[10-Q] Hovnanian Enterprises, Inc. Quarterly Earnings Report
Hovnanian Enterprises, Inc. reported results for the three and nine months ended July 31, 2025 showing lower profitability as homebuilding gross margin and net income declined versus prior-year periods. Revenue rose as home deliveries increased (14.0% and 10.2% for the three and nine months), but average price per home fell, pressuring margins. Income before taxes fell to $23.8 million for the quarter and $90.2 million year-to-date, with net income down to $16.6 million for the quarter and diluted EPS falling to $1.99 year-to-date. The company recorded inventory impairments of $7.6 million and $8.8 million for the three and nine months, recognized a $22.7 million gain from contributing assets to a joint venture, and maintained cash and liquidity of $277.9 million (including $146.6 million cash and $125.0 million revolver capacity). Debt refinancings and new secured term loans reshaped the capital structure, and mortgage warehouse activity reflected lower mortgage origination volumes.
Hovnanian Enterprises, Inc. ha comunicato i risultati per i tre e i nove mesi chiusi il 31 luglio 2025, evidenziando una redditività in calo: il margine lordo delle attività di costruzione di case e l'utile netto sono diminuiti rispetto ai periodi dell'anno precedente. I ricavi sono aumentati grazie a un maggior numero di consegne di abitazioni (14,0% e 10,2% rispettivamente nei tre e nei nove mesi), ma il prezzo medio per abitazione è diminuito, comprimendo i margini. L'utile ante imposte è sceso a 23,8 milioni di dollari nel trimestre e a 90,2 milioni da inizio anno; l'utile netto del trimestre è stato di 16,6 milioni e l'EPS diluito è diminuito a 1,99 dollari da inizio anno. La società ha registrato svalutazioni delle rimanenze per 7,6 milioni e 8,8 milioni nei tre e nei nove mesi, ha rilevato una plusvalenza di 22,7 milioni dalla conferimento di attività in una joint venture e ha mantenuto liquidità e disponibilità per 277,9 milioni (inclusi 146,6 milioni in cassa e 125,0 milioni di capacità sul revolver). Rifinanziamenti del debito e nuovi prestiti a termine garantiti hanno rimodellato la struttura del capitale, mentre l'attività sui magazzini ipotecari ha risentito di volumi inferiori di originazione di mutui.
Hovnanian Enterprises, Inc. informó resultados para los tres y nueve meses terminados el 31 de julio de 2025, mostrando una rentabilidad menor: el margen bruto de la construcción de viviendas y el ingreso neto disminuyeron respecto a los mismos periodos del año anterior. Los ingresos crecieron por un mayor número de entregas de viviendas (14,0% y 10,2% en los tres y nueve meses), pero el precio medio por vivienda cayó, presionando los márgenes. La utilidad antes de impuestos bajó a 23,8 millones de dólares en el trimestre y a 90,2 millones en lo que va del año; el ingreso neto trimestral fue de 16,6 millones y el EPS diluido se redujo a 1,99 dólares en lo que va del año. La compañía registró deterioros de inventario por 7,6 millones y 8,8 millones en los tres y nueve meses, reconoció una ganancia de 22,7 millones por la aportación de activos a una joint venture y mantuvo caja y liquidez por 277,9 millones (incluyendo 146,6 millones en efectivo y 125,0 millones de capacidad en la línea revolvente). Refinanciaciones de deuda y nuevos préstamos a plazo garantizados reconfiguraron la estructura de capital, y la actividad en el almacén hipotecario reflejó menores volúmenes de originación de hipotecas.
호브나니언 엔터프라이즈(Hovnanian Enterprises, Inc.)는 2025년 7월 31일로 종료된 3개월 및 9개월 실적을 발표하며 주택 건설 부문의 매출총이익과 순이익이 전년 동기 대비 감소해 수익성이 낮아졌다고 밝혔습니다. 주택 인도 증가로 매출은 증가했으나(3개월 및 9개월 각각 14.0% 및 10.2%) 주택당 평균 판매가격이 하락해 마진이 압박을 받았습니다. 법인세 차감 전 이익은 분기 기준 2,380만 달러, 연초 누계 기준 9,020만 달러로 감소했고, 분기 순이익은 1,660만 달러, 희석 주당순이익(EPS)은 연초 누계 기준 1.99달러로 하락했습니다. 회사는 3개월 및 9개월 동안 재고손상차손을 각각 760만 달러와 880만 달러 기록했으며, 합작투자에 자산을 출자하면서 2,270만 달러의 이익을 인식했습니다. 현금 및 유동성은 2억7790만 달러(현금 1억4660만 달러 및 회전 신용한도 1억250만 달러 포함)를 유지했습니다. 부채 재금융과 신규 담보 기한부 대출로 자본구조가 재편됐고, 모기지 창고 활동은 주택담보대출 신규 취급량 감소를 반영했습니다.
Hovnanian Enterprises, Inc. a publié ses résultats pour les trois et neuf mois clos le 31 juillet 2025, faisant état d'une rentabilité en baisse : la marge brute de la construction résidentielle et le résultat net ont diminué par rapport aux périodes de l'année précédente. Le chiffre d'affaires a augmenté en raison d'un nombre plus élevé de livraisons de maisons (14,0 % et 10,2 % pour les trois et neuf mois), mais le prix moyen par maison a baissé, exerçant une pression sur les marges. Le résultat avant impôts est tombé à 23,8 millions de dollars sur le trimestre et à 90,2 millions de dollars depuis le début de l'année ; le résultat net trimestriel s'est établi à 16,6 millions et le BPA dilué est retombé à 1,99 dollar depuis le début de l'année. La société a enregistré des dépréciations de stocks de 7,6 millions et 8,8 millions pour les trois et neuf mois, a constaté une plus-value de 22,7 millions liée à l'apport d'actifs à une coentreprise, et a maintenu une trésorerie et des liquidités de 277,9 millions (dont 146,6 millions en cash et 125,0 millions de capacité sur la ligne de crédit renouvelable). Des refinancements de dette et de nouveaux prêts à terme garantis ont remodelé la structure du capital, et l'activité sur l'entrepôt hypothécaire a reflété des volumes d'origination de prêts hypothécaires plus faibles.
Hovnanian Enterprises, Inc. meldete die Ergebnisse für die drei bzw. neun Monate zum 31. Juli 2025 und wies eine geringere Profitabilität aus: Die Bruttomarge im Hausbau und der Nettogewinn fielen gegenüber dem Vorjahr. Der Umsatz stieg infolge höherer Hauslieferungen (14,0% bzw. 10,2% in den drei bzw. neun Monaten), doch der durchschnittliche Verkaufspreis pro Haus ging zurück und belastete die Margen. Das Ergebnis vor Steuern sank im Quartal auf 23,8 Mio. USD und im Jahr bisher auf 90,2 Mio. USD; der Nettogewinn des Quartals betrug 16,6 Mio. USD, das verwässerte Ergebnis je Aktie fiel auf 1,99 USD im Jahresverlauf. Das Unternehmen verbuchte Bestandsabschreibungen von 7,6 Mio. bzw. 8,8 Mio. USD in den drei bzw. neun Monaten, erkannte einen Gewinn von 22,7 Mio. USD aus der Einbringung von Vermögenswerten in ein Joint Venture und hielt Barmittel und Liquidität von 277,9 Mio. USD (darunter 146,6 Mio. USD Zahlungsmittel und 125,0 Mio. USD Revolverkapazität). Umfinanzierungen und neue besicherte Terminkredite veränderten die Kapitalstruktur, und die Aktivitäten im Hypothekenlager spiegelten niedrigere Neuverbriefungsvolumina wider.
- Increased home deliveries: homes delivered rose 14.0% (three months) and 10.2% (nine months), driving higher sale volumes
- Liquidity available: combined cash and borrowing capacity of $277.9 million including $146.6 million cash and $125.0 million revolver capacity as of July 31, 2025
- Strategic joint-venture activity: contribution to a new joint venture generated a $22.7 million gain during the nine months
- Active share repurchase program: authorization to repurchase up to $30.6 million of Class A stock with $26.4 million remaining as of July 31, 2025
- Profitability decline: income before taxes decreased to $23.8 million for the quarter and $90.2 million year-to-date versus substantially higher prior-year amounts
- EPS compression: diluted EPS fell to $1.99 (nine months) from $19.15 prior-year, and quarterly EPS dropped to $2.14 from $9.75 prior-year
- Margin pressure: total homebuilding gross margin decreased to 17.6% from 22.2% year-over-year, driven by higher incentives and concessions
- Inventory impairments: impairments of $7.6 million (three months) and $8.8 million (nine months) were recorded, reducing inventory carrying value
- Financing complexity and interest costs: multiple secured term loans, note redemptions and varying warehouse facility rates increase refinancing and interest-rate exposure
Insights
TL;DR Earnings and margins materially declined despite higher deliveries; liquidity appears adequate but leverage and margin pressure are key concerns.
The company increased home deliveries but offsetting declines in average selling price and higher incentives reduced gross margin to 17.6% versus 22.2% prior-year. Quarterly income before taxes fell from $97.3 million to $23.8 million and EPS declined sharply, indicating materially weaker profitability. Inventory impairments and higher selling, general and administrative costs also weighed on results. Cash plus revolver capacity of $277.9 million supports near-term operations, and a $22.7 million joint venture gain provided one-time benefit. Overall, results are materially negative for earnings but liquidity and strategic JV activity partially mitigate near-term risk.
TL;DR Margin compression and elevated financing complexity increase operational and credit risk despite available liquidity.
Persistent high mortgage rates pressured affordability, prompting increased incentives and mortgage buydowns that compressed margins. The company recorded recurring inventory impairments and has various secured and unsecured borrowings, including recent term loan activity and slated note redemptions with make-whole provisions, adding refinancing and interest-rate exposure. Mortgage warehouse borrowings and pledged mortgages decreased with origination volumes, which may reduce fee income volatility but also signals demand weakness. Litigation and environmental claims are disclosed and in discovery, presenting contingent exposure. These elements raise medium-term execution and refinancing risk.
Hovnanian Enterprises, Inc. ha comunicato i risultati per i tre e i nove mesi chiusi il 31 luglio 2025, evidenziando una redditività in calo: il margine lordo delle attività di costruzione di case e l'utile netto sono diminuiti rispetto ai periodi dell'anno precedente. I ricavi sono aumentati grazie a un maggior numero di consegne di abitazioni (14,0% e 10,2% rispettivamente nei tre e nei nove mesi), ma il prezzo medio per abitazione è diminuito, comprimendo i margini. L'utile ante imposte è sceso a 23,8 milioni di dollari nel trimestre e a 90,2 milioni da inizio anno; l'utile netto del trimestre è stato di 16,6 milioni e l'EPS diluito è diminuito a 1,99 dollari da inizio anno. La società ha registrato svalutazioni delle rimanenze per 7,6 milioni e 8,8 milioni nei tre e nei nove mesi, ha rilevato una plusvalenza di 22,7 milioni dalla conferimento di attività in una joint venture e ha mantenuto liquidità e disponibilità per 277,9 milioni (inclusi 146,6 milioni in cassa e 125,0 milioni di capacità sul revolver). Rifinanziamenti del debito e nuovi prestiti a termine garantiti hanno rimodellato la struttura del capitale, mentre l'attività sui magazzini ipotecari ha risentito di volumi inferiori di originazione di mutui.
Hovnanian Enterprises, Inc. informó resultados para los tres y nueve meses terminados el 31 de julio de 2025, mostrando una rentabilidad menor: el margen bruto de la construcción de viviendas y el ingreso neto disminuyeron respecto a los mismos periodos del año anterior. Los ingresos crecieron por un mayor número de entregas de viviendas (14,0% y 10,2% en los tres y nueve meses), pero el precio medio por vivienda cayó, presionando los márgenes. La utilidad antes de impuestos bajó a 23,8 millones de dólares en el trimestre y a 90,2 millones en lo que va del año; el ingreso neto trimestral fue de 16,6 millones y el EPS diluido se redujo a 1,99 dólares en lo que va del año. La compañía registró deterioros de inventario por 7,6 millones y 8,8 millones en los tres y nueve meses, reconoció una ganancia de 22,7 millones por la aportación de activos a una joint venture y mantuvo caja y liquidez por 277,9 millones (incluyendo 146,6 millones en efectivo y 125,0 millones de capacidad en la línea revolvente). Refinanciaciones de deuda y nuevos préstamos a plazo garantizados reconfiguraron la estructura de capital, y la actividad en el almacén hipotecario reflejó menores volúmenes de originación de hipotecas.
호브나니언 엔터프라이즈(Hovnanian Enterprises, Inc.)는 2025년 7월 31일로 종료된 3개월 및 9개월 실적을 발표하며 주택 건설 부문의 매출총이익과 순이익이 전년 동기 대비 감소해 수익성이 낮아졌다고 밝혔습니다. 주택 인도 증가로 매출은 증가했으나(3개월 및 9개월 각각 14.0% 및 10.2%) 주택당 평균 판매가격이 하락해 마진이 압박을 받았습니다. 법인세 차감 전 이익은 분기 기준 2,380만 달러, 연초 누계 기준 9,020만 달러로 감소했고, 분기 순이익은 1,660만 달러, 희석 주당순이익(EPS)은 연초 누계 기준 1.99달러로 하락했습니다. 회사는 3개월 및 9개월 동안 재고손상차손을 각각 760만 달러와 880만 달러 기록했으며, 합작투자에 자산을 출자하면서 2,270만 달러의 이익을 인식했습니다. 현금 및 유동성은 2억7790만 달러(현금 1억4660만 달러 및 회전 신용한도 1억250만 달러 포함)를 유지했습니다. 부채 재금융과 신규 담보 기한부 대출로 자본구조가 재편됐고, 모기지 창고 활동은 주택담보대출 신규 취급량 감소를 반영했습니다.
Hovnanian Enterprises, Inc. a publié ses résultats pour les trois et neuf mois clos le 31 juillet 2025, faisant état d'une rentabilité en baisse : la marge brute de la construction résidentielle et le résultat net ont diminué par rapport aux périodes de l'année précédente. Le chiffre d'affaires a augmenté en raison d'un nombre plus élevé de livraisons de maisons (14,0 % et 10,2 % pour les trois et neuf mois), mais le prix moyen par maison a baissé, exerçant une pression sur les marges. Le résultat avant impôts est tombé à 23,8 millions de dollars sur le trimestre et à 90,2 millions de dollars depuis le début de l'année ; le résultat net trimestriel s'est établi à 16,6 millions et le BPA dilué est retombé à 1,99 dollar depuis le début de l'année. La société a enregistré des dépréciations de stocks de 7,6 millions et 8,8 millions pour les trois et neuf mois, a constaté une plus-value de 22,7 millions liée à l'apport d'actifs à une coentreprise, et a maintenu une trésorerie et des liquidités de 277,9 millions (dont 146,6 millions en cash et 125,0 millions de capacité sur la ligne de crédit renouvelable). Des refinancements de dette et de nouveaux prêts à terme garantis ont remodelé la structure du capital, et l'activité sur l'entrepôt hypothécaire a reflété des volumes d'origination de prêts hypothécaires plus faibles.
Hovnanian Enterprises, Inc. meldete die Ergebnisse für die drei bzw. neun Monate zum 31. Juli 2025 und wies eine geringere Profitabilität aus: Die Bruttomarge im Hausbau und der Nettogewinn fielen gegenüber dem Vorjahr. Der Umsatz stieg infolge höherer Hauslieferungen (14,0% bzw. 10,2% in den drei bzw. neun Monaten), doch der durchschnittliche Verkaufspreis pro Haus ging zurück und belastete die Margen. Das Ergebnis vor Steuern sank im Quartal auf 23,8 Mio. USD und im Jahr bisher auf 90,2 Mio. USD; der Nettogewinn des Quartals betrug 16,6 Mio. USD, das verwässerte Ergebnis je Aktie fiel auf 1,99 USD im Jahresverlauf. Das Unternehmen verbuchte Bestandsabschreibungen von 7,6 Mio. bzw. 8,8 Mio. USD in den drei bzw. neun Monaten, erkannte einen Gewinn von 22,7 Mio. USD aus der Einbringung von Vermögenswerten in ein Joint Venture und hielt Barmittel und Liquidität von 277,9 Mio. USD (darunter 146,6 Mio. USD Zahlungsmittel und 125,0 Mio. USD Revolverkapazität). Umfinanzierungen und neue besicherte Terminkredite veränderten die Kapitalstruktur, und die Aktivitäten im Hypothekenlager spiegelten niedrigere Neuverbriefungsvolumina wider.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
OR
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission file number
Hovnanian Enterprises, Inc. (Exact Name of Registrant as Specified in Its Charter)
N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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Securities registered pursuant to Section 12(b) of the Act: |
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Trading symbol(s) |
Name of each exchange on which registered |
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N/A |
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The |
(1)
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
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
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.
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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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| 1 |
HOVNANIAN ENTERPRISES, INC.
FORM 10-Q
| INDEX |
PAGE |
| PART I. Financial Information | |
| Item l. Financial Statements: | |
| Condensed Consolidated Balance Sheets (unaudited) as of July 31, 2025 and October 31, 2024 | 3 |
| Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended July 31, 2025 and 2024 | 4 |
| Condensed Consolidated Statements of Changes in Equity (unaudited) for the three and nine months ended July 31, 2025 and 2024 | 5 |
| Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended July 31, 2025 and 2024 | 7 |
| Notes to Condensed Consolidated Financial Statements (unaudited) | 9 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 47 |
| Item 4. Controls and Procedures | 47 |
| PART II. Other Information | 48 |
| Item 1. Legal Proceedings | 48 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 48 |
| Item 5. Other Information | 48 |
| Item 6. Exhibits | 49 |
| Signatures | 51 |
| 2 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
(Unaudited)
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July 31, |
October 31, |
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2025 |
2024 |
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ASSETS |
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Homebuilding: |
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Cash and cash equivalents |
$ | $ | ||||||
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Restricted cash and cash equivalents |
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Inventories: |
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Sold and unsold homes and lots under development |
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Land and land options held for future development or sale |
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Consolidated inventory not owned |
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Total inventories |
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Investments in and advances to unconsolidated joint ventures |
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Receivables, deposits and notes, net |
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Property and equipment, net |
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Prepaid expenses and other assets |
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Total homebuilding |
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Financial services |
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Deferred tax assets, net |
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Total assets |
$ | $ | ||||||
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LIABILITIES AND EQUITY |
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Homebuilding: |
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Nonrecourse mortgages secured by inventory, net of debt issuance costs |
$ | $ | ||||||
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Accounts payable and other liabilities |
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Customers’ deposits |
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Liabilities from inventory not owned, net of debt issuance costs |
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Senior notes and credit facilities (net of discounts, premiums and debt issuance costs) |
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Accrued interest |
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Total homebuilding |
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Financial services |
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Income taxes payable |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, Class A, $ |
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Common stock, Class B, $ |
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Paid in capital - common stock |
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Retained earnings |
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Treasury stock - at cost – |
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Total stockholders’ equity |
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Total liabilities and equity |
$ | $ | ||||||
See notes to condensed consolidated financial statements (unaudited).
| 3 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
(Unaudited)
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Three Months Ended July 31, |
Nine Months Ended July 31, | |||||||||||||||
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2025 |
2024 |
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Revenues: |
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Homebuilding: |
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Sale of homes |
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Land sales and other revenues |
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Total homebuilding |
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Financial services |
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Total revenues |
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Expenses: |
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Homebuilding: |
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Cost of sales, excluding interest |
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Cost of sales interest |
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Inventory impairments and land option write-offs |
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Total cost of sales |
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Selling, general and administrative |
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Total homebuilding expenses |
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Financial services |
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Corporate general and administrative |
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Other interest |
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Other expense (income), net (1) |
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Total expenses |
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Gain on extinguishment of debt, net |
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Income from unconsolidated joint ventures |
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Income before income taxes |
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State and federal income tax provision: |
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State |
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Federal |
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Total income taxes |
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|
Net income |
||||||||||||||||
|
Less: preferred stock dividends |
||||||||||||||||
|
Net income available to common stockholders |
$ | $ | $ | $ | ||||||||||||
|
Per share data: |
||||||||||||||||
|
Basic: |
||||||||||||||||
|
Net income per common share |
$ | $ | $ | $ | ||||||||||||
|
Weighted-average number of common shares outstanding |
||||||||||||||||
|
Assuming dilution: |
||||||||||||||||
|
Net income per common share |
$ | $ | $ | $ | ||||||||||||
|
Weighted-average number of common shares outstanding |
||||||||||||||||
See notes to condensed consolidated financial statements (unaudited).
(1)
| 4 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
THREE AND NINE MONTH PERIODS ENDED JULY 31, 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 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
|
Stock options, amortization and issuances |
||||||||||||||||||||||||||||||||||||||||
|
Preferred dividend declared ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
|
Restricted stock amortization, issuances and forfeitures |
||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A common stock | ( |
) |
|
|||||||||||||||||||||||||||||||||||||
| Share repurchases, including excise taxes | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
|
Net income |
||||||||||||||||||||||||||||||||||||||||
|
Balance, January 31, 2025 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
| Stock options, amortization and issuances | ||||||||||||||||||||||||||||||||||||||||
| Preferred dividend declared ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Restricted stock amortization, issuances and forfeitures | ||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A common stock | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Share repurchases, including excise taxes | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||
| Balance, April 30, 2025 | $ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
| Stock options, amortization and issuances | ||||||||||||||||||||||||||||||||||||||||
| Preferred dividend declared ($ |
( |
( |
||||||||||||||||||||||||||||||||||||||
| Restricted stock amortization, issuances and forfeitures | ||||||||||||||||||||||||||||||||||||||||
| Share repurchases, including excise taxes | ||||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||
| Balance, July 31, 2025 | $ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements (unaudited).
| 5 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
THREE AND NINE MONTH PERIODS ENDED JULY 31, 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 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||||||||||
|
Stock options, amortization and issuances |
||||||||||||||||||||||||||||||||||||||||||||
|
Preferred dividend declared ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
|
Restricted stock amortization, issuances and forfeitures |
||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A common stock |
( |
) | ||||||||||||||||||||||||||||||||||||||||||
|
Changes in noncontrolling interest in consolidated joint ventures |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
|
Net income |
||||||||||||||||||||||||||||||||||||||||||||
|
Balance, January 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||||||||||
| Stock options, amortization and issuances | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Preferred dividend declared ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Restricted stock amortization, issuances and forfeitures | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A common stock | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Share repurchases, including excise taxes | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, April 30, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||||||||||
| Stock options, amortization and issuances | ||||||||||||||||||||||||||||||||||||||||||||
| Preferred dividend declared ($ |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Restricted stock amortization, issuances and forfeitures | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A common stock | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Share repurchases, including excise taxes | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, July 31, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements (unaudited).
| 6 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
(In thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| July 31, | ||||||||
| 2025 | 2024 | |||||||
|
Cash flows from operating activities: |
||||||||
|
Net income |
$ | $ | ||||||
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
|
Depreciation |
||||||||
|
Stock-based compensation |
||||||||
|
Amortization of debt discounts, premiums and deferred financing costs |
( |
) | ( |
) | ||||
|
Gain on sale of property and assets |
( |
) | ( |
) | ||||
| Gain on consolidation of joint venture | ( |
) | ||||||
| Gain on inventory contributed to joint venture | ( |
) | ||||||
|
Income from unconsolidated joint ventures |
( |
) | ( |
) | ||||
|
Distributions of earnings from unconsolidated joint ventures |
||||||||
|
Gain on extinguishment of debt |
( |
) | ( |
) | ||||
|
Inventory impairments and land option write-offs |
||||||||
|
(Increase) decrease in assets: |
||||||||
|
Inventories |
( |
) | ( |
) | ||||
|
Receivables, deposits and notes |
( |
) | ( |
) | ||||
|
Origination of mortgage loans |
( |
) | ( |
) | ||||
|
Sale of mortgage loans |
||||||||
|
Deferred tax assets |
||||||||
|
(Decrease) increase in liabilities: |
||||||||
|
Accounts payable, accrued interest and other liabilities |
( |
) | ||||||
|
Customers’ deposits |
( |
) | ( |
) | ||||
|
State income tax payable |
( |
) | ( |
) | ||||
|
Net cash provided by (used in) operating activities |
( |
) | ||||||
|
Cash flows from investing activities: |
||||||||
|
Proceeds from sale of property and assets |
||||||||
|
Purchase of property, equipment, and other fixed assets |
( |
) | ( |
) | ||||
|
Investment in and advances to unconsolidated joint ventures, net of reimbursements |
( |
) | ( |
) | ||||
|
Distributions of capital from unconsolidated joint ventures |
||||||||
|
Net cash used in investing activities |
( |
) | ( |
) | ||||
|
Cash flows from financing activities: |
||||||||
|
Proceeds from mortgages and notes |
||||||||
|
Payments related to mortgages and notes |
( |
) | ( |
) | ||||
|
Proceeds from model sale leaseback financing programs |
||||||||
|
Payments related to model sale leaseback financing programs |
( |
) | ( |
) | ||||
|
Proceeds from land bank financing programs |
||||||||
|
Payments related to land bank financing programs |
( |
) | ( |
) | ||||
|
Net (payments) proceeds related to mortgage warehouse lines of credit |
( |
) | ||||||
|
Payments related to senior notes, senior secured notes and senior unsecured term loan |
( |
) | ( |
) | ||||
|
Preferred dividends paid |
( |
) | ( |
) | ||||
|
Treasury stock purchases |
( |
) | ( |
) | ||||
|
Deferred financing costs from land banking financing programs and note issuances |
( |
) | ( |
) | ||||
|
Net cash used in financing activities |
( |
) | ( |
) | ||||
|
Net decrease in cash and cash equivalents, and restricted cash and cash equivalents |
( |
) | ( |
) | ||||
|
Cash and cash equivalents, and restricted cash and cash equivalents balance, beginning of period |
||||||||
|
Cash and cash equivalents, and restricted cash and cash equivalents balance, end of period |
$ | $ | ||||||
|
Reconciliation of Cash, cash equivalents and restricted cash |
||||||||
|
Homebuilding: Cash and cash equivalents |
$ | $ | ||||||
|
Homebuilding: Restricted cash and cash equivalents |
||||||||
|
Financial Services: Cash and cash equivalents, included in financial services assets |
||||||||
|
Financial Services: Restricted cash and cash equivalents, included in financial services assets |
||||||||
|
Total cash, cash equivalents and restricted cash shown in the statements of cash flows |
$ | $ | ||||||
| 7 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
(In thousands - Unaudited)
(Continued)
Supplemental disclosure of non-cash operating, investing and financing activities:
In the third quarter of fiscal 2024, we
consolidated the remaining assets of one of our
unconsolidated joint ventures, resulting in a $
In the third quarter of fiscal 2024,
K. Hovnanian exchanged $
| 8 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
|
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.
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,
For the three and nine months ended July 31, 2025, stock-based compensation expense was $
| 9 |
| 3. | Interest |
Interest costs incurred, expensed and capitalized were as follows:
| Three Months Ended |
Nine Months Ended | |||||||||||||||
| July 31, |
July 31, | |||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 | 2024 | ||||||||||||
|
Interest capitalized at beginning of period |
$ | $ | $ | $ | ||||||||||||
|
Plus interest incurred(1) |
||||||||||||||||
|
Less cost of sales interest expensed |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Less other interest expensed(2) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Less interest contributed to unconsolidated joint venture(3) |
( |
) | ( |
) | ||||||||||||
| Plus interest acquired from unconsolidated joint venture(4) | ||||||||||||||||
|
Interest capitalized at end of period(5) |
$ | $ | $ | $ | ||||||||||||
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
| (5) |
| 4. | Reduction of Inventory to Fair Value |
We had
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 as of July 31, 2025 and October 31, 2024, included inventory of $
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 as of July 31, 2025 and October 31, 2024, included inventory of $
| 10 |
| 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 July 31, 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 July 31, 2025 and October 31, 2024, we had total cash deposits amounting to $
|
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 $
|
Three Months Ended |
Nine Months Ended | |||||||||||||||
|
July 31, |
July 31, | |||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 | 2024 | ||||||||||||
|
Balance, beginning of period |
$ | $ | $ | $ | ||||||||||||
|
Additions – Selling, general and administrative |
||||||||||||||||
|
Additions – Cost of sales |
||||||||||||||||
|
Charges incurred during the period (1) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Changes to pre-existing reserves |
||||||||||||||||
|
Balance, end of period |
$ | $ | $ | $ | ||||||||||||
(1) The majority of the charges incurred during the first nine months of fiscal 2024 represented a payment for construction defects related to the settlement of a litigation matter.
| 11 |
|
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, the 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 $
|
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. As of July 31, 2025 and October 31, 2024, $
Homebuilding "Restricted cash and cash equivalents" on the Condensed Consolidated Balance Sheets totaled $
| 12 |
Financial services restricted cash and cash equivalents, which are included in "Financial services" assets on the Condensed Consolidated Balance Sheets, totaled $
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 July 31, 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 | Nine Months Ended | |||||||||||||||
|
July 31, |
July 31, | |||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 | 2024 | ||||||||||||
|
Operating lease costs |
$ | $ | $ | $ | ||||||||||||
|
Cash payments on lease liabilities |
$ | $ | $ | $ | ||||||||||||
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 nine months ended July 31, 2025, we had an increase to ROU assets and lease liabilities of $
|
(In thousands) |
July 31, 2025 |
October 31, 2024 |
||||||
|
ROU assets |
$ | $ | ||||||
|
Lease liabilities |
$ | $ | ||||||
|
Weighted-average remaining lease term (in years) |
||||||||
|
Weighted-average discount rate |
% | % | ||||||
Maturities of our operating lease liabilities as of July 31, 2025 are as follows:
|
Fiscal Year Ending October 31, |
(In thousands) |
|||
|
2025 (excluding the nine months ended July 31, 2025) |
$ | |||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
2029 |
||||
|
2030 and thereafter |
||||
|
Total operating lease payments (1) |
||||
|
Less: imputed interest |
( |
) | ||
|
Present value of operating lease liabilities |
$ | |||
(1)
| 13 |
| 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.
As of July 31, 2025 and October 31, 2024, $
The activity in our loan origination reserves during the three and nine months ended July 31, 2025 and 2024 were as follows:
|
Three Months Ended |
Nine Months Ended | |||||||||||||||
|
July 31, |
July 31, | |||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 | 2024 | ||||||||||||
|
Loan origination reserves, beginning of period |
$ | $ | $ | $ | ||||||||||||
|
Provisions for estimated losses during the period |
||||||||||||||||
|
Payments/settlements |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Loan origination reserves, end of period |
$ | $ | $ | $ | ||||||||||||
| 11. | Mortgages |
Nonrecourse
We had nonrecourse mortgage loans for certain communities totaling $
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”), which was amended on July 31, 2025 to extend the maturity date to April 1, 2026, is a short-term borrowing facility that provides up to $
K. Hovnanian Mortgage has another secured Master Repurchase Agreement with Customers Bank (“Customers Master Repurchase Agreement”), which is a short-term borrowing facility that provides up to $
| 14 |
K. Hovnanian Mortgage has another secured Master Repurchase Agreement with Hinsdale Bank & Trust Company, N.A. ("Hinsdale Master Repurchase Agreement"), which was amended on July 14, 2025 to extend the maturity date to July 13, 2026, and is a short-term borrowing facility that provides up to $
On June 6, 2025, K. Hovnanian Mortgage entered into a new secured Master Repurchase Agreement with PlainsCapital Bank ("PlainsCapital Master Repurchase Agreement"). The short-term borrowing facility provides up to $
The Chase Master Repurchase Agreement, Customers Master Repurchase Agreement, Hinsdale Master Repurchase Agreement and PlainsCapital 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 July 31, 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 July 31, 2025 and October 31, 2024, were as follows:
|
July 31, |
October 31, |
|||||||
|
(In thousands) |
2025 |
2024 |
||||||
|
Senior Secured Notes: |
||||||||
| $ | $ | |||||||
|
Total Senior Secured Notes |
$ | $ | ||||||
|
Senior Notes: |
||||||||
|
|
$ | $ | ||||||
|
|
||||||||
|
Total Senior Notes |
$ | $ | ||||||
|
Senior Secured 1.75 Lien Term Loan Credit Facility due |
$ | $ | ||||||
| Senior Secured Revolving Credit Facility (1) | $ | $ | ||||||
|
Subtotal senior notes and credit facilities |
$ | $ | ||||||
|
Net premiums (discounts) |
$ | $ | ||||||
|
Unamortized debt issuance costs |
$ | ( |
) | $ | ( |
) | ||
|
Total senior notes and credit facilities, net of discounts, premiums and unamortized debt issuance costs |
$ | $ | ||||||
(1)
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 July 31, 2025 (collectively, the "Notes Guarantors").
| 15 |
The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together, the "Debt Instruments") outstanding at July 31, 2025, do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K. Hovnanian, to incur (including through exchange or certain other types of transactions) indebtedness, pay dividends and make distributions on common and preferred stock, repay/repurchase certain indebtedness prior to its respective stated maturity, repurchase common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates. The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans (the "Secured Term Loans") made under the Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028 (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 July 31, 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 in the near term with the right opportunity. We may also continue to make debt or equity purchases and/or exchanges from time to time through tender offers, exchange offers, redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.
Fiscal 2025
On April 30, 2025, K. Hovnanian redeemed the remaining $
Secured Obligations
The Secured Credit Agreement provides for up to $
The
| 16 |
The
The Secured Term Loans bear interest at a rate equal to
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 July 31, 2025, the collateral securing the Secured Credit Agreement, the Secured Term Loan Facility and the senior secured notes included (1) $
Unsecured Obligations
The
Other
We have certain stand-alone cash collateralized letter of credit agreements and facilities under which there was a total of $
| 17 |
| 13. | Per Share Calculation |
Basic and diluted earnings per share for the periods presented below were calculated as follows:
| Three Months Ended |
Nine Months Ended | |||||||||||||||
| July 31, |
July 31, | |||||||||||||||
|
(In thousands, except per share data) |
2025 |
2024 | 2025 | 2024 | ||||||||||||
|
Numerator: |
||||||||||||||||
|
Net income |
$ | $ | $ | $ | ||||||||||||
|
Less: preferred stock dividends |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Less: undistributed earnings allocated to participating securities |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Numerator for basic earnings per share |
$ | $ | $ | $ | ||||||||||||
|
Plus: undistributed earnings allocated to participating securities |
||||||||||||||||
|
Less: undistributed earnings reallocated to participating securities |
( |
) | ( |
) | ( |
( |
) | |||||||||
|
Numerator for diluted earnings per share |
$ | $ | $ | $ | ||||||||||||
|
Denominator: |
||||||||||||||||
|
Denominator for basic earnings per share – weighted average shares outstanding |
||||||||||||||||
|
Effect of dilutive securities: |
||||||||||||||||
|
Stock-based payments |
||||||||||||||||
|
Denominator for diluted earnings per share – weighted-average shares outstanding |
||||||||||||||||
|
Basic earnings per share |
$ | $ | $ | $ | ||||||||||||
|
Diluted earnings per share |
$ | $ |
$ | $ | ||||||||||||
There were
| 14. | Preferred Stock |
On July 12, 2005, we issued
| 18 |
| 15. | Common Stock |
Each share of Class A common stock entitles its holder to
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, and which is 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)
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 $
During the nine months ended July 31, 2025, we repurchased
| 19 |
| 16. | Income Taxes |
For the three and nine months ended July 31, 2025, we recorded income tax expense of $
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted and signed into U.S. law. The OBBBA modifies or extends provisions enacted by the 2017 Tax Cuts and Jobs Act and introduces new provisions including the repeal of our ability to claim energy efficient home credits for homes that close after June 30, 2026. While the OBBBA does not have a material impact on our Condensed Consolidated Financial Statements, we will continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and various state agencies.
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 July 31, 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
HEI’s reportable segments consist of the following
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.
| 20 |
Financial information relating to our reportable segments was as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| July 31, |
July 31, | |||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 | 2024 | ||||||||||||
|
Revenues: |
||||||||||||||||
|
Northeast |
$ | $ | $ | $ | ||||||||||||
|
Southeast |
||||||||||||||||
|
West |
||||||||||||||||
|
Total homebuilding |
||||||||||||||||
|
Financial services |
||||||||||||||||
|
Corporate and unallocated |
||||||||||||||||
|
Total revenues |
$ | $ | $ | $ | ||||||||||||
|
Income (loss) before income taxes: |
||||||||||||||||
|
Northeast |
$ | $ | $ | $ | ||||||||||||
|
Southeast |
||||||||||||||||
|
West |
( |
) | ||||||||||||||
|
Total homebuilding |
||||||||||||||||
|
Financial services |
||||||||||||||||
|
Corporate and unallocated (1) |
( |
) | ( |
) | ( |
) | ||||||||||
|
Income before income taxes |
$ | $ | $ | $ | ||||||||||||
|
(1) |
|
|
July 31, |
October 31, |
|||||||
|
(In thousands) |
2025 |
2024 |
||||||
|
Assets: |
||||||||
|
Northeast |
$ | $ | ||||||
|
Southeast |
||||||||
|
West |
||||||||
|
Total homebuilding |
||||||||
|
Financial services |
||||||||
|
Corporate and unallocated |
||||||||
|
Total assets |
$ | $ | ||||||
|
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
| 21 |
During the third quarter of fiscal 2024, we assumed control of
During the first quarter of fiscal 2025, we contributed
During the third quarter of fiscal 2025, we contributed
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.
|
|
July 31, 2025 |
|||||||||||
|
Land |
||||||||||||
| (In thousands) |
Homebuilding |
Development |
Total |
|||||||||
|
Assets: |
||||||||||||
|
Cash and cash equivalents |
$ | $ | $ | |||||||||
|
Inventories |
||||||||||||
|
Other assets |
||||||||||||
|
Total assets |
$ | $ | $ | |||||||||
|
Liabilities and equity: |
||||||||||||
|
Accounts payable and accrued liabilities |
$ | $ | $ | |||||||||
|
Notes payable |
||||||||||||
|
Total liabilities |
||||||||||||
|
Equity of: |
||||||||||||
|
Hovnanian Enterprises, Inc. |
||||||||||||
|
Others |
||||||||||||
|
Total equity |
||||||||||||
|
Total liabilities and equity |
$ | $ | $ | |||||||||
|
Debt to capitalization ratio |
% | % | % | |||||||||
|
|
October 31, 2024 |
|||||||||||
|
Land |
||||||||||||
| (In thousands) |
Homebuilding |
Development |
Total |
|||||||||
|
Assets: |
||||||||||||
|
Cash and cash equivalents |
$ | $ | $ | |||||||||
|
Inventories |
||||||||||||
|
Other assets |
||||||||||||
|
Total assets |
$ | $ | $ | |||||||||
|
Liabilities and equity: |
||||||||||||
|
Accounts payable and accrued liabilities |
$ | $ | $ | |||||||||
|
Notes payable |
||||||||||||
|
Total liabilities |
||||||||||||
|
Equity of: |
||||||||||||
|
Hovnanian Enterprises, Inc. |
||||||||||||
|
Others |
||||||||||||
|
Total equity |
||||||||||||
|
Total liabilities and equity |
$ | $ | $ | |||||||||
|
Debt to capitalization ratio |
% | % | % | |||||||||
| 22 |
As of July 31, 2025 and October 31, 2024, we had outstanding advances to unconsolidated joint ventures of $
|
Three Months Ended July 31, 2025 |
||||||||||||
|
|
Land |
|||||||||||
| (In thousands) |
Homebuilding |
Development |
Total |
|||||||||
|
Revenues |
$ | $ | $ | |||||||||
|
Cost of sales and expenses |
( |
) | ( |
) | ||||||||
|
Joint venture net income |
$ | $ | $ | |||||||||
|
Our share of net income |
$ | $ | $ | |||||||||
|
Three Months Ended July 31, 2024 |
||||||||||||
|
|
Land |
|||||||||||
| (In thousands) |
Homebuilding |
Development |
Total |
|||||||||
|
Revenues |
$ | $ | $ | |||||||||
|
Cost of sales and expenses |
( |
) | ( |
) | ||||||||
|
Joint venture net income |
$ | $ | $ | |||||||||
|
Our share of net income |
$ | $ | $ | |||||||||
|
Nine Months Ended July 31, 2025 |
||||||||||||
|
|
Land |
|||||||||||
| (In thousands) |
Homebuilding |
Development |
Total |
|||||||||
|
Revenues |
$ | $ | $ | |||||||||
|
Cost of sales and expenses |
( |
) | ( |
) | ||||||||
|
Joint venture net income |
$ | $ | $ | |||||||||
|
Our share of net income |
$ | $ | $ | |||||||||
|
Nine Months Ended July 31, 2024 |
||||||||||||
|
|
Land |
|||||||||||
| (In thousands) |
Homebuilding |
Development |
Total |
|||||||||
|
Revenues |
$ | $ | $ | |||||||||
|
Cost of sales and expenses |
( |
) | ( |
) | ||||||||
|
Joint venture net income |
$ | $ | $ | |||||||||
|
Our share of net income |
$ | $ | $ | |||||||||
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 nine months ended July 31, 2025 and 2024, respectively, we had investments in
| 23 |
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 $
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. |
| 24 |
Our financial instruments measured at fair value on a recurring basis are summarized below:
|
Fair Value at |
Fair Value at |
||||||||
|
Fair Value |
July 31, |
October 31, |
|||||||
|
(In thousands) |
Hierarchy |
2025 |
2024 |
||||||
|
Mortgage loans held for sale (1) |
Level 2 |
$ | $ | ||||||
(1)
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 $
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 July 31, 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 July 31, 2025 |
||||||||||||
|
Mortgage |
Interest Rate |
|||||||||||
|
Loans Held |
Lock |
Forward |
||||||||||
|
(In thousands) |
For Sale |
Commitments |
Contracts |
|||||||||
|
Change in fair value included in financial services revenue |
$ | ( |
) | $ | $ | |||||||
|
Three Months Ended July 31, 2024 |
||||||||||||
|
Mortgage |
Interest Rate |
|||||||||||
|
Loans Held |
Lock |
Forward |
||||||||||
|
(In thousands) |
For Sale |
Commitments |
Contracts |
|||||||||
|
Change in fair value included in financial services revenue |
$ | $ | $ | |||||||||
|
Nine Months Ended July 31, 2025 |
||||||||||||
|
Mortgage |
Interest Rate |
|||||||||||
|
Loans Held |
Lock |
Forward |
||||||||||
|
(In thousands) |
For Sale |
Commitments |
Contracts |
|||||||||
|
Change in fair value included in financial services revenue |
$ | ( |
) | $ | $ | |||||||
|
Nine Months Ended July 31, 2024 |
||||||||||||
|
Mortgage |
Interest Rate |
|||||||||||
|
Loans Held |
Lock |
Forward |
||||||||||
|
(In thousands) |
For Sale |
Commitments |
Contracts |
|||||||||
|
Change in fair value included in financial services revenue |
$ | $ | $ | |||||||||
| 25 |
Assets measured at fair value on a nonrecurring
basis are those assets for which we have recorded valuation adjustments
and write-offs during the three and nine months ended July 31, 2025,
respectively. The assets measured at fair value on a nonrecurring basis are all
within our homebuilding operations and are summarized below:
|
Three Months Ended July 31, 2025 |
|
|||||||||||||||
|
Fair |
|
|
|
|
|
|||||||||||
|
Value |
Pre-Impairment |
Total |
|
Fair |
|
|||||||||||
|
(In thousands) |
Hierarchy |
Amount |
Losses |
|
Value |
|
||||||||||
|
|
|
|
|
|||||||||||||
|
Land and land options held for future development or sale |
Level 3 |
$ |
|
$ |
( |
) |
$ |
|
||||||||
|
Three Months Ended July 31, 2024 |
|
|||||||||||||||
|
Fair |
|
|
|
|
|
|||||||||||
|
Value |
Pre-Impairment |
Total |
|
Fair |
|
|||||||||||
|
(In thousands) |
Hierarchy |
Amount |
Losses |
|
Value |
|
||||||||||
|
|
|
|
|
|||||||||||||
|
Land and land options held for future development or sale |
Level 3 |
$ |
|
$ |
( |
) |
$ |
|
||||||||
|
Nine Months Ended July 31, 2025 |
|
|||||||||||||||
|
Fair |
|
|
|
|
|
|||||||||||
|
Value |
Pre-Impairment |
Total |
|
Fair |
|
|||||||||||
|
(In thousands) |
Hierarchy |
Amount |
Losses |
|
Value |
|
||||||||||
|
|
|
|
|
|||||||||||||
|
Land and land options held for future development or sale |
|
Level 3 |
$ |
|
$ |
( |
) |
|
$ |
|
|
|||||
|
Nine Months Ended July 31, 2024 |
|
|||||||||||||||
|
Fair |
|
|
|
|
|
|||||||||||
|
Value |
Pre-Impairment |
Total |
|
Fair |
|
|||||||||||
|
(In thousands) |
Hierarchy |
Amount |
Losses |
|
Value |
|
||||||||||
|
|
|
|
|
|||||||||||||
|
Land and land options held for future development or sale |
|
Level 3 |
$ |
|
$ |
( |
) |
|
$ |
|
|
|||||
We recorded inventory impairments, which are included in the Condensed Consolidated Statements of Operations as
"Inventory impairments and land option write-offs" and deducted from
inventory of $
The fair value of our cash equivalents, restricted cash and cash equivalents and customers' deposits approximates their carrying amount, based on Level 1 inputs.
| 26 |
The fair value of each series of our Notes and Credit Facilities are listed below. Level 2 measurements are estimated based on recent trades or quoted market prices for the same issues or based on recent trades or quoted market prices for our debt of similar security and maturity to achieve comparable yields. Level 3 measurements are estimated based on third-party broker quotes or management’s estimate of the fair value based on available trades for similar debt instruments. As shown in the table below, our
| Fair Value as of July 31, 2025 |
|
(In thousands) |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Senior Secured Notes: |
||||||||||||||||
|
|
$ | $ | $ | $ | ||||||||||||
|
|
||||||||||||||||
|
Senior Notes: |
||||||||||||||||
|
|
||||||||||||||||
|
Senior Credit Facilities: |
||||||||||||||||
|
Senior Secured 1.75 Lien Term Loan Credit Facility due |
||||||||||||||||
|
Total fair value |
$ | $ | $ | $ | ||||||||||||
| Fair Value as of October 31, 2024 |
|
(In thousands) |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Senior Secured Notes: |
||||||||||||||||
|
|
$ | $ | $ | $ | ||||||||||||
|
|
||||||||||||||||
|
Senior Notes: |
||||||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Senior Credit Facilities: |
||||||||||||||||
|
Senior Secured 1.75 Lien Term Loan Credit Facility due |
||||||||||||||||
|
Total fair value |
$ | $ | $ | $ | ||||||||||||
The Senior Secured Revolving Credit Facility is not included in the above tables because there were
|
21. |
Transactions with Related Parties |
From time to time, an engineering firm owned by Tavit Najarian, a relative of Ara K. Hovnanian, our Chairman and Chief Executive Officer, provides services to the Company. During the three months ended July 31, 2025 and 2024, the services provided by such engineering firm to the Company totaled $
| 27 |
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).
Key Performance Indicators
The following key performance indicators are commonly used in the homebuilding industry and by management as a means to better understand our operating performance and trends affecting our business and compare our performance with the performance of other homebuilders. We believe these key performance indicators also provide useful information to investors in analyzing our performance:
|
● |
Net contracts is a volume indicator which represents the number of new contracts executed during the period for the purchase of homes, less cancellations of contracts in the same period. The dollar value of net contracts represents the dollars associated with net contracts executed in the period. These values are an indicator of potential future revenues; |
|
● |
Contract backlog is a volume indicator which represents the number of homes that are under contract, but not yet delivered as of the stated date. The dollar value of contract backlog represents the dollar amount of the homes in contract backlog. These values are an indicator of potential future revenues; |
|
● |
Active selling communities is a volume indicator which represents the number of communities which are open for sale with ten or more home sites available as of the end of a period. We identify communities based on product type; therefore, at times there are multiple communities at one land site. These values are an indicator of potential revenues; |
|
● |
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; and |
|
● |
Contract cancellation rates is a volume indicator which represents the number of sales contracts cancelled in the period divided by the number of gross sales contracts executed during the period. Contract cancellation rates as a percentage of backlog is calculated by dividing the number of cancelled contracts in the period by the contract backlog at the beginning of the period. Cancellation rates as compared to prior periods can be an indicator of market strength or weakness. |
Overview
Market Conditions and Operating Results
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.
During fiscal 2024 and continuing through the first nine months of fiscal 2025, mortgage rates have fluctuated but still remain at a persistently high level. As a result, affordability generally remains challenging for homebuyers. We have stayed aggressive in our pricing, incentives and concessions in order to align with the current market.
| 28 |
We continue to use our increased inventory of quick move-in homes ("QMI homes") to help meet buyers’ needs for more affordable housing in the existing uncertain interest rate environment. The time between contract signing and closing is shorter with a QMI home as compared to a to be built home, which provides customers with more certainty on their mortgage pricing. The availability of QMI homes also allows us to offer mortgage interest rate buydown assistance, which is a tool we offer through our wholly-owned mortgage banking subsidiary ("K. Hovnanian Mortgage"), to help ease the impact of higher monthly payments from rising interest rates. We pay the cost of interest rate buydowns for customers that qualify through K. Hovnanian Mortgage and decide to use the program. The level of interest rate based incentives utilized differs across our markets and is one of several available options we use to drive sales and close homes.
Although the long-term fundamentals of the new home market remain favorable, during the first nine months of 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 the first nine months of fiscal 2024, although net contracts for the third quarter of fiscal 2025 increased from the prior year period. Even as mortgage rates increased and we focused on increasing sales pace versus price, we were still able to raise net prices in approximately 40%, 31% and 21% of our communities during the first, second and third quarters of fiscal 2025, respectively.
There remains a great degree of uncertainty due to inflation, tariffs, the continued possibility of an economic recession, employment risk and the potential for further mortgage rate increases. While we continue to experience some supply chain issues, we remain focused on continuing to shorten our construction cycle times and building on our national initiatives to drive down costs with our material providers and trade partners. The changing conditions in the housing market, and in the general economy, makes it difficult to predict how strongly our business will be impacted by these external factors over the remainder of fiscal 2025 and beyond.
During the nine months ended July 31, 2025, our cash position allowed us to spend $660.0 million on land purchases and land development for long-term growth, redeem $26.6 million of senior notes, repurchase $30.1 million of our common stock, and still have total liquidity of $277.9 million, including $146.6 million of homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility as of July 31, 2025.
Information on our operating results for the three and nine months ended July 31, 2025 are as follows:
● Sale of homes revenues increased to $769.1 million for the three months ended July 31, 2025 from $687.4 million for the three months ended July 31, 2024, and increased to $2.1 billion for the nine months ended July 31, 2025 from $1.9 billion for the nine months ended July 31, 2024. There was a 14.0% and 10.2% increase in the number of home deliveries for the three and nine months ended July 31, 2025, compared to the same periods of the prior year, partially offset by a decrease in average price of 1.9% and 3.8% for the three and nine months ended July 31, 2025, compared to the same periods of the prior year. The increase in deliveries was primarily the result of an increase in our backlog conversion ratio, while the decrease in average price was the result of the geographic and community mix of our deliveries.
● Gross margin dollars decreased 31.3% and 24.8% for the three and nine months ended July 31, 2025, as compared to the same periods of the prior year, while gross margin percentage decreased to 11.7% and 13.5% for the three and nine months ended July 31, 2025, respectively, from 19.1% and 18.9% for the three and nine months ended July 31, 2024, respectively. Gross margin percentage, before cost of sales interest expense and land charges, decreased to 17.3% for the three months ended July 31, 2025 from 22.1% for the three months ended July 31, 2024, and decreased to 17.6% for the nine months ended July 31, 2025 from 22.2% for the nine months ended July 31, 2024. The decrease in gross margin percentage was primarily due to increased use of incentives and concessions, including additional mortgage interest rate buydowns, to make our homes more affordable. In the current homebuilding environment, we remain focused on driving financial performance by increasing our sales pace versus achieving a higher gross margin.
| 29 |
● Income before income taxes decreased to $23.8 million for the three months ended July 31, 2025 from $97.3 million for the three months ended July 31, 2024, and decreased to $90.2 million for the nine months ended July 31, 2025 from $199.2 million for the nine months ended July 31, 2024. Net income decreased to $16.6 million for the three months ended July 31, 2025 from $72.9 million for the three months ended July 31, 2024, and decreased to $64.5 million for the nine months ended July 31, 2025 from $147.7 million for the nine months ended July 31, 2024. Included in income before income taxes for the nine months ended July 31, 2025 was a gain of $22.7 million related to the contribution of assets to a new joint venture. For the nine months ended July 31, 2024, income before taxes included a gain of $45.7 million related to the consolidation of a joint venture. Earnings per share, basic and diluted, decreased to $2.14 and $1.99, respectively, for the three months ended July 31, 2025 compared to $10.61 and $9.75, respectively, for the three months ended July 31, 2024. Earnings per share, basic and diluted, decreased to $8.55 and $7.94, respectively, for the nine months ended July 31, 2025 compared to $20.85 and $19.15, respectively, for the nine months ended July 31, 2024.
● Net contracts increased 1.6% for the three months ended July 31, 2025 and decreased 0.4% for the nine months ended July 31, 2025, compared to the same periods of the prior year. The increase for the three months ended is primarily due to our current strategy of using increased incentives to drive sale pace. During the third quarter of fiscal 2025, incentives were 11.6% of the average sales price, which is up 3.9% from the same period of the prior year and up 1.1% from the second quarter of fiscal 2025. The slight decrease in net contracts for the nine months ended July 31, 2025 is due to continued macroeconomic uncertainty that permeated throughout the period leading to low consumer confidence.
● Net contracts per active selling community increased to 9.8 and 30.8 for the three and nine months ended July 31, 2025, respectively, compared to 9.5 and 30.4 in the same periods of the prior year, primarily due to our focus on sales pace over price.
● Contract backlog decreased from 2,041 homes at July 31, 2024 to 1,491 homes at July 31, 2025, and the dollar value of contract backlog decreased to $838.8 million, a 27.6% decrease in dollar value compared to the prior year, as our backlog conversion ratio has increased from the prior year period due to our having more QMI homes available to sell and deliver.
Results of Operations
Total Revenues
Compared to the same period in the prior year, revenues increased (decreased) as follows:
|
Three Months Ended |
||||||||||||||||
|
July 31, |
July 31, |
Dollar |
Percentage |
|||||||||||||
|
(Dollars in thousands) |
2025 |
2024 |
Change |
Change |
||||||||||||
|
Homebuilding: |
||||||||||||||||
|
Sale of homes |
$ | 769,050 | $ | 687,424 | $ | 81,626 | 11.9 | % | ||||||||
|
Land sales and other revenues |
2,967 | 16,392 | (13,425 | ) | (81.9) | % | ||||||||||
|
Financial services |
28,566 | 18,888 | 9,678 | 51.2 | % | |||||||||||
|
Total revenues |
$ | 800,583 | $ | 722,704 | $ | 77,879 | 10.8 | % |
||||||||
|
Nine Months Ended |
||||||||||||||||
|
July 31, |
July 31, |
Dollar |
Percentage |
|||||||||||||
|
(Dollars in thousands) |
2025 |
2024 |
Change |
Change |
||||||||||||
|
Homebuilding: |
||||||||||||||||
|
Sale of homes |
$ | 2,066,278 | $ | 1,947,989 | $ | 118,289 | 6.1 | % | ||||||||
|
Land sales and other revenues |
27,573 |
25,968 |
1,605 | 6.2 | % | |||||||||||
|
Financial services |
66,826 | 51,323 | 15,503 | 30.2 | % | |||||||||||
|
Total revenues |
$ | 2,160,677 | $ | 2,025,280 | $ | 135,397 | 6.7 | % |
||||||||
| 30 |
Homebuilding: Sale of Homes
For the three and nine months ended July 31, 2025, sale of homes revenues increased 11.9% and 6.1%, respectively, compared to the same periods in the prior year. The sale of homes revenue increased due to a 14.0% and 10.2% increase in homes delivered, respectively, partially offset by a 1.9% and 3.8% decrease in the average price per home for the three and nine months ended July 31, 2025, respectively, compared with the prior year periods. The average price per home decreased to $537,421 in the three months ended July 31, 2025 from $547,748 in the three months ended July 31, 2024. The average price per home decreased to $520,473 in the nine months ended July 31, 2025 from $540,958 in the nine months ended July 31, 2024. The increase in deliveries was primarily the result of an increase in our backlog conversion ratio. The decrease in average price was the result of the geographic and community mix of our deliveries. For further detail on changes in segment revenues see “Homebuilding: Operations by Segment” below. For further detail on land sales and other revenues, see “Homebuilding: Land Sales and Other Revenues” below.
Information on the sale of homes is set forth in the table below:
|
Three Months Ended July 31, |
Nine Months Ended July 31, | |||||||||||||||||||||||
|
(Dollars in thousands, except average sales price) |
2025 |
2024 |
% Change |
2025 |
2024 |
% Change | ||||||||||||||||||
|
Consolidated total: |
||||||||||||||||||||||||
|
Housing revenues |
$ | 769,050 | $ | 687,424 | 11.9 | % | $ | 2,066,278 | $ | 1,947,989 | 6.1 | % | ||||||||||||
|
Homes delivered |
1,431 | 1,255 | 14.0 | % | 3,970 | 3,601 | 10.2 | % | ||||||||||||||||
|
Average sales price |
$ | 537,421 | $ | 547,748 | (1.9) | % | $ | 520,473 | $ | 540,958 | (3.8) | % | ||||||||||||
|
Unconsolidated joint ventures: (1) |
||||||||||||||||||||||||
|
Housing revenues |
$ | 165,148 | $ | 151,443 | 9.0 | % | $ | 441,419 | $ | 396,901 | 11.2 | % | ||||||||||||
|
Homes delivered |
246 | 227 | 8.4 | % | 650 | 615 | 5.7 | % | ||||||||||||||||
|
Average sales price |
$ | 671,333 | $ | 667,150 | 0.6 | % | $ | 679,106 | $ | 645,367 | 5.2 | % | ||||||||||||
(1) Represents housing revenues and home deliveries for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures. See Note 18 to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for a further discussion of our unconsolidated joint ventures.
| 31 |
Homebuilding: Land Sales and Other Revenues
Land sales and other revenues decreased $13.4 for the three months ended July 31, 2025 and increased $1.6 million for the nine months ended July 31, 2025, compared to the same periods in the prior year. Revenue associated with land sales can vary significantly due to the mix of land parcels sold. There were two and five land sales during the three and nine months ended July 31, 2025, respectively, and one and two land sales in the three and nine months ended July 31, 2024, respectively. Land sales revenues decreased $13.0 million and increased $4.8 million during the three and nine months ended July 31, 2025, respectively, compared to the same periods in the prior year. Other revenues, which includes interest income, decreased due to lower rates on our cash and cash equivalent accounts during the first three quarters of fiscal 2025, partially offsetting the increase in land sales revenues for the nine months ended July 31, 2025.
Homebuilding: Cost of Sales
Cost of sales includes expenses for homebuilding and land and lot sales, including inventory impairments and land option write-offs (defined as “land charges” in the tables below). A breakout of such expenses for homebuilding and land and lot sales and the gross margins for each is set forth below.
Homebuilding gross margin, before cost of sales interest expense and land charges, is a non-GAAP financial measure. This measure should not be considered as an alternative to homebuilding gross margin determined in accordance with U.S. GAAP as an indicator of operating performance.
Management believes this non-GAAP measure enables investors to better understand our operating performance. This measure is also useful internally, helping management evaluate our operating results on a consolidated basis and relative to other companies in our industry. In particular, the magnitude and volatility of land charges for the Company, and for other homebuilders, have been significant and, as such, have made comparable financial analysis of our industry more difficult. Homebuilding metrics excluding land charges, as well as interest amortized to cost of sales, and other similar presentations prepared by analysts and other companies are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’ respective levels of impairments and debt.
|
Three Months Ended |
Nine Months Ended | |||||||||||||||
|
July 31, |
July 31, | |||||||||||||||
|
(Dollars in thousands) |
2025 |
2024 |
2025 | 2024 | ||||||||||||
|
Sale of homes |
$ | 769,050 | $ | 687,424 | $ | 2,066,278 | $ | 1,947,989 | ||||||||
|
Cost of sales, excluding interest expense and land charges |
636,015 | 535,425 | 1,702,360 | 1,515,258 | ||||||||||||
|
Homebuilding gross margin, before cost of sales interest expense and land charges |
133,035 | 151,999 | 363,918 | 432,731 | ||||||||||||
|
Cost of sales interest expense, excluding land sales interest expense |
26,868 | 20,351 | 65,544 | 61,792 | ||||||||||||
|
Homebuilding gross margin, after cost of sales interest expense, before land charges |
106,167 | 131,648 | 298,374 | 370,939 | ||||||||||||
|
Land charges |
16,045 | 446 | 20,141 | 985 | ||||||||||||
|
Homebuilding gross margin |
$ | 90,122 | $ | 131,202 | $ | 278,233 | $ | 369,954 | ||||||||
|
Homebuilding gross margin percentage |
11.7 | % | 19.1 | % | 13.5 | % | 18.9 | % | ||||||||
|
Homebuilding gross margin percentage, before cost of sales interest expense and land charges |
17.3 | % | 22.1 | % | 17.6 | % | 22.2 | % | ||||||||
|
Homebuilding gross margin percentage, after cost of sales interest expense, before land charges |
13.8 | % | 19.2 | % | 14.4 | % | 19.0 | % | ||||||||
| 32 |
Cost of sales as a percentage of consolidated home sales revenues are presented below:
|
Three Months Ended |
Nine Months Ended | |||||||||||||||
|
July 31, |
July 31, | |||||||||||||||
|
2025 |
2024 |
2025 | 2024 | |||||||||||||
|
Sale of homes |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
|
Cost of sales, excluding interest expense and land charges: |
||||||||||||||||
|
Housing, land and development costs |
71.0 | % | 69.1 | % | 71.1 | % | 68.3 | % | ||||||||
|
Commissions |
3.2 | % | 3.0 | % | 3.2 | % | 3.3 | % | ||||||||
|
Financing concessions |
4.4 | % | 2.2 | % | 3.8 | % | 2.3 | % | ||||||||
|
Overheads |
4.1 | % | 3.6 | % | 4.3 | % | 3.9 | % | ||||||||
|
Total cost of sales, excluding interest expense and land charges |
82.7 | % | 77.9 | % | 82.4 | % | 77.8 | % | ||||||||
|
Cost of sales interest |
3.5 | % | 2.9 | % | 3.2 | % | 3.2 | % | ||||||||
|
Land charges |
2.1 | % | 0.1 | % | 0.9 | % | 0.1 | % | ||||||||
|
Homebuilding gross margin percentage |
11.7 | % | 19.1 | % | 13.5 | % | 18.9 | % | ||||||||
|
Homebuilding gross margin percentage, before cost of sales interest expense and land charges |
17.3 | % | 22.1 | % | 17.6 | % | 22.2 | % | ||||||||
|
Homebuilding gross margin percentage, after cost of sales interest expense, before land charges |
13.8 | % | 19.2 | % | 14.4 | % | 19.0 | % | ||||||||
We sell a variety of home types in various communities, each yielding a different gross margin. As a result, depending on the mix of communities delivering homes, consolidated gross margin may fluctuate up or down. Total homebuilding gross margin percentage decreased to 11.7% and 13.5% for the three and nine months ended July 31, 2025, compared to 19.1% and 18.9% for the prior year periods. Total homebuilding gross margin percentage, before cost of sales interest expense and land charges decreased to 17.3% and 17.6% for the three and nine months ended July 31, 2025, compared to 22.1% and 22.2% for the three and nine months ended July 31, 2024. The decrease in gross margin percentage for the three and nine months ended July 31, 2025 was primarily due to increased use of incentives and concessions, including additional mortgage interest rate buydowns, to make our homes more affordable.
Land and lot sale expenses and gross margins are set forth below:
|
Three Months Ended |
Nine Months Ended | |||||||||||||||
|
July 31, |
July 31, | |||||||||||||||
|
(In thousands) |
2025 |
2024 |
2025 | 2024 | ||||||||||||
|
Land and lot sales |
$ | 1,193 | $ | 14,230 | $ | 20,623 | $ | 15,783 | ||||||||
|
Cost of sales, excluding interest |
241 | 11,907 | 10,475 | 12,789 | ||||||||||||
|
Land and lot sales gross margin, excluding interest |
952 | 2,323 | 10,148 | 2,994 | ||||||||||||
|
Land and lot sales interest expense |
- | 1,965 | 618 | 1,965 | ||||||||||||
|
Land and lot sales gross margin, including interest |
$ | 952 | $ | 358 | $ | 9,530 | $ | 1,029 | ||||||||
Land sales are ancillary to our homebuilding operations and are expected to continue in the future but may fluctuate significantly.
| 33 |
Homebuilding: Inventory Impairments and Land Option Write-Offs
Inventory impairments and land option write-offs reflects certain inventories we have either written off or written down to their estimated fair value totaling $16.0 million and $3.1 million in expense for the three months ended July 31, 2025 and 2024, respectively, and $20.1 million and $3.6 million during the nine months ended July 31, 2025 and 2024, respectively. Inventory impairments amounted to $7.6 million and $8.8 million during the three and nine months ended July 31, 2025, respectively, and $2.7 million during both the three and nine months ended July 31, 2024. The impairments recorded for fiscal 2025 were for two communities in the Northeast segment and three communities in the West segment. The impairment recorded for fiscal 2024 was for one community in the West segment. We wrote-off residential land option, approval and engineering costs across each of our segments during the first three quarters of both fiscal 2025 and 2024.
Homebuilding: Selling, General and Administrative
Homebuilding selling, general and administrative (“SGA”) expenses increased $4.8 million to $55.8 million for the three months ended July 31, 2025 and increased $14.7 million to $161.1 million for the nine months ended July 31, 2025 compared to the same periods in the prior year. The increase for the three and nine months ended July 31, 2025 compared to the same periods in the prior year was primarily due to an increase in selling overhead from higher advertising costs and an increase in total compensation expense as a result of an increase in headcount from opening more communities along with the cost of annual merit increases.
Homebuilding: Key Performance Indicators
Net Contracts Per Active Selling Community
Net contracts per active selling community for the three and nine months ended July 31, 2025 were 9.8 and 30.8, respectively, compared to 9.5 and 30.4 for the same periods in the prior year, respectively. Our reported level of sales contracts (net of cancellations) was impacted by increasing incentives and concessions to drive customer demand for QMI homes.
Contract Cancellation Rates
The following table provides historical quarterly cancellation rates, which represents the number of cancelled contracts in the quarter divided by the number of gross sales contracts executed in the quarter, excluding unconsolidated joint ventures:
|
Quarter |
2025 |
2024 |
2023 |
2022 |
2021 |
||||||||||||||||
|
First |
16 |
% | 14 | % | 30 | % | 14 | % | 17 | % | |||||||||||
|
Second |
15 | % | 14 | % | 18 | % | 17 | % | 16 | % | |||||||||||
|
Third |
19 | % | 17 | % | 16 | % | 27 | % | 16 | % | |||||||||||
|
Fourth |
18 | % | 25 | % | 41 | % | 15 | % | |||||||||||||
| 34 |
|
Quarter |
2025 |
2024 |
2023 |
2022 |
2021 |
||||||||||||||||
|
First |
14 | % | 10 | % | 16 | % | 8 | % | 11 | % | |||||||||||
|
Second |
15 | % | 13 | % | 16 | % | 9 | % | 9 | % | |||||||||||
|
Third |
17 | % | 12 | % | 12 | % | 8 | % | 6 | % | |||||||||||
|
Fourth |
15 | % | 13 | % | 13 | % | 6 | % | |||||||||||||
Most cancellations occur within the legal rescission period, which varies by state but is generally less than two weeks after the signing of the contract. Cancellations also occur as a result of a buyer’s failure to qualify for a mortgage, which generally occurs during the first few weeks after signing. Due to our solid backlog position, our cancellation rate as a percentage of beginning backlog for the third quarter of fiscal 2025 was 17%, which approximates our historical normal rate. When sales pace is increasing, the cancellation rate as a percentage of beginning backlog tends to lag the changes seen in our cancellation rate as a percentage of gross sales. Market conditions still remain uncertain and it is difficult to predict what cancellation rates will be in the future.
Contract Backlog
Our consolidated sales contracts and homes in contract backlog, excluding unconsolidated joint ventures, by segment is set forth below:
| Net Contracts for the |
Net Contracts for the | |||||||||||||||||||||||
| Three Months Ended |
Nine Months Ended |
Contract Backlog as of |
||||||||||||||||||||||
| July 31, | July 31, |
July 31, |
||||||||||||||||||||||
|
(Dollars in thousands) |
2025 | 2024 |
2025 | 2024 |
2025 |
2024 |
||||||||||||||||||
|
Northeast: |
||||||||||||||||||||||||
|
Dollars |
$ | 226,020 | $ | 260,081 | $ | 739,452 | $ | 835,809 | $ | 444,862 | $ | 617,520 | ||||||||||||
|
Number of homes |
416 | 414 | 1,353 | 1,346 | 761 | 898 | ||||||||||||||||||
|
Southeast: |
||||||||||||||||||||||||
|
Dollars |
$ | 79,267 | $ | 63,990 | $ | 239,237 | $ | 206,722 | $ | 130,678 | $ | 147,268 | ||||||||||||
|
Number of homes |
157 | 114 | 461 | 388 | 228 | 316 | ||||||||||||||||||
|
West (1): |
||||||||||||||||||||||||
|
Dollars |
$ | 314,349 | $ | 321,722 | $ | 990,833 | $ | 1,013,424 | $ | 263,272 | $ | 393,980 | ||||||||||||
|
Number of homes |
638 | 664 | 2,000 | 2,097 | 502 | 827 | ||||||||||||||||||
|
Total (1): |
||||||||||||||||||||||||
|
Dollars |
$ | 619,636 | $ | 645,793 | $ | 1,969,522 | $ | 2,055,955 | $ | 838,812 | $ | 1,158,768 | ||||||||||||
|
Number of homes |
1,211 | 1,192 | 3,814 | 3,831 | 1,491 | 2,041 | ||||||||||||||||||
| 35 |
Contract backlog dollars decreased 27.6% as of July 31, 2025 compared to July 31, 2024, and the number of homes in backlog decreased 26.9% for the same period. The decrease in contract backlog dollars and number of homes as of July 31, 2025 compared to July 31, 2024, was primarily driven by an increase in sales of QMI homes and improved contract backlog conversion.
Homebuilding: Operations by Segment
Financial information relating to our homebuilding operations by segment was as follows:
|
Three Months Ended July 31, |
||||||||||||||||
|
(Dollars in thousands, except average sales price) |
2025 |
2024 |
Variance |
Variance % |
||||||||||||
|
Northeast |
||||||||||||||||
|
Homebuilding revenue |
$ | 289,180 | $ | 255,332 | $ | 33,848 | 13.3 | % | ||||||||
|
Income before income taxes |
$ | 41,447 | $ | 40,006 | $ | 1,441 | 3.6 | % | ||||||||
|
Homes delivered |
479 | 404 | 75 | 18.6 | % | |||||||||||
|
Average sales price |
$ | 601,269 | $ | 630,653 | $ | (29,384 | ) | (4.7) | % | |||||||
|
Southeast |
||||||||||||||||
|
Homebuilding revenue |
$ | 104,747 | $ | 115,964 | $ | (11,217 | ) | (9.7) | % | |||||||
|
Income before income taxes |
$ | 11,639 | $ | 20,449 | $ | (8,810 | ) | (43.1) | % | |||||||
|
Homes delivered |
195 | 231 | (36 | ) | (15.6) | % | ||||||||||
|
Average sales price |
$ | 535,862 | $ | 501,316 | $ | 34,546 | 6.9 | % | ||||||||
|
West |
||||||||||||||||
|
Homebuilding revenue |
$ | 377,185 | $ | 330,980 | $ | 46,205 | 14.0 | % | ||||||||
|
(Loss) income before income taxes |
$ | (6,284 | ) | $ | 21,009 | $ | (27,293 | ) | (129.9) | % | ||||||
|
Homes delivered |
757 | 620 | 137 | 22.1 | % | |||||||||||
|
Average sales price |
$ | 497,423 | $ | 511,026 | $ | (13,603 | ) | (2.7) | % | |||||||
|
Nine Months Ended July 31, |
||||||||||||||||
|
(Dollars in thousands, except average sales price) |
2025 |
2024 |
Variance |
Variance % |
||||||||||||
|
Northeast |
||||||||||||||||
|
Homebuilding revenue |
$ | 830,209 | $ | 645,859 | $ | 184,350 | 28.5 | % | ||||||||
|
Income before income taxes |
$ | 112,658 | $ | 107,645 | $ | 5,013 | 4.7 | % | ||||||||
|
Homes delivered |
1,374 | 1,067 | 307 | 28.8 | % | |||||||||||
|
Average sales price |
$ | 601,216 | $ | 602,138 | $ | (922 | ) | (0.2) | % | |||||||
|
Southeast |
||||||||||||||||
|
Homebuilding revenue |
$ | 231,025 | $ | 350,761 | $ | (119,736 | ) | (34.1) | % | |||||||
|
Income before income taxes |
$ | 21,752 | $ | 62,391 | $ | (40,639 | ) | (65.1) | % | |||||||
|
Homes delivered |
472 | 672 | (200 | ) | (29.8) | % | ||||||||||
|
Average sales price |
$ | 488,417 | $ | 520,537 | $ | (32,120 | ) | (6.2) | % | |||||||
|
West |
||||||||||||||||
|
Homebuilding revenue |
$ | 1,029,524 | $ | 970,671 | $ | 58,853 | 6.1 | % | ||||||||
|
Income before income taxes |
$ | 15,275 | $ | 77,198 | $ | (61,923 | ) | (80.2) | % | |||||||
|
Homes delivered |
2,124 | 1,862 | 262 | 14.1 | % | |||||||||||
|
Average sales price |
$ | 475,364 | $ | 513,269 | $ | (37,905 | ) | (7.4) | % | |||||||
| 36 |
Homebuilding Results by Segment
Northeast - Homebuilding revenue increased 13.3% for the three months ended July 31, 2025 compared to the same period in the prior year. The increase for the three months ended July 31, 2025 was attributed to a 18.6% increase in homes delivered, partially offset by a 4.7% decrease in average sales price. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes and townhomes in lower-end submarkets of the segment for the three months ended July 31, 2025 compared to some communities delivering higher priced, larger single family homes and townhomes in higher-end submarkets of the segment for the three months ended July 31, 2024, which were no longer delivering in the second quarter of the current year.
Income before income taxes increased $1.4 million to $41.4 million for the three months ended July 31, 2025 as compared to the same period in the prior year. This was primarily due to the increase in homebuilding revenue discussed above and a $4.0 million increase in income from unconsolidated joint ventures, partially offset by a slight decrease in gross margin percentage.
Homebuilding revenue increased 28.5% for the nine months ended July 31, 2025 compared to the same period in the prior year. The increase for the nine months ended July 31, 2025 was attributed to a 28.8% increase in homes delivered, while the average sales price was relatively flat with a 0.2% decrease.
Income before income taxes increased $5.0 million to $112.7 million for the nine months ended July 31, 2025 as compared to the same period in the prior year. This was primarily due to the increase in homebuilding revenues discussed above, while gross margin percentage was relatively flat.
Southeast – Homebuilding revenue decreased 9.7% for the three months ended July 31, 2025 compared to the same period in the prior year. The decrease for the three months ended July 31, 2025 was attributed to a 15.6% decrease in homes delivered, partially offset by a 6.9% increase in average sales price. The increase in average sales price was the result of new communities delivering higher priced, larger single family homes and townhomes in higher-end submarkets of the segment for the three months ended July 31, 2025 compared to some communities delivering lower priced, smaller single family homes, townhomes and build-for-rent homes in lower-end submarkets of the segment for the three months ended July 31, 2024, which were no longer delivering in the current year.
Income before income taxes decreased $8.8 million to $11.6 million for the three months ended July 31, 2025 compared to the same period in the prior year. This was primarily due to the decrease in homebuilding revenue discussed above and a significant decrease in gross margin percentage. For a discussion of gross margin see “Homebuilding: Cost of Sales” above.
Homebuilding revenue decreased 34.1% for the nine months ended July 31, 2025 compared to the same period in the prior year. The decrease was due to a 29.8% decrease in homes delivered and a 6.2% decrease in average sales price. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes in lower-end submarkets of the segment for the nine months ended July 31, 2025 compared to some communities delivering higher priced, larger single family homes and townhomes in mid to higher-end submarkets of the segment for the nine months ended July 31, 2024, which were no longer delivering in the current year.
Income before income taxes decreased $40.6 million to $21.8 million for the nine months ended July 31, 2025 compared to the same period in the prior year. This was primarily due to the decrease in homebuilding revenue discussed above and a significant decrease in gross margin percentage. For a discussion of gross margin see “Homebuilding: Cost of Sales” above.
West – Homebuilding revenue increased 14.0% for the three months ended July 31, 2025 compared to the same period in the prior year. The increase was due to a 22.1% increase in homes delivered, partially offset by a 2.7% decrease in average sales price and a $13.5 million decrease in land sales and other revenue. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes in lower-end submarkets of the segment for the three months ended July 31, 2025 compared to some communities delivering higher priced, larger single family homes in higher-end submarkets of the segment for the three months ended July 31, 2024, which were no longer delivering in the current year.
Income before income taxes decreased $27.3 million to a loss of $6.3 million for the three months ended July 31, 2025 compared to the same period in the prior year. This was primarily due to a $2.3 million increase in SGA, an $8.6 million increase in inventory impairments and land option write-offs and a significant decrease in gross margin percentage. For a discussion of gross margin see “Homebuilding: Cost of Sales” above.
Homebuilding revenue increased 6.1% for the nine months ended July 31, 2025 compared to the same period in the prior year. The increase was due to a $4.9 million increase in land sales and other revenue and a 14.1% increase in homes delivered, partially offset by a 7.4% decrease in average sales price. The decrease in average sales price was the result of new communities delivering lower priced, smaller single family homes in lower-end submarkets of the segment for the nine months ended July 31, 2025 compared to some communities delivering higher priced, larger single family homes in higher-end submarkets of the segment for the nine months ended July 31, 2024, which were no longer delivering in the current year.
| 37 |
Income before income taxes decreased $61.9 million to $15.3 million for the nine months ended July 31, 2025 compared to the same period in the prior year. This is primarily due to a $9.3 million increase in SGA, a $9.5 million increase in inventory impairments and land option write-offs and a significant decrease in gross margin percentage. For a discussion of gross margin see “Homebuilding: Cost of Sales” above.
Financial Services
Financial services consists primarily of originating mortgages from our home buyers, selling such mortgages in the secondary market, and title insurance activities. We use mandatory investor commitments and forward sales of mortgage-backed securities (“MBS”) to hedge our mortgage-related interest rate exposure on agency and government loans. For the nine months ended July 31, 2025 and 2024, Federal Housing Administration and Veterans Administration (“FHA/VA”) loans represented 41.0% and 34.1%, respectively, of our total loans. For the nine months ended July 31, 2025 compared to the same period in the prior year, our conforming conventional loan originations as a percentage of our total loans decreased from 65.3% to 58.0%. The origination of loans which exceed conforming conventions increased from 0.6% to 1.0% for the nine months ended July 31, 2025 compared to the same period in the prior year.
During the three and nine months ended July 31, 2025 and 2024, financial services provided $13.9 million and $25.8 million of income before income taxes compared to $6.5 million and $15.5 million for the same periods in the prior year. The increase in financial services income before income taxes for the three and nine months ended July 31, 2025 compared to the same periods in the prior year was primarily due to an increase in the amount of loans closed during the period and an increase in the basis point spread between the loans originated and the implied rate from our sale of the loans. In the markets served by our wholly owned mortgage banking subsidiaries, 80.9% and 81.4% of our non-cash homebuyers obtained mortgages originated by these subsidiaries during the three months ended July 31, 2025 and 2024, respectively, and 79.9% and 79.7% of our non-cash homebuyers obtained mortgages originated by these subsidiaries during the nine months ended July 31, 2025 and 2024, respectively.
Corporate General and Administrative
Corporate general and administrative expenses include operations at our headquarters in New Jersey. These expenses include payroll, stock compensation, facility costs and rent and other costs associated with our executive offices, legal expenses, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, national and digital marketing, construction services and administration of insurance, quality and safety. Corporate general and administrative expenses decreased to $35.0 million for the three months ended July 31, 2025 compared to $38.5 million for the three months ended July 31, 2024 and decreased to $97.2 million for the nine months ended July 31, 2025 compared to $108.1 million for the nine months ended July 31, 2024. The decrease was primarily due to lower stock compensation expense compared to the same periods in the prior year. During the nine months of fiscal 2024, we had additional expense related to finalizing the value of phantom stock awards granted under our 2019 long-term incentive plan as a result of an increase to our stock price. In addition, for the nine months of fiscal 2025, we recorded a benefit related to our 2024 and 2023 long-term incentive plan phantom stock awards, as a result of a decrease in our stock price during the period.
Income from Unconsolidated Joint Ventures
Income from unconsolidated joint ventures consists of our share of the earnings or losses of our unconsolidated joint ventures. Income from unconsolidated joint ventures increased $4.8 million to $15.5 million for the three months ended July 31, 2025 and decreased $3.1 million to $33.8 million for the nine months ended July 31, 2025 compared to the same periods in the prior year. The increase for the three months ended July 31, 2025 compared to the same period of the prior year was primarily due to the recognition of additional income from two unconsolidated joint ventures; because the joint venture partner achieved certain return hurdles, the Company was able to recognize a higher share of the unconsolidated joint ventures' income than it had in the prior year. The decrease for the nine months ended July 31, 2025 compared to the same period of the prior year was primarily due to the recognition of losses from two unconsolidated joint ventures in which one just started delivering homes in the second quarter of fiscal 2025 and the other is not currently delivering any homes. In addition, we recognized income in the first nine months of the prior year from a joint venture that was subsequently consolidated in fiscal 2024.
| 38 |
Income Taxes
For the three and nine months ended July 31, 2025, we recorded income tax expense of $7.2 million and $25.7 million, respectively, and $24.4 million and $51.6 million for the same periods in the prior year, respectively. In both the current and prior year periods, the expense was primarily driven by federal and state tax expense on income before income taxes and permanent differences, partially offset by the generation of energy home credits. The federal tax expense is not paid in cash as it is offset by the use of our existing NOL carryforwards.
Capital Resources and Liquidity
Overview
Our total liquidity at July 31, 2025 was $277.9 million, including $146.6 million in homebuilding cash and cash equivalents and $125.0 million of borrowing capacity under our senior secured revolving credit facility. We believe that our cash on hand together with available borrowings on our senior secured revolving credit facility will be sufficient for at least the next 12 months to finance our working capital requirements.
We have historically funded our homebuilding and financial services operations with cash flows from operating activities, borrowings under our credit facilities, the issuance of new debt and equity securities, and other financing activities. We may not be able to obtain desired financing 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 impact our ability to grow our business.
Operating, Investing and Financing Cash Flow Activities
We spent $660.0 million on land and land development during the first three quarters of fiscal 2025. After land and land development spending and all other operating activities, including revenue received from deliveries, cash from operations was $19.2 million. During the first three quarters of fiscal 2025, cash used in investing activities was $60.6 million, primarily due to new joint ventures entered into during fiscal 2025, along with spending on capitalized software, partially offset by distributions of capital from existing unconsolidated joint ventures. Cash used in financing activities was $30.5 million during the first three quarters of fiscal 2025, primarily due to the redemption of our 13.5% Senior Notes, along with net payments for our mortgage warehouse lines of credit, net payments for nonrecourse mortgage financings, treasury stock purchases and payments of preferred dividends, partially offset by net proceeds for land banking financings and model sale leaseback financings. We intend to continue to use nonrecourse mortgages, model sale leasebacks, joint ventures, and, subject to covenant restrictions in our debt instruments, land banking programs as our business needs dictate.
Our cash uses during the nine months ended July 31, 2025 and 2024 were for operating expenses, land purchases, land deposits, land development, construction spending, investments in unconsolidated joint ventures, land banking transactions, state income taxes, debt reductions, interest payments, preferred dividends, treasury stock purchases and litigation matters. During these periods, we provided for our cash requirements from available cash on hand, housing and land sales, nonrecourse mortgage transactions, income from unconsolidated joint ventures, financial service revenues and other revenues.
| 39 |
Our net income historically does not approximate cash flow from operating activities. The difference between net income and cash flow from operating activities is primarily caused by changes in inventory levels together with changes in receivables, prepaid expenses and other assets, mortgage loans held for sale, accrued interest, deferred income taxes, accounts payable and other liabilities, and noncash charges relating to depreciation, stock compensation and impairments. When we are expanding our operations, inventory levels, prepaid expenses and other assets increase causing cash flow from operating activities to decrease. Certain liabilities also increase as operations expand and partially offset the negative effect on cash flow from operations caused by the increase in inventory, prepaid expenses and other assets. Similarly, as our mortgage operations expand, net income from these operations increases, but for cash flow purposes, net income is partially offset by the net change in mortgage assets and liabilities. The opposite is true as our investment in new land purchases and development of new communities decrease, causing us to generate positive cash flow from operations.
Debt Transactions
Senior notes and credit facilities balances as of July 31, 2025 and October 31, 2024, were as follows:
|
July 31, |
October 31, |
|||||||
|
(In thousands) |
2025 |
2024 |
||||||
|
Senior Secured Notes |
$ | 655,000 | $ | 655,000 | ||||
|
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) |
- | - | ||||||
|
Less: Net (discounts), premiums and unamortized debt issuance costs |
6,954 | 14,662 | ||||||
|
Total senior notes and credit facilities, net of discounts, premiums and unamortized debt issuance costs |
$ | 861,922 | $ | 896,218 | ||||
(1) At July 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%. In addition, K. Hovnanian will pay an unused commitment fee on the undrawn revolving commitments at a rate of 1.00% per annum.
Except for K. Hovnanian, the issuer of the notes and borrower under the credit agreements governing our term loans and revolving credit facilities (collectively, the "Credit Facilities"), our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, we and each of our subsidiaries are guarantors of the Credit Facilities, the senior secured notes and senior notes outstanding at July 31, 2025 (collectively, the “Notes Guarantors”).
The credit agreements governing the Credit Facilities and the indentures governing the senior secured and senior notes (together, the “Debt Instruments”) outstanding at July 31, 2025 do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the ability of HEI and certain of its subsidiaries, including K. Hovnanian, to incur (including through exchange or certain other types of transactions) indebtedness, pay dividends and make distributions on common and preferred stock, repay/repurchase certain indebtedness prior to its respective stated maturity, repurchase common and preferred stock, make other restricted payments (including investments), sell certain assets (including in certain land banking transactions), incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of their assets and enter into certain transactions with affiliates. The Debt Instruments also contain customary events of default which would permit the lenders or holders thereof to exercise remedies with respect to the collateral (as applicable), declare the loans (the "Secured Term Loans") made under the Senior Secured 1.75 Lien Term Loan Credit Facility due January 31, 2028, and loans (the "Secured Revolving Loans") made under the Senior Secured Revolving Credit Agreement due June 30, 2026, or notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the Secured Term Loans, Secured Revolving Loans or notes or other material indebtedness, cross default to other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency, with respect to the Secured Term Loans and Secured Revolving Loans, material inaccuracy of representations and warranties and with respect to the Secured Term Loans and Secured Revolving Loans, a change of control, and, with respect to the Secured Term Loans, Secured Revolving Loans and senior secured notes, the failure of the documents granting security for the obligations under the secured Debt Instruments to be in full force and effect, and the failure of the liens on any material portion of the collateral securing the obligations under the secured Debt Instruments to be valid and perfected. As of July 31, 2025, we believe we were in compliance with the covenants of the Debt Instruments.
| 40 |
Under the terms of our Debt Instruments, we have the right to make certain redemptions and prepayments and, depending on market conditions, our strategic priorities and covenant restrictions, may do so from time to time. We also continue to actively analyze and evaluate our capital structure and explore transactions to simplify our capital structure and to strengthen our balance sheet, including those that reduce leverage, interest rates and/or extend maturities, and will seek to do so in the near term with the right opportunity. We may also continue to make debt or equity purchases and/or exchanges from time to time through tender offers, exchange offers, redemptions, open market purchases, private transactions, or otherwise, or seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.
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.
See Note 12 to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q 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 secured Debt Instruments.
Mortgages and Notes Payable
We had nonrecourse mortgage loans for certain communities totaling $53.5 million and $90.7 million, net of debt issuance costs, at July 31, 2025 and October 31, 2024, respectively, which are secured by the related real property, including any improvements, with an aggregate book value of $123.8 million and $249.7 million, respectively. The weighted-average interest rate on these obligations was 8.1% and 8.7% at July 31, 2025 and October 31, 2024, respectively, and the mortgage loan payments on each community primarily correspond to home deliveries.
Our wholly owned mortgage banking subsidiary, K. Hovnanian Mortgage, originates mortgage loans primarily from the sale of our homes. Such mortgage loans and related servicing rights are sold in the secondary mortgage market within a short period of time. K. Hovnanian Mortgage finances the origination of mortgage loans through various master repurchase agreements, which are recorded in "Financial services" liabilities on the Condensed Consolidated Balance Sheets. The loans are secured by the mortgages held for sale and are repaid when we sell the underlying mortgage loans to permanent investors. As of July 31, 2025 and October 31, 2024, we had an aggregate of $110.0 million and $131.4 million, respectively, outstanding under several of K. Hovnanian Mortgage’s short-term borrowing facilities.
See Note 11 to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for a further discussion of these agreements.
| 41 |
Equity
On December 18, 2024, our Board of Directors (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 nine months ended July 31, 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 nine months ended July 31, 2024, we repurchased 188,800 shares under the stock repurchase program, with a market value of $26.5 million, or $140.31 per share. As of July 31, 2025, $26.4 million of our Class A common stock was available to be purchased under the stock repurchase program.
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 the 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 $8.0 million on the Series A preferred stock for the three and nine months ended July 31, 2025 and 2024, respectively.
Unconsolidated Joint Ventures
We have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located. Investments in and advances to unconsolidated joint ventures increased $75.4 million to $218.4 million at July 31, 2025 compared to October 31, 2024. The increase was primarily due to new joint ventures entered into during the first and third quarters of fiscal 2025, along with increases in our share of income recognized for two of our existing unconsolidated joint ventures during the period, partially offset by an increase in our share of loss recognized for one of our existing unconsolidated joint ventures, and partner distributions. As of July 31, 2025 and October 31, 2024, we had investments in eight and six unconsolidated homebuilding joint ventures, respectively. We have no guarantees associated with our unconsolidated joint ventures, other than guarantees limited to performance and completion of development activities, environmental indemnification and standard warranty and representation against fraud, misrepresentation and similar actions, including a voluntary bankruptcy.
Inventories
Total inventory, excluding consolidated inventory not owned, decreased $70.6 million to $1.4 billion at July 31, 2025 compared to October 31, 2024. Total inventory, excluding consolidated inventory not owned, decreased by $67.1 million in the Northeast and $73.4 million in the West, partially offset by an increase of $69.9 million in the Southeast. The net decrease was primarily attributable to home deliveries, inventory impairments and land option write-offs, land sales, and inventory contributed to new unconsolidated joint ventures during the period, partially offset by new land purchases and land development. Substantially all homes under construction or completed and included in inventory at July 31, 2025 are expected to be delivered during the next six to nine months.
Consolidated inventory not owned, which consists of options related to land banking and model financing, increased $118.7 million from October 31, 2024 to July 31, 2025. The increase was primarily due to increases 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 with an option to purchase finished lots on a predetermined schedule. Because of our options to repurchase these parcels, these transactions are considered a financing rather than a sale. Our Condensed Consolidated Balance Sheet, at July 31, 2025, included inventory of $263.8 million recorded to “Consolidated inventory not owned,” with a corresponding amount of $167.9 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned” for the amount of net cash received from the transactions. In addition, 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, these sale and leaseback transactions are considered a financing rather than a sale. Therefore, our Condensed Consolidated Balance Sheet, at July 31, 2025, included inventory of $65.9 million recorded to “Consolidated inventory not owned,” with a corresponding amount of $68.7 million (net of debt issuance costs) recorded to “Liabilities from inventory not owned” for the amount of net cash received from the transactions.
| 42 |
The following tables summarize home sites included in our total residential real estate. The decrease in total home sites available at July 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.
|
Active Selling |
Proposed |
|||||||||||||||
|
Active Selling |
Communities |
Developable |
Total |
|||||||||||||
|
Communities(1) |
Homes |
Homes |
Homes |
|||||||||||||
|
July 31, 2025: |
||||||||||||||||
|
Northeast |
37 | 4,811 | 15,200 | 20,011 | ||||||||||||
|
Southeast |
21 | 2,108 | 4,970 | 7,078 | ||||||||||||
|
West |
66 | 6,614 | 6,556 | 13,170 | ||||||||||||
|
Consolidated total |
124 | 13,533 | 26,726 | 40,259 | ||||||||||||
|
Unconsolidated joint ventures (2) |
26 | 3,824 | 852 | 4,676 | ||||||||||||
|
Owned |
4,063 | 1,382 | 5,445 | |||||||||||||
|
Optioned |
9,457 | 25,344 | 34,801 | |||||||||||||
|
Construction to permanent financing lots |
13 | - | 13 | |||||||||||||
|
Consolidated total |
13,533 | 26,726 | 40,259 | |||||||||||||
|
Active Selling |
Proposed |
|||||||||||||||
|
Active Selling |
Communities |
Developable |
Total |
|||||||||||||
|
Communities(1) |
Homes |
Homes |
Homes |
|||||||||||||
|
October 31, 2024: |
||||||||||||||||
|
Northeast |
49 | 4,804 | 14,776 | 19,580 | ||||||||||||
|
Southeast |
16 | 1,537 | 5,624 | 7,161 | ||||||||||||
|
West |
65 | 6,005 | 9,149 | 15,154 | ||||||||||||
|
Consolidated total |
130 | 12,346 | 29,549 | 41,895 | ||||||||||||
|
Unconsolidated joint ventures (2) |
19 | 2,662 | 1,687 | 4,349 | ||||||||||||
|
Owned |
5,311 | 1,321 | 6,632 | |||||||||||||
|
Optioned |
7,031 | 28,228 | 35,259 | |||||||||||||
|
Construction to permanent financing lots |
4 | - | 4 | |||||||||||||
|
Consolidated total |
12,346 | 29,549 | 41,895 | |||||||||||||
|
(1) |
Active selling communities are open for sale communities with ten or more home sites available. We identify communities based on product type. Therefore, at times there are multiple communities at one land site. |
|
|
|
|
|
|
(2) |
Represents active selling communities and home sites for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures. See Note 18 to the Condensed Consolidated Financial Statements for a further discussion of our unconsolidated joint ventures. |
| 43 |
The following table summarizes our started or completed unsold homes and models, excluding unconsolidated joint ventures, in active selling communities and substantially completed communities. The decrease in started or completed unsold homes from October 31, 2024 to July 31, 2025 is due to a concerted effort to align our starts pace with the sales pace during the third quarter of fiscal 2025.
|
July 31, 2025 |
October 31, 2024 |
|||||||||||||||||||||||
|
Unsold |
Unsold |
|||||||||||||||||||||||
|
Homes |
Models |
Total |
Homes |
Models |
Total |
|||||||||||||||||||
|
Northeast |
222 | 26 | 248 | 259 | 35 | 294 | ||||||||||||||||||
|
Southeast |
145 | 14 | 159 | 135 | 19 | 154 | ||||||||||||||||||
|
West |
649 | 19 | 668 | 627 | 31 | 658 | ||||||||||||||||||
|
Total |
1,016 | 59 | 1,075 | 1,021 | 85 | 1,106 | ||||||||||||||||||
|
Started or completed unsold homes and models per active selling communities (1) |
8.2 | 0.5 | 8.7 | 7.9 | 0.6 | 8.5 | ||||||||||||||||||
|
(1) |
Active selling communities (which are communities that are open for sale with ten or more home sites available) were 124 at July 31, 2025 and 130 at October 31, 2024. This ratio does not include substantially completed communities, which are communities with less than ten home sites available. |
Financial Services Assets and Liabilities
Financial services assets decreased $29.8 million to $173.8 million at July 31, 2025, compared to October 31, 2024. Financial services assets consist primarily of residential mortgage receivables held for sale of which $129.4 million and $147.2 million at July 31, 2025 and October 31, 2024, respectively, were being temporarily warehoused and are awaiting sale in the secondary mortgage market. 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 third quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024, partially offset by an increase in the average loan value.
Financial services liabilities decreased $30.8 million to $152.4 million at July 31, 2025 compared to October 31, 2024. The decrease was primarily due to a decrease in amounts outstanding under our mortgage warehouse lines of credit and directly correlates to the decrease in the volume of mortgage loans held for sale during the period.
| 44 |
Inflation
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. These prices usually are applicable for a specified number of residential buildings or for a time period of between three to 12 months. Construction costs for residential buildings represented approximately 50.3% of our homebuilding cost of sales for the nine months ended July 31, 2025.
Critical Accounting Policies
As disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024, our most critical accounting policies relate to inventories, unconsolidated joint ventures, warranty and construction defect reserves and income taxes. Since October 31, 2024, there have been no significant changes to those critical accounting policies.
Safe Harbor Statement
All statements in this Quarterly Report on Form 10-Q that are not historical facts should be considered as “Forward-Looking Statements” within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to statements related to the Company's goals and expectations with respect to its financial results for future financial periods. Although we believe that our plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to:
| 45 |
|
● |
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, and because of changes in immigration laws and trends in labor migration; |
|
|
● |
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; |
|
|
● |
The seasonality of the Company’s business; |
|
|
● |
The availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; |
|
|
● |
Reliance on, and the performance of, subcontractors; |
|
|
● |
Regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; |
|
|
● |
Increases in cancellations of agreements of sale; |
|
|
● |
Changes in tax laws affecting the after-tax costs of owning a home; |
|
|
● |
Legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; |
|
|
● |
Levels of competition; |
|
| ● | Utility shortages and outages or rate fluctuations; | |
| ● | Information technology failures and data security breaches; | |
| ● | Negative publicity; | |
| ● | Global economic and political instability; | |
| ● | High leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; | |
| ● | Availability and terms of financing to the Company; | |
| ● | The Company’s sources of liquidity; | |
| ● | 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; | |
| ● | Potential liability as a result of the past or present use of hazardous materials; | |
|
● |
Operations through unconsolidated joint ventures with third parties; |
|
|
● |
Significant influence of the Company’s controlling stockholders; |
|
| ● | Availability of net operating loss carryforwards; and | |
| ● | Loss of key management personnel or failure to attract qualified personnel. |
Certain risks, uncertainties and other factors are described in detail in Part I, Item 1 “Business” and Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Quarterly Report on Form 10-Q.
| 46 |
Substantially all of our long-term debt requires fixed interest payments and we have limited exposure to variable rates. In connection with our mortgage operations, mortgage loans held for sale and the associated mortgage warehouse lines of credit under our Master Repurchase Agreements are subject to interest rate risk; however, such obligations reprice frequently and are short-term in duration. In addition, we are able to hedge the interest rate risk on mortgage loans by obtaining forward commitments from private investors. Accordingly, the interest rate risk from mortgage loans is not significant. We do not use financial instruments to hedge interest rate risk except with respect to mortgage loans. The following table sets forth as of July 31, 2025, our long-term debt obligations, principal cash flows by scheduled maturity, weighted-average interest rates and estimated fair value (“FV”).
|
Long-Term Debt as of July 31, 2025 by Fiscal Year of Maturity Date |
||||||||||||||||||||||||||||||||
|
FV at |
||||||||||||||||||||||||||||||||
|
(Dollars in thousands) |
2025 |
2026 |
2027 |
2028 |
2029 |
Thereafter |
Total |
7/31/2025 |
||||||||||||||||||||||||
|
Long term debt(1): |
||||||||||||||||||||||||||||||||
|
Fixed rate |
$ | - | $ | - | $ | - | $ | 400,000 | $ |
430,000 |
$ | 24,968 | $ | 854,968 | $ | 892,298 | ||||||||||||||||
|
Weighted average interest rate |
- | % | - | % | - | % | 8.88 | % | 11.75 | % | 5.00 | % | 10.21 | % | ||||||||||||||||||
| (1) | Does not include: |
|
| ● | the mortgage warehouse lines of credit made under our Master Repurchase Agreements; | |
|
|
● | $53.5 million of nonrecourse mortgages secured by inventory, which have various maturities spread over the next two to three years and are paid off as homes are delivered; and |
| ● | our $125.0 million Secured Credit Facility under which there were no borrowings outstanding as of July 31, 2025. | |
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of July 31, 2025. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the Company’s disclosure controls and procedures are effective to accomplish their objectives.
There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended July 31, 2025, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 47 |
Item 1. LEGAL PROCEEDINGS
For information with respect to our legal proceedings, see Note 7 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Recent Sales of Unregistered Equity Securities
None.
Issuer Purchases of Equity Securities
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. As of July 31, 2025, $26.4 million of our Class A common stock was available to be purchased under the stock repurchase program.
There were no repurchases of common stock for the third quarter of fiscal 2025.
Item 5. OTHER INFORMATION
During the three months ended July 31, 2025, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
| 48 |
|
Item 6.
|
EXHIBITS
|
|
|
|
|
3(a) |
Restated Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed on March 29, 2019). |
|
3(b) |
Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed on March 28, 2023). |
|
4(a) |
Specimen Class A Common Stock Certificate (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed on March 29, 2019). |
|
4(b) |
Specimen Class B Common Stock Certificate (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed on March 29, 2019). |
|
4(c) |
Certificate of Designations, Powers, Preferences and Rights of the 7.625% Series A Preferred Stock of Hovnanian Enterprises, Inc., dated July 12, 2005 (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed on July 13, 2005). |
|
4(d) |
Certificate of Designations of the Series B Junior Preferred Stock of Hovnanian Enterprises, Inc., dated August 14, 2008 (Incorporated by reference to Exhibits to Quarterly Report on Form 10-Q of the Registrant for the quarter ended July 31, 2008). |
|
4(e) |
Rights Agreement, dated as of August 14, 2008, between Hovnanian Enterprises, Inc. and National City Bank, as Rights Agent, which includes the Form of Certificate of Designation as Exhibit A, Form of Right Certificate as Exhibit B and the Summary of Rights as Exhibit C (Incorporated by reference to Exhibits to the Registration Statement on Form 8-A of the Registrant filed on August 14, 2008). |
|
4(f) |
Amendment No. 1 to Rights Agreement, dated as of January 11, 2018, between Hovnanian Enterprises, Inc. and Computershare Trust Company, N.A. (as successor to National City Bank), as Rights Agent, which includes the amended and restated Form of Rights Certificate as Exhibit 1 and the amended and restated Summary of Rights as Exhibit 2 (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed on January 11, 2018). |
|
4(g) |
Amendment No. 2 to Rights Agreement, dated as of January 18, 2021, between the Company and Computershare Trust Company, N.A. (as successor to National City Bank), as Rights Agent, which includes the amended and restated Form of Rights Certificate as Exhibit 1 and the amended and restated Summary of Rights as Exhibit 2 (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed January 19, 2021). |
| 4(h) | Amendment No. 3 to Rights Agreement, dated as of January 11, 2024, between the Company and Computershare Trust Company, N.A. (as successor to National City Bank), as Rights Agent, which includes the amended and restated Form of Rights Certificate as Exhibit 1 and the amended and restated Summary of Rights as Exhibit 2 (Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed January 11, 2024). |
| 10(a)* | Form of 2025 Associate Performance Share Unit Agreement EBIT Class A. |
| 10(b)* | Form of 2025 Associate Performance Share Unit Agreement EBIT Class B. |
| 10(c)* | Form of 2025 Associate Phantom Performance Share Unit Agreement EBIT. |
| 10(d)* | Form of 2025 Associate Performance Share Unit Agreement EBIT ROI Class A. |
| 10(e)* | Form of 2025 Associate Performance Share Unit Agreement EBIT ROI Class B. |
| 10(f)* | Form of 2025 Associate Phantom Performance Share Unit Agreement EBIT ROI. |
| 49 |
| 31(a) | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
| 31(b) | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
| 32(a) | Section 1350 Certification of Chief Executive Officer. |
| 32(b) | Section 1350 Certification of Chief Financial Officer. |
| 101 | The following financial information from our Quarterly Report on Form 10-Q for the quarter ended July 31, 2025, formatted in inline Extensible Business Reporting Language (Inline XBRL): (i) the Condensed Consolidated Balance Sheets at July 31, 2025 and October 31, 2024, (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2025 and 2024, (iii) the Condensed Consolidated Statements of Changes in Equity for the three and nine months ended July 31, 2025 and 2024, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2025 and 2024, and (v) the Notes to Condensed Consolidated Financial Statements. |
| 104 | Cover Page from our Quarterly Report on Form 10-Q for the three months ended July 31, 2025, formatted in Inline XBRL (and contained in Exhibit 101). |
| *Management contracts or compensation plans or arrangements. |
| 50 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
HOVNANIAN ENTERPRISES, INC.
(Registrant)
|
|
DATE: |
August 29, 2025 |
|
|
|
/s/ ARA K. HOVNANIAN |
|
|
|
Ara K. Hovnanian |
|
|
|
Chairman of the Board, Chief Executive Officer and President |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
DATE: |
August 29, 2025 |
|
|
|
/s/ BRAD O’CONNOR |
|
|
|
Brad O’Connor |
|
|
|
Chief Financial Officer |
| (Principal Financial Officer and Principal Accounting Officer) |
| 51 |
FAQ
What were Hovnanian (HOV) diluted EPS for the three and nine months ended July 31, 2025?
How much liquidity did Hovnanian report at July 31, 2025?
Did Hovnanian record any one-time gains during the period?
What inventory impairments did the company record?
What change occurred in homebuilding gross margins?
