KB HOME

Previous wording

In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach. With this strategy, which we began implementing on a community-by-community basis in mid-February to stimulate demand and continued during the 2025 second quarter, we reduced selling prices relative to applicable market conditions and lowered or eliminated other homebuyer concessions, which is expected to partly offset the average selling price and housing gross profit margin impacts of those price changes in the reporting period when the corresponding homes are delivered. As most of the net orders in the period since we implemented this approach have not yet closed, the associated pricing adjustments did not significantly affect our average selling price or housing gross profit margin on homes delivered for the three months and six months ended May 31, 2025. While this calibrated repositioning of our communities helped us generate solid net orders in March, with an absorption pace that was approaching a seasonally more normalized level, demand slowed in April and May as weakening consumer confidence and rising and variable mortgage interest rates in those months resulted in heightened hesitancy from homebuyers. Reflecting the price reductions we implemented, and expanded on in certain underperforming communities to align with local demand dynamics, the value of our net orders for the 2025 second quarter was down 21% year over year driven by the 13% decline in net orders and an 8% decrease in their average selling price to $465,600.

Current wording

In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach. With this strategy, which we began implementing on a community-by-community basis in mid-February to stimulate demand, we reduced selling prices relative to applicable market conditions. We also lowered or eliminated other homebuyer concessions, which is expected to partly offset the average selling price and housing gross profit margin impacts of those price changes in the reporting period when the corresponding homes are delivered. Reflecting the price reductions we have made with this strategy, the value of our net orders for the 2025 third quarter was down 15% year over year, driven by the 4% decline in net orders and an 11% decrease in their average selling price to $445,600.

Previous wording

Homebuilding operating income for the three months ended May 31, 2025 was $131.5 million, compared to $188.2 million for the year-earlier period. As a percentage of revenues, homebuilding operating income was 8.6% for the 2025 second quarter compared to 11.1% for the corresponding 2024 period, primarily reflecting a lower housing gross profit margin and an increase in selling, general and administrative expenses as a percentage of housing revenues. Our housing gross profit margin for the 2025 second quarter decreased to 19.3%, compared to 21.1% for the year-earlier quarter, due to price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues, partly offset by lower construction costs. Our selling, general and administrative expenses as a percentage of housing revenues of 10.7% for the 2025 second quarter increased 60 basis points year over year, primarily reflecting higher marketing expenses and decreased operating leverage from lower housing revenues. Total pretax income for the 2025 second quarter was $142.4 million, down from $221.1 million for the year-earlier quarter, which included a $12.5 million gain associated with the sale of a privately held technology company in which we had an ownership interest. Net income and diluted earnings per share for the three months ended May 31, 2025 decreased 36% and 30%, respectively, year over year. Our diluted earnings per share for the 2025 second quarter reflected lower net income, partly offset by the favorable impact of our common stock repurchases over the past several quarters.

Current wording

Homebuilding revenues for the three months ended August 31, 2025 were comprised of housing revenues and nominal land sale revenues. For the three months ended August 31, 2024, homebuilding revenues were generated solely from housing operations. Our 2025 third-quarter housing revenues were down 8% year over year to $1.61 billion, due to a 7% decrease in the number of homes delivered to 3,393 and a slight decline in their average selling price to $475,700. Approximately 50% of our homes delivered in the 2025 third quarter were to first-time homebuyers. Our homes delivered as a percentage of backlog at the beginning of the quarter grew to 71% for the 2025 third quarter, from 58% for the year-earlier quarter, mainly due to our improved build times and an increase in the percentage of homes sold and delivered within the same quarter. Homebuilding operating income for the three months ended August 31, 2025 was $131.2 million, compared to $189.0 million for the year-earlier period. As a percentage of revenues, homebuilding operating income was 8.1% for the 2025 third quarter compared to 10.8% for the corresponding 2024 period, primarily reflecting a lower housing gross profit margin. Excluding total inventory-related charges of $11.3 million for the current quarter and $1.2 million for the year-earlier quarter, the homebuilding operating income margin was 8.8%, compared to 10.9%. Our housing gross profit margin for the 2025 third quarter decreased to 18.2%, compared to 20.6% for the year-earlier quarter, reflecting price reductions, higher relative land costs, and geographic mix, partly offset by lower construction costs. Excluding the above-mentioned inventory-related charges, the housing gross profit margin for the current quarter was 18.9%, compared to 20.7% for the year-earlier quarter. Our selling, general and administrative expenses as a percentage of housing revenues of 10.0% for the 2025 third quarter increased 20 basis points year over year, primarily due to decreased operating leverage from lower housing revenues, partly offset by lower general and administrative expenses. Total pretax income for the 2025 third quarter was $143.2 million, down from $207.4 million for the year-earlier quarter. Net income and diluted earnings per share for the three months ended August 31, 2025 decreased 30% and 21%, respectively, year over year. Our diluted earnings per share for the 2025 third quarter reflected lower net income, partly offset by the favorable impact of our common stock repurchases over the past several quarters.

Previous wording

We take a balanced approach in allocating capital, relative to prevailing market conditions, toward our priorities of investing in land and land development to support future growth and returning capital to our stockholders. In the current environment and given our existing land pipeline, we are scaling back our investments in land and land development while increasing our share repurchases. Reflecting this shift, we reduced our investments for the 2025 second quarter by 23% year over year to $513.9 million, and repurchased $200.0 million of our outstanding common stock. For the 2025 first half, we invested $1.43 billion in land and land development, representing a 14% increase from the corresponding year-earlier period, and repurchased approximately 4.5 million shares of our common stock at a total cost of $250.0 million. We ended the 2025 second quarter with total liquidity of $1.19 billion, including cash and cash equivalents and $881.7 million of available capacity under the Credit Facility. We had $200.0 million of cash borrowings outstanding under the Credit Facility at May 31, 2025.

Current wording

We take a balanced approach in allocating capital, relative to prevailing market conditions, toward our priorities of investing in land and land development to support future growth and returning capital to our stockholders. In the current environment and given our existing land pipeline, we began scaling back our investments in land and land development in the 2025 second quarter while increasing our share repurchases. In our 2025 third quarter, we maintained our land investments at a level that we believe will support our current growth projections. Our investments for the 2025 third quarter decreased by 39% year over year to $514.1 million, and we repurchased $188.5 million of our outstanding common stock, compared to $150.0 million in the year-earlier quarter. For the nine months ended August 31, 2025, we invested $1.95 billion in land and land development, representing a 7% decrease from the corresponding year-earlier period, and repurchased approximately 7.8 million shares of our common stock at a total cost of $438.5 million, compared to approximately 3.5 million shares of our common stock at a total cost of $250.0 million in the year-earlier period. We ended the 2025 third quarter with total liquidity of $1.16 billion, including cash and cash equivalents and $831.7 million of available capacity under the Credit Facility. We had $250.0 million of cash borrowings outstanding under the Credit Facility at August 31, 2025.

Previous wording

Considering the softer market conditions, we have revised our projections for 2025. Although our ending backlog value at May 31, 2025 decreased 27% year over year to approximately $2.29 billion, we believe we are well positioned to achieve our updated projections for the 2025 third quarter and full year, as described below under “Outlook.”

Current wording

Although our ending backlog value at August 31, 2025 decreased 32% year over year to approximately $1.99 billion, we believe we are well positioned to achieve our updated projections for the 2025 fourth quarter and full year, as described below under “Outlook.”

Previous wording

Revenues. Homebuilding revenues for the three months ended May 31, 2025 and 2024 were generated solely from housing operations. Housing revenues for the 2025 second quarter declined 10% from the year-earlier quarter due to an 11% decrease in the number of homes delivered, partly offset by a slight increase in their overall average selling price. Our 2025 second-quarter housing revenues were down year over year in each of our homebuilding reporting segments, with decreases ranging from 1% in our Southwest segment to 25% in our Central segment. The decline in the number of homes delivered mainly reflected our having 23% fewer homes in backlog at the beginning of the 2025 second quarter, as compared to the year-earlier quarter.

Current wording

Revenues. Homebuilding revenues for the three months ended August 31, 2025 were comprised of housing revenues and nominal land sale revenues. In the three months ended August 31, 2024, homebuilding revenues were generated solely from housing operations. Housing revenues for the 2025 third quarter declined 8% from the year-earlier quarter, driven by a 7% decrease in the number of homes delivered and a slight decline in their overall average selling price. Our 2025 third-quarter housing revenues reflected year-over-year decreases of 13% in our West Coast homebuilding reporting segment and 17% in our Central segment, partially offset by increases of 7% and 1% in our Southwest and Southeast segments, respectively. The decline in the number of homes delivered mainly reflected our having 24% fewer homes in backlog at the beginning of the 2025 third quarter, as compared to the year-earlier quarter.

Previous wording

For the six months ended May 31, 2025, homebuilding revenues were generated solely from housing operations. In the year-earlier period, homebuilding revenues were generated from housing operations and land sales. Housing revenues for the six months ended May 31, 2025 decreased 8% from the corresponding 2024 period due to a 10% decline in the number of homes delivered, partially offset by a 3% increase in their average selling price.

Current wording

For the nine months ended August 31, 2025 and 2024, homebuilding revenues were generated from housing operations and land sales. Housing revenues for the nine months ended August 31, 2025 decreased 8% from the corresponding 2024 period due to a 9% decline in the number of homes delivered, partly offset by a slight increase in their average selling price.

Previous wording

There were no land sales for the three months and six months ended May 31, 2025 and the three months ended May 31, 2024. Land sale revenues for the six months ended May 31, 2024 totaled $3.6 million. 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

Land sale revenues for the three months and nine months ended August 31, 2025 totaled $.5 million. There were no land sales during the three months ended August 31, 2024. For the nine months ended August 31, 2024, land sale revenues totaled $3.6 million. 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 May 31, 2025 decreased 30% year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the 2025 second quarter included inventory-related charges of $5.6 million, compared to $1.2 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended May 31, 2025 was 8.6%, compared to 11.1% 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 9.0% for the 2025 second quarter, compared to 11.1% for the year-earlier quarter.

Current wording

Operating Income. Our homebuilding operating income for the three months ended August 31, 2025 decreased 31% year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the 2025 third quarter included inventory-related charges of $11.3 million, compared to $1.2 million in the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended August 31, 2025 was 8.1%, compared to 10.8% for the corresponding 2024 period, mainly due to a lower housing gross profit margin. Excluding inventory-related charges, our operating income as a percentage of revenues was 8.8% for the 2025 third quarter, compared to 10.9% for the year-earlier quarter.

Previous wording

For the six months ended May 31, 2025, our operating income declined 25% from the year-earlier period, reflecting a decrease in housing gross profits and the absence of land sale profits, partly offset by lower selling, general and administrative expenses. Operating income for the six months ended May 31, 2025 included inventory-related charges of $7.0 million, compared to $2.5 million of such charges for the corresponding 2024 period. As a percentage of revenues, our operating income for the six months ended May 31, 2025 decreased 200 basis points year over year to 8.9%, mainly reflecting a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues. Excluding inventory-related charges, our operating income as a percentage of revenues declined 190 basis points to 9.1% for the six months ended May 31, 2025 from 11.0% for the corresponding year-earlier period.

Current wording

For the nine months ended August 31, 2025, our homebuilding operating income declined 27% from the year-earlier period, reflecting a decrease in housing gross profits and the absence of land sale profits, partly offset by lower selling, general and administrative expenses. Operating income for the nine months ended August 31, 2025 included inventory-related charges of $18.4 million, compared to $3.7 million of such charges for the corresponding 2024 period. As a percentage of revenues, our operating income for the nine months ended August 31, 2025 decreased 230 basis points year over year to 8.6%, mainly reflecting a lower housing gross profit margin and higher selling, general and administrative expenses as a percentage of revenues. Excluding inventory-related charges, our operating income as a percentage of revenues declined 200 basis points to 9.0% for the nine months ended August 31, 2025 from 11.0% for the corresponding year-earlier period.

Previous wording

•Housing Gross Profits – Housing gross profits of $294.7 million for the three months ended May 31, 2025 were down 18% year over year, reflecting lower housing revenues and a 180 basis-point decrease in our housing gross profit margin to 19.3%. The decline in the housing gross profit margin was due to price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues, partly offset by lower construction costs. 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% for both the three months ended May 31, 2025 and 2024. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 19.7% for the 2025 second quarter decreased 150 basis points year over year.

Current wording

•Housing Gross Profits – Housing gross profits of $293.4 million for the three months ended August 31, 2025 were down 19% year over year, reflecting lower housing revenues and a 240 basis-point decrease in our housing gross profit margin to 18.2%. The decline in the housing gross profit margin reflected price reductions, higher relative land costs, and geographic mix, partly offset by lower construction costs. 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% for the three months ended August 31, 2025 and 1.6% for the three months ended August 31, 2024. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 18.9% for the 2025 third quarter decreased 180 basis points year over year.

Previous wording

For the six months ended May 31, 2025, our housing gross profits of $574.3 million decreased from $673.1 million for the year-earlier period due to lower housing revenues and a 160 basis-point decline in our housing gross profit margin. The housing gross profit margin primarily reflected the same factors described above for the three months ended May 31, 2025. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for the six months ended May 31, 2025, compared to 1.8% for the corresponding 2024 period. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 20.0% for the six months ended May 31, 2025 decreased 140 basis points year over year.

Current wording

For the nine months ended August 31, 2025, our housing gross profits of $867.7 million decreased from $1.03 billion for the year-earlier period due to lower housing revenues and a 190 basis-point decline in our housing gross profit margin. The housing gross profit margin primarily reflected the same factors described above for the three months ended August 31, 2025. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for both the nine months ended August 31, 2025 and 2024. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 19.6% for the nine months ended August 31, 2025 decreased 150 basis points year over year.

Previous wording

•Land Sale Profits – There was no land sale activity in the three months and six months ended May 31, 2025 and the three months ended May 31, 2024. Land sale profits for the six months ended May 31, 2024 totaled $1.5 million.

Current wording

•Land Sale Profits – Land sales generated essentially break-even results for the three months and nine months ended August 31, 2025. There were no land sales during the three months ended August 31, 2024, while land sale profits for the nine months ended August 31, 2024 totaled $1.5 million.

Previous wording

Selling, general and administrative expenses for the three months ended May 31, 2025 decreased 5% from the year-earlier quarter. As a percentage of housing revenues, our selling, general and administrative expenses for the 2025 second quarter increased 60 basis points. For the six months ended May 31, 2025, selling, general and administrative expenses decreased 4% year over year. As a percentage of housing revenues, selling, general and administrative expenses for the six months ended May 31, 2025 increased 40 basis points. The year-over-year increases in selling, general and administrative expenses as a percentage of revenues for the three-month and six-month periods ended May 31, 2025 primarily reflected higher marketing expenses and decreased operating leverage from lower housing revenues.

Current wording

Reflecting our continued focus on prudently managing our costs and aligning our overhead structure with our volume of homes delivered, selling, general and administrative expenses for both the three-month and nine-month periods ended August 31, 2025 decreased 5% from the corresponding year-earlier periods. As a percentage of housing revenues, our selling, general and administrative expenses for the three-month and nine-month periods ended August 31, 2025 increased 20 basis points and 40 basis points, respectively, year over year. The increase in selling, general and administrative expenses as a percentage of revenues for the three months ended August 31, 2025 primarily reflected decreased operating leverage from lower housing revenues, partly offset by lower general and administrative expenses. For the nine months ended August 31, 2025, selling, general and administrative expenses as a percentage of revenues rose from the corresponding year-earlier period mainly due to higher marketing expenses and decreased operating leverage, partly offset by lower general and administrative expenses.

Previous wording

Interest Income/Expense and Other. Interest income and other for the three months and six months ended May 31, 2025 was comprised solely of interest income. For the three months and six months ended May 31, 2024, interest income and other was comprised of interest income and a $12.5 million gain associated with the sale of a privately held technology company in which we had an ownership interest.

Current wording

Interest Income/Expense and Other. Interest income and other for the three months and nine months ended August 31, 2025 and the three months ended August 31, 2024 was comprised solely of interest income. For the nine months ended August 31, 2024, interest income and other was comprised of interest income and a $12.5 million gain associated with the sale of a privately held technology company in which we had an ownership interest.

Previous wording

Interest income, which is generated from short-term investments, was $1.7 million for the three months ended May 31, 2025, compared to $6.9 million for the year-earlier quarter. For the six months ended May 31, 2025, interest income was $3.8 million, compared to $12.8 million for the corresponding 2024 period. The year-over-year decreases for the three-month and six-month periods ended May 31, 2025 reflected our lower average balance of cash equivalents and a lower interest rate in the 2025 periods. 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, which is generated from short-term investments, was $1.9 million for the three months ended August 31, 2025, compared to $4.1 million for the year-earlier quarter. For the nine months ended August 31, 2025, interest income was $5.6 million, compared to $16.9 million for the corresponding 2024 period. The year-over-year decreases for the three-month and nine-month periods ended August 31, 2025 reflected our lower average balance of cash equivalents and a lower interest rate in the 2025 periods. 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 six-month periods ended May 31, 2025 and 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.

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 and nine-month periods ended August 31, 2025 and 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 $1.1 million for the three months ended May 31, 2025 and nominal for the three months ended May 31, 2024. For the six months ended May 31, 2025, our equity in income of unconsolidated joint ventures was $3.5 million, compared to a nominal equity in loss of unconsolidated joint ventures for the corresponding 2024 period. The year-over-year improvement for the 2025 periods mainly reflected an increase in the number of homes delivered by an unconsolidated joint venture in California, which delivered its first homes in the 2024 second quarter. 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 of Unconsolidated Joint Ventures. Our equity in income of unconsolidated joint ventures was $1.5 million for the three months ended August 31, 2025, compared to $3.5 million for the year-earlier period, mainly reflecting a decrease in the number of homes delivered by an unconsolidated joint venture in California, which delivered its first homes in the 2024 second quarter. For the nine months ended August 31, 2025, our equity in income of unconsolidated joint ventures increased to $5.0 million, compared to $3.2 million for the corresponding 2024 period, primarily due to an increase in the number of homes delivered by the same California-based unconsolidated joint venture. 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

Net Orders. Net orders for the 2025 second quarter decreased 13%, compared to the year-earlier quarter, and the pace of monthly net orders per community was 4.5 in the 2025 second quarter, compared to 5.5 in the corresponding 2024 quarter, reflecting both lower net orders and a higher average community count. The decreases in our net orders and monthly pace per community reflected market conditions in the 2025 second quarter, with demand in the Spring selling season more subdued relative to the past few years due to housing affordability concerns, compounded by the variability in persistently elevated mortgage interest rates, as well as macroeconomic and geopolitical uncertainties that have precipitated a marked weakening in consumer confidence and caused homebuyers to hesitate on making purchase decisions. Also contributing to the year-over-year decline in our net orders were municipal delays in a number of our planned community openings, with some shifting to later in the second quarter or into the 2025 third quarter.

Current wording

Net Orders. Net orders for the 2025 third quarter decreased 4%, compared to the year-earlier quarter, and the pace of monthly net orders per community was 3.8 in the 2025 third quarter, compared to 4.1 in the corresponding 2024 quarter, driven by both lower net orders and a higher average community count. The decreases in our net orders and monthly pace per community reflected prevailing market conditions in the 2025 third quarter, with softer demand relative to the year-earlier quarter due to ongoing affordability concerns and tepid consumer confidence that caused homebuyers to hesitate on making purchase decisions during the first nine months of our fiscal year.

Previous wording

In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach. With this strategy, which we began implementing on a community-by-community basis in mid-February to stimulate demand and continued during the 2025 second quarter, we reduced selling prices relative to applicable market conditions and lowered or eliminated other homebuyer concessions, which is expected to partly offset the average selling price and housing gross profit margin impacts of those price changes in the reporting period when the corresponding homes are delivered. As most of the net orders in the period since we implemented this approach have not yet closed, the associated pricing adjustments did not significantly affect our average selling price or housing gross profit margin on homes delivered for the three months and six months ended May 31, 2025. While this calibrated repositioning of our communities helped us generate solid net orders in March, with an absorption pace that was approaching a seasonally more normalized level, demand slowed in April and May as weakening consumer confidence and rising and variable mortgage interest rates in those months resulted in heightened hesitancy from homebuyers. Reflecting the price reductions we implemented, and expanded on in certain underperforming communities to align with local demand dynamics, the value of our net orders for the 2025 second quarter was down 21% year over year driven by the 13% decline in net orders and an 8% decrease in their average selling price to $465,600.

Current wording

In navigating the current environment, we have focused on delivering the most compelling value to our buyers through pricing transparency and a simplified sales approach. With this strategy, which we began implementing on a community-by-community basis in mid-February to stimulate demand, we reduced selling prices relative to applicable market conditions. We also lowered or eliminated other homebuyer concessions, which is expected to partly offset the average selling price and housing gross profit margin impacts of those price changes in the reporting period when the corresponding homes are delivered. Reflecting the price reductions we have made with this strategy, the value of our net orders for the 2025 third quarter was down 15% year over year driven by the 4% decline in net orders and an 11% decrease in their average selling price to $445,600.

Previous wording

Backlog. The number of homes in our backlog and our backlog value at May 31, 2025 decreased 24% and 27%, respectively, from May 31, 2024. The decline in our overall backlog value reflected decreases in each of our homebuilding reporting segments, ranging from 18% in our Southeast segment to 32% in our Southwest 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 at August 31, 2025 decreased 24% compared to August 31, 2024. Our overall backlog value at August 31, 2025 declined 32% year over year due to the lower number of homes in backlog and a 10% decrease in their average selling price, reflecting the price reductions implemented during 2025. Backlog value was down year over year in each of our homebuilding reporting segments, with decreases ranging from 14% in our Southeast segment to 48% in our Southwest 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 ending community count for the 2025 second quarter grew 2% from the year-earlier quarter. Our average community count for the three months ended May 31, 2025 increased 5% from the year-earlier period. While we increased our investments in land and land development on a year-over-year basis for the six months ended May 31, 2025 to help drive future growth, as discussed below under “Liquidity and Capital Resources,” with the softer market conditions we are scaling back our investments in land and land development, which in the 2025 second quarter decreased 23% compared to the year-earlier quarter.

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 third quarter grew 4% from the year-earlier quarter. Our average community count for the three months ended August 31, 2025 increased 3% from the year-earlier period. While we continued to invest in land and land development during the nine months ended August 31, 2025 to help drive future growth, as discussed below under “Liquidity and Capital Resources,” we began scaling back these investments in the 2025 second quarter in response to softer market conditions. As a result, our investments in land and land development for the three-month and nine-month periods ended August 31, 2025 decreased 39% and 7%, respectively, compared to the corresponding year-earlier 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 $40.4 million and $38.6 million in the three months ended May 31, 2025 and 2024, respectively. For the six months ended May 31, 2025, Corporate and other had an operating loss of $76.9 million, compared to an operating loss of $73.7 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 $36.4 million and $37.9 million in the three months ended August 31, 2025 and 2024, respectively. For the nine months ended August 31, 2025, Corporate and other had an operating loss of $113.3 million, compared to $111.6 million for the corresponding year-earlier period.

Previous wording

The financial results of our homebuilding reporting segments for the three months ended May 31, 2025 and 2024 were impacted to varying degrees by price reductions and other homebuyer concessions we 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 August 31, 2025 and 2024 were impacted to varying degrees by price reductions and other homebuyer concessions we extended to buyers in conjunction with our sales strategies, as well as product and geographic mix shifts of homes delivered.

Previous wording

In the three months and six months ended May 31, 2025 and the three months ended May 31, 2024, this segment’s revenues were generated solely from housing operations. In the six months ended May 31, 2024, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. The year-over-year decline in housing revenues for the three months ended May 31, 2025 reflected a decrease in the number of homes delivered, partly offset by an increase in their average selling price. For the six months ended May 31, 2025, housing revenues of $1.26 billion were essentially even with the corresponding year-earlier period as a decrease in the number of homes delivered was offset by an increase in their average selling price. Operating income for the three months and six months ended May 31, 2025 declined year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income as a percentage of revenues for the 2025 second quarter was down from the year-earlier quarter due to an 80 basis-point decrease in the housing gross profit margin to 18.3% and a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 6.9%. For the six months ended May 31, 2025, operating income as a percentage of revenues declined from the corresponding 2024 period, mainly reflecting a 110 basis-point decrease in the housing gross profit margin to 18.4%, partly offset by a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.1%.

Current wording

In the three months and nine months ended August 31, 2025 and the three months ended August 31, 2024, 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 nominal land sale revenues. The year-over-year decline in housing revenues for the three months ended August 31, 2025 was due to a decrease in the number of homes delivered, partly offset by an increase in their average selling price. For the nine months ended August 31, 2025, housing revenues were down 4% from $2.02 billion for the corresponding year-earlier period, reflecting the same factors. Operating income for the three months and nine months ended August 31, 2025 declined year over year due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income as a percentage of revenues for the 2025 third quarter was down from the year-earlier quarter due to a 140 basis-point decrease in the housing gross profit margin to 17.4% and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 6.9%. For the nine months ended August 31, 2025, operating income as a percentage of revenues declined from the corresponding 2024 period, mainly reflecting a 120 basis-point decrease in the housing gross profit margin to 18.0% and a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 7.0%.

Previous wording

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2025 reflected price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues. Inventory-related charges associated with housing operations for the three-month and six-month periods ended May 31, 2025 were $1.7 million and $1.9 million, respectively, compared to a nominal amount for each of the year-earlier periods. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the three months and six months ended May 31, 2025 was mainly due to decreased operating leverage from lower housing revenues as well as higher costs, including higher marketing and other expenses associated with our expanded community count in this segment.

Current wording

The year-over-year decrease in the housing gross profit margin for the three months and nine months ended August 31, 2025 was primarily due to higher relative land costs, partly offset by lower construction costs. For the three months ended August 31, 2025, inventory-related charges associated with housing operations were $1.1 million, compared to $.5 million for the year-earlier period. For the nine months ended August 31, 2025, inventory-related charges associated with housing operations were $3.0 million, compared to $2.4 million for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for both the three months and nine months ended August 31, 2025 was primarily due to reduced operating leverage from lower housing revenues and higher marketing and other expenses associated with our expanded community count in this segment. For the nine months ended August 31, 2025, these impacts were partly offset by lower general and administrative costs.

Previous wording

In the three-month and six-month periods ended May 31, 2025 and 2024, this segment’s revenues were generated solely from housing operations. This segment’s housing revenues for the three-month and six-month periods ended May 31, 2025 declined slightly year over year, reflecting a decrease in the number of homes delivered, largely offset by an increase in their average selling price. Operating income for the three months ended May 31, 2025 increased slightly year over year due to lower selling, general and administrative expenses as housing gross profits were essentially even with the year-earlier period. As a percentage of revenues, this segment’s operating income for the 2025 second quarter grew from the year-earlier quarter, reflecting a 30 basis-point increase in the housing gross profit margin to 24.7% and a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.1%. For the six months ended May 31, 2025, operating income increased from the corresponding year-earlier period due to higher housing gross profits and lower selling, general and administrative expenses. Operating income as a percentage of revenues for the six months ended May 31, 2025 grew from the corresponding 2024 period, reflecting an 80 basis-point increase in the housing gross profit margin to 25.2% and a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.0%.

Current wording

In the three-month and nine-month periods ended August 31, 2025 and 2024, this segment’s revenues were generated solely from housing operations. This segment’s housing revenues for the three months ended August 31, 2025 increased year over year, driven by a higher average selling price of homes delivered, as the number of homes delivered was consistent with the prior-year period. For the nine months ended August 31, 2025, this segment’s housing revenues rose slightly compared to the year-earlier period, reflecting an increase in the average selling price of homes delivered, largely offset by a decrease in the number of homes delivered. Operating income for the three-month and nine-month periods ended August 31, 2025 increased year over year due to higher housing gross profits and lower selling, general and administrative expenses. As a percentage of revenues, this segment’s operating income for the 2025 third quarter declined from the year-earlier quarter, reflecting a 120 basis-point decrease in the housing gross profit margin to 24.1%, partly offset by a 70 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.0%. For the nine months ended August 31, 2025, operating income as a percentage of revenues grew from the corresponding 2024 period due to a 40 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 7.0% and a 10 basis-point increase in the housing gross profit margin to 24.8%.

Previous wording

In the three months and six months ended May 31, 2025 and the three months ended May 31, 2024, this segment’s revenues were generated solely from housing operations. In the six months ended May 31, 2024, this segment’s revenues were comprised of housing revenues and land sale revenues. Housing revenues for the three months ended May 31, 2025 were down from the year-earlier period due to decreases in both the number of homes delivered and their average selling price. For the six months ended May 31, 2025, housing revenues decreased 19% year over year, from $693.1 million, for the same reasons. Land sale revenues totaled $3.2 million for the six months ended May 31, 2024. Operating income for the three months and six months ended May 31, 2025 declined from the corresponding year-earlier periods mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Also contributing to the year-over-year decrease in operating income for the six months ended May 31, 2025 was the absence of land sale profits in the current period, compared to $1.1 million of land sale profits in the corresponding year-earlier period. This segment’s operating income as a percentage of revenues for the 2025 second quarter decreased from the year-earlier period, primarily due to a 380 basis-point decline in the housing gross profit margin to 18.3% and a 130 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.9%. For the six months ended May 31, 2025, this segment’s operating income as a percentage of revenues decreased from the year-earlier period, mainly due to a 280 basis-point decline in the housing gross profit margin to 19.2% and a 110 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.0%.

Current wording

In the three months and nine months ended August 31, 2025 and the three months ended August 31, 2024, 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, 2025 were down from the year-earlier period due to decreases in both the number of homes delivered and their average selling price. For the nine months ended August 31, 2025, housing revenues decreased 18% year over year, from $1.07 billion, for the same reasons. Land sale revenues totaled $3.2 million for the nine months ended August 31, 2024. Operating income for the three months and nine months ended August 31, 2025 declined from the corresponding year-earlier periods mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. Also contributing to the year-over-year decrease in operating income for the nine months ended August 31, 2025 was the absence of land sales in the current period, compared to $1.1 million of land sale profits in the corresponding year-earlier period. This segment’s operating income as a percentage of revenues for the 2025 third quarter decreased from the year-earlier period, primarily due to a 590 basis-point decline in the housing gross profit margin to 15.9%, partly offset by a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 10.0%. For the nine months ended August 31, 2025, this segment’s operating income as a percentage of revenues decreased from the year-earlier period, mainly reflecting a 390 basis-point decline in the housing gross profit margin to 18.0% and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.6%.

Previous wording

This segment’s revenues for the three months and six months ended May 31, 2025 and 2024 were generated solely from housing operations. Housing revenues for the three months and six months ended May 31, 2025 declined from the corresponding year-earlier periods due to decreases in both the number of homes delivered and their average selling price. Operating income for the three months and six months ended May 31, 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 second quarter declined from the year-earlier quarter due to a 400 basis-point decline in the housing gross profit margin to 17.3% and a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.8%. Operating income as a percentage of revenues for the six months ended May 31, 2025 decreased from the corresponding year-earlier period due to a 390 basis-point decline in the housing gross profit margin to 17.5% and a 140 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 10.3%.

Current wording

This segment’s revenues for the three months and nine months ended August 31, 2025 were comprised of housing revenues and nominal land sale revenues. For the three months and nine months ended August 31, 2024, this segment’s revenues were generated solely from housing operations. Housing revenues for the three months ended August 31, 2025 rose slightly from the year-earlier period to $303.0 million due to an increase in the number of homes delivered, partly offset by a decrease in their average selling price. Housing revenues for the nine months ended August 31, 2025 declined 12% from the corresponding year-earlier period to $767.3 million due to 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, 2025 was down year over year, mainly reflecting lower housing gross profits. As a percentage of revenues, operating income for the 2025 third quarter declined from the year-earlier quarter due to a 370 basis-point decline in the housing gross profit margin to 16.3%, with selling, general and administrative expenses as a percentage of housing revenues remaining flat at 9.0%. Operating income as a percentage of revenues for the nine months ended August 31, 2025 decreased from the corresponding year-earlier period due to a 390 basis-point decline in the housing gross profit margin to 17.0% and a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.8%.

Previous wording

The housing gross profit margin for the three months and six months ended May 31, 2025 declined year over year due to price reductions and other homebuyer concessions, higher relative land costs, geographic mix and reduced operating leverage from lower housing revenues, partly offset by lower construction costs. Inventory-related charges associated with housing operations for the three months ended May 31, 2025 were $1.8 million, compared to $.3 million for the year-earlier period. For the six months ended May 31, 2025, inventory-related charges associated with housing operations were $2.1 million, compared to $.3 million 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 and six months ended May 31, 2025 was mainly due to higher marketing expenses and decreased operating leverage from lower housing revenues.

Current wording

The year-over-year decrease in the housing gross profit margin for the three months ended August 31, 2025 mainly reflected price reductions, higher relative land costs, geographic mix, and an increase in inventory-related charges, partly offset by increased operating leverage from higher housing revenues. Inventory-related charges associated with housing operations for the three months ended August 31, 2025 were $2.5 million, compared to $.2 million for the year-earlier quarter. For the nine months ended August 31, 2025, the year-over-year decline in the housing gross profit margin was primarily due to price reductions, higher relative land costs, geographic mix, increased inventory-related charges, and decreased operating leverage from lower housing revenues, partly offset by lower construction costs. Inventory-related charges associated with housing operations for the nine months ended August 31, 2025 were $4.4 million, compared to $.4 million for the year-earlier period. The year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues for the nine months ended August 31, 2025 was mainly due to decreased operating leverage from lower housing revenues as well as higher costs, including higher marketing and other expenses associated with our expanded community count in this segment.

Previous wording

Revenues. Financial services revenues for the three months and six months ended May 31, 2025 declined 41% and 33%, respectively, from the corresponding year-earlier periods due to decreases in both insurance commissions and title services revenues. Insurance commissions were lower in the 2025 periods due to the contract assets for estimated future renewal commissions remaining relatively steady, as an increase in the number of policies in force was offset by a slight decrease in the average commission per policy. In contrast, the corresponding 2024 periods benefited from growth in these contract assets driven by an increase in the number of policies in force and fairly stable average commission rates. Title services revenues decreased year over year mainly due to fewer homes delivered in the 2025 periods.

Current wording

Revenues. Financial services revenues for the three months and nine months ended August 31, 2025 declined 9% and 26%, respectively, from the corresponding year-earlier periods due to decreases in both insurance commissions and title services revenues. Insurance commissions were lower in the 2025 periods due to less variability in the contract assets for estimated future renewal commissions, compared to the corresponding prior-year periods. For the three months ended August 31, 2025, a modest increase in the average commission per policy was mostly offset by a modest decrease in the number of policies in force. For the nine months ended August 31, 2025, an increase in the number of policies in force was largely offset by a decrease in the average commission per policy. In contrast, the corresponding 2024 periods benefited from growth in the contract assets for estimated future renewal commissions driven by an increase in the number of policies in force, partly offset by a decrease in the average commission rates. Title services revenues decreased year over year mainly due to fewer homes delivered in the 2025 periods.

Previous wording

Pretax income. Financial services pretax income for the three months and six months ended May 31, 2025 was down 38% and 37%, respectively, from the corresponding year-earlier periods, largely due to the above-mentioned decrease in insurance commissions revenues and a decline in the equity in income of our unconsolidated joint venture, KBHS. In the 2025 second quarter, the equity in income of our unconsolidated joint venture was $4.9 million, compared to $6.4 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 $2.1 million in the current quarter, compared to a gain in the fair value of IRLCs of $1.3 million in the year-earlier quarter. For the six months ended May 31, 2025, the equity in income of our unconsolidated joint venture was $9.2 million, compared to $13.5 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 $3.6 million in the current quarter, compared to a gain in the fair value of IRLCs of $4.2 million in the year-earlier quarter. Also contributing to the year-over-year decrease in KBHS’ income for the three months and six months ended May 31, 2025 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.

Current wording

Pretax income. Financial services pretax income for the three months and nine months ended August 31, 2025 was down 21% and 32%, respectively, from the corresponding year-earlier periods. These declines were due to the above-mentioned decreases in insurance commissions and title services revenues as well as a decrease in the equity in income of our unconsolidated joint venture, KBHS. For the three months and nine months ended August 31, 2025, the equity in income of our unconsolidated joint venture was down 28% and 31%, respectively, from the corresponding year-earlier periods, reflecting a decrease in KBHS’ income. The year-over-year decline in KBHS’ income for the three months ended August 31, 2025 mainly reflected a loss in the fair value of IRLCs of $3.0 million in the current period, compared to a $.4 million loss in the year-earlier period. For the nine months ended August 31, 2025, the decrease in KBHS’ income primarily reflected a loss in the fair value of IRLCs of $6.6 million in the current period, compared to a gain in the fair value of IRLCs of $3.8 million in the year-earlier period. Also contributing to the year-over-year decrease in KBHS’ income for the three months and nine months ended August 31, 2025 was a decline in the number of loans originated, which reflected a decrease in the number of homes we delivered as well as a lower percentage of homebuyers using KBHS.

Previous wording

Our effective tax rate for the three months ended May 31, 2025 increased from the year-earlier period, mainly due to a $1.7 million decrease in the Section 45L tax credits we recognized primarily from building energy-efficient homes and a $.4 million decrease in excess tax benefits related to stock-based compensation. For the six months ended May 31, 2025, our effective tax rate increased from the year-earlier period primarily due to a $4.1 million decrease in Section 45L tax credits and a $1.1 million decrease in excess tax benefits related to stock-based compensation. The year-over-year decreases in Section 45L tax credits for the three months and six months ended May 31, 2025 reflect 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.

Current wording

IRS guidance issued in 2023 heightened the Section 45L energy-efficiency qualification standard for homes built in California relative to other states. This guidance, along with 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, impacted the tax credits we recognized for the nine months ended August 31, 2025 relative to the corresponding prior-year period. 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

H.R.1, the One Big Beautiful Bill Act, was signed into law on July 4, 2025, disallowing Section 45L tax credits for new energy-efficient homes delivered after June 30, 2026. As a result, our income tax expense and effective tax rate would not reflect a benefit from such tax credits as to homes delivered after that date.

Current wording

On July 4, 2025, the OBBBA was signed into law. Among its provisions is the repeal of Section 45L tax credits for new energy-efficient homes delivered after June 30, 2026. As a result, beginning in our 2026 third quarter, our income tax expense and effective tax rate will no longer reflect a benefit from such tax credits as to homes delivered after the effective date. We are currently evaluating other elements of the legislation, but do not expect it to have a material effect on our effective tax rate for the year ending November 30, 2025.

Previous wording

We ended the 2025 second quarter with total liquidity of $1.19 billion, including cash and cash equivalents and $881.7 million of available capacity under the Credit Facility, with $200.0 million of cash borrowings outstanding. Cash and cash equivalents totaled $308.9 million at May 31, 2025, compared to $598.0 million at November 30, 2024. Cash equivalents included in the total were $161.2 million at May 31, 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 May 31, 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.

Current wording

We ended the 2025 third quarter with total liquidity of $1.16 billion, including cash and cash equivalents and $831.7 million of available capacity under the Credit Facility, with $250.0 million of cash borrowings outstanding. Cash and cash equivalents totaled $330.6 million at August 31, 2025, compared to $598.0 million at November 30, 2024. Cash equivalents included in the total were $164.7 million at August 31, 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 August 31, 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 six months ended May 31, 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.

Current wording

Cash Requirements. In the nine months ended August 31, 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. In the 2025 first quarter, our investments in land and land development increased 57% year over year to $920.3 million, which included our opportunistic purchase of two sizable land parcels in our Southwest homebuilding reporting segment to replace a large community that is approaching close out. As a result of the heightened first-quarter investment level, our existing land pipeline and softer market conditions, however, we are scaling back our investments in land and land development. Reflecting this shift, our investments for the 2025 second quarter decreased 23% year over year to $513.9 million. For the six months ended May 31, 2025, our investments in land and land development grew 14% year over year to $1.43 billion. Land acquisition expenditures, which are included in our investments in land and land development, increased to $661.9 million, or 46% of our total investments, for the six months ended May 31, 2025, from $491.9 million, or approximately 39% 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 six months ended May 31, 2025 and 2024, approximately 49% and 53%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.

Current wording

Investments in Land and Land Development. In the 2025 first quarter, our investments in land and land development increased 57% year over year to $920.3 million, which included our opportunistic purchase of two sizable land parcels in our Southwest homebuilding reporting segment to replace a large community that is approaching close out. As a result of the heightened first-quarter investment level, our existing land pipeline and softer market conditions, however, we began scaling back our investments in land and land development in the 2025 second quarter. In our 2025 third quarter, we maintained our land investments at a level that we believe will support our current growth projections. Our investments for the 2025 third quarter decreased 39% year over year to $514.1 million. For the nine months ended August 31, 2025, our investments in land and land development declined 7% year over year to $1.95 billion. Land acquisition expenditures, which are included in our investments in land and land development, decreased to $771.3 million, or 40% of our total investments, for the nine months ended August 31, 2025, compared to $916.9 million, or approximately 44% 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 nine months ended August 31, 2025 and 2024, approximately 51% and 55%, respectively, of these investments for each period were made in our West Coast homebuilding reporting segment.

Previous wording

For the 2025 second half, although we expect a year-over-year decrease in our land-related investments, 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.

Current wording

For the 2025 fourth quarter, although we expect a year-over-year decrease in our land-related investments, 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 May 31, 2025 increased 7% from November 30, 2024, reflecting land investments during the six months ended May 31, 2025, partly offset by homes delivered and our abandonment of 14,271 previously controlled lots. The number of lots we owned or controlled as of May 31, 2025 decreased 2% from November 30, 2024. The number of lots in inventory as of May 31, 2025 included 13,808 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 47% at May 31, 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.

Current wording

The carrying value of lots we owned or controlled under land option contracts and other similar contracts at August 31, 2025 increased 6% from November 30, 2024, mainly due to land and land development investments during the nine months ended August 31, 2025. The number of lots we owned or controlled as of August 31, 2025 decreased 15% from November 30, 2024, largely reflecting homes delivered and our strategic abandonment of 21,054 previously controlled lots, partly offset by newly optioned lots during the period. The number of lots in inventory as of August 31, 2025 included 6,310 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 42% at August 31, 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 May 31, 2025, we estimate the remaining purchase price to be paid would be as follows: 2025 – $750.1 million; 2026 – $1.03 billion; 2027 – $350.0 million; 2028 – $132.6 million; 2029 – $63.0 million; and thereafter – $9.2 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 August 31, 2025, we estimate the remaining purchase price to be paid would be as follows: 2025 – $392.5 million; 2026 – $894.3 million; 2027 – $372.0 million; 2028 – $148.0 million; 2029 – $69.3 million; and thereafter – $0.

Previous wording

Our financial leverage, as measured by the ratio of debt to capital, increased 280 basis points to 32.2% at May 31, 2025, compared to 29.4% at November 30, 2024 due to cash borrowings outstanding under the Credit Facility. The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity).

Current wording

Our financial leverage, as measured by the ratio of debt to capital, increased 380 basis points to 33.2% at August 31, 2025, compared to 29.4% at November 30, 2024 due to cash borrowings outstanding under the Credit Facility. The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity).