KB HOME

Previous wording

We generated 3,317 net orders in the 2026 second quarter, a 4% decrease from the year-earlier quarter, with a monthly net order pace per community of 4.0, compared to 4.5 for the prior-year period. Our average community count increased 9% year over year to 278, and our ending community count rose 11% to 280, reflecting our continued investments in land and land development to support future growth. The value of net orders for the quarter was $1.55 billion, down 4% from the year-earlier period, reflecting the lower net order volume, as their $466,800 average selling price was nearly even with the year-ago quarter.

Current wording

Reflecting the operating environment, we produced 2,604 net orders in the 2026 third quarter, down 12% from the year-earlier quarter, which contributed, along with a higher average community count, to a decline in the monthly net order pace per community to 3.1, compared to 3.8 for the prior-year period. Our average community count increased 8% year over year to 279, and our ending community count rose 5% to 277, primarily reflecting our continued investments in land and land development to support future growth. The value of net orders for the quarter was $1.21 billion, down 8% from the year-earlier period, primarily due to lower net orders, partly offset by a 4% increase in their average selling price to $463,600.

Previous wording

In the 2026 first half, we maintained the simplified sales approach we implemented more than a year ago. With this approach, we provide a straightforward, transparent base price with limited, if any, concessions or incentives, designed to offer customers a compelling value competitive with area resale home prices. Additionally, while selling through our existing inventory, we continued to emphasize sales of our Built to Order homes, which are a key industry differentiator for us and typically generate higher gross margins than inventory homes. Our goal is to bring the mix of Built to Order homes delivered to within our historical range of 60% to 70%, compared to approximately 55% in 2025.

Current wording

To support orders, we have remained focused in 2026 on our strategy of offering customers a simple, straightforward and transparent base price with limited, if any, concessions or incentives, intended to provide a compelling value competitive with area resale home prices. In addition, while selling through our existing inventory, we have continued to prioritize orders of our Built to Order homes, which are our core competency and a key industry differentiator for us that typically generate higher gross profit margins than inventory homes, and we generated predominantly Built to Order net orders in each of the first three quarters of 2026.

Previous wording

Homebuilding revenues for the three months ended May 31, 2026 were generated from housing operations and nominal land sales. For the three months ended May 31, 2025, homebuilding revenues were generated solely from housing operations. Housing revenues for the 2026 second quarter decreased 27% year over year to $1.11 billion, due to a 23% decrease in the number of homes delivered to 2,395 and a 5% decline in their average selling price to $461,900. Approximately 50% of our homes delivered in the 2026 second quarter were to first-time homebuyers. Our homes delivered as a percentage of backlog at the beginning of the quarter were 66% for the 2026 second quarter, compared to 70% for the year-earlier quarter. This decrease reflects growth in our backlog since the beginning of the year, as well as a lower percentage of homes sold and delivered within the same quarter.

Current wording

Homebuilding revenues for the three months ended August 31, 2026 were generated solely from housing operations. For the three months ended August 31, 2025, homebuilding revenues were generated from housing operations and nominal land sales. Housing revenues for the 2026 third quarter decreased 20% year over year to $1.29 billion, due to a 19% decrease in the number of homes delivered to 2,732 and a slight decline in their average selling price to $473,000. Approximately 50% of our homes delivered in the 2026 third quarter were to first-time homebuyers. Our homes delivered as a percentage of backlog at the beginning of the quarter were 60% for the 2026 third quarter, compared to 71% for the year-earlier quarter. This decrease reflects growth in our backlog since the beginning of the year, as well as a lower percentage of homes sold and delivered within the same quarter, corresponding to our strategic shift toward increasing our mix of Built to Order net orders.

Previous wording

We continue to take a balanced approach to capital allocation, guided by market conditions and our priorities of investing in land and land development to support future growth and returning capital to our stockholders. Our investments in land and land development for the 2026 second quarter totaled $495.8 million, a 4% decrease compared to the year-earlier quarter. During the 2026 second quarter, we repurchased 1.4 million shares of our common stock at a total cost of $75.0 million, compared to 3.7 million shares at a total cost of $200.0 million in the year-earlier quarter. For the 2026 first half, we invested $1.06 billion in land and land development, representing a 26% decrease from the corresponding year-earlier period, and repurchased 2.2 million shares of our common stock at a total cost of $125.0 million. We ended the 2026 second quarter with total liquidity of $1.12 billion, including cash and cash equivalents and $923.4 million of available capacity under the Credit Facility. We had $275.0 million of cash borrowings outstanding under the Credit Facility at May 31, 2026.

Current wording

We continue to take a balanced approach to capital allocation, guided by market conditions and our priorities of investing in land and land development to support future growth and returning capital to our stockholders. Our investments in land and land development for the 2026 third quarter totaled $722.3 million, a 40% increase compared to the year-earlier quarter. During the 2026 third quarter, we repurchased .9 million shares of our common stock at a total cost of $50.0 million, compared to 3.3 million shares at a total cost of $188.5 million in the year-earlier quarter. For the nine months ended August 31, 2026, we invested $1.79 billion in land and land development, representing an 8% decrease from the corresponding year-earlier period, and repurchased 3.1 million shares of our common stock at a total cost of $175.0 million. We ended the 2026 third quarter with total liquidity of $942.4 million, including cash and cash equivalents and $783.4 million of available capacity under the Credit Facility. We had $415.0 million of cash borrowings outstanding under the Credit Facility at August 31, 2026.

Previous wording

Although our ending backlog value at May 31, 2026 decreased 7% year over year to approximately $2.14 billion, we believe we are well positioned to achieve our projections for the 2026 third quarter and full year, as described below under “Outlook.”

Current wording

With our ending backlog value at August 31, 2026 up 3% year over year to approximately $2.05 billion, we believe we are well positioned to achieve our projections for the 2026 fourth quarter and full year, as described below under “Outlook.”

Previous wording

Revenues. Homebuilding revenues for the three months ended May 31, 2026 consisted of housing revenues and nominal land sale revenues. In the three months ended May 31, 2025, homebuilding revenues were generated solely from housing operations. Housing revenues for the 2026 second quarter declined 27% from the year-earlier quarter due to decreases of 23% in the number of homes delivered and 5% in their overall average selling price. Each of our homebuilding reporting segments posted year-over-year decreases in second quarter housing revenues, ranging from 17% in our Southeast segment to 47% in our Southwest segment. The decline in the overall number of homes delivered primarily resulted from our having 19% fewer homes in backlog at the beginning of the 2026 second quarter compared to the year-earlier period, as well as our strategic shift toward a higher mix of Built to Order sales in the 2026 first half. The lower average selling price mainly reflected a combination of product and geographic mix factors and the price reductions we implemented in conjunction with our simplified sales strategy to stimulate demand.

Current wording

Revenues. Homebuilding revenues for the three months ended August 31, 2026 consisted solely of housing revenues. In the three months ended August 31, 2025, homebuilding revenues were generated from housing operations and nominal land sale revenues. Housing revenues for the 2026 third quarter declined 20% from the year-earlier quarter due to a decrease of 19% in the number of homes delivered and a slight decline in their overall average selling price. Each of our homebuilding reporting segments posted year-over-year decreases in third-quarter housing revenues, ranging from 7% in our West Coast segment to 34% in our Southwest and Central segments. The decline in the overall number of homes delivered primarily resulted from our having 5% fewer homes in backlog at the beginning of the 2026 third quarter compared to the year-earlier period, as well as our strategic shift toward a higher mix of Built to Order sales in the 2026 first nine months.

Previous wording

For the six months ended May 31, 2026, homebuilding revenues consisted of housing revenues and land sale revenues. In the year-earlier period, homebuilding revenues were generated solely from housing operations. Housing revenues for the six months ended May 31, 2026 decreased 25% from the corresponding 2025 period due to a 19% decline in the number of homes delivered and an 8% decrease in their average selling price.

Current wording

For the nine months ended August 31, 2026 and 2025, homebuilding revenues consisted of housing revenues and land sale revenues. Housing revenues for the nine months ended August 31, 2026 decreased 23% from the corresponding 2025 period due to a 19% decline in the number of homes delivered and a 5% decrease in their average selling price.

Previous wording

Land sale revenues for the three-month and six-month periods ended May 31, 2026 totaled $.9 million and $1.4 million, respectively. There were no land sales during the three-month and six-month periods ended May 31, 2025. 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 sale revenues for the three months ended August 31, 2026, compared to land sale revenues of $.5 million for the corresponding 2025 period. For the nine months ended August 31, 2026, land sale revenues totaled $1.4 million, compared to $.5 million for the nine months ended August 31, 2025. 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, 2026 decreased 79% from the prior-year period, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for both periods included $5.6 million of inventory-related charges. As a percentage of revenues, our operating income for the three months ended May 31, 2026 was 2.5%, compared to 8.6% for the corresponding 2025 period, 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 3.0% for the three months ended May 31, 2026, compared to 9.0% for the year-earlier period.

Current wording

Operating Income. Our homebuilding operating income for the three months ended August 31, 2026 decreased 49% from the prior-year period, reflecting lower housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the 2026 third quarter included $3.0 million of inventory-related charges, compared to $11.3 million for the year-earlier quarter. As a percentage of revenues, our operating income for the three months ended August 31, 2026 was 5.2%, compared to 8.1% for the corresponding 2025 period, 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 5.4% for the three months ended August 31, 2026, compared to 8.8% for the year-earlier period.

Previous wording

For the six months ended May 31, 2026, our homebuilding operating income declined 76% from the year-earlier period mainly due to a decrease in housing gross profits, partly offset by lower selling, general and administrative expenses. Operating income for the six months ended May 31, 2026 included inventory-related charges of $7.7 million, compared to $7.0 million of such charges for the corresponding 2025 period. As a percentage of revenues, our operating income for the six months ended May 31, 2026 decreased 610 basis points year over year to 2.8%, 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 590 basis points to 3.2% for the six months ended May 31, 2026 from 9.1% for the corresponding year-earlier period.

Current wording

For the nine months ended August 31, 2026, our homebuilding operating income declined 67% from the year-earlier period mainly due to a decrease in housing gross profits, partially offset by lower selling, general and administrative expenses. Operating income for the nine months ended August 31, 2026 included inventory-related charges of $10.7 million, compared to $18.4 million of such charges for the corresponding 2025 period. As a percentage of revenues, our operating income for the nine months ended August 31, 2026 decreased 490 basis points year over year to 3.7%, 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 500 basis points to 4.0% for the nine months ended August 31, 2026.

Previous wording

•Housing Gross Profits – Housing gross profits of $168.6 million for the three months ended May 31, 2026 were down 43% year over year, reflecting lower housing revenues and a 410 basis-point decrease in our housing gross profit margin to 15.2%. The decline in the housing gross profit margin primarily reflected the price reductions we implemented a year ago, higher relative land costs and reduced operating leverage. 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, 2026 and 2025. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 15.7% for the 2026 second quarter decreased 400 basis points year over year.

Current wording

16.5%. The decline in the housing gross profit margin primarily reflected continued pricing pressure, higher relative land costs and reduced operating leverage. 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 August 31, 2026 and 2025. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 16.8% for the 2026 third quarter decreased 210 basis points year over year.

Previous wording

For the six months ended May 31, 2026, our housing gross profits of $332.6 million decreased from $574.3 million for the year-earlier period due to lower housing revenues and a 440 basis-point decline in our housing gross profit margin. The housing gross profit margin decrease primarily reflected the same factors described above for the three months ended May 31, 2026. As a percentage of housing revenues, the amortization of previously capitalized interest associated with housing operations was 1.7% for both the six months ended May 31, 2026 and 2025. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 15.6% for the six months ended May 31, 2026 decreased 440 basis points year over year.

Current wording

For the nine months ended August 31, 2026, our housing gross profits of $546.3 million decreased from $867.7 million for the year-earlier period due to lower housing revenues and a 350 basis-point decline in our housing gross profit margin. The housing gross profit margin decrease primarily reflected the same factors described above for the three months ended August 31, 2026. 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, 2026 and 2025. Excluding the above-mentioned inventory-related charges, all of which were associated with housing operations, our adjusted housing gross profit margin of 16.1% for the nine months ended August 31, 2026 decreased 350 basis points year over year.

Previous wording

•Land Sale Profits – Land sales generated nominal results for the three-month and six-month periods ended May 31, 2026. There were no land sales during the three-month and six-month periods ended May 31, 2025.

Current wording

•Land Sale Profits – There were no land sales during the three months ended August 31, 2026. Land sales generated nominal results for the nine months ended August 31, 2026 and the three-month and nine-month periods ended August 31, 2025.

Previous wording

Our selling, general and administrative expenses for the three months ended May 31, 2026 decreased 14% compared to the year-earlier period, primarily reflecting a decrease in commission expenses resulting from fewer homes delivered in the 2026 period and a reduction in general and administrative expenses largely due to lower performance-based compensation costs. As a percentage of housing revenues, our selling, general and administrative expenses for the three months ended May 31, 2026 increased 200 basis points year over year, mainly due to a decrease in operating leverage from lower housing revenues. For the six months ended May 31, 2026, selling, general and administrative expenses decreased 14% year over year, primarily due to the same factors described above for the three months ended May 31, 2026 as well as the favorable impact of $8.0 million in insurance recoveries. As a percentage of housing revenues, selling, general and administrative expenses for the six months ended May 31, 2026 increased 170 basis points, primarily reflecting decreased operating leverage from lower housing revenues, partly offset by the insurance recoveries.

Current wording

Our selling, general and administrative expenses for the three months ended August 31, 2026 decreased 10% compared to the year-earlier period, primarily reflecting a decrease in commission expenses resulting from fewer homes delivered in the 2026 period and a reduction in general and administrative expenses largely due to lower costs associated with performance-based compensation and personnel reductions. As a percentage of housing revenues, our selling, general and administrative expenses for the three months ended August 31, 2026 increased 130 basis points year over year, mainly due to a decrease in operating leverage from lower housing revenues, partly offset by lower costs associated with certain performance-based employee compensation plans and personnel reductions. For the nine months ended August 31, 2026, selling, general and administrative expenses decreased 12% year over year, primarily due to the same factors described above for the three months ended August 31, 2026 as well as the favorable impact of $8.0 million in insurance recoveries. As a percentage of housing revenues, selling, general and administrative expenses for the nine months ended August 31, 2026 increased 140 basis points, primarily reflecting decreased operating leverage from lower housing revenues, partly offset by lower costs associated with certain performance-based employee compensation plans and personnel reductions, and the insurance recoveries.

Previous wording

Interest Income/Expense. Interest income, which is generated from short-term investments, was $1.2 million for the three months ended May 31, 2026, compared to $1.7 million for the year-earlier quarter. For the six months ended May 31, 2026, interest income was $2.4 million, compared to $3.8 million for the corresponding 2025 period. The year-over-year decreases for the three-month and six-month periods ended May 31, 2026 reflected our lower average balance of cash equivalents and a lower interest rate in the 2026 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 $1.0 million for the three months ended August 31, 2026, compared to $1.9 million for the year-earlier quarter. For the nine months ended August 31, 2026, interest income was $3.5 million, compared to $5.6 million for the corresponding 2025 period. The year-over-year decreases for the three-month and nine-month periods ended August 31, 2026 reflected our lower average balance of cash equivalents and a lower interest rate in the 2026 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, 2026 and 2025 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, 2026 and 2025 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 of Unconsolidated Joint Ventures. Our equity in income of unconsolidated joint ventures was $1.3 million for the three months ended May 31, 2026, compared to $1.1 million for the year-earlier period. For the six months ended May 31, 2026, our equity in income of unconsolidated joint ventures was $1.8 million, compared to $3.5 million for the corresponding 2025 period, mainly due to a decrease in the number of homes delivered by an unconsolidated joint venture in California. 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 $2.1 million for the three months ended August 31, 2026, compared to $1.5 million for the year-earlier period. For the nine months ended August 31, 2026, our equity in income of unconsolidated joint ventures was $3.9 million, compared to $5.0 million for the corresponding 2025 period. 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 2026 second quarter decreased 4% compared to the year-earlier quarter, driven by declines of 6% and 22% in our Southwest and Central homebuilding reporting segments, respectively, partly offset by growth of 9% in our West Coast segment and 2% in our Southeast segment. The pace of monthly net orders per community was 4.0 in the 2026 second quarter, compared to 4.5 for the corresponding 2025 quarter, reflecting the lower net order volume and our higher average community count. The value of net orders for the 2026 second quarter was $1.55 billion, a decline of 4% from year-earlier quarter, reflecting the lower net order volume, as the average selling price of those net orders was nearly even with the year-earlier quarter at $466,800. Our cancellation rate as a percentage of gross orders for the three months ended May 31, 2026 was 12%, compared to 16% for the year-earlier period.

Current wording

Net Orders. Net orders for the 2026 third quarter were down 12% compared to the year-earlier quarter, driven by decreases ranging from 2% in our Southwest homebuilding reporting segment to 26% in our Central segment, partly offset by an increase of 8% in our West Coast segment. The pace of monthly net orders per community was 3.1 in the 2026 third quarter, compared to 3.8 for the corresponding 2025 quarter, reflecting the lower net order volume and our higher average community count. The value of net orders for the 2026 third quarter was $1.21 billion, a decline of 8% from year-earlier quarter, reflecting the lower net order volume, partly offset by a 4% increase in average selling price of those net orders to $463,600. Our cancellation rate as a percentage of gross orders for the three months ended August 31, 2026 was nearly even with the year-earlier period.

Previous wording

Within this operating environment during the 2026 first half, we maintained the simplified sales approach we implemented more than a year ago. With this approach, we provide a straightforward, transparent base price with limited, if any, concessions or incentives, designed to offer customers a compelling value competitive with area resale home prices. Additionally, while selling through our existing inventory, we continued to emphasize sales of our Built to Order® homes, which are a key industry differentiator for us and typically generate higher gross margins than inventory homes. Our goal is to bring the mix of Built to Order homes delivered to within our historical range of 60% to 70%, compared to approximately 55% in 2025.

Current wording

To support sales in the nine months ended August 31, 2026, we remained focused on offering customers a simple, straightforward, transparent base price with limited, if any, concessions or incentives, intended to provide a compelling value competitive with area resale home prices. Further, while selling through our existing inventory, we have continued to prioritize orders of our Built to Order homes, which are our core competency and a key industry differentiator for us that typically generate higher gross margins than inventory homes, and we generated predominantly Built to Order net orders in each of the first three quarters of 2026. This momentum contributed to a 74% mix of Built to Order homes delivered in the 2026 third quarter and helped drive the first year-over-year increase in our ending backlog in four years, as these homes are generally sold prior to the start of construction and remain in backlog until delivered.

Previous wording

Backlog. The number of homes in our backlog at May 31, 2026 decreased 5% compared to May 31, 2025. Our overall backlog value at May 31, 2026 declined 7% year over year due to the lower number of homes in backlog and a slight decrease in their average selling price. Backlog value was down year over year in three of our homebuilding reporting segments, with decreases ranging from 11% in our Southeast segment to 27% in our Southwest segment, partially offset by a 10% increase in our West Coast segment. Based on our historical experience, a portion of the homes in backlog will not result in homes delivered due to cancellations. Our renewed focus on Built to Order contributed to sequential growth in our ending backlog for both the 2026 first and second quarters, with the number of homes in backlog at May 31, 2026 up 45% from November 30, 2025. Among other benefits, our larger backlog of Built to Order homes generally provides us with greater visibility into future deliveries and enhanced predictability of housing gross profit margins compared to inventory homes, as the selling price and cost to build are usually known prior to starting the home.

Current wording

Backlog. The number of homes in our backlog at August 31, 2026 increased 2% compared to August 31, 2025. Our overall backlog value at August 31, 2026 grew 3% year over year due to the increased number of homes in backlog and their higher average selling price. Backlog value reflected a year-over-year increase of 22% in our West Coast homebuilding reporting segment, partially offset by decreases ranging from 9% in our Southwest segment to 12% 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. Among other benefits, our larger backlog of Built to Order homes generally provides us with greater visibility into future deliveries and enhanced predictability of housing gross profit margins compared to inventory homes, as the selling price and cost to build are usually known prior to starting the home.

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 2026 second quarter grew 11% and our average community count increased 9%, each as 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 2026 third quarter grew 5% and our average community count increased 8%, each as compared to the year-earlier quarter.

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 $36.8 million and $40.4 million in the three months ended May 31, 2026 and 2025, respectively. For the six months ended May 31, 2026, Corporate and other had an operating loss of $70.5 million, compared to $76.9 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 $31.4 million and $36.4 million in the three months ended August 31, 2026 and 2025, respectively. For the nine months ended August 31, 2026, Corporate and other had an operating loss of $101.9 million, compared to $113.3 million for the corresponding year-earlier period.

Previous wording

The financial results of our homebuilding reporting segments for the three months and six months ended May 31, 2026 and 2025 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.

Current wording

The financial results of our homebuilding reporting segments for the three months and nine months ended August 31, 2026 and 2025 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

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2026 was primarily due to price reductions, higher relative construction and land costs, increased inventory-related charges, product and geographic mix, and reduced operating leverage. For the three months ended May 31, 2026, inventory-related charges associated with housing operations were $4.3 million, compared to $1.2 million for the year-earlier period. For the six months ended May 31, 2026, inventory-related charges associated with housing operations were $5.0 million, compared to $1.8 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, 2026 was mainly due to higher marketing and other expenses associated with our expanded community count in this segment as well as a decrease in operating leverage from lower housing revenues. For the six months ended May 31, 2026, these impacts were partly offset by insurance recoveries.

Current wording

The year-over-year decrease in the housing gross profit margin for the three months and nine months ended August 31, 2026 was primarily due to continued pricing pressure, higher relative land costs, and product and geographic mix. For the nine months ended August 31, 2026, the housing gross profit margin was also impacted by higher relative construction costs and reduced operating leverage. For the three months ended August 31, 2026, inventory-related charges associated with housing operations were $.7 million, compared to $1.1 million for the year-earlier period. For the nine months ended August 31, 2026, inventory-related charges associated with housing operations were $5.7 million, compared to $3.0 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 nine months ended August 31, 2026 was mainly due to higher marketing and other expenses associated with our expanded community count in this segment as well as a decrease in operating leverage from lower housing revenues. For the nine months ended August 31, 2026, these impacts were partly offset by insurance recoveries.

Previous wording

In the three-month and six-month periods ended May 31, 2026 and 2025, this segment’s revenues were generated solely from housing operations. This segment’s housing revenues for the three months and six months ended May 31, 2026 declined year over year, driven by decreases in both the number of homes delivered and their average selling price. Operating income for both periods decreased year over year due to lower housing gross profits, partially offset by lower selling, general and administrative expenses. As a percentage of revenues, this segment’s operating income for the 2026 second quarter declined from the year-earlier quarter, reflecting a 450 basis-point decrease in the housing gross profit margin to 20.2% and a 210 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.1%. For the six months ended May 31, 2026, operating income as a percentage of revenues decreased year over year, mainly reflecting a 450 basis-point decrease in the housing gross profit margin to 20.7% and a 190 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.9%.

Current wording

For the three-month and nine-month periods ended August 31, 2026 and 2025, this segment’s revenues were generated solely from housing operations. This segment’s housing revenues declined year over year in both periods, reflecting decreases 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, 2026 decreased from the corresponding year-earlier periods due to lower housing gross profits, partially offset by lower selling, general and administrative expenses. As a percentage of revenues, operating income for the 2026 third quarter declined from the year-earlier quarter, reflecting a 440 basis-point decrease in the housing gross profit margin to 19.7% and a 100 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 8.0%. For the nine months ended August 31, 2026, operating income as a percentage of revenues also decreased year over year due to a

Previous wording

The year-over-year decrease in the housing gross profit margin for the three months and six months ended May 31, 2026 primarily reflected higher relative land costs and decreased operating leverage on lower housing revenues, partly offset by lower construction costs. There were $.4 million of inventory-related charges associated with housing operations for the three months and six months ended May 31, 2026, compared to $.8 million and $1.1 million, respectively, of such charges for the corresponding 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, 2026 was mainly due to a decrease in operating leverage from lower housing revenues.

Current wording

The year-over-year decrease in the housing gross profit margin for the three months and nine months ended August 31, 2026 primarily reflected continued pricing pressure, higher relative land costs and decreased operating leverage on lower housing revenues. There were no inventory-related charges associated with housing operations for the three months ended August 31, 2026, and such charges totaled $.4 million for the nine months ended August 31, 2026, compared to $.5 million and $1.6 million, respectively, for the corresponding year-earlier periods. 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, 2026 was mainly due to a decrease in operating leverage from lower housing revenues.

Previous wording

This segment’s revenues for the three-month and six-month periods ended May 31, 2026 and 2025 were generated solely from housing operations. Housing revenues for the three months and six months ended May 31, 2026 were down 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-month and six-month periods ended May 31, 2026 declined from the corresponding year-earlier periods mainly due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. This segment’s operating income as a percentage of revenues for the 2026 second quarter decreased from the year-earlier period due to a 270 basis-point decline in the housing gross profit margin to 15.6% and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.8%. For the six months ended May 31, 2026, operating income as a percentage of revenues decreased year over year, reflecting a 400 basis-point decrease in the housing gross profit margin to 15.2%, and a 10 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.0%.

Current wording

This segment’s revenues for the three-month and nine-month periods ended August 31, 2026 and 2025 were generated solely from housing operations. Housing revenues for the three months and nine months ended August 31, 2026 were down from the corresponding year-earlier periods primarily due to a decrease in the number of homes delivered. Operating income for the three-month and nine-month periods ended August 31, 2026 declined from the corresponding year-earlier periods due to lower housing gross profits, partly offset by lower selling, general and administrative expenses. This segment’s operating income as a percentage of revenues for the 2026 third quarter decreased from the year-earlier period due to a 220 basis-point decline in the housing gross profit margin to 13.7% and a 200 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 12.0%. For the nine months ended August 31, 2026, operating income as a percentage of revenues decreased year over year, reflecting a 330 basis-point decrease in the housing gross profit margin to 14.7%, and a 70 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 11.3%.

Previous wording

The housing gross profit margin declined year over year for both the three-month and six-month periods ended May 31, 2026, mainly due to price reductions, higher relative construction and land costs, and product and geographic mix. Inventory-related charges associated with housing operations for the three months ended May 31, 2026 were $.4 million, compared to $1.8 million for the year-earlier period. For the six months ended May 31, 2026, inventory-related charges associated with housing operations were $1.0 million, compared to $2.1 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 ended May 31, 2026 primarily reflected decreased operating leverage from lower housing revenues. For the six months ended May 31, 2026, the year-over-year increase in selling, general and administrative expenses as a percentage of housing revenues was mainly due to decreased operating leverage, largely offset by the favorable impact of insurance recoveries.

Current wording

The housing gross profit margin declined year over year for both the three-month and nine-month periods ended August 31, 2026, mainly due to continued pricing pressure, higher relative land costs, product and geographic mix, and decreased operating leverage on lower housing revenues, partly offset by decreased inventory-related charges. Inventory-related charges associated with housing operations for the three months ended August 31, 2026 were $.9 million, compared to $7.2 million for the year-earlier period. For the nine months ended August 31, 2026, inventory-related charges associated with housing operations were $1.9 million, compared to $9.4 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 three months and nine months ended August 31, 2026 primarily reflected a decrease in operating leverage from lower housing revenues. For the nine months ended August 31, 2026, the year-over-year increase was largely offset by the favorable impact of insurance recoveries.

Previous wording

This segment’s revenues for the three months ended May 31, 2026 and the three months and six months ended May 31, 2025 were generated solely from housing operations. For the six months ended May 31, 2026, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. Housing revenues for the three months ended May 31, 2026 were down year over year due to decreases in both the number of homes delivered and their average selling price. For the six months ended May 31, 2026, housing revenues declined from the corresponding year-earlier period to $441.6 million, reflecting a decrease in the average selling price of homes delivered, partly offset by an increase in the number of homes delivered. Operating income for the three months and six months ended May 31, 2026 declined from the corresponding year-earlier periods as a result of lower housing gross profits, partially offset by lower selling, general and administrative expenses. As a percentage of revenues, operating income for the 2026 second quarter declined from the year-earlier quarter primarily due to a 230 basis-point decrease in the housing gross profit margin to 15.0%, partly offset by a 20 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.6%. Operating income as a percentage of revenues for the six months ended May 31, 2026 declined from the year-earlier period due to a 320 basis-point decrease in the housing gross profit margin to 14.3%, partly offset by a 70 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.7%.

Current wording

For the three months ended August 31, 2026, this segment’s revenues were generated solely from housing operations. For the nine months ended August 31, 2026 and the three-month and nine-month periods ended August 31, 2025, this segment’s revenues were comprised of housing revenues and nominal land sale revenues. Housing revenues for the three months ended August 31, 2026 decreased 19% year over year and, for the nine months ended August 31, 2026, declined 11% from the corresponding year-earlier period. In both periods, the decline 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, 2026 was down from the corresponding year-earlier periods mainly due to lower housing gross profits, partially offset by lower selling, general and administrative expenses. As a percentage of revenues, operating income for the 2026 third quarter declined from the year-earlier quarter primarily due to a 90 basis-point increase in selling, general and administrative expenses as a percentage of housing revenues to 9.9%, partially offset by a 20 basis-point increase in the housing gross profit margin to 16.5%. Operating income as a percentage of revenues for the nine months ended August 31, 2026 declined from the year-earlier period due to a 190 basis-point decrease in the housing gross profit margin to 15.1%, partly offset by a 10 basis-point improvement in selling, general and administrative expenses as a percentage of housing revenues to 9.8%.

Previous wording

Revenues. Financial services revenues for the three-month and six-month periods ended May 31, 2026 grew 9% and 7%, respectively, from the corresponding year-earlier periods, reflecting higher insurance commission revenues, partly offset by lower title services revenues. The year-over-year increase in insurance commission revenues in the 2026 periods was primarily due to higher estimated future renewal commissions. Title services revenues decreased mainly due to fewer homes delivered in the 2026 periods.

Current wording

Revenues. Financial services revenues for the three months ended August 31, 2026 declined 21% year over year, reflecting lower title services revenues and insurance commission revenues. For the nine months ended August 31, 2026, financial services revenues decreased 4% from the corresponding year-earlier period, as lower title services revenues were partly offset by higher insurance commission revenues. Lower title services revenues in both periods primarily reflected fewer homes delivered in the 2026 periods. Insurance commission revenues decreased in the three-month period and increased in the nine-month period, primarily due to changes in estimated future renewal commissions.

Previous wording

For the six months ended May 31, 2026, our equity in income of KBHS decreased 46% from the corresponding year-earlier period, due to a decline in KBHS’ income that primarily reflected the same factors described above for the three months ended May 31, 2026. The impact of the lower loan volume for the six months ended May 31, 2026 was partly offset by a $1.0 million gain in the fair value of IRLCs, compared to a $3.6 million loss in the corresponding period of 2025.

Current wording

Pretax income. Financial services pretax income for the three months ended August 31, 2026 decreased 15% from the year-earlier period, mainly reflecting lower results from title and insurance operations. Our equity in income of KBHS declined 4% year over year due to a decline in KBHS’ income that primarily reflected fewer loans originated resulting from the lower number of homes we delivered, partially offset by a higher percentage of our homebuyers using KBHS. The impact of the lower loan volume on KBHS’ income was partly offset by a $1.2 million gain in the fair value of IRLCs in the three months ended August 31, 2026, compared to a $3.0 million loss for the year‑earlier period.

Previous wording

Pretax income. Financial services pretax income for the three-month and six-month periods ended May 31, 2026 decreased 18% and 22%, respectively, from the corresponding year-earlier periods, primarily due to lower equity in income of our unconsolidated joint venture, KBHS. For the 2026 second quarter, our equity in income of KBHS declined 42% year over year, reflecting a decrease in KBHS’ income mainly due to fewer loans originated as a result of both the lower number of homes we delivered and a lower percentage of our homebuyers using KBHS. The impact of the lower loan volume on KBHS’ income was partially offset by a $.9 million gain in the fair value of IRLCs in the three months ended May 31, 2026, compared to a $2.1 million loss for the year‑earlier period.

Current wording

For the nine months ended August 31, 2026, financial services pretax income declined 20% from the corresponding year-earlier period, primarily due to a 33% decrease in the equity in income of our unconsolidated joint venture, KBHS. Our equity in income of KBHS declined from the corresponding year-earlier period due to a decrease in KBHS’ income that mainly reflected fewer loans originated as a result of both the lower number of homes we delivered and a lower percentage of our homebuyers using KBHS. The impact of the lower loan volume for the nine months ended August 31, 2026 was partially offset by a $2.2 million gain in the fair value of IRLCs, compared to a $6.6 million loss in the corresponding period of 2025.

Previous wording

Our effective tax rate for the three months ended May 31, 2026 increased from the year-earlier period, primarily due to the lower pretax income we generated for the 2026 period, which heightened the relative impact of non-deductible executive compensation expense. For the six months ended May 31, 2026, our effective tax rate decreased from the year-earlier period, mainly due to the lower pretax income, which resulted in a higher relative impact of excess tax benefits from stock-based compensation in the 2026 period, partly offset by a higher relative impact of non-deductible executive compensation expense.

Current wording

Our effective tax rate for the three months ended August 31, 2026 decreased from the year-earlier period, primarily due to an increase in excess benefits from stock based compensation as well as the lower pretax income we generated for the 2026 period, which heightened their relative impact. For the nine months ended August 31, 2026, our effective tax rate decreased from the year-earlier period, mainly due to the lower pretax income, which resulted in a higher relative impact of excess tax benefits from stock-based compensation in the 2026 period, partly offset by a higher relative impact of non-deductible executive compensation expense.

Previous 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, our income tax expense and effective tax rate take into account the anticipated lower Section 45L benefit for the homes delivered after the effective date. The other tax-related provisions of the OBBBA did not have a material impact on our consolidated financial statements.

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, our income tax expense and effective tax rate for the three months and nine months ended August 31, 2026 reflected the lower Section 45L benefit for the homes delivered after the effective date. The other tax-related provisions of the OBBBA did not have a material impact on our consolidated financial statements.

Previous wording

We ended the 2026 second quarter with total liquidity of $1.12 billion, including cash and cash equivalents and $923.4 million of available capacity under the Credit Facility, with $275.0 million of cash borrowings outstanding. Cash and cash equivalents totaled $199.8 million at May 31, 2026, compared to $228.6 million at November 30, 2025. Cash equivalents included in the total were $63.3 million at May 31, 2026 and $152.6 million at November 30, 2025, and were mainly invested in interest-bearing bank deposit accounts and money market funds. Based on our financial position as of May 31, 2026, 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 2026 third quarter with total liquidity of $942.4 million, including cash and cash equivalents and $783.4 million of available capacity under the Credit Facility, with $415.0 million of cash borrowings outstanding. Cash and cash equivalents totaled $159.0 million at August 31, 2026, compared to $228.6 million at November 30, 2025. Cash equivalents included in the total were $35.7 million at August 31, 2026 and $152.6 million at November 30, 2025, and were mainly invested in interest-bearing bank deposit accounts and money market funds. Based on our financial position as of August 31, 2026, 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, 2026, 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, 2025.

Current wording

Cash Requirements. In the nine months ended August 31, 2026, 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, 2025.

Previous wording

Investments in Land and Land Development. Our investments in land and land development for the six months ended May 31, 2026 totaled $1.06 billion, a 26% decrease compared to the year-earlier period; the prior period included our purchase of two sizable land parcels in our Southwest homebuilding reporting segment. In the six months ended May 31, 2026, land acquisition expenditures, which are included in our investments in land and land development, decreased to $353.1 million, or 33% of our total investments, compared to $661.9 million, or 46% of our total investments, in the corresponding period of 2025. While land and land development investments were made in all of our homebuilding reporting segments during the six months ended May 31, 2026 and 2025, our West Coast segment comprised 44% and 49%, respectively, of our total investments.

Current wording

Investments in Land and Land Development. Our investments in land and land development for the nine months ended August 31, 2026 totaled $1.79 billion, an 8% decrease compared to the year-earlier period; the prior period included our purchase of two sizable land parcels in our Southwest homebuilding reporting segment. In the nine months ended August 31, 2026, land acquisition expenditures, which are included in our investments in land and land development, decreased to $650.3 million, or 36% of our total investments, compared to $771.3 million, or 40% of our total investments, in the corresponding period of 2025. While land and land development investments were made in all of our homebuilding reporting segments during the nine months ended August 31, 2026 and 2025, our West Coast segment comprised 47% and 51%, respectively, of our total investments.

Previous wording

For the remainder of 2026, 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

In the 2026 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, 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, 2026 increased slightly from November 30, 2025, mainly due to land and land development investments during the six months ended May 31, 2026. The number of lots we owned or controlled as of May 31, 2026 decreased 9% from November 30, 2025, largely reflecting homes delivered and our strategic abandonment of 7,301 previously controlled lots, partly offset by newly optioned lots during the period. The number of lots in inventory as of May 31, 2026 included 6,319 lots under contract where the associated deposits were refundable at our discretion, compared to 7,715 of such lots at November 30, 2025. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 38% at May 31, 2026, compared to 43% at November 30, 2025. 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, 2026 increased 5% from November 30, 2025, mainly due to land and land development investments during the nine months ended August 31, 2026. The number of lots we owned or controlled as of August 31, 2026 decreased 5% from November 30, 2025, largely reflecting homes delivered and our strategic abandonment of 8,777 previously controlled lots, partly offset by newly optioned lots during the period. The number of lots in inventory as of August 31, 2026 included 9,549 lots under contract where the associated deposits were refundable at our discretion, compared to 7,715 of such lots at November 30, 2025. Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 40% at August 31, 2026, compared to 43% at November 30, 2025. 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, 2026, we estimate the remaining purchase price to be paid would be as follows: 2026 – $652.1 million; 2027 – $665.5 million; 2028 – $197.1 million; 2029 – $78.0 million; 2030 – $0; and thereafter – $0.

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, 2026, we estimate the remaining purchase price to be paid would be as follows: 2026 – $358.3 million; 2027 – $859.0 million; 2028 – $297.3 million; 2029 – $98.5 million; 2030 – $4.0 million; and thereafter – $0.