KB Home(KBH) - 2025 Q2 - Quarterly Results

Financial & Operational Highlights KB Home reported solid Q2 2025 results, meeting guidance, with strategic focus on operational efficiency and capital allocation shifts towards share repurchases Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $1.53 billion | $1.71 billion | | Homes Delivered | 3,120 | 3,523 | | Average Selling Price | $488,700 | $483,000 | | Diluted EPS | $1.50 | $2.15 | CEO Commentary and Strategy Management reported solid Q2 2025 results, focusing on operational efficiency and shifting capital allocation towards share repurchases amid softer market conditions - The company is navigating a softer market by focusing on lowering build times and reducing direct construction costs to strengthen the business[3] - In response to market conditions and a strong land pipeline, the company is shifting its capital allocation strategy to reduce land acquisition and development investments while increasing share repurchases[3] - The company repurchased $200 million of common stock in Q2 at an average price of approximately $54 per share, below its current book value[3] Detailed Financial Performance The company experienced year-over-year declines in Q2 and H1 2025 revenues, net income, and homes delivered, alongside a decrease in net orders and backlog value Second Quarter 2025 Results (vs. Q2 2024) Q2 2025 saw year-over-year declines in revenues, homes delivered, and net income, driven by lower housing gross profit margin and higher SG&A expenses Q2 2025 Financial Performance Overview | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1.53B | $1.71B | -10.5% | | Homes Delivered | 3,120 | 3,523 | -11% | | Homebuilding Operating Income | $131.5M | $188.2M | -30.1% | | Net Income | $107.9M | $168.4M | -36% | | Diluted EPS | $1.50 | $2.15 | -30% | - The housing gross profit margin decreased to 19.3% from 21.1% year-over-year, with the adjusted margin at 19.7% due to price reductions and higher land costs[4] - Financial services pretax income fell to $8.2 million from $13.3 million, primarily due to lower income from the mortgage banking joint venture[8] Six Months Ended 2025 Results (vs. 2024) H1 2025 revenues decreased to $2.92 billion, with homes delivered down 10%, while net income and diluted EPS declined by 29% and 23% respectively H1 2025 Financial Performance Overview | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $2.92B | $3.18B | -8.2% | | Homes Delivered | 5,890 | 6,560 | -10% | | Average Selling Price | $494,400 | $481,700 | +3% | | Net Income | $217.4M | $307.1M | -29% | | Diluted EPS | $3.00 | $3.91 | -23% | Net Orders and Backlog Q2 net orders decreased 13% year-over-year, with ending backlog value down 27% to $2.29 billion and cancellation rate increasing to 16% Net Orders and Backlog Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Orders (Units) | 3,460 | 3,997 | -13% | | Ending Backlog (Units) | 4,776 | 6,270 | -24% | | Ending Backlog Value | $2.29B | $3.12B | -27% | | Cancellation Rate | 16% | 13% | +3 p.p. | - The average community count increased 5% to 254, while monthly net orders per community decreased to 4.5 from 5.5 year-over-year[8] Financial Position & Capital Allocation This section details the company's balance sheet, liquidity, and strategic capital allocation, including significant share repurchases and land investments Balance Sheet Highlights As of May 31, 2025, total liquidity was $1.19 billion, inventories grew 7% to $5.91 billion, and the debt-to-capital ratio increased to 32.2% Balance Sheet Summary | Balance Sheet Metric | May 31, 2025 | Nov 30, 2024 | | :--- | :--- | :--- | | Total Liquidity | $1.19B | N/A | | Cash and Cash Equivalents | $308.9M | $598.0M | | Inventories | $5.91B | $5.53B | | Notes Payable | $1.89B | $1.69B | | Debt to Capital Ratio | 32.2% | 29.4% | - The company's total lots owned or under contract increased 14% year-over-year to 74,837, with 53% owned and 47% under contract[8] Shareholder Returns The company demonstrated strong commitment to shareholder returns in H1 2025, repurchasing $200 million of stock in Q2 and increasing book value per share by 10% - In Q2 2025, the company repurchased 3.7 million shares for $200.0 million at an average price of $53.55 per share[13] - For the first half of 2025, total repurchases amounted to 4.5 million shares at a cost of $250.0 million[13] - As of May 31, 2025, $450.0 million remained available under the stock repurchase authorization, and book value per share increased 10% year-over-year to $58.64[13] Business Outlook (Full Year 2025) This section provides the company's full-year 2025 guidance for key financial and operational metrics, including revenues, margins, and community count Full Year 2025 Guidance | FY 2025 Guidance | Range | | :--- | :--- | | Housing Revenues | $6.30B - $6.50B | | Average Selling Price | $480,000 - $490,000 | | Homebuilding Operating Margin | 8.6% - 9.0% | | Housing Gross Profit Margin | 19.0% - 19.4% | | SG&A as % of Housing Revenues | 10.2% - 10.6% | | Effective Tax Rate | Approx. 24% | | Ending Community Count | Approx. 250 | Consolidated Financial Statements This section presents the company's consolidated financial statements, including detailed statements of operations and balance sheets for the reported periods Consolidated Statements of Operations The consolidated statements of operations detail Q2 2025 financial performance, showing total revenues of $1.53 billion and net income of $107.9 million, both declining year-over-year Consolidated Statements of Operations (In Thousands) | (In Thousands) | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :--- | :--- | :--- | | Total revenues | $1,529,585 | $1,709,813 | | Total pretax income | $142,383 | $221,119 | | Net income | $107,883 | $168,419 | | Diluted EPS | $1.50 | $2.15 | Consolidated Balance Sheets As of May 31, 2025, total assets were $7.02 billion, driven by increased inventories and notes payable, while cash and equivalents decreased Consolidated Balance Sheets (In Thousands) | (In Thousands) | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Total assets | $7,017,596 | $6,936,169 | | Cash and cash equivalents | $308,861 | $597,973 | | Inventories | $5,913,348 | $5,528,020 | | Total liabilities | $3,027,058 | $2,875,553 | | Notes payable | $1,892,941 | $1,691,679 | | Total stockholders' equity | $3,990,538 | $4,060,616 | Supplemental Information This section provides supplemental operational metrics broken down by region, highlighting varied performance across different geographic areas Operational Metrics by Region Q2 2025 regional data shows varied performance, with West Coast having highest ASP, Central delivering most homes, and Southeast being the only region with increased net orders Homes Delivered by Region (Q2) | Homes Delivered (Q2) | 2025 | 2024 | | :--- | :--- | :--- | | West Coast | 968 | 1,043 | | Southwest | 661 | 712 | | Central | 811 | 1,028 | | Southeast | 680 | 740 | Net Orders by Region (Q2) | Net Orders (Q2) | 2025 | 2024 | | :--- | :--- | :--- | | West Coast | 1,104 | 1,226 | | Southwest | 557 | 785 | | Central | 1,030 | 1,300 | | Southeast | 769 | 686 | Backlog Value by Region (as of May 31) | Backlog Value (as of May 31) | 2025 | 2024 | | :--- | :--- | :--- | | Total | $2.29B | $3.12B | Non-GAAP Financial Measures Reconciliation This section provides reconciliations of non-GAAP financial measures, specifically adjusted housing gross profit margin, to their most directly comparable GAAP measures Adjusted Housing Gross Profit Margin The adjusted housing gross profit margin, a non-GAAP measure, was 19.7% in Q2 2025, excluding inventory-related charges, providing insight into core operational profitability - The company calculates adjusted housing gross profit margin by excluding inventory impairment and land option contract abandonment charges to better measure profits and aid competitor comparison[26] Adjusted Housing Gross Profit Margin Reconciliation | Margin Reconciliation | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :--- | :--- | :--- | | Housing gross profit margin (GAAP) | 19.3% | 21.1% | | Inventory-related charges | +0.4% | +0.1% | | Adjusted housing gross profit margin (Non-GAAP) | 19.7% | 21.2% |