KB Home(US:KBH)2025-10-09 20:33PART I. FINANCIAL INFORMATION Presents KB Home's unaudited consolidated financial statements and management's discussion and analysis Item 1. Financial Statements Unaudited consolidated financial statements, notes, and a general decline in revenues and net income are presented Consolidated Statements of Operations Details revenues, net income, and diluted EPS for three and nine months ended August 31, 2025 and 2024 Total Revenues | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :----- | :--------------- | :--------------- | :--------- | | 3 Months | $1,620,474 | $1,752,608 | (8)% | | 9 Months | $4,541,836 | $4,930,187 | (8)% | Net Income | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :----- | :--------------- | :--------------- | :--------- | | 3 Months | $109,828 | $157,329 | (30)% | | 9 Months | $327,268 | $464,413 | (30)% | Diluted EPS | Period | 2025 | 2024 | YoY Change | | :----- | :--- | :--- | :--------- | | 3 Months | $1.61 | $2.04 | (21)% | | 9 Months | $4.60 | $5.94 | (23)% | Consolidated Balance Sheets Snapshot of assets, liabilities, and stockholders' equity as of August 31, 2025, and November 30, 2024 Total Assets | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $6,985,572 | | Nov 30, 2024 | $6,936,169 | Cash and Cash Equivalents (Homebuilding) | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $330,586 | | Nov 30, 2024 | $597,973 | Notes Payable | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $1,943,582 | | Nov 30, 2024 | $1,691,679 | Total Stockholders' Equity | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $3,902,363 | | Nov 30, 2024 | $4,060,616 | Consolidated Statements of Stockholders' Equity Outlines changes in equity, including net income, dividends, and stock repurchases, for nine months Net Income (9 Months) | Period | 2025 (Thousands) | 2024 (Thousands) | | :----- | :--------------- | :--------------- | | 9 Months | $327,268 | $464,413 | Dividends on Common Stock (9 Months) | Period | 2025 (Thousands) | 2024 (Thousands) | | :----- | :--------------- | :--------------- | | 9 Months | $(52,806) | $(53,537) | Stock Repurchases (9 Months) | Period | 2025 (Thousands) | 2024 (Thousands) | | :----- | :--------------- | :--------------- | | 9 Months | $(442,614) | $(251,941) | Total Stockholders' Equity (End of Period) | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $3,902,363 | | Aug 31, 2024 | $3,987,094 | Consolidated Statements of Cash Flows Presents cash flows from operating, investing, and financing activities for nine months Net Cash Provided by Operating Activities | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :----- | :--------------- | :--------------- | :--------- | | 9 Months | $31,840 | $81 | Significant Increase | Net Cash Used in Investing Activities | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :----- | :--------------- | :--------------- | :--------- | | 9 Months | $(42,237) | $(38,138) | (11)% increase in outflow | Net Cash Used in Financing Activities | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :----- | :--------------- | :--------------- | :--------- | | 9 Months | $(256,498) | $(313,592) | 18% decrease in outflow | Net Decrease in Cash and Cash Equivalents | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :----- | :--------------- | :--------------- | :--------- | | 9 Months | $(266,895) | $(351,649) | 24% decrease in outflow | Notes to Consolidated Financial Statements Detailed explanations supporting financial statements, covering policies, segments, and specific line items 1. Basis of Presentation and Significant Accounting Policies Describes financial statement preparation, key accounting policies, and new pronouncement evaluations - Cash equivalents totaled $164.7 million at August 31, 2025, down from $385.1 million at November 30, 2024, primarily invested in interest-bearing bank deposit accounts and money market funds19 - Comprehensive income for the nine months ended August 31, 2025, was $327.3 million, equal to net income for the period, down from $464.4 million in 202420 - The company is evaluating the potential impact of new FASB guidance on segment reporting (ASU 2023-07), income tax disclosures (ASU 2023-09), and expense disaggregation (ASU 2024-03)212223 2. Segment Information Provides financial data for homebuilding and financial services segments, including revenues and pretax income - KB Home operates five reporting segments: four homebuilding segments (West Coast, Southwest, Central, Southeast) and one financial services segment25 Homebuilding Revenues (Nine Months Ended August 31) | Segment | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :-------- | :--------------- | :--------------- | :--------- | | West Coast | $1,926,722 | $2,017,336 | (4.5)% | | Southwest | $962,486 | $954,602 | 0.8% | | Central | $869,182 | $1,069,136 | (18.7)% | | Southeast | $767,829 | $868,115 | (11.5)% | | Total | $4,526,219 | $4,909,189 | (7.8)% | Homebuilding Pretax Income (Nine Months Ended August 31) | Segment | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :-------- | :--------------- | :--------------- | :--------- | | West Coast | $216,925 | $252,099 | (13.9)% | | Southwest | $171,432 | $165,302 | 3.7% | | Central | $64,387 | $128,446 | (49.9)% | | Southeast | $55,529 | $103,827 | (46.5)% | | Corporate & Other | $(107,678) | $(82,254) | (30.9)% | | Total | $400,595 | $567,420 | (29.5)% | Inventory Impairment and Land Option Contract Abandonment Charges (Nine Months Ended August 31) | Segment | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :-------- | :--------------- | :--------------- | :--------- | | West Coast | $2,973 | $2,441 | 21.8% | | Southwest | $1,642 | $116 | 1315.5% | | Central | $9,372 | $725 | 1192.7% | | Southeast | $4,364 | $403 | 983.0% | | Total | $18,351 | $3,685 | 397.9% | 3. Financial Services Details financial performance and assets of the financial services segment, including revenues and pretax income Financial Services Revenues (Nine Months Ended August 31) | Category | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :---------------- | :--------------- | :--------------- | :--------- | | Insurance commissions | $8,268 | $12,685 | (34.8)% | | Title services | $7,349 | $8,313 | (11.6)% | | Total | $15,617 | $20,998 | (25.6)% | Financial Services Pretax Income (Nine Months Ended August 31) | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :----- | :--------------- | :--------------- | :--------- | | 9 Months | $24,373 | $35,793 | (31.9)% | - Total assets for the financial services segment were $59.8 million at August 31, 2025, a decrease from $66.9 million at November 30, 202431 4. Earnings Per Share Presents basic and diluted earnings per share calculations and weighted average shares outstanding Basic Earnings Per Share | Period | 2025 | 2024 | YoY Change | | :----- | :--- | :--- | :--------- | | 3 Months | $1.64 | $2.10 | (21.9)% | | 9 Months | $4.69 | $6.12 | (23.3)% | Diluted Earnings Per Share | Period | 2025 | 2024 | YoY Change | | :----- | :--- | :--- | :--------- | | 3 Months | $1.61 | $2.04 | (21.1)% | | 9 Months | $4.60 | $5.94 | (22.6)% | - Weighted average diluted shares outstanding for the nine months ended August 31, 2025, decreased to 70,643 thousand from 77,565 thousand in the prior year32 5. Receivables Breakdown of receivables, including amounts from utility companies and for self-insurance claims Total Receivables | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $386,486 | | Nov 30, 2024 | $377,533 | - Key components of receivables at August 31, 2025, include $186.2 million due from utility companies and $151.9 million for self-insurance and other legal claims34 6. Inventories Details inventory composition, including land under development and capitalized interest Total Inventories | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $5,838,816 | | Nov 30, 2024 | $5,528,020 | - Land under development increased to $3.79 billion at August 31, 2025, from $3.54 billion at November 30, 202435 Interest Incurred and Amortized (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | | :------------------------------------ | :--------------- | :--------------- | | Interest incurred | $84,676 | $79,665 | | Interest amortized to construction and land costs | $(75,755) | $(83,872) | 7. Inventory Impairments and Land Option Contract Abandonments Discusses charges related to inventory impairments and land option contract abandonments - Inventory impairment charges of $7.3 million were recognized for the nine months ended August 31, 2025, primarily related to one community due to increased costs and a change in operational strategy40 - Land option contract abandonment charges increased to $11.0 million for the nine months ended August 31, 2025, from $3.7 million in the prior year42 - As of August 31, 2025, 14 active communities or land parcels with a carrying value of $168.7 million were evaluated for recoverability39 8. Variable Interest Entities Describes involvement with VIEs and interests in land option contracts - One joint venture was identified as a Variable Interest Entity (VIE), but KB Home was not the primary beneficiary, so it remained unconsolidated45 Interests in Land Option Contracts (August 31, 2025) | Category | Cash Deposits (Thousands) | Aggregate Purchase Price (Thousands) | | :------------------------------------ | :------------------------ | :----------------------------------- | | Unconsolidated VIEs | $46,642 | $1,203,536 | | Other land option contracts and similar contracts | $29,871 | $749,024 | | Total | $76,513 | $1,952,560 | - Inventories of $20.2 million were recorded with corresponding financing obligations for land option contracts considered financing arrangements at August 31, 202548 9. Investments in Unconsolidated Joint Ventures Financial information for unconsolidated joint ventures in homebuilding and financial services Homebuilding Unconsolidated Joint Ventures (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :---------------- | :--------------- | :--------------- | :--------- | | Revenues | $58,767 | $37,539 | 56.6% | | Income | $10,117 | $6,594 | 53.4% | Financial Services Unconsolidated Joint Venture (KBHS) (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :------- | :--------------- | :--------------- | :--------- | | Revenues | $79,326 | $93,485 | (15.1)% | | Income | $26,889 | $38,844 | (30.8)% | - KBHS's mortgage loans held for sale increased to $174.9 million at August 31, 2025, from $122.8 million at November 30, 202455 - Changes in the fair value of Interest Rate Lock Commitments (IRLCs) resulted in a loss of $6.6 million for the nine months ended August 31, 2025, compared to a gain of $3.8 million in the prior year57 10. Other Assets Details components of other assets, including equity securities without readily determinable fair values Total Other Assets | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $102,880 | | Nov 30, 2024 | $105,920 | - Other assets include $15.2 million in equity securities without readily determinable fair values at August 31, 2025, stemming from a March 2024 sale that recognized a $12.5 million gain in 202461 11. Accrued Expenses and Other Liabilities Breakdown of accrued expenses and other liabilities, including self-insurance and employee compensation Total Accrued Expenses and Other Liabilities | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $770,450 | | Nov 30, 2024 | $796,261 | - Self-insurance and other legal liabilities increased to $341.1 million at August 31, 2025, from $315.9 million at November 30, 202462 - Employee compensation and related benefits decreased to $146.0 million at August 31, 2025, from $182.5 million at November 30, 202462 12. Leases Outlines lease-related financial information, including expense, right-of-use assets, and liabilities - Total lease expense for the nine months ended August 31, 2025, was $15.4 million, consistent with the prior year64 Lease Right-of-Use Assets and Liabilities | Metric | Aug 31, 2025 (Thousands) | Nov 30, 2024 (Thousands) | | :---------------------- | :----------------------- | :----------------------- | | Lease right-of-use assets | $18,278 | $18,734 | | Lease liabilities | $20,772 | $20,887 | 13. Income Taxes Details income tax expense, effective tax rates, and the impact of tax credits and deferred tax assets Income Tax Expense and Effective Tax Rate (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | | :---------------- | :--------------- | :--------------- | | Income tax expense | $97,700 | $138,800 | | Effective tax rate | 23.0% | 23.0% | - Section 45L tax credits decreased year-over-year for the nine months ended August 31, 2025, due to heightened qualification standards and a strategic decision to build highly energy-efficient homes that do not qualify for these credits6768 - The One Big Beautiful Bill Act (OBBBA) repeals Section 45L tax credits for new energy-efficient homes delivered after June 30, 202669 - Deferred tax assets were $119.2 million at August 31, 2025, partly offset by a $16.8 million valuation allowance, primarily related to state net operating losses71 14. Notes Payable Breakdown of notes payable, including credit facility borrowings and senior notes, and covenant compliance Notes Payable | Category | Aug 31, 2025 (Thousands) | Nov 30, 2024 (Thousands) | | :------------------------------------ | :----------------------- | :----------------------- | | Unsecured revolving credit facility | $250,000 | $0 | | Senior unsecured term loan due August 25, 2026 | $359,329 | $358,826 | | Senior notes (various maturities) | $1,331,104 | $1,329,704 | | Mortgages and land contracts due to land sellers and other loans | $3,149 | $3,149 | | Total | $1,943,582 | $1,691,679 | - As of August 31, 2025, $250.0 million of cash borrowings and $8.3 million of letters of credit were outstanding under the $1.09 billion Credit Facility, leaving $831.7 million available for cash borrowings75 - The company was in compliance with all applicable terms and covenants under its Credit Facility, Term Loan, senior notes, and other debt instruments as of August 31, 202580 15. Fair Value Disclosures Presents fair value measurements for inventories and senior notes, categorized by hierarchy Inventories Measured at Fair Value (Nonrecurring, Nine Months Ended August 31, 2025) | Description | Fair Value Hierarchy | Pre Impairment Value (Thousands) | Impairment Charges (Thousands) | Fair Value (Thousands) | | :---------- | :------------------- | :------------------------------- | :----------------------------- | :--------------------- | | Inventories | Level 3 | $24,268 | $(7,341) | $16,927 | - The estimated fair value of senior notes was $1.32 billion at August 31, 2025, compared to a carrying value of $1.33 billion85 16. Commitments and Contingencies Details warranty and self-insurance liabilities, legal claims, performance bonds, and land option commitments Warranty Liability | Metric | Aug 31, 2025 (Thousands) | Nov 30, 2024 (Thousands) | | :---------------------- | :----------------------- | :----------------------- | | Balance at end of period | $98,598 | $96,026 | Self-Insurance Liability | Metric | Aug 31, 2025 (Thousands) | Nov 30, 2024 (Thousands) | | :---------------------- | :----------------------- | :----------------------- | | Balance at end of period | $188,749 | $185,428 | - Approximately 269 outstanding noticed claims under Florida Chapter 558 were present at August 31, 2025, primarily related to stucco and water-intrusion issues101 - Performance bonds outstanding increased to $1.39 billion at August 31, 2025, from $1.33 billion at November 30, 2024, while letters of credit decreased to $70.7 million from $81.6 million102 - Total cash deposits for land option contracts were $76.5 million to purchase land with an aggregate price of $1.95 billion at August 31, 2025103 17. Legal Matters Discusses ongoing legal proceedings, including a DOJ subpoena, and related accruals - The company received a civil subpoena from the U.S. Department of Justice Civil Division on October 2, 2023, regarding the inspection, rating, marketing, and advertising of its ENERGY STAR certified homes, with an uncertain outcome not considered probable or estimable for loss or penalty104 - Accruals for probable and reasonably estimable losses related to litigation and regulatory proceedings are deemed adequate105 18. Stockholders' Equity Information on stock repurchases and cash dividends declared and paid, impacting equity - The board authorized repurchases of up to $1.00 billion of common stock on April 18, 2024, with $261.5 million remaining availability as of August 31, 2025108 - In the nine months ended August 31, 2025, the company repurchased 7,788,113 shares of common stock at a total cost of $438.5 million108 - Quarterly cash dividends declared and paid totaled $0.75 per share for the nine months ended August 31, 2025, up from $0.70 per share in 2024110 19. Stock-Based Compensation Details stock options, restricted stock, and performance share unit compensation expenses - As of August 31, 2025, 376,641 stock options were outstanding with a weighted average exercise price of $16.21, with no stock-based compensation expense associated as all are fully vested111 - Total compensation expense for restricted stock and PSUs was $25.1 million for the nine months ended August 31, 2025, compared to $25.3 million in 2024111 20. Supplemental Disclosure to Consolidated Statements of Cash Flows Additional details on cash and cash equivalents by segment and income taxes paid Cash and Cash Equivalents at End of Period (Nine Months Ended August 31) | Segment | 2025 (Thousands) | 2024 (Thousands) | | :---------- | :--------------- | :--------------- | | Homebuilding | $330,586 | $374,911 | | Financial services | $1,712 | $782 | | Total | $332,298 | $375,693 | - Income taxes paid for the nine months ended August 31, 2025, decreased to $88.9 million from $145.9 million in the prior year112 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial condition, operations, market responses, and revised projections for 2025 OVERVIEW Summarizes consolidated financial performance, market conditions, and key operational metrics for fiscal 2025 Consolidated Financial Summary (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | Variance | | :---------------- | :--------------- | :--------------- | :------- | | Total revenues | $4,541,836 | $4,930,187 | (8)% | | Net income | $327,268 | $464,413 | (30)% | | Diluted earnings per share | $4.60 | $5.94 | (23)% | - The housing market environment was softer in the first nine months of fiscal 2025 due to affordability concerns and tepid consumer confidence, though demand stabilized in Q3 with moderating mortgage rates114115 - Net orders for Q3 2025 decreased 4% year-over-year to 2,950, with the average selling price of net orders down 11% to $445,600 due to price reductions and a simplified sales approach115116 - Total liquidity at August 31, 2025, was $1.16 billion, including cash and cash equivalents and available capacity under the Credit Facility119 - Ending backlog value at August 31, 2025, decreased 32% year-over-year to approximately $1.99 billion120 HOMEBUILDING Details financial and operational performance of the homebuilding segment, including revenues, homes, margins, and backlog Homebuilding Financial and Operational Data (Nine Months Ended August 31) | Metric | 2025 | 2024 | YoY Change | | :------------------------------------ | :--- | :--- | :--------- | | Housing revenues (Thousands) | $4,525,732 | $4,905,617 | (8)% | | Homes delivered | 9,283 | 10,191 | (9)% | | Average selling price | $487,500 | $481,400 | 1.3% | | Housing gross profit margin | 19.2% | 21.1% | (190) bps | | Adjusted housing gross profit margin | 19.6% | 21.1% | (150) bps | | SG&A as % of housing revenues | 10.6% | 10.2% | 40 bps | | Operating income (Thousands) | $389,965 | $534,809 | (27)% | - Homebuilding operating income for the nine months ended August 31, 2025, declined 27% year-over-year, primarily due to lower housing gross profits and the absence of land sale profits, partly offset by lower selling, general and administrative expenses125 - Inventory-related charges increased significantly to $18.4 million for the nine months ended August 31, 2025, from $3.7 million in the prior year125 Net Orders and Backlog (Nine Months Ended August 31) | Metric | 2025 | 2024 | YoY Change | | :-------------------- | :--- | :--- | :--------- | | Net orders | 9,182 | 10,405 | (12)% | | Cancellation rate | 16% | 14% | 200 bps | | Ending backlog – homes | 4,333 | 5,724 | (24)% | | Ending community count | 264 | 254 | 4% | HOMEBUILDING REPORTING SEGMENTS Detailed breakdown of financial and operational performance across four homebuilding reporting segments West Coast Segment (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :------------------------------------ | :--------------- | :--------------- | :--------- | | Revenues | $1,926,722 | $2,017,336 | (4)% | | Homes delivered | 2,789 | 3,021 | (8)% | | Average selling price | $690,800 | $667,600 | 3% | | Operating income | $211,735 | $248,689 | (15)% | | Operating income as % of revenues | 11.0% | 12.3% | (130) bps | Southwest Segment (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :------------------------------------ | :--------------- | :--------------- | :--------- | | Revenues | $962,486 | $954,602 | 1% | | Homes delivered | 2,020 | 2,110 | (4)% | | Average selling price | $476,500 | $452,400 | 5% | | Operating income | $171,602 | $165,489 | 4% | | Operating income as % of revenues | 17.8% | 17.3% | 50 bps | Central Segment (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :------------------------------------ | :--------------- | :--------------- | :--------- | | Revenues | $869,182 | $1,069,136 | (19)% | | Homes delivered | 2,505 | 2,971 | (16)% | | Average selling price | $347,000 | $358,800 | (3)% | | Operating income | $64,375 | $128,426 | (50)% | | Operating income as % of revenues | 7.4% | 12.0% | (460) bps | Southeast Segment (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :------------------------------------ | :--------------- | :--------------- | :--------- | | Revenues | $767,829 | $868,115 | (12)% | | Homes delivered | 1,969 | 2,089 | (6)% | | Average selling price | $389,700 | $415,600 | (6)% | | Operating income | $55,532 | $103,805 | (47)% | | Operating income as % of revenues | 7.2% | 12.0% | (480) bps | FINANCIAL SERVICES REPORTING SEGMENT Analyzes financial performance of the financial services segment, including revenues, pretax income, and loan originations Financial Services Segment Performance (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :---------------- | :--------------- | :--------------- | :--------- | | Revenues | $15,617 | $20,998 | (26)% | | Pretax income | $24,373 | $35,793 | (32)% | | Equity in income of unconsolidated joint venture | $13,445 | $19,422 | (31)% | KBHS Loan Originations (Nine Months Ended August 31) | Metric | 2025 | 2024 | YoY Change | | :---------------- | :--- | :--- | :--------- | | Loans | 6,630 | 7,332 | (9.6)% | | Principal (Thousands) | $2,717,138 | $2,916,804 | (6.8)% | | % of homebuyers using KBHS | 86% | 87% | (100) bps | - The decline in financial services pretax income was due to decreases in insurance commissions, title services revenues, and reduced income from the unconsolidated joint venture, KBHS, which experienced a loss in the fair value of IRLCs159160 INCOME TAXES Discusses income tax expense, effective tax rate, and the impact of tax credits and legislative changes Income Tax Expense and Effective Tax Rate (Nine Months Ended August 31) | Metric | 2025 (Thousands) | 2024 (Thousands) | | :---------------- | :--------------- | :--------------- | | Income tax expense | $97,700 | $138,800 | | Effective tax rate | 23.0% | 23.0% | - The effective tax rate for the nine months ended August 31, 2025, remained consistent with the prior year, despite a decrease in Section 45L tax credits due to heightened qualification standards and strategic decisions163164 - The repeal of Section 45L tax credits by the OBBBA will eliminate this benefit for homes delivered after June 30, 2026165 NON-GAAP FINANCIAL MEASURES Reconciles GAAP and non-GAAP financial measures, focusing on adjusted housing gross profit margin Housing Gross Profit Margin Reconciliation (Nine Months Ended August 31) | Metric | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Housing gross profit margin (GAAP) | 19.2% | 21.1% | | Adjusted housing gross profit margin (Non-GAAP) | 19.6% | 21.1% | - Adjusted housing gross profit margin, which excludes inventory impairment and land option contract abandonment charges, decreased by 150 basis points year-over-year for the nine months ended August 31, 2025168 Liquidity and Capital Resources Assesses liquidity, capital resources, debt levels, and cash flow activities, including investments and repurchases Total Liquidity | Date | Amount (Thousands) | | :--- | :----------------- | | Aug 31, 2025 | $1,162,326 | | Nov 30, 2024 | $1,679,713 | - Cash and cash equivalents decreased to $330.6 million at August 31, 2025, from $598.0 million at November 30, 2024171 - Investments in land and land development for the nine months ended August 31, 2025, declined 7% year-over-year to $1.95 billion, with land acquisition expenditures representing 40% of total investments173 - The number of lots owned or controlled decreased by 15% to 65,251 at August 31, 2025, largely due to homes delivered and strategic abandonment of 21,054 previously controlled lots177 - The ratio of debt to capital increased to 33.2% at August 31, 2025, from 29.4% at November 30, 2024, due to cash borrowings under the Credit Facility180 - The company was in compliance with all financial covenants under the Credit Facility and Term Loan as of August 31, 2025188190 - Net cash provided by operating activities for the nine months ended August 31, 2025, was $31.8 million, a significant increase from $81 thousand in the prior year195 - Stock repurchases totaled $438.5 million and dividend payments were $52.8 million for the nine months ended August 31, 2025197 Supplemental Guarantor Financial Information Summarized financial data for guarantor subsidiaries, backing senior notes and credit facilities - Senior notes, Credit Facility borrowings, and Term Loan borrowings are guaranteed on a joint and several basis by Guarantor Subsidiaries, which are 100% owned by KB Home203204 Summarized Balance Sheet Data (Guarantor Subsidiaries, in Thousands) | Metric | Aug 31, 2025 | Nov 30, 2024 | | :-------------------------------- | :----------- | :----------- | | Cash | $274,523 | $543,233 | | Inventories | $5,240,220 | $4,981,097 | | Notes payable | $1,943,582 | $1,691,679 | | Stockholders' equity | $3,539,212 | $3,729,310 | Summarized Statement of Operations Data (Guarantor Subsidiaries, Nine Months Ended August 31, 2025, in Thousands) | Metric | Amount | | :-------------------------------- | :----- | | Revenues | $4,107,293 | | Pretax income | $399,679 | | Net income | $307,879 | Critical Accounting Policies and Estimates Confirms no significant changes to critical accounting policies and estimates since the last annual report - There have been no significant changes to critical accounting policies and estimates during the nine months ended August 31, 2025, from those disclosed in the Annual Report on Form 10-K for the year ended November 30, 2024210 Recent Accounting Pronouncements Discusses the expected impact of recent accounting pronouncements on consolidated financial statements - No recent accounting pronouncements are expected to have a material impact on the consolidated financial statements212 Outlook Company's perspective on housing market, strategic priorities, capital allocation, and financial projections for 2025 - The long-term outlook for the housing market remains favorable due to demographic trends and undersupply, despite near-term affordability concerns and cautious consumer sentiment214 - The company plans to remain nimble, balancing pace and price, focusing on Built to Order homes, and managing inventory of finished lots to optimize returns and cash flow216217 - Capital allocation priorities include continued investment in land and land development, scaled back to align with current conditions, and returning capital to stockholders through share repurchases217218 2025 Fourth Quarter Projections | Metric | Range | | :------------------------------------ | :-------------------- | | Housing Revenues | $1.60 billion - $1.70 billion | | Average Selling Price | $465,000 - $475,000 | | Homebuilding Operating Income Margin (excl. charges) | 8.5% - 8.9% | | Housing Gross Profit Margin (excl. charges) | 18.0% - 18.4% | | SG&A as % of Housing Revenues | 9.3% - 9.7% | | Effective Tax Rate | ~23.0% | 2025 Full Year Projections | Metric | Range/Estimate | | :------------------------------------ | :------------- | | Housing Revenues | $6.10 billion - $6.20 billion | | Average Selling Price | ~$483,000 | | Homebuilding Operating Income Margin (excl. charges) | ~8.9% | | Housing Gross Profit Margin (excl. charges) | 19.2% - 19.3% | | SG&A as % of Housing Revenues | 10.2% - 10.3% | | Effective Tax Rate | ~23.0% | | Ending Community Count | ~260 | - The company expects to repurchase between $50.0 million and $150.0 million of common stock in Q4 2025, with $261.5 million remaining under the current authorization219 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk since November 30, 2024, except for Credit Facility borrowings - No material changes in market risk since November 30, 2024, except for $250.0 million cash borrowings outstanding under the Credit Facility229 - The Credit Facility borrowing rates are subject to interest rate changes based on adjusted term SOFR or a base rate, plus a spread dependent on the consolidated leverage ratio229 Item 4. Controls and Procedures Disclosure controls were effective, and no material changes in internal control over financial reporting occurred - Disclosure controls and procedures were evaluated and deemed effective as of August 31, 2025230 - No material changes in internal control over financial reporting occurred during the quarter ended August 31, 2025231 PART II. OTHER INFORMATION Covers legal proceedings, risk factors, equity security sales, other information, and a list of exhibits Item 1. Legal Proceedings Refers to Note 17 for a discussion of the company's legal proceedings - For a discussion of legal proceedings, refer to Note 17 – Legal Matters in the Notes to Consolidated Financial Statements232 Item 1A. Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended November 30, 2024234 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Summarizes common stock repurchases during the three months ended August 31, 2025 Summary of Equity Securities Purchases (Three Months Ended August 31, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Dollar Value of Shares Purchased (Thousands) | | :----- | :----------------------------- | :--------------------------- | :----------------------------------------- | | July 1-31 | 2,135,092 | $56.20 | $119,999 | | Aug 1-31 | 1,164,407 | $58.79 | $68,461 | | Total | 3,299,499 | $57.12 | $188,460 | - As of August 31, 2025, $261.5 million of remaining availability existed under the $1.00 billion share repurchase authorization approved on April 18, 2024236 Item 5. Other Information No Rule 10b5-1 trading arrangements adopted or terminated by directors, officers, or the company - No directors, executive officers, or the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended August 31, 2025235 Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including equity incentive plans and certifications - Exhibits include Amended and Restated KB Home 2014 Equity Incentive Plan Performance-Based Restricted Stock Unit Award Agreement (2025) and Restricted Stock Award Agreement (2025)237238 - Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are included238 - XBRL Instance Document and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are filed238 SIGNATURES Contains the required signatures for the filing of the Form 10-Q