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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 30, 2025

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 1-8551

Hovnanian Enterprises, Inc. (Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)

22-1851059 (I.R.S. Employer Identification No.)

90 Matawan Road, 5th Floor, Matawan, NJ 07747 (Address of Principal Executive Offices)

732-747-7800 (Registrant’s Telephone Number, Including Area Code)

N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	HOV	New York Stock Exchange
Preferred Stock Purchase Rights(1)	N/A	New York Stock Exchange
Depositary Shares each representing 1/1,000th of a share of 7.625% Series A Preferred Stock	HOVNP	The Nasdaq Stock Market LLC

(1) Each share of Common Stock includes an associated Preferred Stock Purchase Right. Each Preferred Stock Purchase Right initially represents the right, if such Preferred Stock Purchase Right becomes exercisable, to purchase from the Company one ten-thousandth of a share of its Series B Junior Preferred Stock for each share of Common Stock. The Preferred Stock Purchase Rights currently cannot trade separately from the underlying Common Stock.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒

Accelerated Filer ☐

Nonaccelerated Filer ☐

Smaller Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 5,068,858 shares of Class A Common Stock and 729,345 shares of Class B Common Stock were outstanding as of May 27, 2025.

Table of Contents

HOVNANIAN ENTERPRISES, INC.

FORM 10-Q

INDEX	PAGE NUMBER

PART I. Financial Information
Item l. Financial Statements:

Condensed Consolidated Balance Sheets (unaudited) as of April 30, 2025 and October 31, 2024	3

Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended April 30, 2025 and 2024	4

Condensed Consolidated Statements of Changes in Equity (unaudited) for the three and six months ended April 30, 2025 and 2024	5

Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended April 30, 2025 and 2024	7

Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3. Quantitative and Qualitative Disclosures About Market Risk	46

Item 4. Controls and Procedures	46

PART II. Other Information	47
Item 1. Legal Proceedings	47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 5. Other Information	47

Item 6. Exhibits	48

Signatures	50

Table of Contents

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

	April 30,			October 31,
	2025			2024

ASSETS
Homebuilding:
Cash and cash equivalents	$	73,980		$	209,976
Restricted cash and cash equivalents		9,031			7,875
Inventories:
Sold and unsold homes and lots under development		1,212,870			1,195,318
Land and land options held for future development or sale		263,363			238,499
Consolidated inventory not owned		267,732			210,987
Total inventories		1,743,965			1,644,804
Investments in and advances to unconsolidated joint ventures		183,461			142,910
Receivables, deposits and notes, net		24,712			29,400
Property and equipment, net		47,730			43,431
Prepaid expenses and other assets		84,058			82,525
Total homebuilding		2,166,937			2,160,921

Financial services		161,619			203,589

Deferred tax assets, net		224,543			241,064
Total assets	$	2,553,099		$	2,605,574

LIABILITIES AND EQUITY
Homebuilding:
Nonrecourse mortgages secured by inventory, net of debt issuance costs	$	78,092		$	90,675
Accounts payable and other liabilities		418,669			433,273
Customers’ deposits		45,662			41,639
Liabilities from inventory not owned, net of debt issuance costs		173,098			140,298
Senior notes and credit facilities (net of discounts, premiums and debt issuance costs)		864,280			896,218
Accrued interest		12,355			14,508
Total homebuilding		1,592,156			1,616,611

Financial services		140,573			183,135

Income taxes payable		-			5,479
Total liabilities		1,732,729			1,805,225

Stockholders' equity:
Preferred stock, $0.01 par value - authorized 100,000 shares; issued and outstanding 5,600 shares with a liquidation preference of $140,000 at April 30, 2025 and October 31, 2024		135,299			135,299
Common stock, Class A, $0.01 par value - authorized 16,000,000 shares; issued 6,416,945 shares at April 30, 2025 and 6,415,794 shares at October 31, 2024		64			64
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) - authorized 2,400,000 shares; issued 757,014 shares at April 30, 2025 and 757,023 shares at October 31, 2024		8			8
Paid in capital - common stock		757,590			749,752
Retained earnings		116,715			74,136
Treasury stock - at cost – 1,348,087 shares of Class A common stock at April 30, 2025 and 1,090,179 shares at October 31, 2024; 27,669 shares of Class B common stock at April 30, 2025 and October 31, 2024		(189,306	)		(158,910	)
Total stockholders’ equity		820,370			800,349
Total liabilities and equity	$	2,553,099		$	2,605,574

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended April 30,					Six Months Ended April 30,
	2025		2024			2025			2024
Revenues:
Homebuilding:
Sale of homes	$	650,314	$	686,929		$	1,297,228		$	1,260,565
Land sales and other revenues		14,839		4,284			24,606			9,576
Total homebuilding		665,153		691,213			1,321,834			1,270,141
Financial services		21,318		17,167			38,260			32,435
Total revenues		686,471		708,380			1,360,094			1,302,576

Expenses:
Homebuilding:
Cost of sales, excluding interest		543,289		531,502			1,076,579			980,715
Cost of sales interest		19,938		21,543			39,294			41,441
Inventory impairments and land option write-offs		3,056		237			4,096			539
Total cost of sales		566,283		553,282			1,119,969			1,022,695
Selling, general and administrative		51,064		46,489			105,317			95,426
Total homebuilding expenses		617,347		599,771			1,225,286			1,118,121

Financial services		12,891		12,023			26,328			23,494
Corporate general and administrative		29,500		32,517			62,192			69,650
Other interest		9,145		8,969			18,662			19,420
Other (income) expense, net (1)		500		(3,128	)		(20,120	)		(2,577	)
Total expenses		669,383		650,152			1,312,348			1,228,108
Gain on extinguishment of debt, net		399		-			399			1,371
Income from unconsolidated joint ventures		9,043		11,164			18,248			26,116
Income before income taxes		26,530		69,392			66,393			101,955
State and federal income tax provision:
State		1,811		5,231			3,860			7,437
Federal		4,993		13,325			14,616			19,778
Total income taxes		6,804		18,556			18,476			27,215
Net income		19,726		50,836			47,917			74,740
Less: preferred stock dividends		2,669		2,669			5,338			5,338
Net income available to common stockholders	$	17,057	$	48,167		$	42,579		$	69,402

Per share data:
Basic:
Net income per common share	$	2.64	$	7.12		$	6.53		$	10.22
Weighted-average number of common shares outstanding		6,411		6,457			6,464			6,477
Assuming dilution:
Net income per common share	$	2.43	$	6.66		$	6.02		$	9.57
Weighted-average number of common shares outstanding		6,951		6,902			7,011			6,920

See notes to condensed consolidated financial statements (unaudited).

(1) Includes gain on contribution of assets to a joint venture of $22.7 million for the six months ended April 30, 2025 (see note 18).

Table of Contents

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

THREE AND SIX MONTH PERIODS ENDED APRIL 30, 2025

(In thousands, except share data)

(Unaudited)

	A Common Stock					B Common Stock					Preferred Stock
	Shares					Shares					Shares
	Issued and					Issued and					Issued and				Paid-In		Retained			Treasury
	Outstanding			Amount		Outstanding			Amount		Outstanding		Amount		Capital		Earnings			Stock			Total
Balance, October 31, 2024		5,325,615		$	64		729,354		$	8		5,600	$	135,299	$	749,752	$	74,136		$	(158,910	)	$	800,349
Stock options, amortization and issuances		476																						-
Preferred dividend declared ($476.56 per share)																		(2,669	)					(2,669	)
Restricted stock amortization, issuances and forfeitures		666														3,605								3,605
Conversion of Class B to Class A common stock		5					(5	)																-
Share repurchases		(131,460	)																		(18,050	)		(18,050	)
Net income																		28,191						28,191
Balance, January 31, 2025		5,195,302		$	64		729,349		$	8		5,600	$	135,299	$	753,357	$	99,658		$	(176,960	)	$	811,426
Stock options, amortization and issuances																								-
Preferred dividend declared ($476.56 per share)																		(2,669	)					(2,669	)
Restricted stock amortization, issuances and forfeitures																4,233								4,233
Conversion of Class B to Class A common stock		4					(4	)																-
Share repurchases		(126,448	)																		(12,346	)		(12,346	)
Net income																		19,726						19,726
Balance, April 30, 2025		5,068,858		$	64		729,345		$	8		5,600	$	135,299	$	757,590	$	116,715		$	(189,306	)	$	820,370

See notes to condensed consolidated financial statements (unaudited).

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HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

THREE AND SIX MONTH PERIODS ENDED APRIL 30, 2024

(In thousands, except share data)

(Unaudited)

	A Common Stock					B Common Stock						Preferred Stock
	Shares					Shares						Shares
	Issued and					Issued and						Issued and				Paid-In			Accumulated			Treasury			Noncontrolling
	Outstanding			Amount		Outstanding			Amount			Outstanding		Amount		Capital			Deficit			Stock			Interest			Total
Balance, October 31, 2023		5,345,929		$	62		749,081		$	8			5,600	$	135,299	$	735,946		$	(157,197	)	$	(132,382	)	$	53		$	581,789
Stock options, amortization and issuances		615															46												46
Preferred dividend declared ($476.56 per share)																				(2,669	)								(2,669	)
Restricted stock amortization, issuances and forfeitures																	4,071												4,071
Conversion of Class B to Class A common stock		16					(16	)																					-
Changes in noncontrolling interest in consolidated joint ventures																										(53	)		(53	)
Net income																				23,904									23,904
Balance, January 31, 2024		5,346,560		$	62		749,065		$	8			5,600	$	135,299	$	740,063		$	(135,962	)	$	(132,382	)	$	-		$	607,088
Stock options, amortization and issuances		120															(4	)											(4	)
Preferred dividend declared ($476.56 per share)																				(2,669	)								(2,669	)
Restricted stock amortization, issuances and forfeitures																	6,942												6,942
Conversion of Class B to Class A common stock		40,141			1		(40,141	)		(1	)																		-
Share repurchases		(106,047	)																				(15,147	)					(15,147	)
Net income																				50,836									50,836
Balance, April 30, 2024		5,280,774		$	63		708,924		$	7			5,600	$	135,299	$	747,001		$	(87,795	)	$	(147,529	)	$	-		$	647,046

See notes to condensed consolidated financial statements (unaudited).

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HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	April 30,
	2025			2024
Cash flows from operating activities:
Net income	$	47,917		$	74,740
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		5,321			3,612
Stock-based compensation		7,881			11,018
Amortization of debt discounts, premiums and deferred financing costs		(1,384	)		570
Gain on sale of property and assets		(952	)		(958	)
Gain on assets contributed to joint venture		(22,683	)		-
Income from unconsolidated joint ventures		(18,248	)		(26,116	)
Distributions of earnings from unconsolidated joint ventures		2,160			1,688
Gain on extinguishment of debt		(399	)		(1,371	)
Inventory impairments and land option write-offs		4,096			539
(Increase) decrease in assets:
Inventories		(80,574	)		(68,411	)
Receivables, deposits and notes		3,475			(1,920	)
Origination of mortgage loans		(778,632	)		(681,335	)
Sale of mortgage loans		809,548			714,495
Deferred tax assets		16,521			23,129
(Decrease) increase in liabilities:
Accounts payable, accrued interest and other liabilities		(22,531	)		(41,694	)
Customers’ deposits		4,023			(5,800	)
State income tax payable		(9,115	)		(2,087	)
Net cash (used in) provided by operating activities		(33,576	)		99
Cash flows from investing activities:
Proceeds from sale of property and assets		1,522			1,000
Purchase of property, equipment, and other fixed assets		(10,004	)		(9,883	)
Investment in and advances to unconsolidated joint ventures, net of reimbursements		(28,889	)		(32,480	)
Distributions of capital from unconsolidated joint ventures		4,425			4,163
Net cash used in investing activities		(32,946	)		(37,200	)
Cash flows from financing activities:
Proceeds from mortgages and notes		105,552			151,283
Payments related to mortgages and notes		(119,069	)		(157,996	)
Proceeds from model sale leaseback financing programs		25,914			-
Payments related to model sale leaseback financing programs		(7,105	)		(12,111	)
Proceeds from land bank financing programs		55,215			25,854
Payments related to land bank financing programs		(40,671	)		(51,813	)
Net payments related to mortgage warehouse lines of credit		(36,830	)		(29,103	)
Payments related to senior notes, senior secured notes and senior unsecured term loan		(26,588	)		(113,502	)
Preferred dividends paid		(5,338	)		(5,338	)
Treasury stock purchases		(30,396	)		(15,147	)
Deferred financing costs from land banking financing programs and note issuances		(1,705	)		(1,624	)
Net cash used in financing activities		(81,021	)		(209,497	)
Net decrease in cash and cash equivalents, and restricted cash and cash equivalents		(147,543	)		(246,598	)
Cash and cash equivalents, and restricted cash and cash equivalents balance, beginning of period		266,761			477,519
Cash and cash equivalents, and restricted cash and cash equivalents balance, end of period	$	119,218		$	230,921

Reconciliation of Cash, cash equivalents and restricted cash
Homebuilding: Cash and cash equivalents	$	73,980		$	181,966
Homebuilding: Restricted cash and cash equivalents		9,031			8,370
Financial Services: Cash and cash equivalents, included in financial services assets		4,705			4,729
Financial Services: Restricted cash and cash equivalents, included in financial services assets		31,502			35,856
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	119,218		$	230,921

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HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

1.	Basis of Presentation

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

The accompanying unaudited Condensed Consolidated Financial Statements include HEI's accounts and those of all of its consolidated subsidiaries after elimination of all intercompany balances and transactions. Noncontrolling interest represents the proportionate equity interest in a consolidated joint venture that is not 100% owned by the Company directly or indirectly, which we sold our membership interest in during the first quarter of fiscal 2024.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024. In the opinion of management, all adjustments for interim periods presented have been made, which include normal recurring accruals and deferrals necessary for a fair presentation of our condensed consolidated financial position, results of operations and cash flows. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and these differences could have a significant impact on the Condensed Consolidated Financial Statements. Results for interim periods are not necessarily indicative of the results which might be expected for a full year.

2.	Stock Compensation

During the first quarter of fiscal 2025, the Board of Directors (the "Board") approved certain grants under a new Long-Term Incentive Program (the "2025 LTIP") that contain performance-based vesting conditions. The performance period for the 2025 LTIP commenced on November 1, 2024 and will end on October 31, 2027. At the end of the performance period, 100% of the awards, if any, are payable in shares of Company stock, subject to a mandatory two-year post-vesting hold period.

For the three and six months ended April 30, 2025, stock-based compensation expense was $4.2 million ($3.1 million net of tax) and $7.9 million ($5.7 million net of tax), respectively. For the three and six months ended April 30, 2024, stock-based compensation expense was $6.9 million ($5.1 million net of tax) and $11.0 million ($8.1 million net of tax), respectively.

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Interest

Interest costs incurred, expensed and capitalized were as follows:

	Three Months Ended						Six Months Ended
	April 30,						April 30,
(In thousands)	2025			2024			2025				2024
Interest capitalized at beginning of period	$	52,884		$	53,672			$	57,671		$	52,060
Plus interest incurred(1)		29,832			34,530				59,687			66,491
Less cost of sales interest expensed		(19,938	)		(21,543	)			(39,294	)		(41,441	)
Less other interest expensed(2)		(9,145	)		(8,969	)			(18,662	)		(19,420	)
Less interest contributed to unconsolidated joint venture(3)		-			(5,468	)			(5,769	)		(5,468	)
Interest capitalized at end of period(4)	$	53,633		$	52,222			$	53,633		$	52,222

(1)

Data does not include interest incurred by our mortgage and finance subsidiaries.

(2)

Other interest expensed includes interest that does not qualify for interest capitalization because our assets that qualify for interest capitalization (inventory under development) did not exceed our debt, which amounted to $1.7 million and $5.4 million for the three and six months ended April 30, 2024, respectively. During the three and six months ended April 30, 2025, our inventory under development exceeded our debt, therefore, all of the related interest incurred qualified for interest capitalization. Other interest also includes interest on completed homes, land in planning and fully developed lots without homes under construction, along with financing programs, which does not qualify for capitalization and therefore is expensed as incurred. This component of other interest was $9.1 million and $7.3 million for the three months ended April 30, 2025 and 2024, respectively, and $18.7 million and $14.1 million for the six months ended April 30, 2025 and 2024, respectively.

(3)	Represents capitalized interest which was included as part of the assets contributed to joint ventures, as discussed in Note 18. There was no impact to the Condensed Consolidated Statement of Operations as a result of these capitalized interest transactions.
(4)	Capitalized interest amounts are shown gross before allocating a portion of impairments, if any, to capitalized interest.

4.	Reduction of Inventory to Fair Value

We had 482 and 423 communities under development and held for future development or sale at April 30, 2025 and 2024, respectively, which we evaluated for impairment indicators (i.e., those with a projected operating loss). We identified an impairment indicator in one community in our Northeast segment with an aggregate carrying value of $5.4 million during both the three and six months ended April 30, 2025. The impairment analysis resulted in an impairment of $1.2 million, included with "Inventory impairments and land option write-offs" in the Condensed Consolidated Statement of Operations and deducted from inventory. We did not identify impairment indicators for any community during the three and six months ended April 30, 2024.

Write-offs of options, engineering and capitalized interest costs are recorded in "Inventory impairments and land option write-offs" when we redesign communities, abandon certain engineering costs or do not exercise options in various locations because the pro forma profitability is not projected to produce adequate returns on investment commensurate with the risk. Total aggregate write-offs related to these items were $1.9 million and $0.2 million for the three months ended April 30, 2025 and 2024, respectively, and $2.9 million and $0.5 million for the six months ended April 30, 2025 and 2024, respectively. The number of lots walked away from during the three months ended April 30, 2025 and 2024 were 2,463 and 342, respectively, and 4,897 and 1,270 during the six months ended April 30, 2025 and 2024, respectively. The walk-aways during the first half of fiscal 2025 and 2024 occurred across each of our segments.

We sell and lease back certain of our model homes with the right to participate in the potential profit when each home is sold to a third-party at the end of the respective lease. As a result of our continued involvement and the ability to repurchase model homes with below market options, for accounting purposes in accordance with ASC 606, these sale and leaseback transactions are considered a financing rather than a sale. Our Condensed Consolidated Balance Sheets at April 30, 2025 and October 31, 2024, included inventory of $62.9 million and $46.1 million, respectively, recorded to “Consolidated inventory not owned” with a corresponding amount of $64.5 million (net of debt issuance costs) and $46.2 million, respectively, recorded to “Liabilities from inventory not owned” for the amount of net cash received from the transactions.

We have land banking arrangements, whereby we sell our land parcels to a land banker and they provide us an option to purchase back finished lots on a predetermined schedule. Because of our options to repurchase these parcels, for accounting purposes in accordance with ASC 606, these transactions are considered a financing rather than a sale. Our Condensed Consolidated Balance Sheets at April 30, 2025 and October 31, 2024, included inventory of $204.8 million and $164.9 million, respectively, recorded to “Consolidated inventory not owned” with a corresponding amount of $108.6 million (net of debt issuance costs) and $94.1 million, respectively, recorded to “Liabilities from inventory not owned” for the amount of net cash received from the transactions.

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5.	Variable Interest Entities

We enter into land and lot option purchase contracts to procure land or lots for the construction of homes. Under these contracts, the Company will fund a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at a future point in time with predetermined terms. Under the terms of the option purchase contracts, many of the option deposits are not refundable at the Company's discretion. Under the requirements of ASC 810, certain option purchase contracts may result in the creation of a Variable Interest Entity ("VIE") that owns the land parcel under option.

Although the Company does not have legal title to the underlying land, we analyze our option purchase contracts to determine whether the corresponding land and lot sellers are VIEs and, if so, whether we are the primary beneficiary. The significant factors we consider in determining if the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared include, among other things, our ability in determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, changing the terms of the contract or arranging financing for the VIE. As a result of our analyses, we have concluded, there are no VIEs that required consolidation at either April 30, 2025 or October 31, 2024 because we are not the primary beneficiary of the land or lots under option purchase contracts.

We will continue to secure land and lots using options, some of which are with VIEs where we have determined power is shared among the partners and we do not have a controlling financial interest. Including deposits on our unconsolidated VIEs, at April 30, 2025 and October 31, 2024, we had total cash deposits amounting to $306.3 million and $264.8 million, respectively, to purchase land and lots with a total purchase price of $3.4 billion and $3.0 billion, respectively. The maximum exposure to loss with respect to our land and lot options is limited to the deposits plus any pre-development costs invested in the property, although some deposits are refundable at our request or if certain conditions are met.

6.	Warranty Costs

We accrue for warranty costs that are covered under our existing general liability and construction defect policy as part of our general liability insurance deductible. For homes to be delivered in fiscal 2025 and previously delivered in 2024, our deductible under our general liability insurance is or was $30.0 million annually, aggregated for construction defect and warranty claims. For bodily injury claims, our deductible per occurrence in fiscal 2025 and 2024 is or was $0.25 million and $0.5 million for action over claims, both with a $30.0 million limit. In addition, we establish a warranty accrual for lower cost-related issues to cover home repairs, community amenities and land development infrastructure that are not covered under our general liability and construction defect policy. We accrue an estimate for these warranty costs at the time each home is closed and control is transferred to the homebuyer. Additions, charges and changes in the warranty reserve and general liability reserve for the three and six months ended April 30, 2025 and 2024 were as follows:

	Three Months Ended						Six Months Ended
	April 30,						April 30,
(In thousands)	2025			2024			2025				2024
Balance, beginning of period	$	90,790		$	99,836			$	89,391		$	98,919
Additions – Selling, general and administrative		2,547			2,041				5,094			4,588
Additions – Cost of sales		2,116			1,982				4,218			4,850
Charges incurred during the period		(3,479	)		(18,949	)			(6,355	)		(25,593	)
Changes to pre-existing reserves		(174	)		267				(548	)		2,413
Balance, end of period	$	91,800		$	85,177			$	91,800		$	85,177

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7.	Commitments and Contingent Liabilities

We are involved in litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on our financial position, results of operations or cash flows, and we are subject to extensive and complex laws and regulations that affect the development of land and home building, sales and customer financing processes, including zoning, density, building standards and mortgage financing. These laws and regulations often provide broad discretion to the administering governmental authorities. This can delay or increase the cost of development or homebuilding. The significant majority of our litigation matters are related to construction defect claims. Our estimated losses from construction defect litigation matters, if any, are included in our construction defect reserves.

We also are subject to a variety of local, state, federal and foreign laws and regulations concerning protection of health and the environment, including those regulating the emission or discharge of materials into the environment, the management of storm water runoff at construction sites, the handling, use, storage and disposal of hazardous substances, impacts to wetlands and other sensitive environments, and the remediation of contamination at properties that we have owned or developed or currently own or are developing (“environmental laws”). The particular environmental laws that apply to a site may vary greatly according to the community site, for example, due to the community, the environmental conditions at or near the site, and the present and former uses of the site. These environmental laws may result in delays, may cause us to incur substantial compliance, remediation and/or other costs, and can prohibit or severely restrict development and homebuilding activity. In addition, noncompliance with these laws and regulations could result in fines and penalties, obligations to remediate or take corrective action, permit revocations or other sanctions; and contamination or other environmental conditions at or in the vicinity of our developments may result in claims against us for personal injury, property damage or other losses.

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, regulations governing wetlands permitting under the federal Clean Water Act have been the subject of extensive rulemakings for many years, resulting in several major joint rulemakings by the EPA and the U.S. Army Corps of Engineers that have expanded and contracted the scope of wetlands subject to regulation; and such rulemakings have been the subject of many legal challenges, some of which remain pending. It is unclear how these and related developments, including at the state or local level, ultimately may affect the scope of regulated wetlands where we operate. Although we cannot reliably predict the extent of any effect these developments regarding wetlands, or any other requirements that 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.

In December 2020, the New Jersey Department of Environmental Protection ("NJDEP") and the Administrator of the New Jersey Spill Compensation Fund (the “Spill Fund”) filed a lawsuit in the Superior Court of New Jersey, Law Division, Union County against Hovnanian Enterprises, Inc., in addition to other unrelated parties, in connection with contamination at Hickory Manor, a residential condominium development. Alleged predecessors of certain defendants had used the Hickory Manor property for decades for manufacturing purposes. In 1998, NJDEP confirmed that groundwater at this site was impacted from an off-site source. The site was later remediated, resulting in the NJDEP issuing an unconditional site-wide No Further Action determination letter and Covenant Not to Sue in 1999. Subsequently, one of our affiliates was involved in redeveloping the property as a residential community. The complaint asserts claims under the New Jersey Spill Act and other state law claims and alleges that the NJDEP and the Spill Fund have incurred over $5.3 million since 2009 to investigate vapor intrusion at the development and to install vapor mitigation systems. Among other things, the complaint seeks recovery of the costs incurred, an order that defendants perform additional required remediation and disgorgement of profits on our affiliate’s sales of the units in the development. Discovery has commenced. Hovnanian Enterprises, Inc. intends to defend these claims vigorously.

8.	Cash Equivalents, Restricted Cash and Customers' Deposits

Cash equivalents include certificates of deposit, U.S. Treasury bills and government money–market funds with maturities of 90 days or less when purchased. Our cash balances are held at a few financial institutions and may, at times, exceed insurable amounts. We believe we help to mitigate this risk by depositing our cash in major high credit quality financial institutions. At April 30, 2025 and October 31, 2024, $12.3 million and $13.6 million, respectively, of our total cash and cash equivalents was in cash equivalents and restricted cash equivalents.

Homebuilding "Restricted cash and cash equivalents" on the Condensed Consolidated Balance Sheets totaled $9.0 million and $7.9 million as of April 30, 2025 and October 31, 2024, respectively, which primarily consists of cash collateralizing our letter of credit agreements and facilities (see Note 12).

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Financial services restricted cash and cash equivalents, which are included in "Financial services" assets on the Condensed Consolidated Balance Sheets, totaled $31.5 million and $42.3 million as of April 30, 2025 and October 31, 2024, respectively. Included in these balances were (1) financial services customers’ deposits of $29.2 million and $39.2 million at April 30, 2025 and October 31, 2024, respectively, which are subject to restrictions on our use, and (2) restricted cash under the terms of our mortgage warehouse lines of credit of $2.3 million and $3.1 million at April 30, 2025 and October 31, 2024, respectively.

Homebuilding "Customers' deposits" are shown as a liability on the Condensed Consolidated Balance Sheets. These liabilities are significantly more than the applicable periods’ restricted cash balances because in some states the deposits are not restricted from use and, in other states, we are able to release the majority of these customer deposits to cash by pledging letters of credit or surety bonds.

9.	Leases

We rent certain office space for use in our operations. Our lease population at April 30, 2025 is comprised of operating leases where we are the lessee, primarily for our corporate office and division offices.

Lease costs are included in our Condensed Consolidated Statements of Operations, primarily in "Selling, general and administrative" homebuilding expenses, and payments on our lease liabilities are presented in the table below.

	Three Months Ended				Six Months Ended
	April 30,				April 30,
(In thousands)	2025		2024		2025			2024
Operating lease costs	$	2,837	$	2,755		$	5,832	$	5,388
Cash payments on lease liabilities	$	2,741	$	2,142		$	5,572	$	4,380

Operating right-of-use lease assets ("ROU assets") are included in "Prepaid expenses and other assets" on our Condensed Consolidated Balance Sheets, while lease liabilities are included in "Accounts payable and other liabilities". During the six months ended April 30, 2025, we had an increase to ROU assets and lease liabilities of $2.2 million as a result of lease renewals that commenced during the period. We also modified a lease in our Northeast segment to shorten the term during the six months ended April 30, 2025, which resulted in a decrease to ROU assets and lease liabilities of $7.7 million. The following table contains additional information about our leases:

(In thousands)	April 30, 2025			October 31, 2024
ROU assets	$	21,680		$	28,765
Lease liabilities	$	23,367		$	30,868
Weighted-average remaining lease term (in years)		3.2			4.6
Weighted-average discount rate		10.2	%		10.3	%

Maturities of our operating lease liabilities as of April 30, 2025 are as follows:

Fiscal Year Ending October 31,	(In thousands)
2025 (excluding the six months ended April 30, 2025)	$	5,165
2026		9,644
2027		7,095
2028		3,345
2029		1,404
2030 and thereafter		843
Total operating lease payments (1)		27,496
Less: imputed interest		(4,129	)
Present value of operating lease liabilities	$	23,367

(1) Lease payments include options to extend lease terms that are reasonably certain of being executed and exclude $12.1 million of legally binding minimum lease payments for office leases signed but not yet commenced as of April 30, 2025. The related ROU assets and operating lease liabilities are not reflected on the Company's Condensed Consolidated Balance Sheets.

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10.	Mortgage Loans Held for Sale

Our wholly owned mortgage banking subsidiary, K. Hovnanian American Mortgage, LLC (“K. Hovnanian Mortgage”), originates mortgage loans, primarily from the sale of our homes. Such mortgage loans are sold in the secondary mortgage market within a short period of time of origination. Mortgage loans held for sale are collateralized by the underlying property. Loans held for sale are recorded at fair value with changes in the value recognized in the Condensed Consolidated Statements of Operations in “Financial services” revenue. We use forward sales of mortgage-backed securities (“MBS”), interest rate commitments from borrowers and forward commitments to sell loans to third parties to protect us from interest rate fluctuations. These short-term instruments do not require any payments to be made to the counterparty or purchaser in connection with the execution of the commitments.

At April 30, 2025 and October 31, 2024, $113.9 million and $145.7 million, respectively, of mortgages held for sale were pledged against our mortgage warehouse lines of credit (see Note 11). We may incur losses with respect to mortgages that were previously sold that are delinquent and which had underwriting defects, but only to the extent the losses are not covered by mortgage insurance or the resale value of the home. The reserves for these estimated losses are included in “Financial services” liabilities on the Condensed Consolidated Balance Sheets. At both April 30, 2025 and October 31, 2024, we had specific reserves for 10 identified mortgage loans, as well as reserves for an estimate of future losses on mortgages sold but not yet identified to us.

The activity in our loan origination reserves during the three and six months ended April 30, 2025 and 2024 were as follows:

	Three Months Ended					Six Months Ended
	April 30,					April 30,
(In thousands)	2025		2024			2025				2024
Loan origination reserves, beginning of period	$	2,626	$	2,059			$	2,520		$	2,013
Provisions for estimated losses during the period		112		85				257			413
Payments/settlements		-		(110	)			(39	)		(392	)
Loan origination reserves, end of period	$	2,738	$	2,034			$	2,738		$	2,034

11.

Mortgages

Nonrecourse

We had nonrecourse mortgage loans for certain communities totaling $78.1 million and $90.7 million, net of debt issuance costs, at April 30, 2025 and October 31, 2024, respectively, which are secured by the related real property, including any improvements, with an aggregate book value of $196.3 million and $249.7 million, respectively. The weighted-average interest rate on these obligations was 8.2% and 8.7% at April 30, 2025 and October 31, 2024, respectively, and the mortgage loan payments primarily correspond to home deliveries.

Mortgage Loans

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.

Our secured Master Repurchase Agreement with JPMorgan Chase Bank, N.A. (“Chase Master Repurchase Agreement”) is a short-term borrowing facility that provides up to $50.0 million through its maturity on July 31, 2025. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at an adjusted Secured Overnight Financing Rate ("SOFR"), plus an applicable margin of 2.00% to 2.25%. As of April 30, 2025 and October 31, 2024, the aggregate principal amount of all borrowings outstanding under the Chase Master Repurchase Agreement was $6.4 million and $7.3 million, respectively.

K. Hovnanian Mortgage has another secured Master Repurchase Agreement with Customers Bank (“Customers Master Repurchase Agreement”), which was amended on March 5, 2025 to extend the maturity date to March 4, 2026, is a short-term borrowing facility that provides up to $100.0 million. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable daily or as loans are sold to permanent investors on outstanding advances at the current Bloomberg Short Term Bank Yield Index ("BSBY") rate or SOFR, plus an applicable margin ranging from 2.125% to 4.5% based on the type of loan and the number of days outstanding on the warehouse line. As of April 30, 2025 and October 31, 2024, the aggregate principal amount of all borrowings outstanding under the Customers Master Repurchase Agreement was $41.0 million and $78.6 million, respectively.

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K. Hovnanian Mortgage has another secured Master Repurchase Agreement with Hinsdale Bank & Trust Company, N.A. ("Hinsdale Master Repurchase Agreement"), which is a short-term borrowing facility that provides up to $50.0 million through its maturity on July 14, 2025. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at the One-Month Term SOFR, plus an applicable margin of 1.75% subject to a floor of 2.75%. As of April 30, 2025 and October 31, 2024, the aggregate principal amount of all borrowings outstanding under the Hinsdale Master Repurchase Agreement was $47.2 million and $45.5 million, respectively.

The Chase Master Repurchase Agreement, Customers Master Repurchase Agreement and Hinsdale Master Repurchase Agreement (together, the “Master Repurchase Agreements”) require K. Hovnanian Mortgage to satisfy and maintain specified financial ratios and other financial condition tests. Because of the extremely short period of time mortgages are held by K. Hovnanian Mortgage before the mortgages are sold to investors (generally a period of a few weeks), the immateriality to us on a consolidated basis, the size of the Master Repurchase Agreements, the levels required by these financial covenants, our ability based on our immediately available resources to contribute sufficient capital to cure any default, were such conditions to occur, and our right to cure any conditions of default based on the terms of the applicable agreement, we do not consider any of these covenants to be substantive or material. As of April 30, 2025, we believe we were in compliance with the covenants under the Master Repurchase Agreements.

12.	Senior Notes and Credit Facilities

Senior notes and credit facilities balances as of April 30, 2025 and October 31, 2024, were as follows:

	April 30,			October 31,
(In thousands)	2025			2024
Senior Secured Notes:
8.0% Senior Secured 1.125 Lien Notes due September 30, 2028	$	225,000		$	225,000
11.75% Senior Secured 1.25 Lien Notes due September 30, 2029		430,000			430,000
Total Senior Secured Notes	$	655,000		$	655,000
Senior Notes:
13.5% Senior Notes due February 1, 2026	$	-		$	26,588
5.0% Senior Notes due February 1, 2040		24,968			24,968
Total Senior Notes	$	24,968		$	51,556
Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028	$	175,000		$	175,000
Senior Secured Revolving Credit Facility (1)	$	-		$	-
Subtotal senior notes and credit facilities	$	854,968		$	881,556
Net premiums (discounts)	$	11,646		$	17,340
Unamortized debt issuance costs	$	(2,334	)	$	(2,678	)
Total senior notes and credit facilities, net of discounts, premiums and unamortized debt issuance costs	$	864,280		$	896,218

(1) At April 30, 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 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 4.00%) plus an applicable margin of 3.50%. In addition, K. Hovnanian will pay an unused commitment fee on the undrawn revolving commitments at a rate of 1.00% per annum.

General

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 April 30, 2025 (collectively, the "Notes Guarantors").

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The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together, the "Debt Instruments") outstanding at April 30, 2025, do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K. Hovnanian, to incur (including through exchange or certain other types of transactions) indebtedness, pay dividends and make distributions on common and preferred stock, repay/repurchase certain indebtedness prior to its respective stated maturity, repurchase common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates. The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans (the "Secured Term Loans") made under the Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028 (the "Secured Term Loan Facility") and loans (the "Secured Revolving Loans") made under the Senior Secured Revolving Credit Agreement due June 30, 2026 (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 Term Loans, Secured Revolving Loans or notes or other material indebtedness, cross default to other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency, with respect to the Secured Term Loans and Secured Revolving Loans, material inaccuracy of representations and warranties and with respect to the Secured Term Loans and Secured Revolving Loans, a change of control, and, with respect to the Secured Term Loans, Secured Revolving Loans and senior secured notes, the failure of the documents granting security for the obligations under the secured Debt Instruments to be in full force and effect, and the failure of the liens on any material portion of the collateral securing the obligations under the secured Debt Instruments to be valid and perfected. As of April 30, 2025, we believe we were in compliance with the covenants of the Debt Instruments.

Under the terms of our Debt Instruments, we have the right to make certain redemptions and prepayments and, depending on market conditions, our strategic priorities and covenant restrictions, may do so from time to time. We also continue to actively analyze and evaluate our capital structure and explore transactions to simplify our capital structure and to strengthen our balance sheet, including those that reduce leverage, interest rates and/or extend maturities, and will seek to do so with the right opportunity. We may also continue to make debt or equity purchases and/or exchanges from time to time through tender offers, exchange offers, redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.

Fiscal 2025

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. This redemption resulted in a gain on extinguishment of debt of $0.4 million for the three and six months ended April 30, 2025, including the write-off of unamortized premiums, debt issuance costs and fees. The gain from the redemption is included in the Condensed Consolidated Statement of Operations as "Gain on extinguishment of debt, net".

Secured Obligations

The Secured Credit Agreement provides for up to $125.0 million in aggregate amount of Secured Revolving Loans to be used for general corporate purposes, upon the terms and subject to the conditions set forth therein. Secured Revolving Loans are to be borrowed by K. Hovnanian and guaranteed by the Notes Guarantors. The revolving loans under the Secured Credit Agreement have a maturity of June 30, 2026 and borrowings bear interest, at K. Hovnanian’s option, at either (i) SOFR (subject to a floor of 3.00%) plus an applicable margin of 4.5% or (ii) an alternate base rate (subject to a floor of 4.0%) plus an applicable margin of 3.5%. In addition, K. Hovnanian pays an unused commitment fee on the undrawn revolving commitments at a rate of 1.0% per annum.

The 8.0% Senior Secured 1.125 Lien Notes due 2028 (the "New 1.125 Lien Notes") have a maturity of September 30, 2028 and bear interest at a rate of 8.0% per annum payable semi-annually on March 30 and September 30 of each year to holders of record at the close of business on March 15 and September 15, as the case may be, immediately preceding such interest payment dates. The New 1.125 Lien Notes are redeemable in whole or in part at K. Hovnanian’s option at any time prior to September 30, 2025 at a redemption price equal to 100% of their principal amount plus an applicable "Make Whole Amount". K. Hovnanian may also redeem some or all of the New 1.125 Lien Notes at 104.0% of their principal amount commencing on September 30, 2025, at 102.0% of their principal amount commencing on September 30, 2026 and at 100.0% of their principal amount commencing September 30, 2027. In addition, K. Hovnanian may also redeem up to 35.0% of the aggregate principal amount of New 1.125 Lien Notes prior to September 30, 2025 with the net cash proceeds from certain equity offerings at 108.0% of their principal amount.

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The 11.75% Senior Secured 1.25 Lien Notes due 2029 (the "New 1.25 Lien Notes") have a maturity of September 30, 2029 and bear interest at a rate of 11.75% per annum payable semi-annually on March 30 and September 30 of each year to holders of record at the close of business on March 15 and September 15, as the case may be, immediately preceding such interest payment dates. The New 1.25 Lien Notes are redeemable in whole or in part at K. Hovnanian’s option at any time prior to March 30, 2026 at a redemption price equal to 100% of their principal amount plus an applicable “Make Whole Amount”. K. Hovnanian may also redeem some or all of the New 1.25 Lien Notes at 105.875% of their principal amount commencing on March 30, 2026, at 102.9375% of their principal amount commencing on September 30, 2027 and at 100.0% of their principal amount commencing on September 30, 2028. In addition, K. Hovnanian may also redeem up to 35.0% of the aggregate principal amount of New 1.25 Lien Notes prior to March 30, 2026, with the net cash proceeds from certain equity offerings at 111.75% of their principal amount.

The Secured Term Loans bear interest at a rate equal to 10.0% per annum (provided that the interest rate on all then outstanding Secured Term Loans shall be increased in certain circumstances when certain priority secured debt is issued, to a weighted average rate that results from applying (x) an 11.75% per annum rate to the principal amount of the Secured Term Loans equal to a specified aggregate principal amount of such priority secured debt and (y) a 10.0% per annum rate on the remaining principal amount of the Secured Term Loans) and will mature on January 31, 2028, with interest payable in arrears on the last business day of each fiscal quarter. At any time and from time to time after November 15, 2023, K. Hovnanian may voluntarily prepay some or all of the Secured Term Loans at a prepayment price equal to 100.0% of their principal amount.

Each series of secured notes and the guarantees thereof, the Secured Term Loans and the guarantees thereof and the Secured Credit Agreement and the guarantees thereof are secured by the same assets. Among the secured debt (in each case, with respect to the assets securing such debt): the liens securing the Secured Credit Agreement are senior to the liens securing all of K. Hovnanian’s other secured notes and the Secured Term Loans; the liens securing the New 1.125 Lien Notes are senior to the liens securing the New 1.25 Lien Notes, the Secured Term Loans and any other future secured obligations that are junior in priority with respect to the assets securing the New 1.125 Lien Notes; the liens securing the New 1.25 Lien Notes are senior to the liens securing the Secured Term Loans and any other future secured obligations that are junior in priority with respect to the assets securing the New 1.25 Lien Notes; and the liens securing the Secured Term Loans are senior to any other future secured obligations that are junior in priority with respect to the assets securing the Secured Term Loans.

As of April 30, 2025, the collateral securing the Secured Credit Agreement, the Secured Term Loan Facility and the senior secured notes included (1) $80.4 million of cash and cash equivalents, which included $3.4 million of restricted cash collateralizing certain letters of credit (subsequent to such date, fluctuations as a result of cash uses include general business operations and real estate and other investments along with cash inflow primarily from deliveries); (2) $710.1 million aggregate book value of real property, which does not include the impact of inventory investments, home deliveries or impairments thereafter and which may differ from the value if it were appraised; and (3) equity interests in joint venture holding companies with an aggregate book value of $179.9 million.

Unsecured Obligations

The 5.0% Senior Notes due 2040 (the “5.0% 2040 Notes”) bear interest at 5.0% per annum and mature on February 1, 2040. Interest on the 5.0% 2040 Notes is payable semi-annually on February 1 and August 1 of each year to holders of record at the close of business on January 15 or July 15, as the case may be, immediately preceding each such interest payment date. At any time and from time to time, K. Hovnanian may redeem some or all of the 5.0% 2040 Notes at a redemption price equal to 100.0% of their principal amount.

Other

We have certain stand-alone cash collateralized letter of credit agreements and facilities under which there was a total of $3.3 million and $2.6 million letters of credit outstanding at April 30, 2025 and October 31, 2024, respectively. These agreements and facilities require us to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder, which is reflected in "Restricted cash and cash equivalents" on the Condensed Consolidated Balance Sheets.

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13.	Per Share Calculation

Basic and diluted earnings per share for the periods presented below were calculated as follows:

	Three Months Ended						Six Months Ended
	April 30,						April 30,
(In thousands, except per share data)	2025				2024		2025				2024
Numerator:
Net income	$	19,726		$	50,836		$	47,917		$	74,740
Less: preferred stock dividends		(2,669	)		(2,669	)		(5,338	)		(5,338	)
Less: undistributed earnings allocated to participating securities		(144	)		(2,193	)		(350	)		(3,214	)
Numerator for basic earnings per share	$	16,913		$	45,974		$	42,229		$	66,188
Plus: undistributed earnings allocated to participating securities		144			2,193			350			3,215
Less: undistributed earnings reallocated to participating securities		(144	)		(2,194	)		(351	)		(3,215	)
Numerator for diluted earnings per share	$	16,913		$	45,973		$	42,228		$	66,188
Denominator:
Denominator for basic earnings per share – weighted average shares outstanding		6,411			6,457			6,464			6,477
Effect of dilutive securities:
Stock-based payments		540			445			547			443
Denominator for diluted earnings per share – weighted-average shares outstanding		6,951			6,902			7,011			6,920
Basic earnings per share	$	2.64		$	7.12		$	6.53		$	10.22
Diluted earnings per share	$	2.43		$	6.66		$	6.02		$	9.57

There were no anti-dilutive shares for the three and six months ended April 30, 2025 and 2024.

14.	Preferred Stock

On July 12, 2005, we issued 5,600 shares of 7.625% Series A preferred stock, with a liquidation preference of $25,000 per share. Dividends on Series A preferred stock are not cumulative and are payable at an annual rate of 7.625%. The Series A preferred stock is not convertible into the Company’s common stock and is redeemable in whole or in part at our option at the liquidation preference of the shares. The Series A preferred stock is traded as depositary shares, with each depositary share representing 1/1000th of a share of Series A preferred stock. We paid dividends of $2.7 million and $5.3 million on the Series A preferred stock for the three and six months ended April 30, 2025 and 2024.

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15.	Common Stock

Each share of Class A common stock entitles its holder to one vote per share, and each share of Class B common stock generally entitles its holder to ten votes per share. The amount of any regular cash dividend payable on a share of Class A common stock will be an amount equal to 110% of the corresponding regular cash dividend payable on a share of Class B common stock. If a shareholder desires to sell shares of Class B common stock, such stock must be converted into shares of Class A common stock at a one-to-one conversion rate.

On August 4, 2008, the Board adopted a shareholder rights plan (the “Rights Plan”), which was amended on January 11, 2018, January 18, 2021, and January 11, 2024, designed to preserve shareholder value and the value of certain tax assets primarily associated with net operating loss (“NOL”) carryforwards and built-in losses under Section 382 of the Internal Revenue Code. Our ability to use NOLs and built-in losses would be limited if there was an “ownership change” under Section 382. This would occur if shareholders owning (or deemed under Section 382 to own) 5% or more of our stock increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a defined period of time. The Rights Plan was adopted to reduce the likelihood of an “ownership change” occurring as defined by Section 382. Under the Rights Plan, one right was distributed for each share of Class A common Stock and Class B common Stock outstanding as of the close of business on August 15, 2008. Effective August 15, 2008, if any person or group acquires 4.9% or more of the outstanding shares of Class A common stock without the approval of the Board, there would be a triggering event causing significant dilution in the voting power of such person or group. However, existing shareholders who owned, at the time of the Rights Plan’s initial adoption on August 4, 2008, 4.9% or more of the outstanding shares of Class A common stock will trigger a dilutive event only if they acquire additional shares. The approval of the Board’s decision to adopt the Rights Plan may be terminated by the Board at any time prior to the Rights being triggered. The Rights Plan will continue in effect until August 14, 2027, unless it expires earlier in accordance with its terms. The approval of the Board’s decision to initially adopt the Rights Plan and Amendments Nos. 1, 2 and 3 thereto were approved by shareholders. Our shareholders also approved an amendment to our Certificate of Incorporation to restrict certain transfers of Class A common stock in order to preserve the tax treatment of our NOLs and built-in losses under Section 382 of the Internal Revenue Code. Subject to certain exceptions pertaining to pre-existing 5% shareholders and holders of Class B common stock, the transfer restrictions in our Restated Certificate of Incorporation generally restrict any direct or indirect transfer (such as transfers of our stock that result from the transfer of interests in other entities that own our stock) if the effect would be to (i) increase the direct or indirect ownership of our stock by any person (or public group) from less than 5% to 5% or more of our common stock; (ii) increase the percentage of our common stock owned directly or indirectly by a person (or public group) owning or deemed to own 5% or more of our common stock; or (iii) create a new “public group” (as defined in the applicable U.S. Treasury regulations). Transfers included under the transfer restrictions include sales to persons (or public groups) whose resulting percentage ownership (direct or indirect) of common stock would exceed the 5% thresholds discussed above, or to persons whose direct or indirect ownership of common stock would by attribution cause another person (or public group) to exceed such threshold.

On December 18, 2024, the Board authorized an incremental increase to our repurchase program and on April 11, 2025, the Board authorized another 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 repurchase program may be changed, suspended or discontinued at any time and does not have a specified expiration date.

During the six months ended April 30, 2025, we repurchased 257,908 shares under the stock repurchase program, with a market value of $30.1 million, or $116.70 per share. During the six months ended April 30, 2024, we repurchased 106,047 shares under the stock repurchase program, with a market value of $15.0 million, or $141.45 per share. The repurchased shares were added to "Treasury stock" on the Condensed Consolidated Balance Sheets. As of April 30, 2025, $26.4 million of our Class A common stock was available to be purchased under the stock repurchase program.

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16.	Income Taxes

For the three and six months ended April 30, 2025, we recorded income tax expense of $6.8 million and $18.5 million, respectively, and $18.6 million and $27.2 million for the same periods in the prior year, respectively. For both the three and six months ended April 30, 2025, and both prior year periods, the expense was primarily driven by federal and state tax expense on income before income taxes and permanent differences, partially offset by the generation of energy home credits. The federal tax expense is not paid in cash as it is offset by the use of our existing NOL carryforwards.

The Company recognizes deferred income taxes for deferred tax benefits arising from NOL carryforwards and temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income. As part of our analysis, we considered both positive and negative factors that impact profitability and whether those factors would lead to a change in estimate of our deferred tax assets (“DTAs”) that may be realized in the future. At April 30, 2025, the Company has determined that it is more likely than not that sufficient taxable income will be generated in the future to realize its DTAs, net of any state valuation allowances.

17.	Operating and Reporting Segments

HEI’s operating segments are components of the Company’s business for which discrete financial information is available and reviewed regularly by the chief operating decision maker, our Chief Executive Officer, to evaluate performance and make resource allocations.

We currently have homebuilding operations in 13 states that are aggregated into reportable segments based primarily upon geographic proximity.

HEI’s reportable segments consist of the following three homebuilding segments and a financial services segment.

Homebuilding:

	(1)	Northeast (Delaware, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia)
	(2)	Southeast (Florida, Georgia and South Carolina)
	(3)	West (Arizona, California and Texas)

Operations of the homebuilding segments primarily include the sale and construction of single-family attached and detached homes, attached townhomes and condominiums, urban infill and active lifestyle homes in planned residential developments. In addition, from time to time, operations of the homebuilding segments include sales of land. Operations of the financial services segment include mortgage banking and title services provided to the homebuilding operations’ customers. Our financial services subsidiaries do not typically retain or service mortgages that we originate but sell the mortgages and related servicing rights to investors.

Corporate and unallocated primarily represents operations at our headquarters in New Jersey. This includes our executive offices, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, construction services, administration of insurance, quality and safety. It also includes interest income and interest expense resulting from interest incurred that cannot be capitalized in inventory in the homebuilding segments, as well as the gains or losses on extinguishment of debt from any debt repurchases or exchanges.

Evaluation of segment performance is based primarily on income (loss) before income taxes. Income (loss) before income taxes for the homebuilding segments consist of revenues generated from the sales of homes and land, income (loss) from unconsolidated entities, management fees and other income, less the cost of homes and land sold, selling, general and administrative expenses and interest expense. Income (loss) before income taxes for the financial services segment consist of revenues generated from mortgage financing, title insurance and closing services, less the cost of such services and corporate general and administrative expenses.

Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent stand-alone entity during the periods presented.

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Financial information relating to our reportable segments was as follows:

	Three Months Ended						Six Months Ended
	April 30,						April 30,
(In thousands)	2025			2024			2025			2024
Revenues:
Northeast	$	257,281		$	199,087		$	541,029		$	390,527
Southeast		74,676			128,787			126,278			234,797
West		332,385			361,234			652,339			639,691
Total homebuilding		664,342			689,108			1,319,646			1,265,015
Financial services		21,318			17,167			38,260			32,435
Corporate and unallocated		811			2,105			2,188			5,126
Total revenues	$	686,471		$	708,380		$	1,360,094		$	1,302,576
Income before income taxes:
Northeast	$	31,420		$	31,730		$	71,211		$	67,639
Southeast		392			27,067			10,113			41,942
West		18,938			35,597			21,559			56,189
Total homebuilding		50,750			94,394			102,883			165,770
Financial services		8,427			5,144			11,932			8,941
Corporate and unallocated (1)		(32,647	)		(30,146	)		(48,422	)		(72,756	)
Income before income taxes	$	26,530		$	69,392		$	66,393		$	101,955

(1)

Corporate and unallocated for the three months ended April 30, 2025, included corporate general and administrative expenses of $29.5 million, $3.5 million of other net expenses, and $0.4 million of gain on extinguishment of debt. Corporate and unallocated for the six months ended April 30, 2025, included corporate general and administrative expenses of $62.2 million, $13.4 million of other income, and $0.4 million of gain on extinguishment of debt. Corporate and unallocated for the three months ended April 30, 2024, included corporate general and administrative expenses of $32.5 million, interest expense of $1.7 million (a component of Other interest in our Condensed Consolidated Statements of Operations) and $4.1 million of other income. Corporate and unallocated for the six months ended April 30, 2024, included corporate general and administrative expenses of $69.7 million, interest expense of $5.4 million, $0.9 million of other income and $1.4 million of gain on extinguishment of debt.

	April 30,		October 31,
(In thousands)	2025		2024

Assets:
Northeast	$	697,025	$	664,064
Southeast		372,741		296,058
West		915,400		889,704
Total homebuilding		1,985,166		1,849,826
Financial services		161,619		203,589
Corporate and unallocated		406,314		552,159
Total assets	$	2,553,099	$	2,605,574

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18.

Investments in Unconsolidated Homebuilding and Land Development Joint Ventures

We enter into homebuilding and land development joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile, leveraging our capital base and enhancing returns on capital.

During the second quarter of fiscal 2024, we contributed 11 communities we owned, including three active selling communities to a new unconsolidated joint venture for $53.8 million of net cash.

During the first quarter of fiscal 2025, we contributed four active selling communities we owned to one new unconsolidated joint venture for $20.8 million of net cash and a $50.0 million note receivable, resulting in a gain of $22.7 million, which was recorded in “Other (income) expense, net.”

The tables set forth below summarize the combined financial information related to our unconsolidated homebuilding and land development joint ventures that are accounted for under the equity method.

	April 30, 2025
				Land
(In thousands)	Homebuilding			Development			Total
Assets:
Cash and cash equivalents	$	141,058		$	-		$	141,058
Inventories		534,268			-			534,268
Other assets		216,871			-			216,871
Total assets	$	892,197		$	-		$	892,197

Liabilities and equity:
Accounts payable and accrued liabilities	$	435,513		$	-		$	435,513
Notes payable		134,705			-			134,705
Total liabilities		570,218			-			570,218
Equity of:
Hovnanian Enterprises, Inc.		179,850			-			179,850
Others		142,129			-			142,129
Total equity		321,979			-			321,979
Total liabilities and equity	$	892,197		$	-		$	892,197
Debt to capitalization ratio		29	%		0	%		29	%

	October 31, 2024
				Land
(In thousands)	Homebuilding			Development			Total
Assets:
Cash and cash equivalents	$	130,532		$	-		$	130,532
Inventories		402,628			-			402,628
Other assets		311,955			-			311,955
Total assets	$	845,115		$	-		$	845,115

Liabilities and equity:
Accounts payable and accrued liabilities	$	469,320		$	-		$	469,320
Notes payable		88,653			-			88,653
Total liabilities		557,973			-			557,973
Equity of:
Hovnanian Enterprises, Inc.		140,540			-			140,540
Others		146,602			-			146,602
Total equity		287,142			-			287,142
Total liabilities and equity	$	845,115		$	-		$	845,115
Debt to capitalization ratio		24	%		0	%		24	%

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As of April 30, 2025 and October 31, 2024, we had outstanding advances to unconsolidated joint ventures of $3.6 million and $2.4 million, respectively. These amounts were included in “Accounts payable and accrued liabilities” in the tables above. In some cases, our net investment in unconsolidated joint ventures is less than our proportionate share of equity reflected in the tables above because of differences between asset impairments recorded against our unconsolidated joint venture investments and any impairments recorded in the applicable unconsolidated joint venture. During the six months ended April 30, 2025 and 2024, we did not write-down any of our unconsolidated joint venture investments.

	Three Months Ended April 30, 2025
				Land
(In thousands)	Homebuilding			Development		Total

Revenues	$	146,139		$	-	$	146,139
Cost of sales and expenses		(133,957	)		-		(133,957	)
Joint venture net income	$	12,182		$	-	$	12,182
Our share of net income	$	9,043		$	-	$	9,043

	Three Months Ended April 30, 2024
				Land
(In thousands)	Homebuilding			Development		Total

Revenues	$	124,044		$	-	$	124,044
Cost of sales and expenses		(111,117	)		-		(111,117	)
Joint venture net income	$	12,927		$	-	$	12,927
Our share of net income	$	11,164		$	-	$	11,164

	Six Months Ended April 30, 2025
				Land
(In thousands)	Homebuilding			Development		Total

Revenues	$	280,052		$	-	$	280,052
Cost of sales and expenses		(254,215	)		-		(254,215	)
Joint venture net income	$	25,837		$	-	$	25,837
Our share of net income	$	18,248		$	-	$	18,248

	Six Months Ended April 30, 2024
				Land
(In thousands)	Homebuilding			Development		Total

Revenues	$	250,469		$	-	$	250,469
Cost of sales and expenses		(219,776	)		-		(219,776	)
Joint venture net income	$	30,693		$	-	$	30,693
Our share of net income	$	26,116		$	-	$	26,116

The reason “Our share of net income” in homebuilding joint ventures is higher or lower than the “Joint venture net income” in the tables above is a result of our varying ownership percentages in each investment. For the three and six months ended April 30, 2025 and 2024, respectively, we had investments in seven and eight unconsolidated joint ventures, respectively, and our ownership in these joint ventures ranged from 20% to over 50% for both periods. Therefore, depending on mix, if the unconsolidated joint ventures in which we have higher sharing percentages are more profitable than our other unconsolidated joint ventures, that results in us having a higher overall percentage of income in the aggregate than would occur if all joint ventures had the same sharing percentage; conversely, if the unconsolidated joint ventures in which we have lower sharing percentages are more profitable than our other unconsolidated joint ventures, that results in us having a lower overall percentage of income in the aggregate than would occur if all joint ventures had the same sharing percentage. For the three and six months ended April 30, 2025, respectively, “Our share of net income” was less than the "Joint venture net income" due to two unconsolidated joint ventures with increased income during the period for which we currently recognize a lower profit-sharing percentage based on the joint venture agreements, partially offset by one unconsolidated joint venture with increased losses during the period for which we currently recognize a lower profit-sharing percentage based on the joint venture agreements.

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To compensate us for the administrative services we provide as the manager of certain unconsolidated joint ventures, we receive a management fee based on a percentage of the applicable unconsolidated joint ventures' revenues. These management fees, which totaled $6.2 million and $4.2 million for the three months ended April 30, 2025 and 2024, respectively, and $11.4 million and $8.5 million for the six months ended April 30, 2025 and 2024, respectively, are recorded in “Selling, general and administrative” homebuilding expenses in the Condensed Consolidated Statements of Operations.

Our unconsolidated joint ventures may obtain separate project specific mortgage financing. Any unconsolidated joint venture financing is on a nonrecourse basis, with guarantees from us limited only to performance and completion of development, environmental warranties and indemnification, standard indemnification for fraud, misrepresentation and other similar actions, including a voluntary bankruptcy filing. In some instances, the unconsolidated joint venture entity is considered a VIE due to the returns being capped to the equity holders; however, in these instances, we have determined that we are not the primary beneficiary, and therefore we do not consolidate these entities.

19.	Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within the segment measure of profit or loss. This guidance will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. We are currently evaluating the potential impact, but we do not expect the adoption of this guidance to have a material impact on our Condensed Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires enhanced disclosures related to the rate reconciliation and information on income taxes paid. This guidance will be applied prospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2024. We are currently evaluating the potential impact the adoption of this guidance will have on our Condensed Consolidated Financial Statements.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires disclosure of additional information about specific cost and expense categories in the notes to the financial statements. This guidance will be applied either prospectively or retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2026, and interim reporting periods in fiscal years beginning after December 15, 2027. We are currently evaluating the potential impact the adoption of this guidance will have on our Condensed Consolidated Financial Statements.

20.	Fair Value of Financial Instruments

We use a fair-value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1:

Fair value determined based on quoted prices in active markets for identical assets.

Level 2:

Fair value determined using significant other observable inputs.

Level 3:

Fair value determined using significant unobservable inputs.

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Our financial instruments measured at fair value on a recurring basis are summarized below:

		Fair Value at		Fair Value at
	Fair Value	April 30,		October 31,
(In thousands)	Hierarchy	2025		2024

Mortgage loans held for sale (1)	Level 2	$	118,009	$	148,925

(1) The aggregate unpaid principal balance was $118.8 million and $149.4 million at April 30, 2025 and October 31, 2024, respectively.

Fair value of mortgage loans held for sale is based on independent quoted market prices, where available, or the prices for other mortgage loans with similar characteristics.

The financial services segment had a pipeline of loan applications in process of $583.4 million at April 30, 2025. Loans in process for which interest rates were committed to the borrowers totaled $61.5 million as of April 30, 2025. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments are expected to expire without being exercised by the borrowers, the total commitments do not necessarily represent future cash requirements.

In addition, the financial services segment uses investor commitments and forward sales of mandatory MBS to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments, option contracts with investment banks, federally regulated bank affiliates and loan sales transactions with permanent investors meeting the segment’s credit standards. Our risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At April 30, 2025, we had no open mandatory investor commitments to sell MBS.

Changes in fair value that are included in income are shown by financial instrument and financial statement line item, below:

Three Months Ended April 30, 2025

Mortgage

HOVNANIAN ENTERPRISES INC 10-Q