KB HOME

Previous wording

Homebuilding revenues for the three months ended August 31, 2024 were generated solely from housing operations. In the year-earlier period, homebuilding revenues were generated from housing operations and land sales. Our 2024 third-quarter housing revenues grew 11% year over year to $1.75 billion due to an 8% increase in the number of homes delivered to 3,631 and a 3% increase in their average selling price to $480,900. Approximately 50% of our homes delivered in the 2024 third quarter were to first-time homebuyers. Homebuilding operating income for the three months ended August 31, 2024 rose 5% from the year-earlier period to $189.0 million. As a percentage of revenues, homebuilding operating income was 10.8% for the 2024 third quarter compared to 11.3% for the year-earlier quarter, primarily reflecting a lower housing gross profit margin, partly offset by a modest improvement in selling, general and administrative expenses as a percentage of housing revenues. Our housing gross profit margin for the 2024 third quarter was 20.6%, compared to 21.5% for the year-earlier quarter. Net income and diluted earnings per share for the three months ended August 31, 2024 increased 5% and 13%, respectively, year over year. The increase in diluted earnings per share for the 2024 third quarter was driven by higher net income and the favorable impact of our common stock repurchases over the past several quarters.

Current wording

Homebuilding revenues for the three months ended February 28, 2025 were generated solely from housing operations. In the year-earlier period, homebuilding revenues were generated from housing operations and land sales. Our 2025 first-quarter housing revenues were down 5% year over year to $1.39 billion due to a 9% decrease in the number of homes delivered to 2,770, partly offset by a 4% increase in their average selling price to $500,700. Approximately 49% of our homes delivered in the 2025 first quarter were to first-time homebuyers. Our homes delivered as a percentage of backlog at the beginning of the quarter increased to 62% for the 2025 first quarter, from 55% for the year-earlier quarter, mainly due to our improved build times. Homebuilding operating income for the three months ended February 28, 2025 declined 19% from the year-earlier period to $127.3 million. As a percentage of revenues, homebuilding operating income was 9.2% for the 2025 first quarter compared to 10.8% for the corresponding 2024 period, primarily reflecting a lower housing gross profit margin. Our housing gross profit margin for the 2025 first quarter was 20.2%, compared to 21.5% for the year-earlier quarter, mainly due to higher relative land costs, increased homebuyer concessions and reduced operating leverage from lower housing revenues. Net income and diluted earnings per share for the three months ended February 28, 2025 decreased 21% and 15%, respectively, year over year. Our diluted earnings per share for the 2025 first quarter reflected lower net income, partly offset by the favorable impact of our common stock repurchases over the past several quarters.

Previous wording

We believe our strong balance sheet and liquidity position will provide us with the flexibility to operate effectively through evolving market conditions during the 2024 fourth quarter and pursue our priorities of investing in land and land development to support future growth and returning capital to our stockholders. We continue to take a balanced approach in allocating our capital aligned with these priorities. For the nine months ended August 31, 2024, we increased our investments in land and land development to $2.10 billion, representing a 59% increase from the prior-year period, and repurchased 3,460,697 shares of our common stock at a total cost of $250.0 million. Over the nine months ended August 31, 2024, we have repurchased about 5% of our shares that were outstanding at the start of the fiscal year. Additionally, in the 2024 second quarter, we raised the quarterly cash dividend on our common stock by $.05 per share, or 25%, to $.25 per share, and we paid a cash dividend at this rate in the 2024 second and third quarters. We ended the 2024 third quarter with total liquidity of $1.46 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility. We had no cash borrowings outstanding under the Credit Facility at August 31, 2024.

Current wording

We continue to take a balanced approach in allocating our capital aligned with our priorities of investing in land and land development to support future growth and returning capital to our stockholders. For the three months ended February 28, 2025, we increased our investments in land and land development to $920.3 million, representing a 57% increase from the prior-year period, and repurchased 753,939 shares of our common stock at a total cost of $50.0 million. We ended the 2025 first quarter with total liquidity of $1.25 billion, including cash and cash equivalents and $981.7 million of available capacity under the Credit Facility. We had $100.0 million of cash borrowings outstanding under the Credit Facility at February 28, 2025.

Previous wording

Although our ending backlog value at August 31, 2024 decreased 14% year over year to approximately $2.92 billion, we believe we are well-positioned to achieve solid results for the 2024 fourth quarter and full year, as described below under “Outlook.”

Current wording

We have revised our projections for 2025 due to our first quarter results, the relatively soft start to the Spring selling season and the selling price adjustments we implemented in mid-February 2025. Although our ending backlog value at February 28, 2025 decreased 21% year over year to approximately $2.20 billion, we believe we are well positioned to achieve our updated projections for the 2025 second quarter and full year, as described below under “Outlook.”

Previous wording

Revenues. Homebuilding revenues for the three months ended August 31, 2024 were generated solely from housing operations. For the three months ended August 31, 2023, homebuilding revenues were generated from housing operations and land sales. Housing revenues for the 2024 third quarter grew 11% from the year-earlier quarter due to increases of 8% in the overall number of homes delivered and 3% in their overall average selling price. The year-over-year growth in our 2024 third quarter housing revenues reflected increases of 50%, 15% and 4% in our West Coast, Southeast and Southwest homebuilding reporting segments, respectively, partially offset by a 26% decrease in our Central segment. The growth in the number of homes delivered as compared to the year-earlier quarter reflected increases of 57% and 9% in our West Coast and Southeast homebuilding reporting segments, respectively, partly offset by decreases of 5% and 15% in our Southwest and Central segments, respectively. The higher overall average selling price primarily resulted from the combined effect of product and geographic mix factors, particularly a greater proportion of homes delivered from our higher-priced West Coast homebuilding reporting segment, and a year-over-year decrease in homebuyer concessions.

Current wording

Revenues. Homebuilding revenues for the three months ended February 28, 2025 were generated solely from housing operations. For the three months ended February 29, 2024, homebuilding revenues were generated from housing operations and land sales. Housing revenues for the 2025 first quarter declined 5% from the year-earlier quarter due to a 9% decrease in the number of homes delivered, partly offset by a 4% increase in their overall average selling price. Our 2025 first-quarter housing revenues reflected year-over-year decreases of 3%, 13% and 24% in our Southwest, Central and Southeast homebuilding reporting segments, respectively, partially offset by an 8% increase in our West Coast segment. The number of homes delivered decreased as compared to the year-earlier quarter, primarily due to fewer inventory homes sold and delivered, and utility services-related delays stemming from the unprecedented wildfires in Southern California as certain municipal resources were diverted to fire-related priorities. The higher overall average selling price primarily resulted from the combined effect of product and geographic mix factors, particularly a greater proportion of homes delivered from our higher-priced West Coast homebuilding reporting segment, partly offset by a year-over-year increase in homebuyer concessions.

Previous wording

There were no land sales for the three months ended August 31, 2024, compared to $6.0 million of land sale revenues for the three months ended August 31, 2023. For the nine months ended August 31, 2024 and 2023, land sale revenues totaled $3.6 million and $6.0 million, respectively. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions.

Current wording

There were no land sales for the three months ended February 28, 2025, compared to $3.6 million of land sale revenues for the three months ended February 29, 2024. Generally, land sale revenues fluctuate with our decisions to maintain or decrease our land ownership position in certain markets based upon the volume of our holdings, our business strategy, the strength and number of developers and other land buyers in particular markets at given points in time, the availability of opportunities to sell land at acceptable prices and prevailing market conditions.

Previous wording

Operating Income. Our homebuilding operating income for the three months ended August 31, 2024 increased 5% year over year, reflecting higher housing gross profits, partly offset by higher selling, general and administrative expenses. Operating income for the 2024 third quarter included inventory-related charges of $1.2 million, compared to $.6 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended August 31, 2024 was 10.8%, compared to 11.3% for the corresponding 2023 period due to a lower housing gross profit margin, partially offset by lower selling, general and administrative expenses as a percentage of housing revenues. Excluding inventory-related charges, our operating income as a percentage of revenues was 10.9% for the 2024 third quarter, compared to 11.4% for the year-earlier quarter.

Current wording

Operating Income. Our homebuilding operating income for the three months ended February 28, 2025 decreased 19% year over year, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the 2025 first quarter included inventory-related charges of $1.5 million, compared to $1.3 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended February 28, 2025 was 9.2%, compared to 10.8% for the corresponding 2024 period, mainly due to a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of housing revenues. Excluding inventory-related charges, our operating income as a percentage of revenues was 9.3% for the 2025 first quarter, compared to 10.9% for the year-earlier quarter.

Previous wording

•Housing Gross Profits – Housing gross profits of $360.4 million for the three months ended August 31, 2024 grew 7% year over year, reflecting an increase in housing revenues, partly offset by a 90 basis-point decrease in our housing gross profit margin to 20.6%. The decline in the housing gross profit margin was primarily due to product and geographic mix shifts of homes delivered along with higher relative construction and land costs, which included the impact of pricing adjustments to support demand, partially offset by reduced homebuyer concessions. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.6% and 1.8% for the three months ended August 31, 2024 and 2023, respectively. Excluding the inventory-related charges associated with housing operations of $1.2 million in the current quarter and $.6 million in the year-earlier quarter, our adjusted housing gross profit margin of 20.7% for the 2024 third quarter decreased 80 basis points year over year.

Current wording

•Housing Gross Profits – Housing gross profits of $279.6 million for the three months ended February 28, 2025 were down 11% year over year, reflecting a decrease in housing revenues and a 130 basis-point decrease in our housing gross profit margin to 20.2%. The decline in the housing gross profit margin was primarily due to higher relative land costs, increased homebuyer concessions and reduced operating leverage from lower housing revenues. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations, which is included in construction and land costs, was 1.7% and 1.8% for the three months ended February 28, 2025 and February 29, 2024, respectively. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 20.3% for the 2025 first quarter decreased 130 basis points year over year. The calculation of adjusted housing gross profit margin, which we believe provides a clearer measure of the performance of our business, is described below under “Non-GAAP Financial Measures.”

Previous wording

•Land Sale Profits – There was no land sale activity in the three months ended August 31, 2024, compared to land sale profits of $1.1 million in the three months ended August 31, 2023. For the nine months ended August 31, 2024 and 2023, land sale profits totaled $1.5 million and $1.1 million, respectively.

Current wording

•Land Sale Profits – There was no land sale activity in the three months ended February 28, 2025, compared to land sale profits of $1.5 million in the three months ended February 29, 2024.

Previous wording

Selling, general and administrative expenses for the three months ended August 31, 2024 increased 7% from the year-earlier quarter. As a percentage of housing revenues, our selling, general and administrative expenses for the 2024 third quarter decreased 40 basis points, primarily reflecting increased operating leverage from higher housing revenues.

Current wording

Selling, general and administrative expenses for the three months ended February 28, 2025 decreased 3% from the year-earlier quarter. As a percentage of housing revenues, our selling, general and administrative expenses for the 2025 first quarter increased 20 basis points, primarily reflecting reduced operating leverage from lower housing revenues.

Previous wording

Interest income, which is generated from short-term investments, was $4.1 million for the three months ended August 31, 2024, compared to $5.5 million for the year-earlier quarter, reflecting a decrease in the average balance of cash equivalents and a lower interest rate. For the nine months ended August 31, 2024, interest income increased to $16.9 million, compared to $7.7 million for the corresponding period of 2023, due to a higher average balance of cash equivalents and a higher interest rate in the 2024 period. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.

Current wording

Interest Income/Expense. Interest income, which is generated from short-term investments, was $2.1 million for the three months ended February 28, 2025, compared to $5.9 million for the year-earlier quarter, reflecting a decrease in the average balance of cash equivalents and a lower interest rate. Generally, increases and decreases in interest income are attributable to changes in the interest-bearing average balances of short-term investments and fluctuations in interest rates.

Previous wording

We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month and nine-month periods ended August 31, 2024 and 2023 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. Accordingly, we had no interest expense for these periods. Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report.

Current wording

We incur interest principally from our borrowings to finance land acquisitions, land development, home construction and other operating and capital needs. All interest incurred during the three-month periods ended February 28, 2025 and February 29, 2024 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. Accordingly, we had no interest expense for these periods. Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report.

Previous wording

Equity in Income (Loss) of Unconsolidated Joint Ventures. Our equity in income of unconsolidated joint ventures was $3.5 million and $3.2 million for the three-month and nine-month periods ended August 31, 2024, respectively. For the three-month and nine-month periods ended August 31, 2023, our equity in loss of unconsolidated joint ventures was nominal and $1.2 million, respectively. The year-over-year improvement for the 2024 periods mainly reflected homes delivered by an unconsolidated joint venture in California. In the corresponding periods of 2023, our unconsolidated joint ventures did not deliver any homes. Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

Current wording

Equity in Income (Loss) of Unconsolidated Joint Ventures. Our equity in income of unconsolidated joint ventures was $2.4 million for the three months ended February 28, 2025, compared to our equity in loss of unconsolidated joint ventures of $.4 million for three months ended February 29, 2024. The year-over-year improvement for the 2025 period mainly reflected homes delivered by an unconsolidated joint venture in California. In the corresponding period of 2024, our unconsolidated joint ventures did not deliver any homes. Further information regarding our investments in homebuilding unconsolidated joint ventures is provided in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report.

Previous wording

(a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design studio options and upgrades for homes in backlog during the same period.

Current wording

(a) Net order value represents potential future housing revenues associated with net orders generated during the period, as well as homebuyer selections of lot and product premiums and design choices and options for homes in backlog during the same period.

Previous wording

(b) Cancellation rates represent the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period.

Current wording

(b) Cancellation rate represents the total number of contracts for new homes cancelled during a period divided by the total (gross) orders for new homes generated during the same period.

Previous wording

Our cancellation rate as a percentage of gross orders for the three months ended August 31, 2024 improved from the year-earlier period, reflecting positive housing market dynamics, as well as buyers’ ability and willingness to close on their homes when available for delivery.

Current wording

Our cancellation rate as a percentage of gross orders for the three months ended February 28, 2025 increased slightly from the year-earlier period.

Previous wording

Backlog. The number of homes in our backlog and our backlog value at August 31, 2024 decreased 18% and 14%, respectively, from August 31, 2023. The decline in our overall backlog value reflected decreases in each of our homebuilding reporting segments, ranging from 9% in our Southwest segment to 24% in our Southeast segment. Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations.

Current wording

Backlog. The number of homes in our backlog and our backlog value at February 28, 2025 decreased 23% and 21%, respectively, from February 29, 2024. The decline in our overall backlog value reflected decreases in each of our homebuilding reporting segments, ranging from 20% in our West Coast and Southwest segments to 25% in our Southeast segment. Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations.

Previous wording

Community Count. We use the term “community count” to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period. Our average community count for the three months ended August 31, 2024 increased 5% from the year-earlier period. Our ending community count for the 2024 third quarter grew 10% from the year-earlier quarter. On a sequential basis, our 2024 third quarter ending community count expanded 3%. To help drive future community count growth, we increased our investments in land and land development on a year-over-year basis for the nine months ended August 31, 2024, as discussed below under “Liquidity and Capital Resources.”

Current wording

Community Count. We use the term “community count” to refer to the number of communities open for sale with at least five homes left to sell at the end of a reporting period. Our ending community count for the 2025 first quarter grew 7% from the year-earlier quarter. Our average community count for the three months ended February 28, 2025 also increased 7% from the year-earlier period. To help drive future growth, we increased our investments in land and land development on a year-over-year basis for the three months ended February 28, 2025, as discussed below under “Liquidity and Capital Resources.”

Previous wording

The composition of our homes delivered, net orders and backlog shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing communities wind down or sell out in the ordinary course. In addition, with our Built to Order business model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design studio options and upgrades buyers select in the community. These intrinsic variations in our business limit the comparability of our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods.

Current wording

The composition of our homes delivered, net orders and backlog shifts with the product and geographic mix of our active communities and the corresponding average selling prices of the homes ordered and/or delivered at these communities in any particular period, changing as new communities open and existing communities wind down or sell out in the ordinary course. In addition, with our Built to Order business model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design choices and options buyers select. These intrinsic variations in our business limit the comparability of our homes delivered, net orders and backlog, as well as their corresponding values, between sequential and year-over-year periods, in addition to the effect of prevailing economic or housing market conditions in or across any particular periods.

Previous wording

In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment. Corporate and other had operating losses of $37.9 million and $36.0 million in the three months ended August 31, 2024 and 2023, respectively. For the nine months ended August 31, 2024, Corporate and other had an operating loss of $111.6 million, compared to an operating loss of $104.5 million for the corresponding year-earlier period.

Current wording

In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment. Corporate and other had operating losses of $36.5 million and $35.1 million in the three months ended February 28, 2025 and February 29, 2024, respectively.

Previous wording

The financial results of our homebuilding reporting segments for the three-month and nine-month periods ended August 31, 2024 and 2023 were negatively impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered.

Current wording

The financial results of our homebuilding reporting segments for the three months ended February 28, 2025 and February 29, 2024 were impacted to varying degrees by homebuyer concessions we extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered.

Previous wording

In the three months ended August 31, 2024 and the three-month and nine-month periods ended August 31, 2023, revenues were generated solely from housing operations. In the nine months ended August 31, 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. The year-over-year growth in housing revenues for the three-month and nine-month periods ended August 31, 2024 was driven by an increase in the number of homes delivered, partially offset by a decrease in their average selling price. Operating income for the three months and nine months ended August 31, 2024 was up year over year, reflecting higher housing gross profits, partly offset by increased selling, general and administrative expenses. Operating income as a percentage of revenues for the 2024 third quarter rose from the year-earlier quarter, primarily due to a 30 basis-point increase in the housing gross profit margin to 18.8% and a 140 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.2%. For the nine months ended August 31, 2024, operating income as a percentage of revenues increased from the corresponding 2023 period, reflecting a 110 basis-point expansion in the housing gross profit margin to 19.2% and a 60 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 6.9%.

Current wording

In the three months ended February 28, 2025, this segment’s revenues were generated solely from housing operations. In the three months ended February 29, 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. The year-over-year growth in housing revenues for the three months ended February 28, 2025 was driven by increases in both the number of homes delivered and their average selling price. Operating income for the three months ended February 28, 2025 was nearly even year over year, as housing gross profits were essentially flat, and a slight decrease in selling, general and administrative expenses was partly offset by the absence of land sale profits in the current period. Land sale profits were $.4 million in the year-earlier period. Operating income as a percentage of revenues for the 2025 first quarter was down from the year-earlier quarter, primarily due to a 140 basis-point decrease in the housing gross profit margin to 18.4%, partly offset by a 70 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.3%. The year-over-year decrease in the housing gross profit margin for the three months ended February 28, 2025 mainly reflected higher relative land costs as well as increased homebuyer concessions. For the three months ended February 28, 2025, inventory-related charges associated with housing operations were $.6 million, compared to $1.3 million for the year-earlier period. The year-over-year improvement in selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2025 primarily reflected improved operating leverage from higher housing revenues, partly offset by higher costs including marketing and other expenses associated with our increased community count in this segment.

Previous wording

In the three months ended August 31, 2024 and the three-month and nine-month periods ended August 31, 2023, this segment’s revenues were generated solely from housing operations. In the nine months ended August 31, 2024, this segment’s revenues were comprised of housing revenues and land sale revenues. Housing revenues for the three months ended August 31, 2024 decreased 26% from the year-earlier period. For the nine months ended August 31, 2024, housing revenues of $1.07 billion were also down 26% year over year. The lower housing revenues for the three-month and nine-month periods ended August 31, 2024 reflected decreases in both the number of homes delivered and their average selling price. Operating income for the three months and nine months ended August 31, 2024 declined from the year-earlier period due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the nine months ended August 31, 2024 also reflected land sale profits of $1.1 million. This segment’s operating income as a percentage of revenues for the 2024 third quarter decreased from the year-earlier period, primarily due to a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.1%, and a 140 basis-point decline in the housing gross profit margin to 21.8%. Operating income as a percentage of revenues for the nine months ended August 31, 2024 decreased from the corresponding 2023 period, mainly reflecting a 100 basis-point decrease in the housing gross profit margin to 21.9% and a 180 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.0%.

Current wording

In the three months ended February 28, 2025, this segment’s revenues were generated solely from housing operations. In the three months ended February 29, 2024, this segment’s revenues were comprised of housing revenues and land sale revenues. Housing revenues for the three months ended February 28, 2025 were down 13% from $317.3 million in the year-earlier period due to a decrease in the number of homes delivered, partly offset by a slight increase in their average selling price. Land sale revenues totaled $3.2 million in the three months ended February 29, 2024. Operating income for the 2025 first quarter declined from the year-earlier period mainly due to lower housing gross profits and the absence of land sale profits in the current quarter, partly offset by lower selling, general and administrative expenses. Land sale profits totaled $1.1 million for the 2024 first quarter. This segment’s operating income as a percentage of revenues for the 2025 first quarter decreased from the year-earlier period, primarily due to a 170 basis-point decline in the housing gross profit margin to 20.2% and a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.0%. The housing gross profit margin for the three months ended February 28, 2025 declined mainly due to higher relative land costs, and reduced operating leverage from lower housing revenues. Inventory-related charges associated with housing operations for the three months ended February 28, 2025 were $.3 million, compared to none for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2025 was mainly due to reduced operating leverage from lower housing revenues.

Previous wording

This segment’s revenues for the three-month and nine-month periods ended August 31, 2024 and 2023 were generated solely from housing operations. Housing revenues for the three-month and nine-month periods ended August 31, 2024 grew year over year due to increases in both the number of homes delivered and their average selling price. Operating income for the three-month and nine-month periods ended August 31, 2024 decreased from the corresponding year-earlier periods, primarily reflecting higher selling, general and administrative expenses, as housing gross profits were essentially flat year over year. As a percentage of revenues, operating income for the 2024 third quarter decreased from the year-earlier quarter due to a 390 basis-point decrease in the housing gross profit margin to 20.0%, slightly offset by a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.0%. For the nine months ended August 31, 2024, operating income as a percentage of revenues for the nine months ended August 31, 2024 decreased from the year-earlier period, reflecting a 220 basis-point decline in the housing gross profit margin to 20.9%.

Current wording

This segment’s revenues for the three months ended February 28, 2025 and February 29, 2024 were generated solely from housing operations. Housing revenues for the three-month period ended February 28, 2025 declined from the corresponding year-earlier period due to decreases in both the number of homes delivered and their average selling price. Operating income for the three months ended February 28, 2025 was down year over year, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses. As a percentage of revenues, operating income for the 2025 first quarter decreased from the year-earlier quarter due to a 390 basis-point decline in the housing gross profit margin to 17.7% and a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.1%. The year-over-year decrease in the housing gross profit margin primarily reflected higher relative construction and land costs, increased homebuyer concessions and reduced operating leverage from lower housing revenues. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months ended February 28, 2025 was mainly due to reduced operating leverage from lower housing revenues as well as higher costs, including marketing and other expenses associated with our expanded community count in this segment.

Previous wording

Revenues. Financial services revenues for the three months ended August 31, 2024 declined 9% year over year, due to decreases in both insurance commissions and title services revenues. For the nine months ended August 31, 2024, financial services revenues rose slightly from the year-earlier period, as an increase in insurance commissions was largely offset by a decrease in title services revenues.

Current wording

Revenues. Financial services revenues for the three months ended February 28, 2025 declined 22% year over year, due to decreases in both insurance commissions and title services revenues.

Previous wording

Pretax income. Financial services pretax income for the three months ended August 31, 2024 grew 11% from the year-earlier period, largely due to an increase in the equity in income of our unconsolidated joint venture, KBHS. In the 2024 third quarter, the equity in income of our unconsolidated joint venture increased to $5.9 million, from $4.1 million in the year-earlier quarter, due to an increase in KBHS’ income. The year-over-year increase in KBHS’ income reflected the loss in the fair value of IRLCs decreasing to $.4 million in the current quarter, compared to $5.2 million in the year-earlier quarter. Also contributing to the year-over-year increase in KBHS’ income was the higher principal amount of loans originated, which reflected increases in both the number of homes we delivered and the percentage of homebuyers using KBHS. In the 2024 third quarter, 88% of the buyers financing their home purchases used KBHS, up from 84% in the year-earlier quarter.

Current wording

Pretax income. Financial services pretax income for the three months ended February 28, 2025 was down 35% from the year-earlier period, largely due to a decrease in the equity in income of our unconsolidated joint venture, KBHS. In the 2025 first quarter, the equity in income of our unconsolidated joint venture was $4.3 million, compared to $7.1 million in the year-earlier quarter, reflecting a decrease in KBHS’ income. The year-over-year decrease in KBHS’ income primarily reflected a loss in the fair value of IRLCs of $1.5 million in the current quarter, compared to a gain in the fair value of IRLCs of $2.9 million in the year-earlier quarter. Also contributing to the year-over-year decrease in KBHS’ income was a decline in the number of loans originated, which reflected a decrease in the number of homes we delivered, partly offset by an increase in the percentage of homebuyers using KBHS.

Previous wording

Our effective tax rate for the three months ended August 31, 2024 increased from the year-earlier period, mainly due to a $3.0 million decline in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $1.9 million decrease in excess tax benefits related to stock-based compensation, partly offset by a $2.4 million decrease in state taxes. For the nine months ended August 31, 2024, our effective tax rate was essentially flat with the year-earlier period, primarily reflecting a $5.3 million decrease in state income taxes, a $1.3 million decline in nondeductible executive compensation expense and a $.8 million increase in excess tax benefits related to stock-based compensation, largely offset by a $6.6 million decrease in the Section 45L tax credits.

Current wording

Our effective tax rate for the three months ended February 28, 2025 increased from the year-earlier period, mainly due to a $2.4 million decrease in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $.7 million decrease in excess tax benefits related to stock-based compensation. The year-over-year decrease in Section 45L tax credits reflects the impact of guidance the IRS issued in 2023 that heightened the Section 45L energy-efficiency qualification standard for homes built in California relative to other states and our decision to build homes in many of our markets beginning in 2025 that are highly energy efficient and qualify for ENERGY STAR certification but do not qualify for Section 45L tax credits. We believe the additional costs necessary to satisfy the higher standards for some of our homes outweigh the possible benefits of meeting those standards for both our business and our buyers.

Previous wording

This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with GAAP. We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operations and the leverage employed in our operations, and may be helpful in comparing us 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 our operations.

Current wording

This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with GAAP. We believe this non-GAAP financial measure is relevant and useful to investors in understanding our operations, and may be helpful in comparing us 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 our operations.

Previous wording

We ended the 2024 third quarter with total liquidity of $1.46 billion, including cash and cash equivalents and $1.08 billion of available capacity under the Credit Facility. Based on our financial position as of August 31, 2024, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity. We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.

Current wording

We ended the 2025 first quarter with total liquidity of $1.25 billion, including cash and cash equivalents and $981.7 million of available capacity under the Credit Facility, with $100.0 million of cash borrowings outstanding. Cash and cash equivalents totaled $267.8 million at February 28, 2025, compared to $598.0 million at November 30, 2024. Cash equivalents included in the total were $48.7 million at February 28, 2025 and $385.1 million at November 30, 2024, and were mainly invested in interest-bearing bank deposit accounts and money market funds. Based on our financial position as of February 28, 2025, and our business forecast as discussed below under “Outlook,” we have no material concerns related to our liquidity. We believe that our existing cash and cash equivalents, our anticipated cash flows from operations and amounts available under our Credit Facility will be sufficient to fund our anticipated operating and land-related investment needs for at least the next 12 months.

Previous wording

Cash Requirements. In the nine months ended August 31, 2024, there have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2023.

Current wording

Cash Requirements. In the three months ended February 28, 2025, there have been no significant changes in our cash requirements from those reported in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended November 30, 2024.

Previous wording

Investments in Land and Land Development. Our investments in land and land development for the nine months ended August 31, 2024 increased 59% to $2.10 billion, compared to $1.32 billion for the year-earlier period. Land acquisition expenditures, which are included in our investments in land and land development, increased to $916.9 million in the nine months ended August 31, 2024, from $329.5 million in the corresponding period of 2023. Approximately 44% of our total investments for the nine months ended August 31, 2024 related to land acquisitions, compared to approximately 25% in the prior-year period. While we made investments in land and land development in each of our homebuilding reporting segments during the nine months ended August 31, 2024 and 2023, approximately 55% of these investments for each period were made in our West Coast homebuilding reporting segment.

Current wording

Investments in Land and Land Development. Our investments in land and land development for the three months ended February 28, 2025 grew 57% to $920.3 million, compared to $587.1 million for the corresponding year-earlier period. This increase reflected the execution of our strategic priority to expand our land-related investments to support future growth, and our opportunistic purchase of two sizable land parcels in our Southwest homebuilding reporting segment to replace a large community that is approaching close out. Land acquisition expenditures, which are included in our investments in land and land development, increased to $538.0 million, or 58% of our total investments, for the three months ended February 28, 2025, from $214.4 million, or approximately 37% of our total investments, for the corresponding period of 2024. While we made investments in land and land development in each of our homebuilding reporting segments during the three months ended February 28, 2025 and February 29, 2024, approximately 47% and 50%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.

Previous wording

For the 2024 fourth quarter, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards. While we expect our land acquisition activity to increase on a year-over-year basis in the 2024 fourth quarter, our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards.

Current wording

For the remainder of 2025, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards, depending significantly on market conditions and available opportunities that meet our investment return standards.

Previous wording

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at August 31, 2024 increased 10% from November 30, 2023, reflecting land investments during the nine months ended August 31, 2024, partly offset by homes delivered and our abandonment of 5,590 previously controlled lots. The number of lots we owned or controlled as of August 31, 2024 increased 24% from November 30, 2023. The number of lots in inventory as of August 31, 2024 included 16,069 lots under contract where the associated deposits were refundable at our discretion, compared to 6,260 of such lots at November 30, 2023. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 42% at August 31, 2024, compared to 27% at November 30, 2023. Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.

Current wording

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at February 28, 2025 increased 7% from November 30, 2024, reflecting land investments during the three months ended February 28, 2025, partly offset by homes delivered and our abandonment of 4,621 previously controlled lots. The number of lots we owned or controlled as of February 28, 2025 increased 2% from November 30, 2024. The number of lots in inventory as of February 28, 2025 included 13,993 lots under contract where the associated deposits were refundable at our discretion, compared to 18,923 of such lots at November 30, 2024. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 46% at February 28, 2025, compared to 49% at November 30, 2024. Generally, this percentage fluctuates with our decisions to control (or abandon) lots under land option contracts and other similar contracts or to purchase (or sell owned) lots based on available opportunities and our investment return standards.

Previous wording

Land Option Contracts and Other Similar Contracts. As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date. We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers. If we were to acquire all the land we had under land option contracts and other similar contracts at August 31, 2024, we estimate the remaining purchase price to be paid would be as follows: 2024 – $436.1 million; 2025 – $1.06 billion; 2026 – $406.2 million; 2027 – $123.6 million; 2028 – $91.0 million; and thereafter – $.6 million.

Current wording

Land Option Contracts and Other Similar Contracts. As discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, our land option contracts and other similar contracts generally do not contain provisions requiring our specific performance. Our decision to exercise a particular land option contract or other similar contract depends on the results of our due diligence reviews and ongoing market and project feasibility analysis that we conduct after entering into such a contract. In some cases, our decision to exercise a land option contract or other similar contract may be conditioned on the land seller obtaining necessary entitlements, such as zoning rights and environmental and development approvals, and/or physically developing the underlying land by a pre-determined date. We typically have the ability not to exercise our rights to the underlying land for any reason and, if applicable, forfeit our deposits without further penalty or obligation to the sellers. If we were to acquire all the land we had under land option contracts and other similar contracts at February 28, 2025, we estimate the remaining purchase price to be paid would be as follows: 2025 – $902.6 million; 2026 – $1.09 billion; 2027 – $276.2 million; 2028 – $107.5 million; 2029 – $62.5 million; and thereafter – $0.

Previous wording

Our financial leverage, as measured by the ratio of debt to capital, improved 90 basis points to 29.8% at August 31, 2024, compared to 30.7% at November 30, 2023. On a year-over-year basis, our debt to capital ratio improved 80 basis points from 30.6%. The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity).

Current wording

Our first quarter is typically when we have the lowest cash inflows and highest cash outflows of our fiscal year. As such, to support executing on our strategic priority of expanding our investments in land and land development for future growth, during the 2025 first quarter we utilized cash borrowings from the Credit Facility. As a result, our financial leverage, as measured by the ratio of debt to capital, increased 110 basis points to 30.5% at February 28, 2025, compared to 29.4% at November 30, 2024. On a year-over-year basis, our debt to capital ratio was nearly even with 30.4% at February 29, 2024. The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity).

Previous wording

LOC Facility. We maintain the LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business. Under the LOC Facility, which expires on February 18, 2027, we may issue up to $75.0 million of letters of credit. As of August 31, 2024 and November 30, 2023, we had letters of credit outstanding under the LOC Facility of $70.6 million and $12.5 million, respectively.

Current wording

LOC Facility. We maintain the LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business. Under the LOC Facility, which expires on February 13, 2028, we may issue up to $100.0 million of letters of credit. As of February 28, 2025 and November 30, 2024, we had letters of credit outstanding under the LOC Facility of $72.6 million and $73.3 million, respectively.

Previous wording

Performance Bonds. As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.31 billion and $1.32 billion of performance bonds outstanding at August 31, 2024 and November 30, 2023, respectively.

Current wording

Performance Bonds. As discussed in Note 16 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.31 billion and $1.33 billion of performance bonds outstanding at February 28, 2025 and November 30, 2024, respectively.

Previous wording

Unsecured Revolving Credit Facility. We have a $1.09 billion Credit Facility that will mature on February 18, 2027. The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $1.29 billion under certain conditions, including obtaining additional bank commitments. The amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the Credit Facility. As of August 31, 2024, we had no cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility. The Credit Facility is further described in Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report.

Current wording

Unsecured Revolving Credit Facility. We have a $1.09 billion Credit Facility that will mature on February 18, 2027. The Credit Facility contains an uncommitted accordion feature under which its aggregate principal amount of available loans can be increased to a maximum of $1.29 billion under certain conditions, including obtaining additional bank commitments. The amount of the Credit Facility available for cash borrowings and the issuance of letters of credit depends on the total cash borrowings and letters of credit outstanding under the Credit Facility and the maximum available amount under the terms of the Credit Facility. As of February 28, 2025, we had $100.0 million of cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility. The Credit Facility is further described in Note 14 – Notes Payable in the Notes to Consolidated Financial Statements in this report.

Previous wording

Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties. At August 31, 2024, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million, secured primarily by the underlying property, which had an aggregate carrying value of $11.7 million.

Current wording

Depending on available terms, we finance certain land acquisitions with purchase-money financing from land sellers or with other forms of financing from third parties. At February 28, 2025, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million, secured primarily by the underlying property, which had an aggregate carrying value of $16.5 million.

Previous wording

Unconsolidated Joint Ventures. As discussed in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located. As of August 31, 2024, one of our unconsolidated joint ventures had borrowings outstanding under a revolving line of credit with a third-party lender and secured by the underlying property and related project assets. None of our other unconsolidated joint ventures had outstanding debt at August 31, 2024.

Current wording

Unconsolidated Joint Ventures. As discussed in Note 9 – Investments in Unconsolidated Joint Ventures in the Notes to Consolidated Financial Statements in this report, we have investments in unconsolidated joint ventures in various markets where our homebuilding operations are located. As of February 28, 2025, one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender and secured by the underlying property and related project assets. None of our other homebuilding unconsolidated joint ventures had outstanding debt at February 28, 2025.

Previous wording

Operating Activities. Generally, our net operating cash flows fluctuate mainly based on changes in our inventories and our profitability. Our net cash provided by operating activities for the nine months ended August 31, 2024 mainly reflected net income of $464.4 million and a net decrease in receivables of $6.2 million, partly offset by a net increase in inventories of $504.4 million and a net decrease in accounts payable, accrued expenses and other liabilities of $14.4 million. In the nine months ended August 31, 2023, our net cash provided by operating activities primarily reflected net income of $439.9 million and a net decrease in inventories of $355.3 million, partly offset by a net decrease in accounts payable, accrued expenses and other liabilities of $100.5 million and a net increase in receivables of $1.6 million.

Current wording

Operating Activities. Generally, our net operating cash flows fluctuate mainly based on changes in our inventories and our profitability. Our net cash used by operating activities for the three months ended February 28, 2025 mainly reflected a net increase in inventories of $416.4 million and a net decrease in accounts payable, accrued expenses and other liabilities of $99.0 million, partly offset by net income of $109.6 million and a net decrease in receivables of $39.3 million. In the three months ended February 29, 2024, our net cash provided by operating activities primarily reflected net income of $138.7 million and a net decrease in receivables of $10.1 million, partly offset by a net increase in inventories of $107.5 million and a net decrease in accounts payable, accrued expenses and other liabilities of $38.5 million.