Revenues Grew 6% to $1.47 Billion; Diluted
Earnings Per Share Increased 21% to $1.76 Net Orders Up 55%;
Net Order Value Increased 58% to $1.58 Billion Repurchased
$50 Million of Common Stock
KB Home (NYSE: KBH) today reported results for its first quarter
ended February 29, 2024.
"Fiscal 2024 is off to a strong start, as we generated solid
results in our first quarter that were either at or above the high
end of our guidance ranges. Market conditions have improved since
the end of our 2023 fiscal year, contributing to the significant
year‐over‐year increase in our net orders for the quarter,” said
Jeffrey Mezger, Chairman and Chief Executive Officer. “This
positive momentum in demand has continued in our 2024 second
quarter to date, and we believe we are well‐positioned to
capitalize on it given our commitment to offering all homebuyers
the ability to personalize their home, our well-designed products
and attractive price points, as well as our expanding community
count.”
“With a healthy balance sheet and strong cash flow, we continue
to prioritize investing in land acquisition and development, as
well as returning capital to our stockholders. In the 2024 first
quarter, we increased our investments in land and land development
and continued to repurchase our common stock. While positioning the
Company for growth, we also intend to make additional share
repurchases in 2024, as we remain focused on creating long‐term
stockholder value,” concluded Mezger.
Three Months Ended February 29, 2024
(comparisons on a year-over-year basis)
- Revenues up 6% to $1.47 billion.
- Homes delivered increased 9% to 3,037.
- Average selling price was $480,100, compared to $494,500.
- Homebuilding operating income totaled $157.7 million, up
slightly from $156.5 million. The homebuilding operating income
margin was 10.8%, compared to 11.4%. Excluding total
inventory-related charges of $1.3 million for the current quarter
and $5.3 million for the year-earlier quarter, the homebuilding
operating income margin was 10.9%, compared to 11.7%.
- The housing gross profit margin of 21.5% was even with the
year-earlier quarter. Excluding the above-mentioned
inventory-related charges, the housing gross profit margin was
21.6%, compared to 21.8%.
- Selling, general and administrative expenses as a percentage of
housing revenues were 10.8%, compared to 10.1%, mainly reflecting
higher costs including marketing, advertising and other expenses
associated with the planned increase in our community count during
the year as we position our operations for growth.
- Financial services pretax income rose to $11.6 million from
$6.0 million, primarily 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 more homes were delivered in the current period
and 85% of the buyers financing their home purchases used the joint
venture, up from 79%.
- Net income increased 10% to $138.7 million. Diluted earnings
per share grew 21% to $1.76, reflecting the favorable impact of the
Company’s common stock repurchases over the past several quarters.
- The effective tax rate was 20.6%, compared to 22.6%, largely
due to an increase in tax benefits related to stock-based
compensation in the current period.
Backlog and Net Orders (comparisons on
a year-over-year basis, except as noted)
- Net orders grew 55% to 3,323 due to improved demand and a lower
cancellation rate as compared to the year-earlier quarter. Net
order value rose 58% to $1.58 billion, reflecting the growth in net
orders and a higher average selling price of those orders.
- Monthly net orders per community increased to 4.6 from
2.8.
- Gross orders were up 15% to 3,873, and the cancellation rate as
a percentage of gross orders improved to 14%, compared to 36%.
- The number of homes in the Company’s ending backlog totaled
5,796, compared to 7,016. Ending backlog value was $2.79 billion,
compared to $3.31 billion. Ending backlog homes and value each
increased 5% from the previous quarter.
- The Company’s average community count was down 4% to 240, and
ending community count decreased 7% to 238. On a sequential basis,
the average community count expanded 2%.
Balance Sheet as of February 29, 2024
(comparisons to November 30, 2023, except as noted)
- The Company had total liquidity of $1.75 billion, including
$668.1 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 $5.24 billion, up 2%.
- The Company’s total investments in land and land development of
$587.1 million increased 60% from the year-earlier quarter.
- The Company’s lots owned or under contract totaled 55,509, of
which approximately 72% were owned and 28% were under
contract.
- Notes payable of $1.69 billion were essentially unchanged. The
Company’s debt to capital ratio improved 30 basis points to 30.4%,
compared to 30.7%. On a year-over-year basis, the debt to capital
ratio improved 220 basis points from 32.6%.
- Stockholders’ equity increased to $3.88 billion, compared to
$3.81 billion, mainly reflecting net income, partly offset by
common stock repurchases and cash dividends.
- In the 2024 first quarter, the Company repurchased 826,663
shares of its outstanding common stock at a total cost of $50.0
million. As of February 29, 2024, the Company had $113.6 million
remaining under its current common stock repurchase
authorization.
- Based on the Company’s 75.9 million outstanding shares as of
February 29, 2024, book value per share of $51.14 increased 14%
year over year.
Guidance
The Company is providing the following guidance for its 2024
full year:
- Housing revenues in the range of $6.50 billion to $6.90
billion.
- Average selling price in the range of $480,000 to
$490,000.
- Homebuilding operating income as a percentage of revenues in
the range of 10.9% to 11.3%, assuming no inventory-related charges.
- Housing gross profit margin in the range of 21.0% to 21.4%,
assuming no inventory-related charges.
- Selling, general and administrative expenses as a percentage of
housing revenues of approximately 10.2%.
- Effective tax rate of approximately 23.0%.
- Ending community count of about 260, up 7% year over year.
The Company plans to also provide guidance for its 2024 second
quarter on its conference call today.
Conference Call
The conference call to discuss the Company’s 2024 first 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 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 Ended
February 29, 2024 and February 28, 2023
(In Thousands, Except Per Share
Amounts – Unaudited)
Three Months Ended
February 29, 2024
February 28, 2023
Total revenues
$
1,467,766
$
1,384,314
Homebuilding:
Revenues
$
1,461,698
$
1,378,537
Costs and expenses
(1,304,022
)
(1,222,048
)
Operating income
157,676
156,489
Interest income
5,857
467
Equity in loss of unconsolidated joint
ventures
(445
)
(757
)
Homebuilding pretax income
163,088
156,199
Financial services:
Revenues
6,068
5,777
Expenses
(1,546
)
(1,358
)
Equity in income of unconsolidated joint
ventures
7,055
1,582
Financial services pretax income
11,577
6,001
Total pretax income
174,665
162,200
Income tax expense
(36,000
)
(36,700
)
Net income
$
138,665
$
125,500
Earnings per share:
Basic
$
1.81
$
1.49
Diluted
$
1.76
$
1.45
Weighted average shares
outstanding:
Basic
75,894
83,468
Diluted
78,264
85,995
KB HOME
CONSOLIDATED BALANCE
SHEETS
(In Thousands – Unaudited)
February 29, 2024
November 30, 2023
Assets
Homebuilding:
Cash and cash equivalents
$
668,084
$
727,076
Receivables
354,728
366,862
Inventories
5,243,581
5,133,646
Investments in unconsolidated joint
ventures
59,674
59,128
Property and equipment, net
88,433
88,309
Deferred tax assets, net
117,175
119,475
Other assets
93,411
96,987
6,625,086
6,591,483
Financial services
58,406
56,879
Total assets
$
6,683,492
$
6,648,362
Liabilities and stockholders’
equity
Homebuilding:
Accounts payable
$
378,906
$
388,452
Accrued expenses and other liabilities
728,328
758,227
Notes payable
1,692,729
1,689,898
2,799,963
2,836,577
Financial services
859
1,645
Stockholders’ equity
3,882,670
3,810,140
Total liabilities and stockholders’
equity
$
6,683,492
$
6,648,362
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months Ended
February 29, 2024 and February 28, 2023
(In Thousands, Except Average
Selling Price – Unaudited)
Three Months Ended
February 29, 2024
February 28, 2023
Homebuilding revenues:
Housing
$
1,458,126
$
1,378,537
Land
3,572
—
Total
$
1,461,698
$
1,378,537
Homebuilding costs and
expenses:
Construction and land costs
Housing
$
1,144,427
$
1,082,821
Land
2,101
—
Subtotal
1,146,528
1,082,821
Selling, general and administrative
expenses
157,494
139,227
Total
$
1,304,022
$
1,222,048
Interest expense:
Interest incurred
$
26,505
$
27,804
Interest capitalized
(26,505
)
(27,804
)
Total
$
—
$
—
Other information:
Amortization of previously capitalized
interest
$
26,503
$
26,136
Depreciation and amortization
10,195
9,547
Average selling price:
West Coast
$
673,800
$
687,000
Southwest
450,700
447,000
Central
364,700
417,100
Southeast
417,700
393,600
Total
$
480,100
$
494,500
KB HOME
SUPPLEMENTAL
INFORMATION
For the Three Months Ended
February 29, 2024 and February 28, 2023
(Dollars in Thousands –
Unaudited)
Three Months Ended
February 29, 2024
February 28, 2023
Homes delivered:
West Coast
828
786
Southwest
717
536
Central
870
935
Southeast
622
531
Total
3,037
2,788
Net orders:
West Coast
950
857
Southwest
698
470
Central
1,017
411
Southeast
658
404
Total
3,323
2,142
Net order value:
West Coast
$
633,400
$
535,539
Southwest
314,863
177,392
Central
363,923
139,468
Southeast
270,005
149,469
Total
$
1,582,191
$
1,001,868
February 29, 2024
February 28, 2023
Homes
Value
Homes
Value
Backlog data:
West Coast
1,667
$
1,100,889
1,358
$
918,535
Southwest
1,360
608,455
1,626
686,101
Central
1,414
505,194
2,465
1,069,380
Southeast
1,355
577,206
1,567
640,874
Total
5,796
$
2,791,744
7,016
$
3,314,890
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
February 29, 2024
February 28, 2023
Housing revenues
$
1,458,126
$
1,378,537
Housing construction and land costs
(1,144,427
)
(1,082,821
)
Housing gross profits
313,699
295,716
Add: Inventory-related charges (a)
1,298
5,289
Adjusted housing gross profits
$
314,997
$
301,005
Housing gross profit margin
21.5
%
21.5
%
Adjusted housing gross profit margin
21.6
%
21.8
%
(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/20240320665090/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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