Financial News

KB Home Reports 2024 Second Quarter Results

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.

KB Home Reports 2024 Second Quarter Results

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