What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-12-22 compared with 2024-12-18 · 248 added, 209 removed, 435 unchanged (51% of the section changed)

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Hovnanian Enterprises, Inc.

(“HEI”) conducts all of

its homebuilding and financial services operations through its subsidiaries

(references herein to the “Company”, “we”, “us” or “our” refer to HEI and its

consolidated subsidiaries and should be understood to reflect the consolidated

business of HEI’s subsidiaries).

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

The following tables and related discussion set forth key operating and financial data for our homebuilding and financial services operations as of and for the fiscal years ended October 31, 2025 and 2024 .

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These values are an indicator of potential revenues;

Net contracts per average active selling community is used to indicate the pace at which homes are being sold (put into contract) in active selling communities and is calculated by dividing the number of net contracts in a period by the average number of active selling communities in the same period.

Net contracts per active selling community is used to indicate the pace at which homes are being sold (put into contract) in active selling communities and is calculated by dividing the number of net contracts in a period by the number of active selling communities in the same period.

Sales pace is an indicator of market strength and demand;

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The demand for new and existing homes is dependent on a variety of demographic and economic factors, including job and wage growth, household formation, consumer confidence, mortgage financing, interest rates, inflation and overall housing affordability.

From January 2022 to October 2023,

30-year mortgage rates more than doubled.

The sharp increase in interest rates,

persistently high levels of inflation and doubt about the stability of the

economy, negatively impacted housing demand beginning in the second half of

fiscal 2022 and into fiscal 2023 .

During the first quarter of fiscal 2024 , mortgage rates declined, which had a positive

effect on our sales pace.

Rates fluctuated for the remainder of

fiscal 2024 and affordability generally remains challenging for homebuyers.

have been 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 recent uncertain interest rate

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.

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.

From January 2022 to October 2023, 30-year mortgage rates more than doubled.

The sharp increase in interest rates, persistently high levels of inflation and doubt about the stability of the economy negatively impacted housing demand beginning in the second half of fiscal 2022 and into fiscal 2023 .

During the first quarter of fiscal 2024 , mortgage rates declined, which had a positive effect on our sales pace.

Rates fluctuated for the remainder of fiscal 2024 and throughout fiscal 2025 but still remain persistently high.

As a result, affordability generally remains challenging for homebuyers.

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

We continue to use our increased inventory of quick move-in homes ( “ QMI homes ” ) to help meet buyers’ needs for more affordable housing in the existing uncertain interest rate environment.

The time between contract signing and closing is shorter with a QMI home as compared to a to be built home, which provides customers with more certainty on their mortgage pricing.

The availability of QMI homes also allows us to offer mortgage interest rate buydown assistance, which is a tool we offer through our wholly-owned mortgage banking subsidiary ( “ K.

Hovnanian Mortgage ” ), to help ease the impact of higher monthly payments from rising interest rates.

We pay the cost of interest rate buydowns for customers that qualify through K.

Hovnanian Mortgage and decide to use the program.

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.

The number of existing home sales listings are at all-time low levels, which limits the supply of homes available for purchase, leading to increased demand for new homes, which leads to improved pricing power.

During fiscal 2024, there was stronger demand for our homes as compared to the prior year, which led to a significant increase in net contracts and net contracts per average active selling community .

We were able to increase net prices in approximately 34% of our communities during the fourth quarter of fiscal 2024.

There still remains a great degree of uncertainty due to inflation, the continued possibility of an economic recession, employment risk and the potential for further mortgage rate increases.

While we continue to experience some lingering supply chain issues, we remain focused on continuing to shorten our construction cycle times and building on our national initiatives to drive down costs with our material providers and trade partners.

The changing conditions in the housing market, and in the general economy, make it difficult to predict how strongly our business will be impacted by these external factors over fiscal 2025 and beyond.

The level of interest rate based incentives utilized differs across our markets and is one of several available options we use to drive sales and close homes.

Although the long-term fundamentals of

the new home market remain favorable, during fiscal 2025, volatility in

the broader economy and affordability constraints caused many consumers to

delay purchasing a new home.

As a result of this more difficult sales

environment, we experienced a decrease in net contracts compared to fiscal 2024.

Even as mortgage rates increased and we focused on increasing sales

pace versus price, we were still able to raise net prices in approximately 36 % of our communities during the fourth quarter of fiscal 2025 .

There remains a great degree of

uncertainty due to inflation, tariffs, the continued possibility of an economic

recession, employment risk and the potential for further mortgage rate

While we continue to experience certain supply chain issues, we remain

focused on continuing to shorten our construction cycle times and building on

our national initiatives to drive down costs with our material providers and

trade partners.

The changing conditions in the housing market, and in the

general economy, make it difficult to predict how strongly our business will

be impacted by these external factors over fiscal 2026 and

Our cash position allowed us to spend $ 859.4 million on land purchases and land development for long-term growth during fiscal 2025 and still have total liquidity of $ 404.1 million, including $ 272.8 million of homebuilding cash and cash equivalents and $ 125.0 million of borrowing capacity under our senior secured revolving credit facility as of October 31, 2025 .

In addition, our September 2025 issuance of $900.0

million in aggregate amount of senior unsecured notes to refinance all of our

senior secured notes and secured term loan facility contributed to our ongoing

efforts to manage and simplify the Company’s capital structure and strengthen

its financial position.

Additional information on our results for the year ended October 31, 2025 were as follows:

● For the year ended October 31, 2024 , sale of homes revenues increased 9.3 % as compared to the prior year, primarily due to a 9.6 % increase in homes delivered, partially offset by a 0.3 % decrease in average sales price.

● For the year ended October 31, 2025 , sale of homes revenues decreased 0.8 % as compared to the prior year, due to a 3.5% decrease in average sales prices, partially offset by a 2.8 % increase in homes delivered.

The increase in deliveries in fiscal 2025 was primarily the result of a 7.7 % increase in community count as well as an increase in QMI contracts.

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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 $ 7.6 million for the year ended October 31, 2025 as compared to the prior year, however, a s a percentage of total revenue, such costs were relatively flat at 11.7 % for the year ended October 31, 2025 compared to 11.4 % for the year ended October 31, 2024 .

The increase was primarily due to an increase in advertising expenses and compensation expense, mainly related to increased headcount and annual merit increases, along with grants of phantom stock awards under our 2019, 2023 and 2024 long-term incentive plans, for which expense is impacted by the change in our stock price each period.

increase in headcount is in preparation for growth in community count and

deliveries in fiscal 2025.

● Other interest decreased

to $ 30.8 million for the year ended October 31, 2024 from $54.1 million for the year ended October 31, 2023, primarily due to a reduction in principal of our senior notes as a

result of redemptions during fiscal 2023

and the first quarter of fiscal 2024 , and

the debt exchange executed in the third quarter of fiscal 2024.

● Income before income taxes increased to $ 317.1 million for the year ended October 31, 2024 from $ 256.0 million for the year ended October 31, 2023 .

Net income increased to $ 242.0 million for the year ended October 31, 2024 from $ 205.9 million for the year ended October 31, 2023 .

Net income for the years ended October 31, 2024 and 2023, included gains of $ 45.7 million and $19.1 million, respectively, from the consolidation of previously unconsolidated joint ventures.

Net income for the year ended October 31, 2023 included a $ 25.6 million loss on extinguishment of debt.

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

● Net contracts increased 11.6 % to 5,186 for the year ended October 31, 2024 , compared to 4,647 in the prior year, primarily driven by demand for new homes resulting from the low supply of existing homes for sale and overall growth in the broader economy.

The increase was primarily due to an increase in advertising expenses and compensation expense, mainly related to increased headcount and annual merit increases, as well as fees incurred on unused builder forward commitments.

The increase in headcount was in preparation for expected growth in community count and deliveries in fiscal 2025 and fiscal 2026.

● Other interest in creased to $ 35.4 million for the year ended October 31, 2025 from $ 30.8 million for the year ended October 31, 2024, primarily due to an increase in communities in planning, along with an increase in land banking and model lease financing interest, as our inventory not owned increased during fiscal 2025.

● Income before income taxes decreased to $ 86.1 million for the year ended October 31, 2025 from $ 317.1 million for the year ended October 31, 2024 .

Similarly, net income declined to $ 63.9 million for fiscal 2025, compared to $ 242.0 million in the previous fiscal year.

Several key factors contributed to these

Although both fiscal years

included gains resulting from the consolidation of previously unconsolidated

joint ventures, the gain in fiscal 2024 was $ 45.7 million whereas the gain

for fiscal 2025 was $ 18.9 million.

Additionally, the results for the year ended October 31, 2025 reflected

a loss on extinguishment of debt totaling $ 33.1 million.

In contrast, the year

ended October 31, 2024 included a gain on extinguishment of debt totaling $ 1.4

Net income was also negatively impacted by inventory impairments and

land option write-offs of $ 39.6 million and $ 11.6 million for the years ended

October 31, 2025 and 2024, respectively.

● Earnings per share, basic and diluted, decreased to $ 7.95 and $ 7.43 , respectively, for the year ended October 31, 2025 , compared to earnings per share, basic and diluted of $ 34.40 and $ 31.79 , respectively, for the year ended October 31, 2024 .

● Net contracts decreased 3.1 % to 5,023 for the year ended October 31, 2025 , compared to 5,186 in the prior year.

Included in the year ended October 31, 2025 and 2024 , respectively, were 44 and 276 build-for-rent contracts.

Net contracts, including domestic unconsolidated

joint ventures, increased 16.1 % to 6,007 for the year ended October 31, 2024, from

5,172 in fiscal 2023.

● Net contracts per average active selling community increased to 43.6 for the year ended October 31, 2024 compared to 40.8 in the prior year.

The increase was due to the increase in net contracts discussed above.

● Active selling communities increased to 130 at October 31, 2024 compared to 113 at October 31, 2023 , and our total lots controlled increased to 41,891 at October 31, 2024 compared to 31,726 at October 31, 2023 .

● Net contracts per active selling community decreased to 35.9 for the year ended October 31, 2025 compared to 39.9 in the prior year.

The decrease was due to the decrease in net contracts from October 31, 2024 to October 31, 2025.

● Active selling communities increased to 140 at October 31, 2025 compared to 130 at October 31, 2024 , while our total lots controlled decreased to 35,883 at October 31, 2025 compared to 41,891 at October 31, 2024 .

This reduction in the number of total lots controlled was primarily the result of our decision to walk away from certain lower

These lots had been originally underwritten prior to the escalation

of sales incentives that are necessary in the current market environment in order to make home purchases more affordable.

We expect our community count will continue to grow in fiscal 2026 .

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

● Contract backlog decreased from 1,649 homes at October 31, 2024 to 1,242 homes at October 31, 2025 , and the dollar value of contract backlog decreased to $ 726.5 million, a 22.4 % decrease in dollar value compared to the prior year.

Our backlog conversion ratio has increased from the prior year due to our focus on having more QMI homes available to sell and deliver.

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Sale of Homes

Sale of homes revenues increased $ 245.0 million, or 9.3 %, for the year ended October 31, 2024 , compared to the prior year.

The increased revenues in fiscal 2024 were primarily due to a 9.6 % increase in homes delivered, partially offset by the average sales price per home decreasing slightly to $ 537,675 in fiscal 2024 from $ 539,249 in fiscal 2023 .

Sale of homes revenues decreased $ 22.6 million, or 0.8 %, for the year ended October 31, 2025 , compared to the prior year.

The slight decrease in revenues in fiscal 2025 was primarily due to the average sales price per home decreasing 3.5 % in fiscal 2025 from fiscal 2024 , partially offset by a 2.8 % increase in homes delivered.

The increase in deliveries in fiscal 2025 was primarily the result of community count increasing, along with an increase in our backlog conversion ratio.

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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.

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Land sales and other revenues decreased $ 24.7 million for the year ended October 31, 2025 , compared to the prior year.

Other revenues include interest income, which decreased as a result of lower rates on cash and cash equivalent accounts beginning in the first quarter of fiscal 2024 compared to the prior year.

Revenue associated with land sales can vary significantly due to the mix of land parcels sold.

There were six land sales during the year ended October 31, 2024 , compared to four in the prior year.

There were five land sales during the year ended October 31, 2025 , compared to six in the prior year.

Other revenues include interest income, which decreased as a result of lower rates on cash and cash equivalent account balances beginning in the first quarter of fiscal 2025 compared to the prior year.

Homebuilding:

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Land and lot sales gross margin, including interest

Land sales are ancillary to our homebuilding operations and are expected to continue in the future but may fluctuate significantly.

Homebuilding:

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Such write-offs occurred across each of our segments in fiscal 2025 and 2024 .

Inventory impairments were $ 10.0 million in the aggregate for the year ended October 31, 2024 for two communities in our Northeast segment and two communities in our West segment.

We did not record any inventory impairments for the year ended October 31, 2023.

It is difficult to predict future impairments, but if conditions in the overall housing industry or a specific geographic market worsen in the future beyond our current expectations, there are future changes in our business strategy that significantly affect the key assumptions used in our projections of future cash flows, and/or there are material changes in any other items we consider in assessing recoverability, we may need to recognize additional inventory impairments and any such charges could be material.

Inventory impairments were $ 21.4 million in the aggregate for the year ended October 31, 2025 for six communities in our Northeast segment, one community in our Southeast segment and five communities in our West segment.

For the year ended October 31, 2024, inventory impairments were $ 10.0 million in the aggregate for two communities in our Northeast segment and two communities in our West segment.

It is difficult to predict future impairments, but if conditions in the overall housing industry or a specific geographic market worsen in the future, there are future changes in our business strategy that significantly affect the key assumptions used in our projections of future cash flows, and/or there are material changes in any other items we consider in assessing recoverability, we may need to recognize additional inventory impairments and any such charges could be material.

In fiscal 2025 , we walked away from 32.9 % of all the lots we controlled under option contracts.

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Selling, General and Administrative

Homebuilding selling, general and administrative (“SGA”) expenses remained nearly flat with a $ 0.9 million increase to $ 202.5 million for the year ended October 31, 2024 , compared to the prior fiscal year.

Homebuilding selling, general and administrative (“SGA”) expenses increased $ 9.9 million to $ 212.4 million for the year ended October 31, 2025 , compared to the prior fiscal year.

The increase is primarily due to an increase in selling overhead from higher advertising costs and an increase in total compensation expense as a result of an increase in headcount from opening more communities along with the cost associated with annual merit increases, as well as fees incurred on unused builder forward commitments we began offering in the second half of fiscal 2022 to lower mortgage rates for our customers.

Homebuilding:

Key Performance Indicators

Net Contracts Per Average Active Selling Community

Net contracts per average active selling community in fiscal 2024 were 43.6 compared to 40.8 in fiscal 2023 , a 6.9 % increase in sales pace per community.

Our reported level of sales contracts (net of cancellations) was impacted by an increase in our active selling communities and an increase in customer demand partially due to the increased availability of QMI homes.

Net Contracts Per Active Selling Community

Net contracts per active selling community in fiscal 2025 were 35.9 compared to 39.9 in fiscal 2024 , a 10.0% decrease in sales pace per community.

Our reported level of sales contracts (net of cancellations) was impacted by uneven demand caused by overall market uncertainty along with affordability constraints and high interest rates.

Contract Cancellation Rates

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(Dollars in thousands)

( 1 )( 2 )(3)

Total contract backlog

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Number of homes

Reflects the reclassification

of 86 homes and $ 70.1 million of contract backlog and 13 homes and $ 10.6

million of contract backlog as of April 30, 2024 from the consolidated

Northeast and Southeast segments, respectively, to unconsolidated joint

This is related to the assets and liabilities contributed to a joint

venture the Company entered into during the three months ended April 30, 2024.

Reflects the reclassification of 88 homes and $ 74.2 million of contract backlog as of July 31, 2024 from an unconsolidated joint venture to the consolidated Northeast segment.

This is related to the assets and liabilities acquired from a joint venture the Company closed out during the three months ended July 31, 2024.

Reflects the reclassification of 38 homes and $ 32.3 million of contract backlog as of April 30, 2023 from an unconsolidated joint venture to the consolidated Northeast segment.

This is related to the assets and liabilities acquired from a joint venture the Company closed out during the three months ended April 30, 2023.

Reflects the reclassification of 90 homes and $ 73.7 million, 59 homes and $ 33.0 million, and 12 homes and $ 5.7 million of contract backlog from the consolidated Northeast, Southeast and West segments, respectively, to an unconsolidated joint venture as of July 31, 2023.

This is related to the assets and liabilities contributed to a joint venture by the Company during the three months ended July 31, 2023.

Reflects the reclassification of 22 homes and $ 14.4 million of contract backlog and 46 homes and $ 30.7 million of contract backlog as of October 31, 2025 from unconsolidated joint ventures to the consolidated Northeast and Southeast segments, respectively.

This is related to the consolidation of the remaining assets and liabilities from an unconsolidated joint venture the Company closed out and two active selling communities from another unconsolidated joint venture that were consolidated during the three months ended October 31, 2025.

Reflects the reclassification of eight consolidated homes and $ 5.0 million of contract backlog as of January 31, 2025 from the West segment to an unconsolidated joint venture.

This is related to the assets and liabilities contributed to the joint venture the Company entered into during the three months ended January 31, 2025.

Contract backlog dollars decreased 22.4 % as of October 31, 2025 compared to October 31, 2024 , and the number of homes in backlog decreased 24.7 % for the same period.

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Homebuilding Results by Segment

Northeast – Homebuilding revenues increased

6.9 % in fiscal 2024 compared to fiscal 2023 , primarily due to a 1.7 % increase in homes delivered and a 6.1%

increase in average sales price.

The increase in average sales price was

the result of new communities delivering higher priced, larger single family

homes and condominiums in higher-end submarkets of the segment in fiscal 2024

compared to some communities delivering lower priced, smaller single family

homes and townhomes in lower-end submarkets of the segment in fiscal 2023,

which were no longer delivering in the current year.

Income before income

taxes increased $ 12.0 million to $ 190.5 million in fiscal 2024 compared to fiscal 2023 , primarily due to the increase in homebuilding

revenue discussed above and a $ 1.1 million

decrease in SGA, while gross margin percentage remained relatively flat.

Southeast – Homebuilding revenues increased

6.8 % in fiscal 2024 compared to fiscal 2023 , primarily due to a 13.1 % increase in homes delivered, partially

offset by a 5.7 %

decrease in average sales price.

The decrease in average sales price was the

result of new communities delivering lower priced, smaller single family homes, townhomes and build-for-rent homes in lower-end submarkets of the segment in fiscal 2024 compared to

some communities in fiscal 2023 that had higher priced, larger single family

homes and townhomes in mid to higher-end submarkets, which were no longer

delivering in the current year.

Income before income taxes remained relatively flat, with a

$ 0.1 million decrease to $ 77.6 million in

fiscal 2024 compared to fiscal 2023 .

There was a slight decrease in gross margin

percentage in fiscal 2024 compared to

West – Homebuilding revenues increased

10.9 % in fiscal 2024 compared to fiscal 2023 , primarily due to a 13.7 %

increase in homes delivered, partially offset by a 2.2 %

decrease in average sales price.

The decrease in average sales price was mainly

the result of new communities delivering lower priced, smaller single family

homes in lower-end submarkets of the segment in fiscal 2024 compared to some

communities in fiscal 2023 that had higher priced, larger single family homes

and condominiums in mid to higher-end submarkets, which were no longer

delivering in the current year.

Income before income taxes increased $ 9.2

million to $ 123.2

million in fiscal 2024 compared to fiscal 2023 , primarily due to the increase in

homebuilding revenue discussed above and a $5.7 million increase in income from

unconsolidated joint ventures, while gross

margin percentage remained relatively flat.

revenues increased 11.2% in fiscal 2025 compared to fiscal 2024, primarily

due to a 19.6 % increase in homes delivered,

partially offset by a 4.8% decrease in average sales price.

in average sales price was the result of new communities delivering lower

priced, smaller single family homes, townhomes and affordable-housing homes in fiscal 2025 compared to some

communities delivering higher priced, larger single family homes and townhomes

in higher-end submarkets of the segment in fiscal 2024, which were no longer

delivered in fiscal 2025.

Income before income taxes decreased $25.5 million

to $ 165.5 million in fiscal

2025 compared to fiscal 2024, primarily due to a $23.6 million decrease in land sales

and other revenue, an $11.5 million increase in inventory impairments and land

option write-offs and a decrease in gross margin percentage.

For a discussion of gross margin, see

“Homebuilding:

Cost of Sales” above.

Southeast – Homebuilding revenues decreased 22.0% in fiscal

2025 compared to fiscal 2024, primarily due to a 19.8 %

decrease in homes delivered and a 2.7% decrease in average sales price.

decrease in average sales price was the result of new communities delivering

lower priced, smaller single family homes in lower-end submarkets of the

segment in fiscal 2025 compared to some communities in fiscal 2024 that had

higher priced, larger single family homes and townhomes in higher-end

submarkets, which were no longer delivered in fiscal 2025.

Income before income taxes decreased $62.2 million

to $ 15.5 million in fiscal

2025 compared to fiscal 2024, primarily due to the decrease in

homebuilding revenue discussed above, a $4.8 million increase in inventory

impairments and land option write-offs and a decrease in gross

margin percentage.

For a discussion of gross margin, see

“Homebuilding:

Cost of Sales” above.

West – Homebuilding revenues decreased 4.2% in fiscal

2025 compared to fiscal 2024 due a 4.5% decrease in average

sales price, while the numbers of homes delivered remained flat.

in average sales price was mainly the result of new communities delivering

lower priced, smaller single family homes in lower-end and higher-end submarkets

of the segment in fiscal 2025 compared to some communities in fiscal 2024 that

had higher priced, larger single family homes in higher-end submarkets, which

were no longer delivered in fiscal 2025.

Income before income taxes decreased $111.6 million to

$ 15.1 million in fiscal

2025 compared to fiscal 2024, primarily due to the decrease in

homebuilding revenue discussed above, an $11.7 million increase in inventory

impairments and land option write-offs, a $12.4 million increase in SGA expenses and a decrease in gross margin percentage.

For a discussion of gross margin, see

“Homebuilding:

Cost of Sales” above.

Financial Services

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During the years ended October 31, 2025 and 2024 , financial services provided $39.0 million and $ 24.1 million of income before income taxes, respectively.

In fiscal 2024 , financial services income before income taxes increased $ 4.7 million from the prior year primarily due to an increase in the volume of loans closed and an increase in the average size of the loans settled.

In fiscal 2025 , financial services income before income taxes increased from the prior year primarily due to an increase in the volume of loans closed and an increase in the basis point spread between the loans originated and the implied rate from our sale of the loans.

In the markets served by our wholly owned mortgage banking subsidiaries, 80.0 % and 79.4 % of our noncash home buyers obtained mortgages originated by these subsidiaries during the years ended October 31, 2025 and 2024 , respectively.

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Corporate general and administrative expenses include payroll, stock compensation, facility costs and rent and other costs associated with our executive offices, legal expenses, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, national and digital marketing, construction services and administration of insurance, quality and safety.

Corporate general and administrative expenses increased $ 36.5 million for the year ended October 31, 2024 compared to the year ended October 31, 2023 , primarily due to an increase in compensation expense, mainly related to increased headcount and annual merit increases and increased expense related to grants of phantom stock awards under our 2019, 2023 and 2024 long-term incentive plans, for which expense is impacted by the change in our stock price each period.

In addition, since the 2024 long-term incentive plan was new in the current year this resulted in incremental stock compensation expense when compared to the prior year.

Corporate general and administrative expenses decreased $2.3 million for the year ended October 31, 2025 compared to the year ended October 31, 2024 , primarily due to lower stock compensation expense, along with a decrease in bonus expense due to lower profitability.

In addition, we recorded a benefit in fiscal 2025 related to our 2024 and 2023 long-term incentive plan phantom stock awards, as a result of a decrease in our stock price during fiscal 2025.

Other Interest

Other interest decreased $ 23.3 million to $ 30.8 million for the year ended October 31, 2024 compared to the year ended October 31, 2023 .

Our assets that qualify for interest capitalization (inventory under development) exceeded our debt during the third quarter of fiscal 2024, therefore, all of the related interest incurred during fiscal 2024 qualified for interest capitalization instead of being directly expensed.

Also contributing to the decrease in Other interest was the reduction in principal of our senior notes as a result of redemptions during fiscal 2023 and the first quarter of fiscal 2024, and the debt exchange executed in the third quarter of fiscal 2024.

Gain (Loss) on Extinguishment of Debt, Net

Other interest increased $ 4.7 million to $ 35.4 million for the year ended October 31, 2025 compared to the year ended October 31, 2024 .

The increase in Other interest was primarily due to an increase in communities in planning, along with additional inventory financing resulting from an increase in average land banking and model lease financing interest, as our inventory not owned increased during fiscal 2025.

(Loss) Gain on Extinguishment of Debt, Net

On April 30, 2025 , K.

Hovnanian Enterprises, Inc.

Hovnanian ” ) redeemed the remaining $ 26.6 million aggregate principal amount of its 13.5 % Senior Notes due 2026 for a redemption price of $ 27.5 million, which included accrued and unpaid interest.

This redemption resulted in a gain on extinguishment of debt of $ 0.4 million for the fiscal year ended October 31, 2025, including the write-off of unamortized premiums, debt issuance costs and fees.

The gain from the redemption is included in the Consolidated Statement of Operations as "(Loss) gain on extinguishment of debt, net".

On September 25, 2025 , K.

Hovnanian completed a private placement of $ 450.0 million aggregate principal amount of 8.0 % Senior Notes due 2031 (the “ 2031 Notes”) and $ 450.0 million aggregate principal amount of 8.375 % Senior Notes due 2033 (the “ 2033 Notes” and, together with the 2031 Notes, the “Notes”).

The Notes are guaranteed by the Company and substantially all of its subsidiaries, other than K.

Hovnanian, its home mortgage subsidiaries, certain of its title insurance subsidiaries, joint ventures and subsidiaries holding interests in joint ventures.

Hovnanian used the net proceeds from the Notes issuance, together with cash on hand, to (i) fund the redemption on September 25, 2025 of the entire outstanding principal amount of its 11.75 % Senior Secured 1.25 Lien Notes due 2029 at a redemption price equal to 100.0 % of the principal amount thereof plus the applicable “make-whole” premium, plus accrued and unpaid interest to, but excluding, the redemption date, (ii) fund the redemption of the entire outstanding principal amount of its 8.0% Senior Secured 1.125 Lien Notes due 2028 at a redemption price equal to 104.0 % of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the redemption date of September 30, 2025 and (iii) repay in full all outstanding loans under its Senior Secured 1.75 Lien Term Loan Facility due 2028 at par plus accrued and unpaid interest to, but excluding, the prepayment date.

In addition, on September 25, 2025 , the amendments to the Fourth Amendment to the Credit Agreement, dated as of September 10, 2025, to the Credit Agreement dated as of October 31, 2019 (as amended by the First Amendment to the Credit Agreement, dated as of November 27, 2019, the Second Amendment to the Credit Agreement, dated as of August 19, 2022 and the Third Amendment to the Credit Agreement, dated as of September 25, 2023), by and among K.

Hovnanian, the Company, the other guarantors party thereto, Wilmington Trust, National Association, as administrative agent, and the lenders party thereto, which provides for up to $ 125.0 million in aggregate amount of senior secured first lien revolving loans became effective.

These transactions resulted in a loss on extinguishment of debt of $ 33.5 million for the fiscal year ended October 31, 2025, including the write off of unamortized premiums, debt issuance costs and fees.

On November 15, 2023 , we redeemed in full all of the $ 113.5 million aggregate principal amount of our 10.0 % Senior Secured 1.75 Lien Notes due 2025 for a redemption price of $ 119.2 million, which included accrued and unpaid interest.

This redemption resulted in a gain on extinguishment of debt of $ 1.4 million, including the write-off of unamortized premiums, debt issuance costs and fees.

On May 30, 2023, we redeemed $ 100.0 million aggregate principal amount of our 7.75 % Senior Secured 1.125 Lien Notes due 2026 (the “ Existing 1.125 Lien Notes ” ).

The aggregate purchase price for this redemption was $ 104.2 million, which included accrued and unpaid interest and was funded with cash on hand.

This redemption resulted in a loss on extinguishment of debt of $ 4.1 million, including the write-off of unamortized debt issuance costs and fees.

On August 29, 2023, we redeemed an additional $ 100.0 million aggregate principal amount of our Existing 1.125 Lien Notes.

The aggregate purchase price for this redemption was $ 102.2 million, which included accrued and unpaid interest and was funded with cash on hand.

This redemption resulted in a loss on extinguishment of debt of $ 3.8 million, including the write-off of unamortized debt issuance costs and fees.

On September 7, 2023, we repurchased in the open market $ 45.0 million aggregate principal amount of our 10.0 % Senior Secured 1.75 Lien Notes due 2025 .

The aggregate purchase price for this repurchase was $ 46.7 million, which included accrued and unpaid interest and which was funded with cash on hand.

This repurchase resulted in a gain on extinguishment of debt of $ 0.2 million, including the write-off of unamortized debt issuance costs and fees.

On October 5, 2023, we issued new 8.0 % Senior Secured 1.125 Lien Notes due 2028 (the “ New 1.125 Lien Notes ” ) and new 11.75 % Senior Secured 1.25 Lien Notes due 2029 (the “ New 1.25 Lien Notes ” ) and redeemed with the proceeds from the issuances of the New 1.125 Lien Notes and New 1.25 Lien Notes all of the remaining (i) $ 50.0 million aggregate principal amount of our Existing 1.125 Lien Notes for a redemption price of $ 51.5 million, which included accrued and unpaid interest, (ii) $ 282.3 million aggregate principal amount of our 10.5 % Senior Secured 1.25 Lien Notes due 2026 for a redemption price of $ 293.9 million, which included accrued and unpaid interest, and (iii) $ 162.3 million aggregate principal amount of our 11.25 % Senior Secured 1.5 Lien Notes due 2026 for a redemption price of $ 164.8 million, which included accrued and unpaid interest.

These redemptions resulted in a loss on extinguishment of debt of $ 17.9 million, including the write-off of unamortized debt issuance costs and fees.

Income from Unconsolidated Joint Ventures

Income from unconsolidated joint ventures consists of our share of the earnings or losses of our joint ventures.

Income from unconsolidated joint ventures increased to $ 52.3 million for the year ended October 31, 2024 from income of $ 43.2 million for the year ended October 31, 2023 .

The increase of $ 9.1 million in fiscal 2024 was primarily due to the recognition of additional income from two of our 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 venture’s income than it had in the prior year.

Income tax expense of $ 75.1 million and $ 50.1 million for the years ended October 31, 2024 and 2023 , respectively, was primarily driven by federal and state tax expense on income before income taxes and non-deductible executive compensation expense , partially offset by the generation of energy efficient home tax credits.

Income tax expense for fiscal years 2024 and 2023 also reflected the favorable impact of releasing state valuation allowances.

The federal tax expense is not paid in cash as it is offset by the use of our existing net operating loss (“NOL”) carryforwards.

Income from unconsolidated joint ventures consists of our share of the income or loss from our joint ventures.

Income from unconsolidated joint ventures decreased to $ 46.4 million for the year ended October 31, 2025 from $ 52.3 million for the year ended October 31, 2024 .

The decrease of $ 5.8 million in fiscal 2025 was primarily due to the recognition of losses from two unconsolidated joint ventures in which one started delivering homes during the second quarter of fiscal 2025 and the other is not yet delivering homes.

In addition, we recognized income during the first nine months of the prior year from a joint venture that was subsequently consolidated prior to the end of fiscal 2024.

Income tax expense decreased to $ 22.2 million for the year ended October 31, 2025 from $75.1 million for the year ended October 31, 2024 .

These amounts were primarily attributable to federal and state taxes on

income before taxes and non-deductible executive compensation, along with less state net operating losses (“NOL”) available to utilize , partially offset by energy efficient home

In fiscal 2025 , income tax expense was further reduced by the

benefit of our debt extinguishment.

Income tax expense for fiscal year 2024 includes the favorable impact of releasing state valuation allowances.

Currently, federal tax expense is not paid in cash as it is offset by the use of our existing NOL carryforwards.

Deferred federal and state income tax assets ( “ DTAs ” ) primarily represent the deferred tax benefits arising from NOL carryforwards and temporary differences between book and tax income which will be recognized in subsequent years as an offset against future taxable income.

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Operating leases

Represents our senior secured and unsecured term loan credit facilities, senior secured and senior notes and other notes payable and $ 399.3 million of related interest payments for the life of such debt.

Re p r esen ts our senior notes and $511.1 million of related interest payments for the life of such debt

(assuming in each case that

such debt is not redeemed or otherwise repaid prior to the stated maturity

Does not include $29.5 million of nonrecourse mortgages secured by inventory.

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During fiscal 2025 , cash used in investing activities was $ 66.0 million, primarily due to a new joint venture entered into during the period, along with spending on capitalized software, partially offset by distributions of capital from existing unconsolidated joint ventures.

Cash used in financing activities was $187.9 million during fiscal 2024 , which was primarily due to a $ 113.5 million redemption of our senior secured notes, net payments of $ 31.5 million related to the May 2024 debt exchange, net payments for nonrecourse mortgage financings, treasury stock purchases and payments of preferred dividends, partially offset by net proceeds from our mortgage warehouse lines of credit, land banking financings and model sale leaseback financings.

Cash used in financing activities was $ 70.4 million during fiscal 2025 , which was primarily due to a $ 26.6 million redemption of our senior secured notes, net payments related to the September 2025 debt transaction and related deferred financing costs, net payments for nonrecourse mortgage financings, treasury stock purchases, payments of preferred dividends and net payments under our mortgage warehouse lines of credit, partially offset by net proceeds from land banking financings and model sale leaseback financings.

We intend to continue to use nonrecourse mortgages, model sale leasebacks, joint ventures, and, subject to covenant restrictions in our debt instruments, land banking programs as our business needs dictate.

Our cash uses during the years ended October 31, 2025 and 2024 were for operating expenses, land purchases, land deposits, land development, construction spending, debt payments, model sale leasebacks, land banking transactions, state income taxes, interest payments, preferred dividend payments, financing transaction costs, debt and equity repurchases, litigation matters and investments in unconsolidated joint ventures.

During these periods, we provided for our cash requirements from available cash on hand, housing and land sales, financing transactions, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.

During these periods, we provided for our cash requirements from available cash on hand, home and land sales, financing transactions, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.

Our net income historically does not approximate cash flow from operating activities.

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Senior Secured Notes:

10.0 % Senior Secured 1.75 Lien Notes due November 15, 2025 ( 1 )

8.0 % Senior Secured 1.125 Lien Notes due September 30, 2028 ( 1 )

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13.5 % Senior Notes due February 1, 2026 ( 2 )

8.0 % Senior Notes due April 1, 2031 ( 1 )

8.375 % Senior Notes due October 1, 2033 ( 1 )

5.0 % Senior Notes due February 1, 2040

Total Senior Notes

Senior Unsecured Term Loan Credit Facility due February 1, 2027 ( 2 )

Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028 ( 1 )

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Total senior notes and credit facilities, net of discounts, premiums and unamortized debt issuance costs

( 1 ) On November 15, 2023, K.

Hovnanian redeemed all of its $ 113.5 million aggregate principal amount of 10.0 % Senior Secured 1.75 Lien Notes due November 15, 2025.

( 2 ) On May 21, 2024, K.

Hovnanian exchanged $64.0 million aggregate principal amount of 13.5% Senior Notes due February 1, 2026 and cash, $65.2 million aggregate principal amount of 5.0% Senior Notes due February 1, 2040 and all of its $39.6 million aggregate principal amount of loans under the Senior Unsecured Term Loan Credit Facility due February 1, 2027 and cash for an additional $93.5 million aggregate principal amount of loans under the Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028.

( 1 ) On September 25, 2025, K.

Hovnanian completed a private placement of $ 450.0 million aggregate principal amount of 8.0 % Senior Notes due April 1, 2031 and $ 450.0 million aggregate principal amount of 8.375 % Senior Notes due October 1, 2033.

Hovnanian used the net proceeds from the notes issuance, together with cash on hand, to fund (i) the redemption of all of its $ 430.0 million aggregate principal amount of 11.75 % Senior Secured 1.25 Lien Notes due September 30, 2029 and all of its $ 225.0 million aggregate principal amount of 8.0 % Senior Secured 1.125 Lien Notes due September 30, 2028, and (ii) the payoff in full of its $ 175.0 million Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028.

( 2 ) On April 30, 2025 K.

Hovnanian redeemed the remaining $ 26.6 million aggregate principal amount of its 13.5 % Senior Notes due 2026 for a redemption price of $ 27.5 million, which included accrued and unpaid interest.

( 3 ) At October 31, 2025, provides for up to $ 125.0 million in aggregate amount of senior secured first lien revolving loans.

The revolving loans 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 %.

The revolving loans under the revolving credit facility have a maturity of June 30, 2028 and borrowings bear interest, at K.

Hovnanian’s option, at either (i) a term SOFR (subject to a floor of 3.00 %) plus an applicable margin of 4.50 % or (ii) an alternate base rate (subject to a floor of 3.00 %) plus an applicable margin of 3.50 %.

In addition, K.

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Except for K.

Hovnanian, the issuer of the notes and borrower under the credit agreements governing our term loans and revolving credit facilities (collectively, the “ Credit Facilities ” ), our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, we and each of our subsidiaries are guarantors of the Credit Facilities, the senior secured notes and senior notes outstanding at October 31, 2024 (collectively, the “Notes Guarantors”).

The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together with the Credit Facilities, the “Debt Instruments”) outstanding at October 31, 2024 do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K.

Hovnanian, to incur (including through exchanges or certain other types of transactions) indebtedness, pay dividends and make distributions on common and preferred stock, repay/repurchase certain indebtedness prior to its respective stated maturity, repurchase common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates.

The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans (the “ Secured Term Loans ” ) made under the Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028, and loans (the “ Secured Revolving Loans ” ) made under the Senior Secured Revolving Credit Agreement due June 30, 2026, or notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the Secured Term Loans, Secured Revolving Loans or notes or other material indebtedness, cross default to other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency, with respect to the Secured Term Loans and Secured Revolving Loans, material

inaccuracy of representations and warranties and with respect to the Secured

Term Loans and Secured Revolving Loans, a change of control, and, with respect to the Secured Term Loans, Secured Revolving Loans and senior secured notes, the failure of the documents granting security for the obligations under the secured Debt Instruments to be in full force and effect, and the failure of the liens on any material portion of the collateral securing the obligations under the secured Debt Instruments to be valid and perfected.

Hovnanian, the issuer of the notes and borrower under the credit agreement governing our secured revolving credit facility (the "Secured Credit Facility"), our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, we and each of our subsidiaries are guarantors of the Secured Credit Facility and senior notes outstanding at October 31, 2025 (collectively, the “Notes Guarantors”).

The credit agreement governing the Secured Credit Facility and the indentures governing the senior notes (together, the “Debt Instruments”) outstanding at October 31, 2025 do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K.

Hovnanian, to incur (including through exchanges or certain other types of transactions) indebtedness, pay dividends, including on our preferred stock, and make distributions on common and preferred stock, repay/repurchase certain indebtedness prior to its respective stated maturity, repurchase common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates.

The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans under the Secured Credit Facility (the “Secured Revolving Loans”) made under the Credit Agreement, dated as of October 31, 2019 , as amended, by and among K.

Hovnanian, the Company, the other guarantors party thereto, Wilmington Trust, National Association, as administrative agent, and the lenders party thereto (the “Secured Credit Agreement”) or notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the Secured Revolving Loans or notes or other material indebtedness, cross default to other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency and, with respect to the Secured Revolving Loans, material inaccuracy of representations and warranties, a change of control, the failure of the documents granting security for the obligations under the Secured Credit Agreement to be in full force and effect, and the failure of the liens on any material portion of the collateral securing the obligations under the Secured Credit Agreement to be valid and perfected.

As of October 31, 2025 , we believe we were in compliance with the covenants of the Debt Instruments.

If our consolidated fixed charge coverage ratio is less than 2.0 to 1.0 , as defined in the applicable Debt Instrument, we are restricted from making certain payments and dividends (in the case of certain of such payments, our secured debt leverage ratio must also be less than 4.0 to 1.0 ), and from incurring indebtedness other than certain permitted indebtedness and nonrecourse indebtedness.

Beginning as of October 31, 2021, as a result of our improved operating results, we were no longer restricted from paying dividends.

As such, we have made dividend payments of $ 2.7 million to preferred shareholders in every quarter since the first quarter of fiscal 2022 .

We currently believe our ratios will permit us to continue to make dividend payments on our preferred stock.

However, with general economic uncertainty, it is difficult to predict long-term market conditions and the effects on our business and if and when we may be restricted under our Debt Instruments from continuing to pay dividends on our Series A preferred stock.

Dividends on the Series A preferred stock are not cumulative and, accordingly, if for any reason we do not declare a dividend on the Series A preferred stock for a quarterly dividend period (regardless of our availability of funds), holders of the Series A Preferred Stock will have no right to receive a dividend for that period, and we will have no obligation to pay a dividend for that period.

Under the terms of our Debt Instruments, we have the right to make certain redemptions and prepayments and, depending on market conditions, our strategic priorities and covenant restrictions, may do so from time to time.

We also continue to actively analyze and evaluate our capital structure and explore transactions to simplify our capital structure and to strengthen our balance sheet, including those that reduce leverage, interest rates and/or extend maturities, and will seek to do so with the right opportunity.

We will also continue to analyze and evaluate our capital structure and explore transactions to strengthen our balance sheet, including those that reduce leverage, interest rates and/or extend maturities, and will seek to do so with the right opportunity.

We may also continue to make debt or equity purchases and/or exchanges from time to time through tender offers, exchange offers, redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.

Any liquidity-enhancing or other capital raising or refinancing transaction will depend on identifying counterparties, negotiation of documentation and applicable closing conditions and any required approvals.

Due to covenant restrictions in our Debt Instruments, we are currently limited in the amount of debt we can incur, even if market conditions, including then-current market available interest rates (in recent years, we have not been able to access the traditional capital and bank lending markets at competitive interest rates due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business.

Due to covenant restrictions in our Debt Instruments, we may be limited in the amount of debt we can incur, even if market conditions, including then-current market available interest rates (prior to the fourth quarter of fiscal 2025, we had not been able to access the traditional capital and bank lending markets at competitive interest rates for some time due to our highly leveraged capital structure), would otherwise be favorable, which could also impact our ability to grow our business.

See Note 9 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of K.

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

Hovnanian’s Debt Instruments, including information with respect to the collateral securing our Secured Credit Agreement.

Mortgages and Notes Payable

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See Note 8 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of these agreements and facilities.

On September 1, 2022, our Board of Directors authorized a repurchase program for up to $ 50.0 million of our Class A common stock.

On September 1, 2022, our Board of Directors (the “ Board ” ) authorized a repurchase program for up to $ 50.0 million of our Class A common stock.

On December 18, 2024, the Board authorized an incremental increase to our repurchase program and on April 11, 2025, the Board authorized another incremental increase to our repurchase program, such that, inclusive of any amounts remaining under the existing repurchase authorization, as of April 11, 2025, we were authorized to repurchase up to $30.6 million of our Class A common stock.

Under the program, repurchases may be made from time to time in open market transactions, in privately negotiated transactions or otherwise.

The timing and the actual dollar amount repurchased will depend on a variety of factors, including legal requirements, price, future tax implications and economic and market conditions.

The timing and actual dollar amount repurchased will depend on a variety of factors, including legal requirements, price, future tax implications and economic and market conditions.

The repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.

During the year ended October 31, 2024, we repurchased 188,800 shares, with a market value of $ 26.5 million, or $ 140.31 per share.

During the year ended October 31, 2023, we repurchased 118,478 shares, with a market value of $ 4.8 million, or $ 40.51 per share.

During the year ended October 31, 2025, we repurchased 257,908 shares of Class A common stock, with a market value of $ 30.1 million, or $ 116.70 per share.

During the year ended October 31, 2024, we repurchased 188,800 shares of Class A common stock, with a market value of $ 26.5 million, or $ 140.31 per share.

Share repurchases are added to “ Treasury stock ” on our Consolidated Balance Sheets.

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We have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located.

As of October 31, 2024 and 2023 , we had investments in six and seven unconsolidated homebuilding joint ventures, respectively, and one unconsolidated land development joint venture as of October 31, 2023.

At both October 31, 2025 and 2024 , we had investments in six unconsolidated homebuilding joint ventures.

Our unconsolidated joint ventures had total combined assets of $ 720.4 million and $ 845.1 million at October 31, 2025 and 2024 , respectively.

Our investments in unconsolidated joint ventures totaled $163.5 million and $ 142.9 million at October 31, 2025 and 2024 , respectively.

The increase in our investments of $ 45.0 million was primarily due to a new joint venture formed during the year, along with income recognized from existing joint ventures, partially offset by the consolidation of a previously unconsolidated joint venture.

The increase in our investments of $20.6 million was primarily due to new joint ventures formed during the year, along with income recognized from existing joint ventures,

partially offset by an i ncrease in

our share of losses recognized from existing joint ventures.

Partner distributions and the consolidation of previously unconsolidated joint ventures also partially offset the increase in the investment balance.

As of October 31, 2025 and 2024 , our unconsolidated joint ventures had outstanding debt totaling $ 121.9 million and $ 88.7 million, respectively, under separate construction loan agreements with different third-party lenders and affiliates of certain investment partners to finance land development activities.

The outstanding debt is secured by the underlying property and related project assets and is non-recourse to us.

Although we and our unconsolidated joint venture partners provide certain guarantees and indemnities to the lender, we do not have a guaranty or any other obligation to repay the outstanding debt or to support the value of the collateral underlying the outstanding debt.

The outstanding debt is secured by the underlying property and related project assets and is nonrecourse to us.

Although we and our unconsolidated joint venture partners provide certain guarantees and indemnities to the lender, we do not provide a guaranty or have any other obligation to repay the outstanding debt or to support the value of the collateral underlying the outstanding debt.

Our guarantees are limited to performance and completion of development activities, environmental indemnification and standard warranty and representation against fraud, misrepresentation and similar actions, including voluntary bankruptcy.

We do not believe that our existing exposure under our guaranty and indemnity obligations related to the outstanding debt is material.

We determined that none of our joint ventures were a variable interest entity.

We do not believe that our existing exposure under our guaranty and indemnity obligations related to the outstanding debt of our unconsolidated joint ventures is material.

We determined that none of our joint ventures was a variable interest entity.

All our unconsolidated joint ventures were accounted for under the equity method because we did not have a controlling financial interest.

See Notes 19 and 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further discussion of joint ventures and variable interest entities.

Total inventory, excluding consolidated inventory not owned, increased $ 309.4 million during the year ended October 31, 2024 from October 31, 2023 .

Total inventory, excluding consolidated inventory not owned, increased in the Northeast by $ 155.1 million, in the Southeast by $ 2.8 million and in the West by $ 151.5 million.

The increases were primarily attributable to new land purchases and land development during the period, along with an increase in inventory from the consolidation of a previously unconsolidated joint venture.

The increases were partially offset by home deliveries and land sales.

In addition, our sold and unsold homes have increased as we focus on building more QMI homes.

In the last few years, we have been able to acquire new land parcels at prices that we believe will generate reasonable returns under current homebuilding market conditions.

This trend may not continue in either the near or the long term.

Total inventory, excluding consolidated inventory not owned, decreased $ 129.2 million during the year ended October 31, 2025 from October 31, 2024 .

Total inventory, excluding consolidated inventory not owned, decreased in the Northeast by $ 83.3 million, increased in the Southeast by $ 108.8 million and decreased in the West by $ 154.7 million.

The net decrease was primarily attributable to home deliveries, impairments and write-offs, and land sales.

However, this reduction was partially offset by new land purchases and land development during fiscal 2025, along with an increase in inventory from the consolidation of previously unconsolidated joint ventures.

Substantially all homes under construction or completed and included in inventory at October 31, 2025 are expected to close during the next six to nine months.

Consolidated inventory not owned, which consists of options related to land banking and model financing, decreased $ 13.8 million during fiscal 2024 .

The decrease was primarily due to a decrease in land banking transactions, partially offset by an increase in the sale and leaseback of certain model homes during the period.

Consolidated inventory not owned, which consists of options related to land banking and model financing, increased $ 121.9 million during fiscal 2025 .

The increase was primarily due to an increase in land banking transactions, along with an increase in the sale and leaseback of certain model homes during the period.

We have land banking arrangements, whereby we sell land parcels to land bankers and they provide us an option to purchase back finished lots on a predetermined schedule.

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The following tables summarize home sites included in our total residential real estate.

The decrease in total home sites available at October 31, 2025 compared to October 31, 2024 is attributable to delivering homes and terminating certain option agreements,

partially offset by acquiring new land parcels during the period.

October 31, 2025 :

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The following table summarizes our started or completed unsold homes and models, excluding unconsolidated joint ventures, in active selling communities.

The increase in unsold homes was primarily due to a conscious effort to increase the number of QMI homes per community to provide buyers the opportunity to lock in a lower mortgage rate by closing quickly, thereby making our homes more affordable and creating certainty as mortgage rates continued to fluctuate during fiscal 2024 .

The decrease in unsold homes was primarily due to a concerted effort to align our starts pace with the sales pace in fiscal 2025.

October 31, 2025

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Financial services assets consist primarily of residential mortgage receivables held for sale of which $ 109.8 million and $ 147.2 million at October 31, 2025 and 2024 , respectively, were being temporarily warehoused and are awaiting sale in the secondary mortgage market.

The increase in mortgage loans held for sale from October 31, 2023 was primarily related to an increase in the volume of loans originated during the fourth quarter of fiscal 2024 compared to the fourth quarter of fiscal 2023 , along with an increase in the average loan value.

Financial services liabilities increased $34.9 million from $ 148.2 million at October 31, 2023 , to $ 183.1 million at October 31, 2024 .

The increase was primarily due to the increase in amounts outstanding under our mortgage warehouse lines of credit, and directly correlated to the increase in the volume of mortgage loans held for sale.

The annual rate of inflation in the United States was 2.6 % in October 2024 , as measured by the Consumer Price Index, which is much improved from its peak of 9.1 % in June 2022.

The decrease in mortgage loans held for sale from October 31, 2024 was primarily related to a decrease in the volume of loans originated during the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024 .

Financial services liabilities decreased $ 52.3 million from $ 183.1 million at October 31, 2024 , to $ 130.9 million at October 31, 2025 .

The decrease was primarily due to the decrease in amounts outstanding under our mortgage warehouse lines of credit and directly correlated to the decrease in the volume of mortgage loans held for sale.

The annual rate of inflation in the United States was 3.0 % in September 2025 , as measured by the most recent publicly available Consumer Price Index, which is slightly higher than October 2024, but much improved from its peak of 9.1 % in June 2022.

Inflation has a long-term effect, because of higher costs of land, materials and labor results in increasing the sale prices of our homes.

Historically, these price increases have been commensurate with the general rate of inflation in our housing markets and have not had a significant adverse effect on the sale of our homes.

A significant risk faced by the housing industry generally is that rising house construction costs, including land and interest costs, could substantially outpace increases in the income of potential purchasers and therefore limit our ability to raise home sales prices, which may result in lower gross margins.

A significant risk faced by the housing industry generally is that rising house construction costs, including land, labor and interest costs, could substantially outpace increases in the income of potential purchasers and therefore limit our ability to raise home sale prices, which may result in lower gross margins.

Inflation has a lesser short-term effect, because we generally negotiate fixed-price contracts with many, but not all, of our subcontractors and material suppliers for the construction of our homes.

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Because of our options to repurchase these parcels, for accounting purposes in accordance with ASC 606 , these transactions are considered a financing rather than a sale.

The recoverability of inventories and other long-lived assets is assessed in accordance with ASC 360 , “Property, Plant and Equipment.” ASC 360 requires long-lived assets, including inventories, held for development to be evaluated for impairment based on undiscounted future cash flows of the assets at the lowest level for which there are identifiable cash flows.

The recoverability of inventories and other long-lived assets is assessed in accordance with ASC 360 , “Property, Plant and Equipment.” ASC 360 requires long-lived assets, including inventories, held for development to be evaluated for impairment based on the undiscounted future cash flows of the assets at the lowest level for which there are identifiable cash flows.

We evaluate impairment at the individual community level, which is the lowest level of discrete cash flows that are available.

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Inventories held for sale are land parcels ready for sale in their current condition, where we have decided not to build homes but are instead actively marketing the land.

Land held for sale is recorded at the lower of carrying amount or fair value less costs to sell.

Land held for sale is recorded at the lower of its carrying amount or the fair value less costs to sell.

In determining fair value for land held for sale, management considers, among other things, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale) and recent bona fide offers received from third parties.

Unconsolidated Homebuilding and Land Development Joint Ventures - Investments in unconsolidated entities in which the Company has significant influence over the operating and financial decisions of the entity, but holds less than a controlling financial interest, are accounted for by the equity method.

In all periods presented, our investments in unconsolidated homebuilding and land development joint ventures are accounted for under the equity method.

Under the equity method, we recognize our proportionate share of income and loss earned by the joint venture upon the delivery of lots or homes to third parties.

In all periods presented, our investments in unconsolidated homebuilding and land development joint ventures are accounted for under the equity method because

we are not the primary beneficiary or de-facto agent, and we have a

significant, but less than controlling, interest in the entities.

Under the equity method, we recognize our proportionate share of income or loss earned by the joint venture upon the delivery of lots or homes to third parties.

Our ownership interests in joint ventures vary but our voting equity interests held are generally 20 % to 50 %.

In determining whether or not we must consolidate joint ventures where we are the managing member of the joint venture, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture.

In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the significant operating and capital decisions of the partnership, including budgets, in the ordinary course of business.

The evaluation of whether or not we control a joint venture can require significant judgment.

In accordance with ASC 323 , “Investments - Equity Method and Joint Ventures” we assess our investments in unconsolidated joint ventures for recoverability, and if it is determined that a loss in value of the investment below its carrying amount is other than temporary, we write down the investment to its fair value.

criteria is used when determining if we are the primary beneficiary of, or have

a controlling interest in, an unconsolidated entity.

Factors considered in

determining whether we have significant influence, or we have control include

risk and reward sharing, experience and financial condition of the other

partner, voting rights, involvement in day-to-day capital and operating

decisions and continuing involvement.

The evaluation of whether an entity is a

variable interest entity or a voting interest entity and then whether we are

the primary beneficiary or have control or significant influence can require

significant judgment.

We believe that the equity method of accounting is

appropriate for our investments in unconsolidated entities where we are not the

primary beneficiary and we do not have a controlling interest but rather share

control with our partners.

In most cases, the joint venture agreements require

that both partners agree on establishing the significant operating and capital

decisions of the partnership, including budgets, in the ordinary course of

In accordance with ASC 323 , “Investments - Equity Method and Joint Ventures,” w e assess our investments in unconsolidated joint ventures for recoverability quarterly, and if it is determined that a loss in value of the investment below its carrying amount is other than temporary, we write down the investment to its fair value.

We evaluate our equity investments for impairment based on the joint venture’s projected cash flows.

This process requires significant management judgment and estimates.

Warranty Costs and Construction Defect Reserves - We accrue warranty costs that are covered under our existing general liability and construction defect policy as part of our general liability insurance deductible.

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Changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn;

Shortages in, and price fluctuations of, raw materials and labor, including due to geopolitical events, changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with, and retaliatory measures taken by other countries;

Fluctuations in interest rates and the availability of mortgage financing, including as a result of instability in the banking sector;

Increases in inflation;

Adverse weather and other environmental conditions and natural disasters;

Adverse weather and other environmental conditions and natural or man-made disasters;

The seasonality of the Company’s business;

14 unchanged sentences

Changes in credit ratings;

Government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment;

Government regulation, including regulations concerning the development of land, the home building, sales and customer financing processes, tax laws and environmental, health and safety matters;

Potential liability as a result of the past or present use of hazardous materials;

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis