home prices resulting from the COVID-19 pandemic, significant inflation in the broader economy, stock market volatility, and other macro-economic conditions, which adversely impacted buyer sentiment and behavior.

The homebuilding industry is significantly affected by changes in weather and other environmental conditions and resulting governmental regulations and increased focus by stakeholders on climate change and other sustainability issues.

Weather conditions and man-made or natural disasters such as hurricanes, tornadoes, earthquakes, floods or prolonged precipitation, droughts, fires and other severe environmental conditions have harmed us in the past,past and may harm us in the future. During fiscal year 2024, we experienced disruptions from Hurricane Beryl in Texas, our largest state in terms of deliveries. Additionally, theThe physical impacts of climate change may cause these occurrences to increase in frequency, severity and duration, which can delay home construction, increase costs by damaging inventories, reduce the availability of building materials, and adversely impact the demand for new homes in affected areas, and cause policymakers and industry stakeholders to adopt new and stricter building codes and standards, as well as slow down or otherwise impair the ability of utilities and local governmental authorities to provide approvals and service to new housing communities. For example, wildfires in California and hurricanes in Texas and Florida in recent years have at various times caused utility company delays, slowing of our production process, increasing cost of operations and also impacting our sales and construction activity in affected markets during the related time periods. Additionally, other coastal areas where we operate face increased risks of adverse weather conditions or natural disasters. For example, adverse weather conditions and natural disasters may increase the cost of homeowner’s insurance, which could reduce the number of potential buyers who can afford, or who are willing to purchase homes we build in these affected areas, which could result in reduced demand for our homes in these markets.

In addition, there is a growing concern from advocacy groups and the general public that the emissions of greenhouse gases and other human activities have caused, or will cause, significant changes in weather patterns and temperatures and the frequency and severity of natural disasters. Government mandates, standards and regulations enacted in response to these projected climate changes impacts could result in restrictions on land development in certain areas or increased energy, transportation and raw material costs that may adversely affect our financial condition and results of operations. These concerns have also resulted in increasing government, investor and societal attention to environmental, social, and governance (“ESG”) matters, including in certain cases expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, waste production, water usage, human capital, labor, and risk oversight, and could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. In recent years, certain U.S. states and federal officeholders have also proposed or enacted “anti-ESG” policies, legislation or initiatives. These and other rapidly changing laws, regulations, policies and related interpretations, as well as increased or varied enforcement actions by various governmental and regulatory agencies, may create challenges for the Company, including with respect to our compliance and ethics programs, may alter the environment in which we do business, and may increase the ongoing costs of compliance, which could adversely impact our results of operations and cash flows.

Our quarterly operating results generally fluctuate by season. The construction of a customer’s home typically begins after signing the sale agreement of sale and can take six to nine months or more to complete. Weather-related problems, typically in the fall, winter and early spring, can delay starts or closings and increase costs and thus reduce profitability. In addition, delays in opening communities could have an adverse effect on our sales and revenues. Due to these factors, our quarterly operating results will likely continue to fluctuate.

We conduct a significant portion of our business in Arizona, California, Delaware, Florida, Maryland, New Jersey, Ohio, South Carolina, Texas and Virginia, and accordingly, regional factors affecting home sales and activities in these markets may have a large impact on our results of operations.

We presently conduct a significant portion of our business in Arizona, California, Delaware, Florida, Maryland, New Jersey, Ohio, South Carolina, Texas and Virginia, which subjects us to risks associated with the regional and local economies of these markets. Home prices and sales activities in these markets and in most of the other markets in which we operate have declined from time to time, particularly as a result of slow economic growth. These markets may also depend, to a degree, on certain sectors of the economy, and any declines in those sectors may impact home sales and activities in that region. For example, to the extent the oil and gas industries, which can be very volatile, are negatively impacted by declining commodity prices, climate change, legislation or other factors, it could result in reduced employment, or other negative economic consequences, which in turn could adversely impact our home sales and activities in Texas. Furthermore, precarious economic and budget situations at the state government level or federal government shut-downs may adversely affect the market for our homes in the affected areas. Weather-related or other events impacting these markets could also negatively affect these markets as well as the other markets in which we operate. If home prices and sales activity decline in one or more of the markets in which we operate, our costs may not decline at all or at the same rate and the Company’s business, financial condition and results of operations could be materially adversely affected.

Increases in cancellations of sales agreements of sale could have an adverse effect on our business.

Our backlog reflects sales agreements of sale with our home buyers for homes that have not yet been delivered. We have received a deposit from our home buyer for each home, which is reflected in our backlog, and we generally have the right to retain the deposit if the home buyer does not complete the purchase. In some situations, however, a home buyer may cancel the sale agreement of sale and receive a complete or partial refund of the deposit for reasons related to state and local law, an inability to obtain mortgage financing at prevailing interest rates (including financing arranged or provided by us), an inability to sell their current home, or our inability to complete and deliver the new home within the specified time. AtAs of October 31, 2024,2025, including unconsolidated joint ventures, we had a backlog of signed contracts for 2,3282,240 homes with a sales value aggregating $1.3$1.1 billion. If mortgage financing becomes less accessible, or if economic conditions deteriorate, more home buyers may cancel their sale agreements of sale with us, which could have an adverse effect on our business and results of operations.

Significant expenses of owning a home, including mortgage interest expenses and real estate taxes, have historically been deductible expenses for an individual’s federal, and in some cases state, income taxes, subject to limitations under tax law and policy. The “Tax Cuts and Jobs Act” (“TCJA”), which was signed into law in December 20172017, included provisions which imposeimposed significant limitations with respect to these income tax deductions. For instance,deductions through the end of 2025. In addition, the One Big Beautiful Bill Act (“OBBBA”), which was signed into law on July 4, 2025, includes provisions which extend and modify these limitations. For instance, under OBBBA, the annual limitation on the deduction for real estate taxes and state and local income taxes (or sales taxes in lieu of income taxes) is permanently extended and the deduction is now generally limited to $10,000.$40,000 Furthermore,for 2025 through 2029, subject to 1% increases from 2026 through 2029 and phasedown depending on the income of the taxpayer, and to $10,000 for 2030 and subsequent years. The OBBBA also permanently extends the TCJA limitation that provided that, through the end of 2025, the deduction for mortgage interest is generally only available with respect to the first $750,000 of a new mortgagemortgage. and there is no longer a federal deduction for interest on home equity loans. It is unclear whether the provisions of the TCJA described above will be allowed to expire at the end of 2025, which would cause a reversion to the provisions in effect prior to the TCJA, or whether some or all of such provisions will be extended beyond 2025 by future legislation. In addition, ifIf the federal government or a state government further changes its income tax laws to further eliminate or substantially limit these income tax deductions, the after-tax cost of owning a new home would further increase for many of our potential customers. The loss or reduction of these homeowner tax deductions that have historically been available has and could further reduce the perceived affordability of homeownership, and therefore the demand for and sales price of new homes, including ours, particularly in states with higher state income taxes or home prices, such as in California and New Jersey. In addition, increases in property tax rates or fees on developers by local governmental authorities, as experienced in response to reduced federal and state funding or to fund local initiatives, such as funding schools or road improvements, or increases in insurance premiums can adversely affect the ability of potential customers to obtain financing or their desire to purchase new homes, and can have an adverse impact on our business and financial results.

We may not be able to compete on several levels with homebuilders that may have greater sales and financial resources, which could hurt future earnings.

In prior years, the areas in which we operate in California have experienced power shortages, including periods without electrical power, as well as significant fluctuations in utility costs. We may incur additional costs and may not be able to complete construction on a timely basis if such power shortages and outages and utility rate fluctuations continue. Furthermore, power shortages and outages and rate fluctuations may adversely affect the regional economies in which we operate, which may reduce demand for our homes. Our operations may be adversely affected if further rate fluctuations and/or power shortages and outages occur in California,California or in our other markets.

We use information technology (“IT”), digital telecommunications and other computer resources to conduct important operational activities and to maintain our business records. In addition, we rely on the systems of third parties, such as third-party vendors. Our computer systems, including our backup systems, and those of the third parties on whose systems we rely, are subject to damage or interruption from computer and telecommunications failures, computer viruses, power outages, security breaches (including through phishing attempts, data-theft and cyber-attack), ransomware attacks, usage errors by our associates or other business partners or outside service providers, and catastrophic events, such as fires, floods, hurricanes and tornadoes. Cyber-attacks and other security threats could originate from a wide variety of external sources, including cyber-criminals, nation-state hackers, hacktivists and other outside parties. Cyber-attacks and other security threats could also originate from the malicious or accidental acts of insiders, such as employees, and other business partners and outside service providers. In addition, cybersecurity risk is exacerbated with the advancement of technologies like artificial intelligence, which malicious third parties are using to create new, sophisticated and more frequent attacks.

As of October 31, 2024,2025, we had an aggregate of $2.6$6.2 million outstanding under various letters of credit and other credit facilities and agreements, certain of which were collateralized by $3.2$6.3 million of cash. Our fees for these letters of credit for the year ended October 31, 2024, which are based on both the used and unused portion of the facilities and agreements, were $0.1 million. We also had substantial contractual commitments and contingent obligations, including $225.7$276.8 million of performance bonds as of October 31, 2024.2025. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations.”

We are largely dependent on our current cash balance and future cash flows from operations (which may not be positive) to enable us to service our indebtedness, to cover our operating expenses and/or to fund our other liquidity needs. Cash provided by operating activities in fiscal 2024years 2025 and 20232024 was $23.6$188.3 million and $435.3$23.6 million, respectively. Depending on the levels of our land purchases, we could generate positive or negative cash flow in future years. If there is a sustained decline in market conditions in the homebuilding industry over the next several years, our cash flows could be insufficient to fund our obligations and support land purchases, and if we cannot buy additional land, we would ultimately be unable to generate future revenues from the sale of houses. If our cash flows and capital resources are insufficient to fund our debt service obligations or we are unable to refinance our indebtedness, we may be forced to reduce or delay investments and capital expenditures, sell assets, seek additional capital or restructure our indebtedness. These alternative measures may not be successful or, if successful, made on desirable terms and may not permit us to meet our debt service obligations. We have also entered into certain cash collateralized letters of credit agreements and facilities that require us to maintain specified amounts of cash in segregated accounts as collateral to support our letters of credit issued thereunder. If our available cash and capital resources are insufficient to meet our debt service and other obligations, we could face liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions or the proceeds from the dispositions may not be permitted under the terms of our debt instruments to be used to service indebtedness or may not be adequate to meet any debt service obligations then due. For additional information about capital resources and liquidity, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity.”

Our cash flows, liquidity and consolidated financial statementscondition could be materially and adversely affected if we are unable to obtain letters of credit.

Our operations require significant amounts of cash, and we may be required to seek additional capital, whether from sales of debt or equity securities or borrowing additional money, for the future growth and development of our business. The terms and/or availability of additional capital is uncertain. Moreover, the agreements governing our outstanding debt instruments contain provisions that restrict the debt we may incur in the future and our ability to pay dividends on equity. If we are not successful in obtaining sufficient capital, it could reduce our sales and may hinder our future growth and results of operations. In addition, pledging substantially all of our assets are pledged to support our senior secured revolving credit facilityfacility, and our senior secured noteswhich may make it more difficult to raise additional financing in the future.

Our ability to access capital on favorable terms is a key factor in our ability to service our indebtedness to cover our operating expenses and to fund our other liquidity needs. Negative rating actions by credit agencies, including downgrades, may make it more difficult and costly for us to access capital. Therefore, any downgrade by any of the principal credit agencies may exacerbate these difficulties. There can be no assurances that our credit ratings will not be downgraded in the future, whether as a result of deteriorating general economic conditions, a protracted downturn in the housing industry, failure to successfully implement our operating strategy, the adverse impact on our results of operations or liquidity position of any of thethese above,factors, or otherwise.

Restrictive covenants in our debt instruments may restrict our and certain of our subsidiaries’ ability to operate, and if our financial performance worsens, we may not be able to undertake transactions within the restrictions of our debt instruments.instruments, in particular if our financial performance worsens.

The indentures governing our outstanding debt securities and the agreementsagreement governing our senior secured revolving credit facilitiesfacility impose certain restrictions on our and certain of our subsidiaries’ operations and activities. The most significant restrictions relate to debt incurrence, creation of liens, repayment of certain indebtedness prior to its respective stated maturity, sales of assets (including in certain land banking transactions), cash distributions, (including paying dividends on common and preferred stock), capital stock repurchases, and investments by us and certain of our subsidiaries (including in joint ventures). Any other debt instruments that we may enter into in the future may contain similar or additional restrictions on our operations and activities. Because of these restrictions, we could be prohibited from paying dividends.dividends or repurchasing shares of our common stock.

The restrictions in our debt instruments could prohibit or restrict our and certain of our subsidiaries’ activities, such as undertaking capital raising or restructuring activities or entering into other transactions. In addition, if we fail to comply with these restrictions or to make timely payments on this debt and other material indebtedness, an event of default could occur and our debt under these debt instruments could become due and payable prior to maturity.maturity and the lenders under our senior secured revolving credit facility could terminate their commitments thereunder. Any such event of default could lead to cross defaults under certain of our other debt instruments or negatively impact other debt-related covenants. In any of these situations, we may be unable to amend the applicable debt instrument or obtain a waiver without significant additional cost, or at all, and we may be unable to obtain alternative financing. Any such situation could have a material adverse effect on the solvency of the Company.

Under the terms of our indebtedness under our indentures and senior secured revolving credit facilities,facility, we have the ability, subject to our debt and liens covenants, to incur additional amounts of debt, including secured debt. The incurrence of additional indebtedness could magnify the risks described above. In addition, certain obligations, such as standby letters of credit and performance bonds issued in the ordinary course of business, including those issued under our stand-alone letter of credit agreements and facilities, are not considered indebtedness under our debt instruments (and may be secured) and, therefore, are not subject to limits in our debt covenants.

Homebuilders are subject to a number of federal, local, state, and foreign laws and regulations concerning the development of land and homebuilding, sales and customer financing processesprocesses, and theenvironmental, protectionhealth ofand thesafety environment,matters, which can cause us to incur delays and costs associated with compliance and which can prohibit or restrict our activity in some regions or areas.

We anticipate that increasingly stringent requirements will continue to be imposed on developers and homebuilders in the future. In addition, some of these laws and regulations that significantly affect how certain properties may be developed are contentious, attract intense political attention, and may be subject to significant changes over time. For example, regulationsover governing wetlands permitting under the federal Clean Water Act have been the subject of extensive rulemakings for many years, resulting intime several major joint rulemakings and formal guidance by the Environmental Protection Agency (“EPA”) and the U.S. Army Corps of Engineers that have expanded and contracted the scope of “waters of the United States” (i.e., wetlands and streams) subject to regulation under the Clean Water Act (“CWA”), which impacts, among other things, permitting requirements applicable to the homebuilding industry; and such rulemakings have been the subject of many legal challenges, some of which remain pending. ItOn November 17, 2025, the EPA and U.S. Army Corps of Engineers announced a proposed rule that would revise the definition of “waters of the United States.” The proposed rule is unclearcurrently subject howto thesea andpublic relatedcomment period ending on January 5, 2026. While the proposed rule appears to narrow the scope of properties subject to certain Clean Water Act permitting obligations, there is ongoing legal uncertainty due to potential future regulatory developments, including at the state or local level, ultimatelyand any legal challenges that may affectarise in response to the scoperevised definition, of regulated wetlands where we operate. Althoughand we cannot reliably predict the extent of any effect these regulatory developments regardingand wetlands,legal or any other requirements thatchallenges may take effect, may have on us, they could result in time-consuming and expensive compliance programs and in substantial expenditures, which could cause delays and increase our cost of operations. In addition, our ability to obtain or renew permits or approvals and the continued effectiveness of permits already granted or approvals already obtained is dependent upon many factors, some of which are beyond our control, such as changes in policies, rules and regulations and their interpretations and application.us.

We may be liable for claims for damages as a result of the use or presence of hazardous materials.materials in our operations or developments.

As a homebuilding and land development business with a wide variety of historical homebuilding, land development, and construction activities, we have in the past been and could in the future be liable for future claims for damages as a result of the past or present use or presence of hazardous materials,materials in our operations and developments, including building materials or fixtures known or suspected to be hazardous, to contain hazardous materials, materials (such as asbestos, lead or per- and polyfluoroalkyl substances), or to be associated with mold. Any such claims may adversely affect our business, prospects, financial condition or operating results. Insurance coverage for such claims may be limited or non-existent.

Legal claims not resolved in our favor, such as product liability litigation and warranty claimsclaims, may be costly.

With regard to certain general liability exposures such as product liability claims, construction defect claims and related claims, assessment of claims and the related liability and reserve estimation process is highly judgmental and subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to our markets and the types of products we build, claim settlement patterns, insurance industry practices and legal interpretations, among others. Because of the high degree of judgment required in determining these estimated liability amounts, actual future costs could differ significantly from our currently estimated amounts. Furthermore, after claims are asserted for construction defects, it can be difficult to determine the extent to which assertions of such claims will expand geographically. In addition, the amount and scope of coverage offered by insurance companies is currently limited, and this coverage may be further restricted and become more costly. If we are not able to obtain adequate insurance against such claims, if the costs associated with such claims significantly exceed the amount of our insurance coverage, or if our insurers do not pay on claims under our policies (whether because of dispute, inability, or otherwise), we may experience losses that could hurtnegatively impact our financial results.

As a company conducting business with physical operations throughout the U.S.,United States, we are exposed, both directly and indirectly, to the effects of changes in U.S.,federal, state and local tax rules. Taxes for financial reporting purposes and cash tax liabilities in the future may be adversely affected by changes in such tax rules. Such changes may put us at a competitive disadvantage compared to some of our majorlarger competitors,peers, to the extent we are unable to pass the tax costs through to our customers.

We currently operate through a number of unconsolidated homebuilding joint ventures with independent third parties in which we do not have a controlling interest. AtAs of October 31, 2024,2025, we had invested an aggregate of $142.9$163.5 million in these unconsolidated joint ventures,ventures. including outstanding net advances to these unconsolidated joint ventures of $2.4 million. In addition, asAs part of our strategy, we intend to continue to evaluate additional joint venture opportunities; however, we may be limited in pursuing allany such desirable opportunities because the indentures governing our outstanding debt securities and agreements governing our senior secured revolving credit facilitiesfacility impose certain restrictions, among others, on investments by us and certain of our subsidiaries (including in joint ventures).

These investments involve risks and are highly illiquid. There are a limited number of sources willing to provide acquisition, development and construction financing to land development and homebuilding joint ventures, and if market conditions become more challenging, it may be difficult or impossible to obtain financing for our joint ventures on commercially reasonable terms. In addition, we lack a controlling interest in these joint ventures and, therefore, are usually unable to require that our joint ventures sell assets or return invested capital, make additional capital contributions, or take any other action without the vote of at least one of our venture partners. Therefore, absent partner agreement, we will be unable to liquidate our joint venture investments to generate cash.cash or take other actions to protect our investment.

The combined ownership of members of the Hovnanian family, including Ara K. Hovnanian, our Chairman of the Board, President,Board and Chief Executive Officer, through personal holdings, the limited partnership and the limited liability company established for members of Mr. Hovnanian’s family and family trusts of Class A and Class B common stock, enables them to exert significant control over us, including power to control the election of the Board of Directors and to approve matters presented to our stockholders. SuchAs of October 31, 2025, such holdings represented approximately 58%60.2% of the votes that could be cast by the holders of our outstanding Class A and Class B common stock on a combined as of October 31, 2024.basis. This concentration of ownership may also make some transactions, including mergers or other changes in control, more difficult or impossible without their support. Also, because of their combined voting power, circumstances may occur in which their interests could be in conflict with the interests of other stakeholders.

The value of our deferred tax assets is also dependent upon the tax rates expected to be in effect at the time the taxable income is expected to be generated. A decrease in enacted corporate tax rates in our major jurisdictions, especially the U.S. federal corporate rate, would decrease the value of our deferred tax assets, which could be material.

We could be adversely impacted by the loss of key management personnel or if we fail to attract and retain qualified personnel.

To a significant degree, our future success depends on the efforts of our senior management, many of whom have been with the Company for a significant number of years, and our ability to attract and retain qualified personnel. Our operations could be adversely affected if key members of our senior management leave the Company or if we cannot attract and retain qualified personnel to manage growth in our business.

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, 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 beenstayed aggressive in our pricing, incentives and concessions in order to align with the current market.

We continue to use our increased inventory of quick move-in homes (“QMI homes”) to help meet buyers’ needs for more affordable housing in the recentexisting uncertain interest rate environment. The time between contract signing and closing is shorter with a QMI home as compared to a to be built home, which provides customers with more certainty on their mortgage pricing. The availability of QMI homes also allows us to offer mortgage interest rate buydown assistance, which is a tool we offer through our wholly-owned mortgage banking subsidiary (“K. Hovnanian Mortgage”), to help ease the impact of higher monthly payments from rising interest rates. We pay the cost of interest rate buydowns for customers that qualify through K. Hovnanian Mortgage and decide to use the program. The level of interest rate based incentives utilized differs across our markets and is one of several available options we use to drive sales and close homes.

There still 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 lingeringcertain 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 20252026 and beyond.

Our cash position allowed us to spend $995.4$859.4 million on land purchases and land development for long-term growth during fiscal 2024,2025 and still have total liquidity of $338.2$404.1 million, including $210.0$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, 2024.2025. 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.

● For the year ended October 31, 2024,2025, sale of homes revenues increaseddecreased 9.3%0.8% as compared to the prior year, primarily due to a 9.6%3.5% increasedecrease in homesaverage delivered,sales prices, partially offset by a 0.3%2.8% decreaseincrease in averagehomes sales price.delivered. The increase in deliveries in fiscal 20242025 was primarily the result of a 15.0%7.7% increase in community count as well as an increase in QMI contracts.

● Homebuilding gross margin percentage decreased from 19.6% for the year ended October 31, 2023 to 18.7% for the year ended October 31, 2024,2024 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 22.7% for the year ended October 31, 2023 to 22.0% for the year ended October 31, 2024.2024 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.

● Selling, general and administrative expenses (including corporate general and administrative) increased $37.5$7.6 million for the year ended October 31, 20242025 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 compared to 11.1% for the year ended October 31, 2023.2024. The increase was primarily due to an increase in advertising expenses and compensation expense, mainly related to increased headcount and annual merit increases, alongas withwell grantsas offees phantomincurred stockon awardsunused underbuilder ourforward 2019, 2023 and 2024 long-term incentive plans, for which expense is impacted by the change in our stock price each period.commitments. The increase in headcount iswas in preparation for expected growth in community count and deliveries in fiscal 2025.2025 and fiscal 2026.

● Net contracts perdecreased average active selling community increased3.1% to 43.65,023 for the year ended October 31, 20242025, compared to 40.85,186 in the prior year. TheIncluded increase was due toin the increaseyear inended netOctober contracts31, discussed2025 above.and 2024, respectively, were 44 and 276 build-for-rent contracts.

● Contract backlog decreased from 1,824 homes at October 31, 2023 to 1,649 homes at October 31, 2024,2024 to 1,242 homes at October 31, 2025, and the dollar value of contract backlog decreased to $936.8$726.5 billion,million, a 11.7%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.

Sale of homes revenues increaseddecreased $245.0$22.6 million, or 9.3%,0.8%, for the year ended October 31, 2024,2025, compared to the prior year. The increasedslight decrease in revenues in fiscal 20242025 werewas primarily due to a 9.6% increase in homes delivered, partially offset by the average sales price per home decreasing slightly to $537,6753.5% in fiscal 20242025 from $539,249fiscal 2024, partially offset by a 2.8% increase in fiscalhomes 2023.delivered. The increase in deliveries in fiscal 20242025 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 20242025 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.

(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.

Land sales and other revenues decreased $10.1$24.7 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 20242025, compared to the prior year. Revenue associated with land sales can vary significantly due to the mix of land parcels sold. There were sixfive land sales during the year ended October 31, 2024,2025, compared to foursix in the prior year. Other revenues include interest income, which decreased as a result of lower rates on cash and cash equivalent account balances beginning in the first quarter of fiscal 2025 compared to the prior year.

Homebuilding gross margin before cost of sales interest expense and land chargescharges, is a non-GAAP financial measure. This measure should not be considered as an alternative to homebuilding gross margin determined in accordance with U.S. GAAP as an indicator of operating performance.

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$39.6 million and $1.5$11.6 million in expense for the years ended October 31, 20242025 and 2023,2024, respectively. During the years ended October 31, 20242025 and 2023,2024, we wrote off residential land option, approval and engineering costs totaling $1.6$18.2 million and $1.5$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 20242025 and 2023.2024. Inventory impairments were $10.0$21.4 million in the aggregate for the year ended October 31, 20242025 for six communities in our Northeast segment, one community in our Southeast segment and five communities in our West segment. For the year ended October 31, 2024, inventory impairments were $10.0 million in the aggregate for two communities in our Northeast segment and two communities in our West segment. 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,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.

Net Contracts Per Average Active Selling Community

Net contracts per average active selling community in fiscal 20242025 were 43.635.9 compared to 40.839.9 in fiscal 2023,2024, a 6.9%10.0% increasedecrease in sales pace per community. Our reported level of sales contracts (net of cancellations) was impacted by anuneven increasedemand incaused ourby activeoverall sellingmarket communitiesuncertainty along with affordability constraints and anhigh increaseinterest in customer demand partially due to the increased availability of QMI homes.rates.

SoutheastNortheast – Homebuilding revenues increased 6.8% 11.2% in fiscal 20242025 compared to fiscal 2023,2024, primarily due to a 13.1%19.6% increase in homes delivered, partially partially offset by a 5.7% 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 build-for-rentaffordable-housing homes in lower-endfiscal 2025 compared to some communities delivering higher priced, larger single family homes and townhomes in higher-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,2024, which were no longer deliveringdelivered in thefiscal current year.2025.

Income before income taxes increaseddecreased $9.2$25.5 million million to $123.2 $165.5 million in fiscal 2024 2025 compared to fiscal 2023,2024, primarily due to thea increase$23.6 million decrease in land sales homebuilding revenue discussed above and aother $5.7revenue, an $11.5 million increase in incomeinventory fromimpairments and land unconsolidatedoption jointwrite-offs ventures,and whilea decrease in gross margin percentagepercentage. remainedFor relativelya flat.discussion of gross margin, see “Homebuilding: Cost of Sales” above.

During the years ended October 31, 20242025 and 2023,2024, financial services provided $24.1$39.0 million and $19.4$24.1 million of income before income taxes, respectively. In fiscal 2024,2025, 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 averagebasis sizepoint spread between the loans originated and the implied rate from our sale of the loans settled.loans. In the markets served by our wholly owned mortgage banking subsidiaries, 79.4%80.0% and 70.1%79.4% of our noncash home buyers obtained mortgages originated by these subsidiaries during the years ended October 31, 20242025 and 2023,2024, respectively.

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 increaseddecreased $36.5$2.3 million for the year ended October 31, 20242025 compared to the year ended October 31, 2023,2024, primarily due to anlower increase instock compensation expense, mainlyalong with a decrease in bonus expense due to lower profitability. In addition, we recorded a benefit in fiscal 2025 related to increasedour headcount2024 and annual2023 meritlong-term increasesincentive and increased expense related to grants ofplan phantom stock awardsawards, underas oura 2019,result 2023of anda 2024 long-term incentive plans, for which expense is impacted by the changedecrease in our stock price eachduring period.fiscal 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.2025.

Gain (Loss) Gain on Extinguishment of Debt, Net

Income from unconsolidated joint ventures consists of our share of the earningsincome or lossesloss offrom our joint ventures. Income from unconsolidated joint ventures increaseddecreased to $46.4 million for the year ended October 31, 2025 from $52.3 million for the year ended October 31, 20242024. fromThe incomedecrease of $43.2 million for the year ended October 31, 2023. The increase of $9.1$5.8 million in fiscal 20242025 was primarily due to the recognition of additional incomelosses from two of our unconsolidated joint ventures; becausein which one started delivering homes during the second quarter of fiscal 2025 and the other is not yet delivering homes. In addition, we recognized income during the first nine months of the prior year from a joint venture partnerthat achievedwas certainsubsequently returnconsolidated hurdles,prior to the Company was able to recognize a higher shareend of thefiscal unconsolidated joint venture’s income than it had in the prior year.2024.

Income tax expense ofdecreased $75.1to million and $50.1$22.2 million for the yearsyear ended October 31, 20242025 andfrom 2023,$75.1 respectively,million wasfor the year ended October 31, 2024. These amounts were primarily drivenattributable byto federal and state tax expensetaxes on income before income taxes and non-deductible executive compensationcompensation, expense,along with less state net operating losses (“NOL”) available to utilize, partially offset by the generation of energy efficient home tax credits. In fiscal 2025, income tax credits.expense was further reduced by the benefit of our debt extinguishment. Income tax expense for fiscal yearsyear 2024 and 2023 also reflectedincludes the favorable impact of releasing state valuation allowances. TheCurrently, federal tax expense is not paid in cash as it is offset by the use of our existing net operating loss (“NOL”) carryforwards.

We spent $995.4$859.4 million on land and land development during fiscal 2024.2025. After land and land development spending and all other operating activities, including revenue received from deliveries, we had $23.6$188.3 million in cash provided by operations. During fiscal 2024,2025, cash used in investing activities was $46.5$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 $187.9$70.4 million during fiscal 2024,2025, which was primarily due to a $113.5$26.6 million redemption of our senior secured notes, net payments of $31.5 million related to the MaySeptember 20242025 debt exchange,transaction and related deferred financing costs, net payments for nonrecourse mortgage financings, treasury stock purchases andpurchases, payments of preferred dividends,dividends and net payments under our mortgage warehouse lines of credit, 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.

Our cash uses during the years ended October 31, 20242025 and 20232024 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, housinghome and land sales, financing transactions, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.

(12) On NovemberApril 15,30, 2023,2025 K. Hovnanian redeemed allthe ofremaining its $113.5$26.6 million aggregate principal amount of 10.0%its 13.5% Senior Secured 1.75 Lien Notes due November2026 15,for 2025.a redemption price of $27.5 million, which included accrued and unpaid interest.

Hovnanian Enterprises, Inc. (“HEI”) conducts all of its homebuilding and financial services operations through its consolidated subsidiaries (references herein to the “Company,” “we,” “us” or “our” refer to HEI and its consolidated subsidiaries and should be understood to reflect the consolidated business of HEI’s subsidiaries).

During fiscal 2025 and continuing through the first halfnine months 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.

We continue to use our increased inventory of quick move-in homes ("QMI homes") to help meet buyers’ needs for more affordable housing in the existing uncertain interest rate environment. The time between contract signing and closing is shorter with a QMI home as compared to a to be built home, which provides customers with more certainty on their mortgage pricing. The availability of QMI homes also allows us to offer mortgage interest rate buydown assistance, which is a tool we offer through our wholly-owned mortgage banking subsidiary ("K. Hovnanian Mortgage"), to help ease the impact of higher monthly payments from rising interest rates. We pay the cost of interest rate buydowns for customers that qualify through K. Hovnanian Mortgage and decide to use the program. The level of interest rate based incentives utilized differs across our markets and is one of several available options we use to drive sales and close homes.

Our emphasisfocus remains on driving sales pace versusrather pricethan resultedprice. However, higher mortgage rates and concerns about global instability continued to weigh on the housing market contributing to a 4.6% decrease in domestic net contracts increasing by 1.0% in the secondthird quarter of fiscal 2026 compared towith the prior year secondthird quarter and 2.0%a 0.1% decrease for the sixnine months ended AprilJuly 30,31, 2026 compared towith the same period ofin the prior year. WithinDuring the six-monthnine-month period,period ended July 31, 2026, net contracts fluctuatedvaried from month toby month, reflecting ongoing shifts inchanging market conditions and consumer sentiment, including increased buyer hesitancy from buyers, whichthat we believe was partially attributedattributable to the Iran war. EvenDespite withbroader thepolitical and economic volatility inand the broader economy andcontinued affordability constraints, we were able to raiseraised prices or decreasereduced incentives in approximately 44%31% of our domestic communities during the secondthird quarter of fiscal 2026.

WhileAlthough the long-term fundamentals of the new home market remain favorable, there remains a great degree ofsignificant uncertainty persists due to inflation, tariffs, the continuedpotential possibility offor an economic recession, employment risk, geopolitical events and the potentialpossibility forof further increases in mortgage rate increases.rates. While we continue to experience some supply chain issues,issues continue, we remain focused on continuing to shorten ourshortening construction cycle times and building onadvancing our national initiatives to drive downreduce costs with our materialmaterials providers and trade partners. TheGiven changing conditions in the housing market,market and in the generalbroader economy, makesit itremains difficult to predict howthe stronglyextent ourto business will be impacted bywhich these external factors overwill affect our business for the remainder of fiscal 2026 and beyond.

During the sixnine months ended AprilJuly 30,31, 2026, our cash position allowed us to spend $413.0$644.9 million on domestic land purchases and land development for long-term growth and repurchase $18.5 million of our common stock and still have total liquidity of $442.0$379.8 million, including $310.9$249.1 million of homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of AprilJuly 30,31, 2026.

Information on our operating results for the three and sixnine months ended AprilJuly 30,31, 2026 are as follows:

● Sale of homes revenues decreased to $604.2$679.0 million for the three months ended AprilJuly 30,31, 2026 from $650.3$769.1 million for same period in 2025. For the threenine months ended AprilJuly 30,31, 2025,2026, andsale wasof $1.2homes revenues were $1.9 billion forcompared thewith six months ended April 30, 2026 and $1.3$2.1 billion for the six months ended April 30, 2025. There was an 11.8% and 12.1% decrease in the numberprior ofyear period. The decreases were primarily due to a 12.0% decline in home deliveries for both the three and sixnine months ended April 30, 2026, respectively, compared to the samemonth periods of the prior year,2026, partially offset by an increaseincreases in average sales price of 5.3%0.4% and 3.4%2.3%, for the three and six months ended April 30, 2026, respectively, compared to the same periods of the prior year.respectively.

● Gross margin dollars decreased 31.0%11.4% and 36.0%28.0% for the three and sixnine months ended AprilJuly 30,31, 2026, respectively, as compared towith the same periods ofin the prior year.year, primarily due to a reduction in delivery volume. Gross margin percentage decreasedwas to 10.2% for both the three11.8% and six months ended April 30, 2026 from 13.8% and 14.5%10.8% for the three and sixnine months ended AprilJuly 30,31, 2026, respectively, compared with 11.7% and 13.5% for the corresponding periods in 2025, respectively. Gross margin percentage, before cost of sales interest expense and land charges, decreased to 14.3%14.6% for the three months ended AprilJuly 30,31, 2026 from 17.3% in the prior year period and to 14.2% for the threenine months ended AprilJuly 30, 2025 and decreased to 13.9% for the six months ended April 30,31, 2026 from 17.8%17.6% forin the sixprior monthsyear ended April 30, 2025.period. The decreasedecreases in gross margin percentage waswere primarily due to increased use of incentives and concessions, including additional mortgage interest rate buydowns, to makeimprove our homes more affordable.affordability. In the current homebuilding environment, we remain focused on driving financial performance by increasing our sales pace versusrather than achieving a higher gross margin.

● Net domestic contracts increaseddecreased 1.0%4.6% and 2.0%0.1% for the three and sixnine months ended AprilJuly 30,31, 2026, respectively, compared towith the same periods ofin the prior year. The increasedecreases forwere theprimarily threedriven by more cautious buyer behavior resulting from affordability concerns and sixan monthsuncertain endedmacroeconomic is primarily due to our current strategy of using increased incentives to drive sales pace, although the incentives needed decreased this quarter from the first quarter of fiscal 2026.environment.

● Net domestic contracts per active selling community increased slightlydecreased to 11.3 and 21.29.4 for the three months ended July 31, 2026 compared to 9.8 for the same period in the prior year and sixwere relatively flat at 31.0 and 30.8 for the nine months ended AprilJuly 30,31, 2026, respectively, compared to 11.22026 and 20.82025, in the same periods of the prior year.respectively.

● Domestic contract backlog decreasedincreased from 1,7111,491 homes at AprilJuly 30,31, 2025 to 1,6131,509 homes at AprilJuly 30,31, 2026, and the dollar value of domestic contract backlog decreasedincreased to $938.4$881.9 million, a 5.0%5.1% decreaseincrease in dollar value compared to the prior year,year. asAlthough ourwe domesticremain backlogfocused conversion ratio has increased fromon the prior year period due to increased salessale of QMI homeshomes, thatthere werehas bothbeen solda andsubtle deliveredshift withintoward themore quarter.to-be-built home contracts, which in general have higher gross margins than QMI homes.

For the three months ended AprilJuly 30,31, 2026, sale of homes revenues decreased 7.1%11.7% compared to the same period inwith the prior year.year Theperiod. saleSale of homes revenue decreased primarily due to ana 11.8%12.0% decrease in homes delivered, partially offset by a 5.3%0.4% increase in the average sales price per home for the three months ended April 30, 2026 compared with the prior year period. The averageAverage price per home increased to $532,794$539,350 in the three months ended AprilJuly 30,31, 2026 from $506,081$537,421 in the three months ended AprilJuly 30,31, 2025. For the sixnine months ended AprilJuly 30,31, 2026, sale of homes revenues decreased 9.0%10.0% compared to the same period inwith the prior year.year Theperiod. saleSale of homes revenues decreased primarily due to a 12.1%12.0% decrease in homes delivered, partially offset by a 3.4%2.3% increase in theaverage averagesales price per home for the six months ended April 30, 2026 compared to the same period inwith the prior year.year Theperiod. averageAverage price per home increased to $528,413$532,357 in the sixnine months ended AprilJuly 30,31, 2026 from $510,921$520,473 in the sixnine months ended AprilJuly 30,31, 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.

Land sales and other revenues increased $25.2$0.1 million and $52.6$52.7 million for the three and sixnine months ended AprilJuly 30,31, 2026, respectively, compared towith the same periods in the prior year. Revenue associated with land sales can vary significantly due to the mix of land parcels sold. There were threezero and four land sales during the three and sixnine months ended AprilJuly 30,31, 2026, respectively, and two and threefive land sales in the three and sixnine months ended AprilJuly 30,31, 2025, respectively. Land sales revenues increaseddecreased $20.9$1.2 million and $48.8increased $47.6 million during the three and sixnine months ended AprilJuly 30,31, 2026, respectively, compared towith the same periods in the prior year.

We sell a variety of home types inacross variousour 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.fluctuate. Total homebuilding gross margin percentage decreasedwas to11.8% 10.2%and 10.8% for both the three and sixnine months ended AprilJuly 30,31, 2026, respectively, compared towith 13.8%11.7% and 14.5%13.5% for the prior year periods. Total homebuilding gross margin percentage, before cost of sales interest expense and land charges decreased to 14.3%14.6% and 13.9%14.2% for the three and sixnine months ended AprilJuly 30,31, 2026, respectively, compared tofrom 17.3% and 17.8%17.6% for the threecorresponding andperiods sixin months ended April 30, 2025, respectively.2025. The decreaseslight increase in gross margin percentage for the three andmonths sixended July 31, 2026 was primarily due to a modest increase in average price per home. The decrease for the nine months ended AprilJuly 30,31, 2026 was primarily due to increased use of incentives and concessions, including additional mortgage interest rate buydowns, to make our homes more affordable.

Inventory impairments and land option write-offs reflects certain inventories we have either written off or written down to their estimated fair value totaling $8.8$0.5 million and $3.1$16.0 million in expense for the three months ended AprilJuly 30,31, 2026 and 2025, respectively, and $11.1$11.6 million and $4.1$20.1 million during the sixnine months ended AprilJuly 30,31, 2026 and 2025, respectively. Inventory impairments amounted to $5.3 million during boththe nine months ended July 31, 2026 and $7.6 million and $8.8 million during the three and sixnine months ended AprilJuly 30,31, 20262025, andrespectively. $1.2No millioninventory impairments were recorded during both the three and six months ended AprilJuly 30,31, 2025.2026. The impairments recorded for fiscalthe nine months ended July 31, 2026 wererelated forto two communities in the Southeast segment and two communities in the West segment. The impairmentimpairments recorded for fiscalthe three and nine months ended July 31, 2025 wasrelated forto onetwo communitycommunities in the Northeast segment and three communities in the West segment. WeDuring the first nine months of both fiscal 2026 and 2025, we wrote-off residential land option, approval and engineering costs across each of our segments during the first half of both fiscal 2026 and 2025.segments.

Homebuilding selling, general and administrative (“SGA”) expenses increaseddecreased $5.9by $6.3 million to $57.0$49.5 million for the three months ended AprilJuly 30,31, 2026 and increasedby $2.0$4.3 million to $107.3$156.7 million for the sixnine months ended AprilJuly 30,31, 2026 compared towith the same periods in the prior year. The increasedecreases for the three and six months ended April 30, 2026 compared to the same periods in the prior year waswere primarily due to thea costreduction in construction defect reserves based on our annual third-party actuarial analysis of annual merit increases and a decrease in unconsolidated joint venture deliveries, where we receive a management fee on each delivery, which offsets our SGAclaims expenses incurred with respect to the applicable joint venture.history.

Net domestic contracts per active selling community were 9.4 and 31.0 for the three and sixnine months ended AprilJuly 30,31, 2026 were 11.3 and 21.2,2026, respectively, compared towith 11.29.8 and 20.830.8 for the same periods in the prior year,year. respectively. Our reported level of domesticDomestic sales contractscontracts, (net of cancellations)cancellations, continuescontinued to be largely driven by customer demand for our available QMI homes. This approach of offeringOffering a strong selection of QMI homes allowsenables customers to take advantage ofuse available incentives and purchase homes more quickly and affordably.

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 resultbecause of a buyer’s failure to qualify for a mortgage, which generally occurs during the first few weeks after signing. 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.

Domestic contract backlog dollars decreasedincreased 5.0%5.1% as of AprilJuly 30,31, 2026 compared towith AprilJuly 30,31, 2025, andwhile the number of homes in domestic backlog decreasedincreased 5.7%1.2%. forThese theincreases same period. The decrease in domestic contract backlog dollars and number of homes as of April 30, 2026 compared to April 30, 2025, was primarilywere driven by ana increasemodest decline in sales of QMI homeshome andsales, improvedoffset domesticby contracthigher backlogto-be-built conversion.home sales, which are generally more profitable.

Northeast - Homebuilding revenue decreased 2.0%19.6% for the three months ended AprilJuly 30,31, 2026 compared to the same period in the prior year. The decrease for the three months ended AprilJuly 30,31, 2026 was attributed to aan 14.2%11.7% decrease in homes delivered and aan 1.5%8.7% decrease in average sales price, partially offset by a $34.5 million increase in land sales and other revenue.price. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment for the three months ended AprilJuly 30,31, 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 AprilJuly 30,31, 2025, which werewe are no longer delivering in the second quarter of the current year.

Income before income taxes decreased $24.6$16.6 million to a loss of $11.3$30.7 million for the three months ended AprilJuly 30,31, 2026 as compared to the same period in the prior year. This iswas primarily due to the decrease in homebuilding revenue discussed above,above and a $3.6 million decrease in income from unconsolidated joint ventures, a $3.3 million increase in inventory impairments and land option write-offs and a significant decrease inwhile gross margin percentage.percentage was relatively flat. For a discussion of gross margin see “Homebuilding: Cost of Sales” above.

Homebuilding revenue decreased 11.3%8.5% for the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in the prior year. The decrease for the nine months ended July 31, 2026 was dueattributed to a 17.8%10.8% decrease in homes delivered and a $16.56.6% decrease in average sales price, partially offset by a $66.3 million decreaseincrease in land sales and other revenue,revenue. partiallyThe offset by a 10.7% increasedecrease in average sales price. The increase inthe 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 nine months ended July 31, 2026 compared to some communities delivering higher priced, larger single family homes and townhomes in higher-end submarkets of the segment for the sixnine months ended AprilJuly 30, 2026 compared to some communities delivering lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment for the six months ended April 30,31, 2025, which we are no longer delivering in the current year.

Income before income taxes decreasedincreased $45.1$2.4 million to a loss of $22.7$129.5 million for the sixnine months ended AprilJuly 30,31, 2026 as compared to the same period in the prior year. This iswas primarily due to the decrease$66.3 million increase in homebuildingland sales and other revenue discussed above, apartially $7.1offset million decrease in income from unconsolidated joint ventures,by a $3.1 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.

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 the sixnine months ended AprilJuly 30,31, 2026 and 2025, Federal Housing Administration and Veterans Administration (“FHA/VA”) loans represented 35.5%36.4% and 40.6%,41.0%, respectively, of our total loans. For the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in the prior year, our conforming conventional loan originations as a percentage of our total loans increased from 58.5%58.0% to 62.9%.62.1%. The origination of loans which exceed conforming conventions increased from 0.9%1.0% to 1.6%1.5% for the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in the prior year.

During the three and sixnine months ended AprilJuly 30,31, 2026 and 2025, financial services provided $10.0$9.7 million and $15.8$25.5 million of income before income taxes, respectively, compared to $8.4$13.9 million and $11.9$25.8 million for the same periods in the prior year. The increasedecrease in financial services income before income taxes for the three and sixnine months ended AprilJuly 30,31, 2026 compared to the same periods in the prior year was primarily due to ana increasedecrease in the basisvolume point spread between theof loans originated and the implied rate from our sale of the loans.closed. In the markets served by our wholly owned mortgage banking subsidiaries, 83.6%84.2% and 78.1%80.9% of our non-cash homebuyers obtained mortgages originated by these subsidiaries during the three months ended AprilJuly 30,31, 2026 and 2025, respectively, and 81.6%82.5% and 79.2%79.9% of our non-cash homebuyers obtained mortgages originated by these subsidiaries during the sixnine months ended AprilJuly 30,31, 2026 and 2025, respectively.

Corporate general and administrative expenses include costs related to operations at our headquarters in New Jersey.Jersey Theseand expensesNew includeYork, including 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 decreasedincreased to $27.0$37.4 million for the three months ended AprilJuly 30,31, 2026 comparedfrom to $29.5$35.0 million for the three months ended April 30, 2025 and decreased to $60.7 million for the six months ended April 30, 2026 compared to $62.2 million for the six months ended April 30, 2025. The decrease for the three months ended April 30, 2026 was primarily due to a decrease in bonus expense due to lower profitability. The decrease in the six months ended April 30, 2026 compared to the same period in the prior year wasperiod primarily dueand to lower$98.1 stockmillion compensation expense compared tofor the samenine periodmonths ended July 31, 2026 from $97.2 million in the prior year and.period. The increases were primarily due to higher compensation expense, driven mainly by increased headcount and annual merit increases, as well as higher depreciation expense related to completed software projects and certain leasehold improvements depreciated in the current fiscal year.

(Loss) Income from Unconsolidated Joint Ventures

Income from unconsolidated joint ventures consists ofrepresents our share of the earnings or losses offrom our unconsolidated jointthose ventures. Income from unconsolidated joint ventures decreased $10.1$12.1 million to a loss of $1.1$3.4 million for the three months ended AprilJuly 30,31, 20262026, and decreasedby $15.9$28.0 million to $2.3$5.7 million for the sixnine months ended AprilJuly 30,31, 20262026, compared towith the same periods in the prior year. The decreasedecreases waswere primarily due to lessfewer unconsolidated joint ventures communities open for salesale, unconsolidatedwhich jointresulted venture communities leading toin fewer deliveries. Additionally,In addition, several joint venture communities are currently in the early stages of development and are incurring typical start-up costs aheadbefore of firstinitial deliveries.

Other interest increased $3.3by $4.2 million to $12.5$11.4 million for the three months ended AprilJuly 30,31, 2026 compared to the same quarter of the prior year and increasedby $6.0$10.2 million to $24.6$36.0 million for the sixnine months ended AprilJuly 30,31, 20262026, compared towith the same periodperiods ofin the prior year. OtherThe interestincreases increasedwere primarily due to ana increasehigher innumber of communities in planning,planning alongand with higherincreased model lease financing activity during the period.periods.

For the three months ended AprilJuly 30,31, 2026 and 2025, we recorded income tax benefit of $0.6 million and income tax expense of $7.2 million, respectively. For the nine months ended July 31, 2026 and 2025, we recorded income tax expense of $0.9$8.2 million and $6.8$25.7 million, respectively. For the six months ended April 30, 2026 and 2025, we recordedThe income tax expense ofor $8.8benefit millionfor andeach $18.5 million, respectively. For both the three and six months ended April 30, 2026 and 2025, the expenseperiod was primarily duedriven toby federal and state tax expensetaxes on income (or loss) before income taxes and permanent differences, partially offset by home energy home credits. Federal tax expense isdid not paidresult in cash astax payments because it iswas offset by the use of our existing NOL carryforwards.

Our total liquidity at AprilJuly 30,31, 2026 was $442.0$379.8 million, including $310.9$249.1 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.

We spent $413.0$644.9 million on domestic land and land development during the first halfthree quarters of fiscal 2026. After land and land development spending and all other operating activities, including revenue received from deliveries, cash from operations was $73.8$49.8 million. During the first halfthree quarters of fiscal 2026, cash used in investing activities was $31.3$38.3 million, primarily due to a new joint venture entered into during the first halfthree quarters of fiscal 2026, along with spending on capitalized software, partially offset by net cash acquired through acquisitions. Cash used in financing activities was $10.8$39.1 million during the first halfthree quarters of fiscal 2026, primarily due to net payments for nonrecourse mortgage financings, net payments for model sale leaseback financings and land bank financings, treasury stock purchases and payments of preferred dividends, partially offset by net proceeds from our mortgage warehouse lines of credit and net proceeds from land banking financings.credit. 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.

Our cash uses during the sixnine months ended AprilJuly 30,31, 2026 and 2025 were for operating expenses, land purchases, land deposits, land development, construction spending, nonrecourse mortgage transactions, model sale leasebacks, 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, land banking transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.

Senior notes and credit facilities balances as of AprilJuly 30,31, 2026 and October 31, 2025, were as follows:

(1) At AprilJuly 30,31, 2026, 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 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.

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 AprilJuly 30,31, 2026 (collectively, the “Notes Guarantors”).

The credit agreement governing the Secured Credit Facility and the indentures governing the senior notes (together, the “Debt Instruments”) outstanding at AprilJuly 30,31, 20262026, 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,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 AprilJuly 30,31, 2026, we believe we were in compliance with the covenants of the Debt Instruments.

We had nonrecourse mortgage loans for certain communities totaling $32.7$32.4 million and $29.5 million, net of debt issuance costs, as of AprilJuly 30,31, 2026 and October 31, 2025, respectively, which are secured by the related real property, including any improvements, with an aggregate book value of $55.2$48.0 million and $113.9 million, respectively. The weighted-average interest rate on these obligations was 7.2% and 7.4% at AprilJuly 30,31, 2026 and October 31, 2025, respectively, and the mortgage loan payments primarily correspond to home deliveries.

Our wholly owned mortgage banking subsidiary, K. Hovnanian Mortgage, originates mortgage loans primarily from the sale of our homes. Such mortgage loans and related servicing rights are sold in the secondary mortgage market within a short period of time. K. Hovnanian Mortgage finances the origination of mortgage loans through various master repurchase agreements, which are recorded in "Financial services" liabilities on the Condensed Consolidated Balance Sheets. The loans are secured by the mortgages held for sale and are repaid when we sell the underlying mortgage loans to permanent investors. As of AprilJuly 30,31, 2026 and October 31, 2025, we had an aggregate of $101.6$101.7 million and $94.3 million, respectively, outstanding under several of K. Hovnanian Mortgage’s short-term borrowing facilities.