Revenues Totaled $1.71 Billion; Diluted
Earnings Per Share Increased 11% to $2.15
Net Orders Up 2% to 3,997; Net Order Value
Expanded 7% to $2.03 Billion
KB Home (NYSE: KBH) today reported results for its second
quarter ended May 31, 2024.
“We produced solid results in our 2024 second quarter, with our
key metrics above the high end of our guidance ranges,” said
Jeffrey Mezger, Chairman and Chief Executive Officer. “Buyers
remained resilient in their desire for homeownership despite the
volatility in mortgage interest rates. Our pace of monthly net
orders per community was one of our highest second quarter levels
in many years, which we believe reflected the compelling
personalized choice that our Built to Order model offers to meet
each buyer’s lifestyle and budget.”
“Our business is generating substantial cash flows, and we are
continuing our balanced approach in allocating this capital,
focused on both expanding our scale and returning cash to our
stockholders. In the 2024 second quarter, we significantly
increased our investment in land acquisition and development,
repurchased additional shares and raised our quarterly dividend.
With a healthy expansion in our owned and controlled lot count, as
well as our planned community openings, we are confident we are
well positioned for future growth,” concluded Mezger.
Three Months Ended May 31, 2024
(comparisons on a year-over-year basis)
- Revenues totaled $1.71 billion, compared to $1.77 billion.
- Homes delivered were 3,523, compared to 3,666.
- Average selling price increased to $483,000, up from
$479,500.
- Homebuilding operating income totaled $188.2 million, compared
to $202.1 million. The homebuilding operating income margin was
11.1%, compared to 11.5%. Excluding total inventory-related charges
of $1.2 million for the current quarter and $4.3 million for the
year-earlier quarter, the homebuilding operating income margin was
11.1%, compared to 11.7%.
- The housing gross profit margin of 21.1% was even with the
year-earlier quarter. Excluding the above-mentioned
inventory-related charges, the housing gross profit margin was
21.2%, compared to 21.4%.
- Selling, general and administrative expenses as a percentage of
housing revenues were 10.1%, compared to 9.6%, mainly reflecting
higher costs including marketing and other expenses associated with
the Company’s planned increase in its community count during the
year to position its operations for growth.
- Financial services pretax income rose 16% to $13.3 million,
partly due to increased equity in income of the Company’s mortgage
banking joint venture. This was largely driven by a higher volume
of both interest rate locks and loan originations, as 86% of the
buyers financing their home purchases in the current quarter used
the joint venture, up from 80%.
- Total pretax income, which included a $12.5 million gain
associated with the sale of a privately held technology company in
which the Company held an ownership interest, increased to $221.1
million, compared to $214.9 million.
- Net income rose 2% to $168.4 million. Diluted earnings per
share grew 11% to $2.15, reflecting the higher net income and the
favorable impact of the Company’s common stock repurchases over the
past several quarters.
- The effective tax rate was 23.8%, compared to 23.5%.
Six Months Ended May 31, 2024
(comparisons on a year-over-year basis)
- Revenues totaled $3.18 billion, compared to $3.15 billion.
- Homes delivered of 6,560 were up 2%.
- Average selling price was $481,700, compared to $486,000.
- Net income increased 6% to $307.1 million.
- Diluted earnings per share were up 16% to $3.91.
Backlog and Net Orders (comparisons on
a year-over-year basis, except as noted)
- Net orders for the quarter increased 2% to 3,997. Net order
value rose 7% to $2.03 billion, reflecting the growth in net orders
and a higher average selling price of those orders.
- Monthly net orders per community increased to 5.5 from
5.2.
- The cancellation rate as a percentage of gross orders improved
to 13%, compared to 22%.
- The Company’s ending backlog homes of 6,270 and ending backlog
value of $3.12 billion were down 14% and 10%, respectively. The
year-over-year decreases narrowed for the fourth consecutive
quarter.
- The Company’s average community count for the quarter was down
4% to 243, and ending community count was essentially flat at 247.
On a sequential basis, the ending community count expanded 4%.
Balance Sheet as of May 31, 2024
(comparisons to November 30, 2023, except as noted)
- The Company had total liquidity of $1.73 billion, including
$643.5 million of cash and cash equivalents and $1.08 billion of
available capacity under its unsecured revolving credit facility,
with no cash borrowings outstanding.
- Inventories totaled $5.34 billion, up 4%.
- The Company’s investments in land and land development for the
six months ended May 31, 2024 increased 64% to $1.26 billion,
compared to $763.2 million for the year-earlier period.
- The Company’s lots owned or under contract grew 17% to 65,533,
of which approximately 61% were owned and 39% were under contract.
By comparison, approximately 73% of the Company’s total lots were
owned and 27% were under contract as of November 30, 2023.
- Notes payable of $1.70 billion were essentially unchanged. The
Company’s debt to capital ratio improved 90 basis points to 29.8%,
compared to 30.7%.
- Stockholders’ equity increased to $3.99 billion, compared to
$3.81 billion, mainly reflecting net income, partly offset by
common stock repurchases and cash dividends.
- In April 2024, the Company’s board of directors approved an
increase in the quarterly cash dividend on the Company’s common
stock to $.25 per share from $.20 per share, and authorized the
repurchase of up to $1.00 billion of the Company’s outstanding
common stock, replacing a prior authorization.
- In the 2024 second quarter, the Company repurchased 764,742
shares of its outstanding common stock at a total cost of $50.0
million, bringing its total repurchases in the 2024 first half to
1,591,405 shares at a total cost of $100.0 million, or $62.84 per
share. As of May 31, 2024, the Company had $950.0 million remaining
under its current common stock repurchase authorization.
- Based on the Company’s 75.2 million outstanding shares as of
May 31, 2024, book value per share of $53.08 increased 14% year
over year.
Guidance
The Company is providing the following guidance for its 2024
full year:
- Housing revenues in the range of $6.70 billion to $6.90
billion.
- Average selling price in the range of $485,000 to
$495,000.
- Homebuilding operating income as a percentage of revenues in
the range of 11.0% to 11.4%, assuming no inventory-related charges.
- Housing gross profit margin in the range of 21.1% to 21.5%,
assuming no inventory-related charges.
- Selling, general and administrative expenses as a percentage of
housing revenues of approximately 10.1%.
- Effective tax rate of approximately 23.0%.
- Ending community count in the range of 250 to 255.
The Company plans to also provide guidance for its 2024 third
quarter on its conference call today.
Conference Call
The conference call to discuss the Company’s 2024 second quarter
earnings will be broadcast live TODAY at 2:00 p.m. Pacific Time,
5:00 p.m. Eastern Time. To listen, please go to the Investor
Relations section of the Company’s website at kbhome.com.
About KB Home
KB Home is one of the largest and most trusted homebuilders in
the United States. We operate in 47 markets, have built over
680,000 quality homes in our more than 65-year history, and are
honored to be the #1 customer-ranked national homebuilder based on
third-party buyer surveys. What sets KB Home apart is building
strong, personal relationships with every customer and creating an
exceptional homebuying experience that offers our homebuyers the
ability to personalize their home based on what they value at a
price they can afford. As the industry leader in sustainability, KB
Home has achieved one of the highest residential energy-efficiency
ratings and delivered more ENERGY STAR® certified homes than any
other builder, helping to lower the total cost of homeownership.
For more information, visit kbhome.com.
Forward-Looking and Cautionary
Statements
Certain matters discussed in this press release, including any
statements that are predictive in nature or concern future market
and economic conditions, business and prospects, our future
financial and operational performance, or our future actions and
their expected results are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on current expectations and
projections about future events and are not guarantees of future
performance. We do not have a specific policy or intent of updating
or revising forward-looking statements. If we update or revise any
such statement(s), no assumption should be made that we will
further update or revise that statement(s) or update or revise any
other such statement(s). Actual events and results may differ
materially from those expressed or forecasted in forward-looking
statements due to a number of factors. The most important risk
factors that could cause our actual performance and future events
and actions to differ materially from such forward-looking
statements include, but are not limited to the following: general
economic, employment and business conditions; population growth,
household formations and demographic trends; conditions in the
capital, credit and financial markets; our ability to access
external financing sources and raise capital through the issuance
of common stock, debt or other securities, and/or project
financing, on favorable terms; the execution of any securities
repurchases pursuant to our board of directors’ authorization;
material and trade costs and availability, including building
materials and appliances, and delays related to state and municipal
construction, permitting, inspection and utility processes, which
have been disrupted by key equipment shortages; consumer and
producer price inflation; changes in interest rates, including
those set by the Federal Reserve, which the Federal Reserve has
increased sharply over the past two years and may further increase
to moderate inflation, and those available in the capital markets
or from financial institutions and other lenders, and applicable to
mortgage loans; our debt level, including our ratio of debt to
capital, and our ability to adjust our debt level and maturity
schedule; our compliance with the terms of our revolving credit
facility and our senior unsecured term loan; the ability and
willingness of the applicable lenders and financial institutions,
or any substitute or additional lenders and financial institutions,
to meet their commitments or fund borrowings, extend credit or
provide payment guarantees to or for us under our revolving credit
facility or unsecured letter of credit facility; volatility in the
market price of our common stock; home selling prices, including
our homes’ selling prices, being unaffordable relative to consumer
incomes; weak or declining consumer confidence, either generally or
specifically with respect to purchasing homes; competition from
other sellers of new and resale homes; weather events, significant
natural disasters and other climate and environmental factors, such
as a lack of adequate water supply to permit new home communities
in certain areas; any failure of lawmakers to agree on a budget or
appropriation legislation to fund the federal government’s
operations (also known as a government shutdown), and financial
markets’ and businesses’ reactions to any such failure; government
actions, policies, programs and regulations directed at or
affecting the housing market (including the tax benefits associated
with purchasing and owning a home, and the standards, fees and size
limits applicable to the purchase or insuring of mortgage loans by
government-sponsored enterprises and government agencies), the
homebuilding industry, or construction activities; changes in
existing tax laws or enacted corporate income tax rates, including
those resulting from regulatory guidance and interpretations issued
with respect thereto, such as the Internal Revenue Service’s recent
guidance regarding heightened qualification requirements for
federal tax credits for building energy-efficient homes; changes in
U.S. 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; disruptions
in world and regional trade flows, economic activity and supply
chains due to the military conflict and other attacks in the Middle
East region and military conflict in Ukraine, including those
stemming from wide-ranging sanctions the U.S. and other countries
have imposed or may further impose on Russian business sectors,
financial organizations, individuals and raw materials, the impact
of which may, among other things, increase our operational costs,
exacerbate building materials and appliance shortages and/or reduce
our revenues and earnings; the adoption of new or amended financial
accounting standards and the guidance and/or interpretations with
respect thereto; the availability and cost of land in desirable
areas and our ability to timely and efficiently develop acquired
land parcels and open new home communities; impairment, land option
contract abandonment or other inventory-related charges, including
any stemming from decreases in the value of our land assets; our
warranty claims experience with respect to homes previously
delivered and actual warranty costs incurred; costs and/or charges
arising from regulatory compliance requirements, including the
costs to implement recent federal and state climate-related
disclosure rules, or from legal, arbitral or regulatory
proceedings, investigations, claims or settlements, including
unfavorable outcomes in any such matters resulting in actual or
potential monetary damage awards, penalties, fines or other direct
or indirect payments, or injunctions, consent decrees or other
voluntary or involuntary restrictions or adjustments to our
business operations or practices that are beyond our current
expectations and/or accruals; our ability to use/realize the net
deferred tax assets we have generated; our ability to successfully
implement our current and planned strategies and initiatives
related to our product, geographic and market positioning, gaining
share and scale in our served markets, through, among other things,
our making substantial investments in land and land development,
which, in some cases, involves putting significant capital over
several years into large projects in one location, and in entering
into new markets; our operational and investment concentration in
markets in California; consumer interest in our new home
communities and products, particularly from first-time homebuyers
and higher-income consumers; our ability to generate orders and
convert our backlog of orders to home deliveries and revenues,
particularly in key markets in California; our ability to
successfully implement our business strategies and achieve any
associated financial and operational targets and objectives,
including those discussed in this release or in any of our other
public filings, presentations or disclosures; income tax expense
volatility associated with stock-based compensation; the ability of
our homebuyers to obtain homeowners and flood insurance policies,
and/or typical or lender-required policies for other hazards or
events, for their homes, which may depend on the ability and
willingness of insurers or government-funded or -sponsored programs
to offer coverage at an affordable price or at all; the ability of
our homebuyers to obtain residential mortgage loans and mortgage
banking services, which may depend on the ability and willingness
of lenders and financial institutions to offer such loans and
services to our homebuyers; the performance of mortgage lenders to
our homebuyers; the performance of KBHS Home Loans, LLC (“KBHS”);
the ability and willingness of lenders and financial institutions
to extend credit facilities to KBHS to fund its originated mortgage
loans; information technology failures and data security breaches;
an epidemic, pandemic or significant seasonal or other disease
outbreak, and the control response measures that international,
federal, state and local governments, agencies, law enforcement
and/or health authorities implement to address it, which may
precipitate or exacerbate one or more of the above-mentioned and/or
other risks, and significantly disrupt or prevent us from operating
our business in the ordinary course for an extended period;
widespread protests and/or civil unrest, whether due to political
events, social movements or other reasons; and other events outside
of our control. Please see our periodic reports and other filings
with the Securities and Exchange Commission for a further
discussion of these and other risks and uncertainties applicable to
our business.
KB HOME
CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Three Months and Six
Months Ended May 31, 2024 and 2023
(In Thousands, Except Per Share
Amounts – Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2024
2023
2024
2023
Total revenues
$
1,709,813
$
1,765,316
$
3,177,579
$
3,149,630
Homebuilding:
Revenues
$
1,701,512
$
1,757,846
$
3,163,210
$
3,136,383
Costs and expenses
(1,513,329
)
(1,555,744
)
(2,817,351
)
(2,777,792
)
Operating income
188,183
202,102
345,859
358,591
Interest income and other
19,449
1,729
25,306
2,196
Equity in income (loss) of unconsolidated
joint ventures
224
(313
)
(221
)
(1,070
)
Homebuilding pretax income
207,856
203,518
370,944
359,717
Financial services:
Revenues
8,301
7,470
14,369
13,247
Expenses
(1,473
)
(1,472
)
(3,019
)
(2,830
)
Equity in income of unconsolidated joint
venture
6,435
5,426
13,490
7,008
Financial services pretax income
13,263
11,424
24,840
17,425
Total pretax income
221,119
214,942
395,784
377,142
Income tax expense
(52,700
)
(50,500
)
(88,700
)
(87,200
)
Net income
$
168,419
$
164,442
$
307,084
$
289,942
Earnings per share:
Basic
$
2.21
$
2.00
$
4.02
$
3.49
Diluted
$
2.15
$
1.94
$
3.91
$
3.38
Weighted average shares
outstanding:
Basic
75,653
81,764
75,773
82,607
Diluted
77,806
84,306
78,034
85,141
KB HOME
CONSOLIDATED BALANCE
SHEETS
(In Thousands – Unaudited)
May 31, 2024
November 30, 2023
Assets
Homebuilding:
Cash and cash equivalents
$ 643,536
$ 727,076
Receivables
371,674
366,862
Inventories
5,335,185
5,133,646
Investments in unconsolidated joint
ventures
64,319
59,128
Property and equipment, net
89,228
88,309
Deferred tax assets, net
114,475
119,475
Other assets
119,453
96,987
6,737,870
6,591,483
Financial services
67,810
56,879
Total assets
$ 6,805,680
$ 6,648,362
Liabilities and stockholders’
equity
Homebuilding:
Accounts payable
$ 396,584
$ 388,452
Accrued expenses and other liabilities
720,622
758,227
Notes payable
1,695,196
1,689,898
2,812,402
2,836,577
Financial services
1,574
1,645
Stockholders’ equity
3,991,704
3,810,140
Total liabilities and stockholders’
equity
$ 6,805,680
$ 6,648,362
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months and Six
Months Ended May 31, 2024 and 2023
(In Thousands, Except Average
Selling Price – Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2024
2023
2024
2023
Homebuilding revenues:
Housing
$
1,701,512
$
1,757,846
$
3,159,638
$
3,136,383
Land
—
—
3,572
—
Total
$
1,701,512
$
1,757,846
$
3,163,210
$
3,136,383
Homebuilding costs and
expenses:
Construction and land costs
Housing
$
1,342,102
$
1,386,558
$
2,486,529
$
2,469,379
Land
—
—
2,101
—
Subtotal
1,342,102
1,386,558
2,488,630
2,469,379
Selling, general and administrative
expenses
171,227
169,186
328,721
308,413
Total
$
1,513,329
$
1,555,744
$
2,817,351
$
2,777,792
Interest expense:
Interest incurred
$
26,577
$
25,995
$
53,082
$
53,799
Interest capitalized
(26,577
)
(25,995
)
(53,082
)
(53,799
)
Total
$
—
$
—
$
—
$
—
Other information:
Amortization of previously capitalized
interest
$
29,189
$
31,932
$
55,692
$
58,068
Depreciation and amortization
10,377
9,886
20,572
19,433
Average selling price:
West Coast
$
669,600
$
703,700
$
671,500
$
695,400
Southwest
447,600
431,700
449,100
437,900
Central
365,600
418,800
365,200
418,000
Southeast
417,100
398,500
417,300
396,500
Total
$
483,000
$
479,500
$
481,700
$
486,000
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months and Six
Months Ended May 31, 2024 and 2023
(Dollars in Thousands –
Unaudited)
Three Months Ended May 31,
Six Months Ended May 31,
2024
2023
2024
2023
Homes delivered:
West Coast
1,043
802
1,871
1,588
Southwest
712
778
1,429
1,314
Central
1,028
1,302
1,898
2,237
Southeast
740
784
1,362
1,315
Total
3,523
3,666
6,560
6,454
Net orders:
West Coast
1,226
1,299
2,176
2,156
Southwest
785
789
1,483
1,259
Central
1,300
1,042
2,317
1,453
Southeast
686
806
1,344
1,210
Total
3,997
3,936
7,320
6,078
Net order value:
West Coast
$
902,483
$
870,149
$
1,535,883
$
1,405,688
Southwest
362,788
345,340
677,651
522,732
Central
485,824
365,213
849,747
504,681
Southeast
280,808
318,947
550,813
468,416
Total
$
2,031,903
$
1,899,649
$
3,614,094
$
2,901,517
May 31, 2024
May 31, 2023
Homes
Value
Homes
Value
Backlog data:
West Coast
1,850
$
1,304,955
1,855
$
1,224,334
Southwest
1,433
652,578
1,637
695,613
Central
1,686
615,228
2,205
889,379
Southeast
1,301
549,374
1,589
647,367
Total
6,270
$
3,122,135
7,286
$
3,456,693
KB HOME RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (In Thousands, Except Percentages –
Unaudited)
This press release contains, and Company management’s discussion
of the results presented in this press release may include,
information about the Company’s adjusted housing gross profit
margin, which is not calculated in accordance with generally
accepted accounting principles (“GAAP”). The Company believes this
non-GAAP financial measure is relevant and useful to investors in
understanding its operations, and may be helpful in comparing the
Company with other companies in the homebuilding industry to the
extent they provide similar information. However, because it is not
calculated in accordance with GAAP, this non-GAAP financial measure
may not be completely comparable to other companies in the
homebuilding industry and, thus, should not be considered in
isolation or as an alternative to operating performance and/or
financial measures prescribed by GAAP. Rather, this non-GAAP
financial measure should be used to supplement the most directly
comparable GAAP financial measure in order to provide a greater
understanding of the factors and trends affecting the Company’s
operations.
Adjusted Housing Gross Profit
Margin
The following table reconciles the Company’s housing gross
profit margin calculated in accordance with GAAP to the non-GAAP
financial measure of the Company’s adjusted housing gross profit
margin:
Three Months Ended May 31,
Six Months Ended May 31,
2024
2023
2024
2023
Housing revenues
$
1,701,512
$
1,757,846
$
3,159,638
$
3,136,383
Housing construction and land costs
(1,342,102
)
(1,386,558
)
(2,486,529
)
(2,469,379
)
Housing gross profits
359,410
371,288
673,109
667,004
Add: Inventory-related charges (a)
1,210
4,287
2,508
9,576
Adjusted housing gross profits
$
360,620
$
375,575
$
675,617
$
676,580
Housing gross profit margin
21.1
%
21.1
%
21.3
%
21.3
%
Adjusted housing gross profit margin
21.2
%
21.4
%
21.4
%
21.6
%
(a) Represents inventory impairment and land option contract
abandonment charges associated with housing operations.
Adjusted housing gross profit margin is a non-GAAP financial
measure, which the Company calculates by dividing housing revenues
less housing construction and land costs excluding housing
inventory impairment and land option contract abandonment charges
(as applicable) recorded during a given period, by housing
revenues. The most directly comparable GAAP financial measure is
housing gross profit margin. The Company believes adjusted housing
gross profit margin is a relevant and useful financial measure to
investors in evaluating the Company’s performance as it measures
the gross profits the Company generated specifically on the homes
delivered during a given period. This non-GAAP financial measure
isolates the impact that housing inventory impairment and land
option contract abandonment charges have on housing gross profit
margins, and allows investors to make comparisons with the
Company’s competitors that adjust housing gross profit margins in a
similar manner. The Company also believes investors will find
adjusted housing gross profit margin relevant and useful because it
represents a profitability measure that may be compared to a prior
period without regard to variability of housing inventory
impairment and land option contract abandonment charges. This
financial measure assists management in making strategic decisions
regarding community location and product mix, product pricing and
construction pace.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240618004667/en/
Jill Peters, Investor Relations Contact (310) 893-7456 or
jpeters@kbhome.com Cara Kane, Media Contact (321) 299-6844 or
ckane@kbhome.com
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